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3PL Americas

2014 IWLA Convention & ExpoPassing of the Gavel

World Bank — Logistics Performance Index

www.IWLA.com

PM 42128520

THE MAGAZINE OF IWLA IN NORTH AMERICA • SPRING 2014

™

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International Warehouse Logistics Association Steve DeHaan, president & CEO 2800 River Road, Suite 260 Des Plaines, IL 60018 USA Tel: (847) 813-4699 Email: [email protected]

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3PL AmericasTHE MAGAZINE OF IWLA IN NORTH AMERICA • SPRING 2014

™

Cover photo: IWLA staff

3PL Americas

2014 IWLA Convention & ExpoPassing of the Gavel

World Bank —Logistics Performance Index

www.IWLA.com

PM 42128520

THE MAGAZINE OF IWLA IN NORTH AMERICA • SPRING 2014

™

6 Invest 40 to Get 2000By Steve DeHaan

7 Off to a Good StartBy Tom Herche

9 IWLA Annual Convention Takes a Fresh Look at Diversity in the WorkplaceBy Scott McWilliams

12 Five Employment Law Trends in 2014 Every 3PL Should WatchBy Kerryann Haase Minton, Brian P. Paul and Sarah Flotte Porter

13 Future Issues of 3PL Americas

14 Connecting to Compete 2014: Trade Logistics in the Global EconomyBy Jean-François Arvis, Daniel Saslavsky, Lauri Ojala, Ben Shepherd, Christina Busch and Anasuya Raj

17 IWLA Events Calendar

18 The 2014 IWLA Convention & Expo: The Story in Pictures

22 Security and the Logistics Industry: Legal ConsiderationsBy Ann Christopher

24 Parke Warehouses: Adapting, Evolving, GrowingBy Kim Biggar

25 IWLA Food Council: Taking on Major Issues As It Ramps UpBy Kim Biggar

27 Advertiser Index

28 Improve Customer Service and Reduce Costs with Lean Management PrinciplesBy J.P. Joei

31 Put Positive Leadership into ActionBy Chip Scholz

33 Tactics to Reduce Small-Parts Picking ErrorsFrom Cisco-Eagle

3PL Americas — Spring 20146

PRESIDENT’S MESSAGE

Invest 40 to Get 2000

GOVERNMENT REGULATION is excessively overrunning our businesses. IWLA has been involved with many of the regulatory agen-

cies, and we have been very successful in working with Congressional staff and other organizations to help educate the agency staff and bureaucrats as to what a 3PL is and how it operates. We have been successful in writing lan-guage that is beneficial to our members and IWLA, via Pat O’Connor, who is being seen as a leader who is pulling the people and language together.

So what is the “40” investment? It is 40 hours from you and your com-pany’s executives in the campaigns of candidates that would be good for your business, your employees and your owners. We need to have Congressional oversight of the regulatory agencies and be involved in making sure that the regulations being proposed work within our industry. That means we need the people who can understand our businesses to be elected. It takes dollars and man power to get good people into office.

What is the “2000”? That is the number of hours for which you would have to pay in order to employ a full-time person whose whole job was to evaluate all of the new regulations and their effect on your business. That person would be responsible for discovering the rules and regulations, rec-ommending the action needed, developing the new policies and procedures, and ensuring that they are being implemented, just in case one of the agencies shows up to investigate. By investing 40 hours, you could well save the cost of those 2000 hours.

In the next three years, there is a window of opportunity. I believe that each of us needs to define how we are going to get involved and DO SOME-THING. Please do not sit on the sidelines and let it happen to you. You don’t do that in your business, so don’t do that with the government that affects your business. We all need to step up and get involved in the campaigns of candidates that can help the people involved in our businesses.

Look at our success with the Food and Drug Administration. Look at our success with the Minnesota sales tax on warehouses, our success with the Department of Labor relative to check card, and many more. It’s because we chose to get involved and not sit it out. We got in the game and we played hard and fair. We made a difference. Volunteer for a candidate’s campaign today. Your future is in your hands.

Steve DeHaan, CAE President & CEO International Warehouse Logistics Association

I believe that each of us needs to

define how we are going to get

involved and DO SOMETHING.

3PL Americas — Spring 2014 7

CHAIRMAN’S MESSAGE

Off to a Good Start

IWLA is truly off to a good start in 2014. New President & CEO Steve De-Haan hit the ground running. He made some internal changes that already

benefit the association and he has been well received by members he has met. I look forward to working with Steve during his first full year as our CEO.

