When we as logistics professionals avoid turf wars and power trips in favor of team playing, we all emerge as winners.

John Knowles once wrote a well-known novel called "A Separate Peace." With a little creative spelling, that title could serve as the story of many logistics professionals' lives, because for most companies, each logistics component operates as a "separate piece" of the total equation. Many people think that's they way it should be. They view the separate or "silo" approach as the direct path to success, arguing that if each logistics-related silo (such as transportation and warehousing) looks out for number one, the collective function will be more efficient.

I disagree.Over the course of my career, I've seen thousands of logistics programs in action. I've seen a lot of successes. But I've also seen a lot of mistakes and missed opportunities. And most can be traced to a fundamental lack of teamwork and coordination. As a result, I have come to believe that it's time to replace the "separate but equal" model so popular in our field with something new, different and — in my opinion — clearly better: integration.


Why silos aren't the best option
Some of the best arguments for making this shift can be found by examining the flaws inherent in the current silo approach.

For starters, many silos achieve efficiencies at the expense of the others. I remember a case of one warehousing silo that reduced its storage costs by moving to a warehouse with lower rent. Unfortunately, the new warehouse had fewer truck doors and was located in an out-of-the-way place that was harder for trucks to get to. The result? The company's warehousing savings were eaten up by incremental transportation costs.

Another flaw in the silo approach is that individual departments don't always get to benefit from each other's expertise. I can think of any number of times when my company's employees have come up with some technique for handling product that minimized damage. These techniques worked great while the product was in our possession. But if the inventory was turned over to the next player in the supply chain, it wasn't uncommon for that player to decide not to pursue those techniques. As a result, a lot of product got damaged downstream. And the shippers ultimately lost money.

Finally, the silo mentality promotes excess. Most silos (and sometimes every end user) in a company's supply chain are so afraid they won't have product when they need it that they keep extra product on hand as insurance. As a result, inventory costs are far higher than they need to be. A classic example of this occurred at a leading New York City hospital. None of its departments seemed to trust the logistics process, so everyone stockpiled product. As a result, the hospital had more than $600,000 worth of product that was unaccounted for each year.


Why integration is the key
An integrated approach to logistics minimizes these flaws and, if properly executed, may even be able to do away with them altogether. With this approach, the logistics process is viewed as a channel of interrelated activities. The point of the channel approach is to get every silo to view itself not as a stand-alone piece, but as a link critical to the success of the overall chain. Individual performance is still important. But so are teamwork and integration. Each link must be willing to work with the others and occasionally to make sacrifices in its own bottom-line performance for the common good.

Although that may sound idealistic, I can point to several real-life cases that demonstrate that it is, indeed, a workable model. For example, a few years ago, one of our clients decided that it was tired of seeing $500,000 worth of products go up in smoke because of in-transit damage. This company created a multi-functional task force, consisting of several members of its supply chain, and had them address the problem together. This team reviewed everything that impacted product handling, identified the source of the problem and created a solution that brought in-transit losses down to a mere $4,000 per year. That dramatic improvement wouldn't have been possible if each department hadn't been willing to admit that its link or silo was less than perfect.

And how about the case of the hospital I mentioned earlier? Every one of its departments ordered supplies on its own, which worked out fine for them but was a financial train wreck for the hospital. When we were asked to come in and revamp the logistics program, we had to work with all of these departments to get them to place orders through a single source. This meant that each individual department initially lost a little bit in the way of convenience and independence. But because they were willing to be flexible and give up their logistics autonomy, the hospital managed to save an estimated $3 million a year.

I have countless more examples I could use. But suffice it to say that when we as logistics professionals avoid turf wars and power trips in favor of team playing, we'll all emerge as winners.

No logistics function, be it warehousing, transportation or anything else, is an island. The sooner we all realize that and start working together instead of separately, the sooner the logistics function can reach its full cost-cutting and value-adding potential. And the sooner logistics will be regarded as the important piece of the corporate value chain that it is.

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