Recently someone asked me if there is a difference in approach for an independent business owner versus participating in a network of pallet companies or a cooperative situation like the Canadian Pallet Council (CPC).
It made me think back to that cheesy Tim Burton movie, “Mars Attacks!” When the Martians storm Congress, President James Dale (Jack Nicholson) implores, “Can’t we all just get along?” He is promptly blasted to oblivion by alien ray guns.
It seems that the way the market is going, there has never been a greater need for cooperative networks, but there are lots of examples where cooperation can be dangerous to your health. Over time you figure out whom you can trust and whom you can’t. But without trust and a commitment to partners and process, successful networks are difficult or expensive to sustain.
Take the Canadian Pallet Council. In its finest moments, it was a major force on the Canadian distribution scene. It had support that far exceeded minimum compliance. There was a widespread sense of commitment that produced superior results. The Cleveland Consulting Group (CCA) report of a dozen years ago touted it as the cheapest option available to the American grocery industry, albeit one that would not work because American industry did not have that same spirit of cooperation. Tied into that commitment, many major CPC members made investments greater than the minimum required. Participating executives saw a payback in terms of a robust, low-cost system.
Over the course of the 1990s, as resources became tighter and tighter for many member companies, cooperation beyond minimum compliance began to often wane; not surprisingly, so did market share in the face of inroads by CHEP.
The CPC’s new Internet-based software for tracking pallets and containers, CTSweb, however, is stimulating a lot of interest once again in the CPC and a new, more efficient pallet control process. The enthusiasm level of companies I’ve interviewed is rising, and that is bound to bolster the program.
So how do trust and commitment fit into the equation when you sit at the table with 20 fiercely competitive entrepreneurs and try to figure out how to operate a joint venture? The question of management approach is increasingly relevant as companies form alliances of various descriptions to go after regional or national accounts. Trust and openness are needed, but how much is advisable?
My first thought is that enduring business success is strongly influenced by the management of relationships — with employees, suppliers, customers, and now – increasingly — network participants. Good relationships are built on the notion of mutual gain, the proverbial ‘win-win.’ In a network environment, it can become a little trickier, more like trying to engineer a ‘win-win-win-win.’ The necessity for independents to participate in networks in order to survive has never been stronger, but it involves a more complicated decision process.
Case in point, working hard at communications is a critical component of success for Glenn Merritt, CEO and president of First Alliance Logistics Management. (See the article on First Alliance on page 56.) Glenn is a great example of a manager in a network environment; his company is backed by a number of partners and supported by a network of independent pallet companies around the country operating as ongoing service providers. The partners are also suppliers, which can add an extra element of complexity. Glenn has to consider not only the bottom line of First Alliance, but how his decisions impact the businesses of the partners.
Just recently, researchers at Harvard University have been looking at the decision making process in supply chains, and asking why managers make sub-optimal decisions (like the purchasing agents who buy pallets based on price instead of cost, pallet companies that under-spec, cooperative pallet users that shirk their responsibility to repair or return pallets) that bring damaging results. The short answer is that decision maker analysis is typically too narrow and biased toward a few key considerations that exclude others — the dreaded silo effect, which does not consider enough relevant supply chain impacts.
Likewise, when we look at deals, we sometimes look at business in an adversarial manner — as something to fight over instead of something to cooperate on in order to increase the overall pie.
Take the circumstance of new companies entering a market with cheap prices, based on some low cost core sources or minimal overhead. They are hitting on your customer, and you are looking at either losing the customer or lowering your price. What should you do?
According to Clarence Leising, the author of “Pallet Head,” the thing to do is neither of the above. A better approach is to go see the new operator, who typically has cash flow concerns, and pay him cash for his production. In the process, you eliminate his cost of
When it comes to relationships, trust, good communication, honesty, reputation, creativity and entrepreneurial spirit all count, and increasingly these are supported by tools such as better communication technology and third-party audit processes. The intangibles are not built overnight. For successful companies, good business relationships are the fruit of hard work, and they become the foundation for moving into formal network relationships. Sure, there is risk when you enter into a network, but it is reduced by the strength of the participants’ bonds. Tomorrow’s successful networks are being built on today’s solid relationships.