The 2014 IWLA Convention & Expo, from March 23 to 25 in Phoenix, was a great success. We had more attendees, exhibitors and sponsors than ever before. The credit goes to our IWLA-member volunteers and to IWLA staff.

There has been a gradual shift for the IWLA Convention to include more content and educational opportunities. The 2014 event featured educational opportunities in the form of general session presentations, breakouts, and council and committee meetings. Attendees enjoyed keynote presenter and former Major League Baseball player Jim Abbott’s and economist and futurist Brian Beaulieu’s presentations.

So many members attended IWLA committee and council meetings that we had to bring in additional chairs. Even late in the day, during one of our last breakouts, more than 70 people packed one room. This level of engagement is a true indication of the value of attending the IWLA Convention.

The convention also included time to honor outgoing IWLA Chairman Paul Verst. Paul did a great job exerting his strong leadership style. He took the lead in hiring a new CEO for IWLA. The process took place over an eight-month timeframe with many pitfalls along the way. With Paul’s steady leader-ship, we came to a positive outcome hiring Steve DeHaan. Thank you, Paul.

Also at the convention, IWLA awarded the Jock Menzies 2014 IWLA Distinguished Service & Leadership award to retiring President & CEO Joel Anderson. Joel was a perfect candidate for the newly named award, which honors Menzies, former leader of the American Logistics Aid Network (ALAN) and a dear friend who passed away in 2013. Joel, as we all know, did a great job advancing IWLA for seven years. We hope we can build off the strength that Joel has given us. Thank you, Joel.

During the convention, we received great news that the State of Minnesota had repealed the sales tax on warehousing services that it enacted for the 2014 budget. IWLA members Richard Murphy and Kathy Forester with the Minnesota Warehouse Association (along with the IWLA Government Af-fairs Committee) led the effort to repeal. IWLA added fodder to the debate by funding a study that highlighted the effect of similar taxes in other states.

We’re looking ahead in other areas, too. I recently toured (with Steve DeHaan and others) the March 8–10, 2015, IWLA Convention & Expo site in Savannah, Ga. It’s a great city with a strong logistics history. We are very confident that IWLA Vice Chairman and 2015 IWLA Convention Chairman Rob Doyle will make next year’s event better than ever.

Yes, we are off to a good start!

Tom HercheChairmanInternational WarehouseLogistics Association

The level of engagement is a true

indication of the value of attending

the IWLA Convention.

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RECENTLY, the International Warehouse Logistics Association host-ed its 2014 Annual Convention & Expo, with the theme, “It’s About

Your People.” In keeping with that theme, one of the key panel discussions at the convention was “Diversity in the Workforce: Today and Tomorrow.” The panel featured three speakers: Karen Blackwell, manager for supplier diversity and development for Nestlé North America Procurement, Nelson Remus, president and CEO of Remar Inc., and André Thornton, president and CEO of ASW Global, LLC. Each of these leaders in the industry is an excellent example of why diversity in the supply chain industry is so crucial.

I had the pleasure of moderating this important panel discussion, so rel-evant today as the workplace is becoming increasingly diverse and our global economy continues to shift from the paradigms of old toward new frontiers. And though slow to adapt to these new shifts, the supply chain industry is beginning to really focus on the importance of diversity in the workplace from a different perspective. The panel discussion gave us an opportunity to talk about the goal of genuine diversity and inclusion in our industry and in the workplace.

Supply chain companies, like those in many other industries in the U.S., are becoming more diverse but still struggle to foster the systemic growth, infrastructure and supporting resources to truly cultivate diversity in the workplace at the management and leadership levels. During the panel discus-sion, we talked openly about the causes of this slow growth in diversity, the benefits of diversity in the workplace and steps to develop and grow a truly inclusive workplace diversity plan.

I opened the discussion with a quote from Bob Dylan’s well-known folk song from 1964, “The Times They Are A-Changin.” The popular Dylan song is often viewed as a reflection of the generation gap and of the political divide marking American culture in the 1960s. However, I believe its lyrics ring even truer today, but from a different perspective, especially as it relates to our in-dustry and the need to proactively take a smart and responsible approach to diversity in the workplace. The times they are a-changin, and we must do our best to close the diversity gap in our industry and stay in step or we will find ourselves lacking in intellectual resources, creativity, global contracts, indus-try growth, well-trained professionals and so much more in the years to come.

For the session panelists and me, the goals of the day included providing the audience with three key takeaways. They incorporated the following:1. A strong understanding of why diversity matters and the importance of it

from a business standpoint.2. The ability to identify areas of diversity that already exist within companies.

HUMAN RESOURCES

IWLA Annual Convention Takes a Fresh Look at Diversity in the WorkplaceBy Scott McWilliams

Supply chain companies still

struggle to foster the systemic

growth, infrastructure and supporting

resources to truly cultivate diversity

in the workplace.


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3. Strategies for using diversity in a positive way through the adoption of policies, shifts in culture and new management principles.Opening panelist Blackwell, who is currently respon-

sible for expanding the supplier diversity initiative at Nestlé North America, led the discussion in a direction that is often missed in the supply chain diversity and inclusion conversation today. She shared business-case examples to prove that increasing the volume of business done with diverse companies is consistent with sourcing, innovation and competitive best practices. Many of us in the industry are seeking to be or are vendors for Fortune 500 giants like Nestlé and may not have considered the importance of diversity within our companies as it relates to gaining and sustaining the business of said clients and prospects.

We looked at some successful diversity programs within smaller supply chain companies, including ASW Global, which, as Thornton said, has gone to great lengths to foster diversity within the company. “We put diversity on the front page of our mission statement and among the guiding principles of our company,” said Thornton. The company has implemented training programs for employees to explain the importance of diversity and has instituted policies to sustain a good rep-resentation of women and minorities in leadership. “This allows us to stay competitive,” said Thornton, “against larger companies by attracting talented individuals that

perform well and allow us to remain profitable.”When embarking on developing a highly intuitive

and evolving workplace diversity and inclusion program within one’s own company, starting with existing talent and resources is definitely the way to go. When I joined OHL (formerly Ozburn Hessey Storage Company) in 1990, we had 125 employees with $10 million in annual revenue and two locations. Our account base included only one foreign company and our management team only one African American and not a single female. We quickly came to realize this was not in line with busi-ness practices across other industries and we could not achieve significant growth and success without changing our approach to diversity and doing business. Mainly, we needed to implement real diversity and inclusion poli-cies for our internal talent pool and for those we would seek to recruit. Today, we have nearly 8,000 employees, annual revenue exceeding $1.3 billion, more than 130 locations, and clients and offices around the globe in 17 foreign countries. Our management team includes hun-dreds of managers who are women, people of various races and ethnicities, ranging in age from Baby Boomers to Millennials, the handicapped, veterans and those of various religions. Even with all of this growth and di-versity since our days in the early ’90s, we know there is more we can do and that true diversity and inclusion in the workplace is an ever-changing and evolving concept we must seek to improve upon each day.

Our last talking point during the panel session could have gone on through the rest of the day. First steps, tools and resources for developing strategies for adopting policies, management principles and shifts in culture to create the kind of diversity and inclusion programs and best practices that we had been discussing turned out to be the session hot topic. Where do we begin? Many in the panel audience wanted to know, once you have identified the gaps in your company’s approach to diversity and identified your existing resources, where to go to get help in developing and implementing a truly effective and sus-tainstable diversity and inclusion program within your company. Here are the top five suggestions and tips that came out of that part of the panel discussion.

1. Bring senior leaders within the company together to engage early in the journey. Executive alignment and com-mitment is critical to the success of a diversity program.

2. Once executive alignment and commitment is gained, seek strategic consulting services or an objective third party to support your company at all stages of the journey. An objective partner can provide guidance and support to take your company where it seeks to be to achieve desired results. Many local universities and di-versity and inclusion consulting agencies can lead your company down the right path for this part of the process.

3. Take part in an objective assessment of your com-pany at all levels to address the real issues and oppor-tunities, rather than the symptoms of the barriers you may have to achieving a robust diversity and inclusion


program.4. Education and development

is a key component of a diversity and inclusion strategy for companies that are in the beginning stages of launching their efforts, as well as those that have been committed to the journey for a period of time. Im-plementing ongoing training plans and programs at all levels, with mul-tiple touch points throughout the year, can ensure the kind of ongoing success you are looking for in your program.

5 Make sure you develop strate-gies with measurable objectives and practical, pragmatic action plans to create the solution you need to drive results and positive movement toward a diverse and inclusive com-pany. Measureable outcomes are im-portant to assessing where you are throughout the process and where you need to go. They will also be very important for continuous im-provement efforts.

The panel audience learned from a unique group of individuals who

have experienced the ups and downs of what it is to come from diverse backgrounds and what diversity means to the industry and their busi-nesses. They shared their insights about why diversity is an important component of our industry and why, as leaders, we need to embrace it for our success today and tomorrow.

Good leaders never put themselves in a place of comfort. They should always feel anxious about improv-ing their companies and understand that change is what drives success!

Scott McWilliams is Chief Customer Officer at OHL in Brentwood, Ten-nessee.

Left to right: Scott McWilliams, Karen Blackwell, Nelson Remus and André Thornton.


WITH the daily demands of running a successful 3PL business, it can be

difficult to keep up with the ever-changing trends creating liability in your workplace. The summary that follows provides an overview of the key trends in workforce liability that every U.S. 3PL should watch in 2014.

1. The EEOC’s and FTC’s Continued Pursuit of Background Checks

In 2014, for the first time, the Equal Employment Opportunity Commission (“EEOC”) and the Federal Trade Com-mission issued joint guidance addressing pre-employment background checks. The guidance focuses on criminal background checks and credit checks. While the FTC monitors technical compliance with the Fair Credit Reporting Act, the EEOC contin-ues to aggressively pursue its attack on the use of background checks in connection with hiring and recruitment on the grounds that criminal background checks and credit checks discriminate against a host of indi-viduals, including African-Americans, His-panics and men.

In 2013, the EEOC lost two significant cases where the EEOC alleged background-check discrimination against African-Ameri-cans, Hispanics and men. In 2014, the EEOC appealed its losses to two different federal circuit courts: the Fourth Circuit and Sixth Circuit.

On April 9, 2014, the Sixth Circuit re-jected the EEOC’s background-discrim-ination claims, citing a lack of reliable statistical evidence to show discrimina-tion. The Fourth Circuit should rule in the coming months. Given the EEOC’s recent reliance on background-check claims, the

WORKPLACE LIABILITY

Five Employment Law Trends in 2014 Every 3PL Should WatchBy Kerryann Haase Minton, Brian P. Paul and Sarah Flotte Porter

Kerryann Haase Minton

Brian Paul

Sarah Flotte Porter

EEOC may have to pursue its arguments to the U.S. Supreme Court. Every 3PL should be watching the development of this trend to ensure that its background checks are in compliance with the law.

2. Increased Litigation to Enforce the Americans With Disabilities Act

In 2013, for the first time ever, the EEOC filed more federal lawsuits alleging discrimi-nation in violation of the Americans with Disabilities Act (“ADA”) than any other form of discrimination. Though the ADA was amended in 2008 to significantly in-crease the number of individuals considered disabled by the ADA, many 3PLs have not changed their practices to enhance compli-ance with the ADA. Every 3PL should ensure its supervisors and human resources team are trained to identify requests for reason-able accommodation and to engage in the interactive process.

Further, if you have a leave policy that provides for a finite amount of leave before employment ends, you are an EEOC target for litigation.

On February 11, 2014, a federal district court in Illinois refused to dismiss one such case, which the EEOC filed against the United Parcel Service, Inc. (“UPS”). In EEOC v. UPS, the challenged policy requires that employees “be administra-tively separated” from employment after 12 months of medical leave. UPS is fighting back, arguing that the ability to regularly attend work and not miss multiple months on the job is an “essential job function,” as opposed to a standard used to screen out disabled individuals. The development of this case in 2014 will impact 3PL leave poli-cies across the country.


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3. Big Changes Ahead to Federal Overtime and Minimum Wage LawsOn March 13, 2014, President

Obama issued a memorandum directing the U.S. Department of Labor (“DOL”) to revise the regu-lations that define when employees are exempt from federal overtime requirements under the Fair Labor Standards Act (“FLSA”). Although the President’s memorandum does not detail how the DOL should revise its regulations, employers should expect major changes in how the Department defines those three widely used exemptions.

We anticipate significant pro-posed changes to the overtime ex-emptions, including a higher salary threshold, a greater number of em-ployees that must be supervised, and increasing the amount of time exempt employees must spend on administrative or supervisory du-ties. Though most of the press has covered the higher salary threshold, it is the other revisions that are likely to have the most significant impact on 3PLs.

The DOL likely will take months to issue proposed regulations, and there will be a period for “com-ments” by employers and other in-terested parties. While the timeline for implementing final regulations could easily be more than a year, 3PLs should follow these devel-opments closely, as the new regu-lations could alter how the work force operates.

4. When Do 3PLs Have to Pay Employees for Pre-Shift and Post-Shift Time?

On March 3, 2014, the U.S. Su-preme Court agreed to hear a case that could determine whether 3PLs must pay warehouse workers for the time they spend waiting to clear security checks at the end of their work shifts.

The case, Integrity Staffing Solu-tions v. Busk, revolves around work-ers at Amazon.com warehouses in

3PL Americas™

2014 IWLA CONVENTION & EXPO

It’s About Your People

THE MAGAZINE OF IWLA IN NORTH AMERICA • WINTER 2014

www.IWLA.com

PM 42128520

Future Issues of 3PL Americas

3PL Americas is the magazine of IWLA and provides members and non-members with news and informa-tion on concepts and best practices in warehouse and logistics management. The lead articles for upcoming issues are set well in advance. We welcome reader input on themes and articles for future issues.

Lead article themes and deadlines:

• Summer 2014 – Technology: Supply Chain Enabler (July 14, 2014)

• Fall 2014 – International Logistics

Operations (October 17, 2014)

• Winter 2015 – Pre-Convention

issue (January 16, 2015)

• Spring 2015 – Post-Convention issue (April 13, 2015)

Suggestions for authors, articles and themes can be submitted to [email protected].

Continued on page 16


GLOBAL LOGISTICS

Connecting to Compete 2014: Trade Logistics in the Global EconomyThe Logistics Performance Index and Its IndicatorsBy Jean-François Arvis, Daniel Saslavsky, Lauri Ojala, Ben Shepherd, Christina Busch and Anasuya Raj

THE FOURTH EDITION of Connecting to Compete: Trade Logis-tics in the Global Economy was recently released by the World Bank.

The report features the Logistics Performance Index (LPI), which the World Bank has produced every two years since 2007. The LPI measures the on-the-ground efficiency of trade supply chains, or logistics performance. This year’s edition covers 160 countries. Information in this article is from the report’s introductory summary; the full report is available at www.worldbank.org/content/dam/Worldbank/document/Trade/LPI2014.pdf.

Supply chains are the backbone of international trade and commerce. Their logistics encompasses freight transportation, warehousing, border clearance, payment systems and, increasingly, many other functions outsourced by producers and merchants to dedicated service providers. The importance of good logistics performance for economic growth, diversification and poverty reduction is now firmly established.

Although logistics is performed mainly by private operators, it has become a public-policy concern of national governments, and regional and interna-tional organizations. Supply chains are a complex sequence of coordinated activities. The performance of the whole depends on such government inter-ventions as infrastructure, logistics-services provision and cross-border trade facilitation.

Since the first edition, the LPI has shown that good policies matter to develop efficient supply chains but also that many developing countries still lag behind. The “logistics gap” evident in the first three editions still prevails and underscores the importance of consistent policies across sectors (trade, customs and transportation, for instance). The agenda and priorities are evolving. The imperative of facilitating trade through more transparent and consistent border clearance is now universally recognized – and set in stone in December 2013’s World Trade Organization Agreement on Trade Facilitation in Bali, Indonesia. New challenges of environmental sustainability, spatial planning, and the regulation and organization of services are receiving more attention, and not only in rich and emerging countries.

The LPI and its components help countries understand the challenges that they and their trading partners face in making their national logistics per-form strongly. The LPI complements, rather than substitutes for, the in-depth country assessments that many countries have undertaken in recent years, and many of them with World Bank support. The LPI scores are not to be overemphasized, however – a country’s actual ranking or score should not be interpreted in isolation, but instead whether it ranks among the best or worst

The LPI and its components

help countries understand the

challenges that they and their

trading partners face.


performers. The LPI allows leaders in government, business and civil so-ciety to better assess the competitive advantage created by good logistics and to understand the relative im-portance of different interventions. We hope that this fourth edition of Connecting to Compete will contin-ue to support this broad community of policymakers and stakeholders.

■ Summary and Key Findings

Improving logistics performance is at the core of the economic growth and competitiveness agenda. Policy-makers globally recognize the logis-tics sector as one of their key pillars for development. Trade powerhous-es in Europe like the Netherlands or in developing countries like Viet-nam or Indonesia see seamless and sustainable logistics as an engine of growth and of integration with global value chains.

Indeed, inefficient logistics rais-es the costs of trading and reduces the potential for global integration. This is a hefty burden for developing countries trying to compete in the global marketplace. Since 2007, the LPI has been informing the debate on the role of logistics for growth and the policies to support it in such areas as infrastructure, service provision and cross-border trade facilitation.

■ Logistics Performance Continues to Converge — Slowly

The results of Connecting to Compete 2014 point to Germany as the best-performing country, with an LPI score of 4.12, and Somalia as the worst, with 1.77 (on a scale of 1 to 5). (Germany was also the best performer over the period of 2007 to 2014.) A slightly converging trend from previous LPI surveys in 2007, 2010 and 2012 is also found in 2014, with lower-performing coun-tries improving their overall LPI scores more than higher-performing countries (see Figure 1).

The modest convergence since 2007 is explained by a perceived improvement in trade-supporting

infrastructure in low- and middle-income countries – and to a lesser extent in their logistics services and customs and border management (see Figure 2). This perceived im-provement attests to the success of developing countries in closing the transport-infrastructure gap with high-income countries.

■ If Service Delivery is Poor, Good Physical Connectivity is Not Enough

Infrastructure development has assured basic connectivity and ac-cess to gateways for most develop-ing countries, a fact consistent with trends in the LPI since 2007. Yet countries have been more successful in delivering quality for some types of infrastructure. Quality of infor-mation and communications-tech-nology infrastructure is regarded not only as the highest across all respon-dents, but also where the gap be-tween lowest and highest performers has narrowed the most, partly due to automation in border manage-ment. Conversely, rail infrastructure inspires general dissatisfaction. Rat-ings for other types of infrastructure vary by region.

Infrastructure services are de-livered by logistics providers that operate under very different environ-ments globally. Usually, the quality of the services they provide is per-ceived to be better than the quality of the corresponding infrastructure they operate. This “divide” between services and infrastructure quality is wider in air and maritime transport. Railroads, again, have low ratings almost everywhere. And low-income countries still score poorly on road freight services, despite having given them more policy attention recently. Acceptable services in infrastructure can be achieved in less-than-ideal circumstances, but differences in service quality can be substantial for similar levels of perceived in-frastructure quality, for operational excellence cannot be replaced or necessarily equated with good physi-cal “hardware.”

■ Trade-Facilitation and Border-Management Reforms MatterSupply chain reliability is a major

concern for traders and logistics providers alike. In a global envi-ronment, consignees require more certainty about when and how deliv-eries will take place. This increases the demand for quality in logistics services, posing challenges for pri-vate agents and for governments, all of which face pressure to facilitate trade while safeguarding the public against criminal activity, health con-cerns or terrorism threats.

Efficient border management is critical for eliminating avoidable delays and enhancing predictability in border clearance. Coordination

0

2

4

6

8

10

12

Uppermiddle income

Lowermiddle income

Lowincome

Percentage change

Source: Logistics Performance Index 2007 and 2014.

Customs InfrastructureQuality of logistics services

Figure 2 Percentage change in LPI component as measured against the highest performer, 2007–14

Percent

Source: Logistics Performance Index 2007, 2010, 2012, and 2014.

30

40

50

60

70

80

90

Topquintile

Secondquintile

Thirdquintile

Fourthquintile

Bottomquintile

2007 2010 2012 2014

Figure 1 LPI score as percentage of highest LPI score by LPI quintile, 2007, 2010, 2012, and 2014

0

2

4

6

8

10

12

Uppermiddle income

Lowermiddle income

Lowincome

Percentage change

Source: Logistics Performance Index 2007 and 2014.

Customs InfrastructureQuality of logistics services

Figure 2 Percentage change in LPI component as measured against the highest performer, 2007–14

Percent

Source: Logistics Performance Index 2007, 2010, 2012, and 2014.

30

40

50

60

70

80

90

Topquintile

Secondquintile

Thirdquintile

Fourthquintile

Bottomquintile

2007 2010 2012 2014

Figure 1 LPI score as percentage of highest LPI score by LPI quintile, 2007, 2010, 2012, and 2014


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ployees are required to engage in any work-related activi-ties pre-shift or post-shift.

5. New Trend for Temporary Worker Liability

Plaintiffs’ lawyers are quickly learning that tempo-rary employees make more willing plaintiffs than your employees – and now they can use your temporary workers to sue your clients. On January 12, 2014, a fed-eral district court in California refused to dismiss a case where Schneider Logistics, Inc.’s temporary employees are suing Wal-Mart, Schneider’s customer, for wage and hour violations and retaliations. This decision may send shockwaves through the 3PL industry.

In Carrillo v. Schneider Logistics, Inc., temporary workers of two staffing agencies were staffed at a ware-house run by Schneider Logistics, Inc. and unloaded Wal-Mart trucks at those facilities. The temporary employees allege that Wal-Mart acted as their employer based on requirements that Wal-Mart had in its contract with Schneider Logistics. If these temporary workers are suc-cessful, 3PLs will have to strongly consider what custom-er requirements are included in the customer contracts and whether those requirements expose their customers to lawsuits by 3PL employees or temporary employees.

■ Conclusion

A key step toward minimizing workforce liability is risk awareness. Following each of these trends will allow 3PLs to avoid being caught unaware of liability exposure. At Michael Best, we are a proud International Warehouse and Logistics Association member, and we strive to keep 3PLs knowledgeable about the constantly evolving laws impacting their workplace. Please do not hesitate to contact us with any questions or concerns.

Kerryann Haase Minton is managing partner of the Chi-cago office of Michael Best & Friedrich LLP. Brian P. Paul is a partner and Sarah Flotte Porter an associate in the same office.

The material appearing in this article is for informational purposes only and is not legal advice. Transmission of this information is not intended to create, and receipt does not constitute, an attorney-client relationship. © Michael Best & Friedrich LLP 2014

Nevada, who had to pass through security checks before the start of the shift and after the end of the shift as part of an anti-theft procedure. The workers, former temporary employees at Amazon.com contractor Integrity Staff-ing Solutions, said they spent nearly 30 minutes some days waiting for the security checks. In their lawsuit, the warehouse employees argued they must be paid for the security-check time, most of which would be overtime.

The Supreme Court’s decision to hear the Amazon.com class action, which now includes all Amazon.com warehouse employees across the country, could lead to a landmark decision that upends widely held views on whether security screening time and other pre-shift and post-shift time must be paid time.

While awaiting this ruling, 3PLs should revisit if em-

among government control agencies will remain essen-tial in trade-facilitation efforts – as will introducing best practices in automation and risk management in non-customs control agencies, which have generally been less open to reform. Accordingly, customs agencies have ob-tained higher LPI ratings than all other agencies in border management, particularly sanitary and phytosanitary control agencies and, less so, those enforcing standards.

The World Trade Organization Ministerial Confer-ence Agreement on Trade Facilitation, agreed to in December 2013 in Bali, marked the importance of the

facilitation agenda for expanding trade. After more than a decade of negotiations, the Bali Ministerial Declara-tion renewed the impetus to reform trade facilitation. It also created some urgency for the donor community to support developing countries in this endeavor.

■ Increased Complexity, No More Low-Hanging Fruit

Previous editions proposed a typology of four broad groups of countries, based on how friendly their logis-tics environments are. The most in need of attention

LAW TRENDS from page 13


IWLA Events Calendar★ 2014 IFWLA Annual Conference

May 18 to 21 – Chicago, Ill.

★ IWLA Members Benefit WebinarMay 22

IWLA-Canada WebinarsMay 22 and June 17 – See www.IWLA.ca for details

★ IWLA Warehouse Legal Practice SymposiumJune 18 and 19 – Chicago, Ill.

★ IWLA Education WebinarJuly 10: topic TBD

from the international community and their neighbors are those with governance challenges – such as postconflict countries and fragile states – as well as those challenged by their economic size or geography in their connectivity to global mar-kets – such as landlocked developing countries and small island states. Long-standing, but still mainly un-resolved, implementation challenges in these countries, such as regional transit regimes, remain key for fu-ture progress, as many now have the basic connective infrastructure in place.

Despite least-developed countries’ efforts to improve their logistics, there is a growing need for consis-tent action plans where complexity is higher, as in most middle-income countries. The notion that there may be low-hanging fruit that countries can pick easily is less and less true. Further, reforms with many stake-holders can be slow to implement, or even reversed by governance weak-nesses, as in Tunisia. More detailed, accurate data for policymaking and information sharing is needed. For instance, the trade-facilitation con-cept of “single windows for trade” requires alignment of several gov-ernment control agencies, which takes time, but can be implemented in least-developed countries, as in the Lao People’s Democratic Re-public. Countries that introduce far-reaching changes have combined regulatory reform with investment planning, interagency coordination and incentives for operators.

The LPI shows that the quality of services is driving logistics per-formance in emerging and richer economies, too (see Figure 2). Yet developing services like third-party logistics, trucking and forwarding may be the most complex policy agenda ahead, with few success sto-ries so far. In “logistics-friendly” countries, manufacturers and trad-ers already outsource logistics to third-party providers, and focus on their core business, while managing more-complex supply chains.

Supply chain sustainability con-

cerns are stronger in this edition. About 37 percent of respondents shipping to countries in the Organ-isation for Economic Co-operation and Development recognized a de-mand for environmentally friendly logistics solutions, compared with just 10 percent for low-income des-tinations. Governments will need to make long-term policy changes that improve and maintain the competi-tiveness of these services, consistent with fast-changing industry practic-es. So developing countries will have to not only consider the environ-mental footprint of their logistics, especially in trading with developed countries, but also revisit gover-nance and operational models for environmentally friendly infrastruc-ture and related transport modes,

especially railways, that seem to perform poorly relative to those in the top performers.

■ Conclusion

Logistics performance is strongly associated with the reliability of sup-ply chains and the predictability of service delivery for producers and exporters. Supply chains – only as strong as their weakest links – are becoming more and more complex, often spanning many countries while remaining critical to national competitiveness.

Comprehensive reforms and long-term commitments from poli-cymakers and private stakeholders will be essential. Here, the LPI pro-vides a unique reference to better understand key trade logistics im-pediments worldwide.

Jean-François Arv is , Danie l Saslavsky, Ben Shepherd, Christina Busch and Anasuya Raj are with The World Bank; Lauri Ojala is with the Turku School of Economics. Access their full report at www.worldbank.org/content/dam/Worldbank/docu-ment/Trade/LPI2014.pdf.

Logistics performance is strongly

associated with the reliability

of supply chains and the

predictability of service delivery

for producers and exporters.


A message from Past Chairman Paul VerstWhoever coined the phrase “how time flies” was absolute-ly correct. As I look back on my year as IWLA chairman,that is exactly how I feel. Further, I would describe theyear as bittersweet, humbling and rewarding.

My chairmanship began in March 2013 with Joel Andersonannouncing his retirement, and ended in March 2014 withmany of our members meeting our new president, SteveDeHaan, for the first time. What happened in between iskind of a blur.

Our association and its membership should be proud of ourmany accomplishments this past year. Some of the high-lights include: a record-setting convention in Orlando;revamping our dues structure to address member requeststo consolidate billings; resurrecting the Sustainability Council; initiating the Diversity Council;returning to financial stability; hiring Steve DeHaan as our new president ... the list goes on.

All of these successes could not have occurred were it not for the support and passion of ourmembers and staff. While there is not enough space to thank everyone, I do want to offer my grat-itude to the following: our Executive Committee members, who provided thoughtful recommen-dations and input to me; our board of directors, for your support during the entire year and, inparticular, for providing guidance to our search committee and remaining focused on our strate-gic plan; our 11-person Presidential Search Committee, for your time, talents and treasures inbeing there whenever and wherever I asked; our committee/council chairs and board liaisons, foryour diligence in moving our efforts forward; Joel Anderson, for staying the course and giving a

110-percent effort after announcing his retirement; our staff, for remaining focusedon the tasks at hand, allowing us to focus on finding our next president; our trust-ed advisors, for your continued commitment on behalf of IWLA members; ourPartner Members for your time, talent and treasures; and last, but certainly notleast, Steve and Karen DeHaan – a big welcome from all of our members.

My time as your chairman is now over, but I cannot think of anyone more qual-ified to lead the IWLA this next year than Tom Herche. Tom is a consensusbuilder, passionate about legal issues impacting our membership, as well asfinancial accuracy and improvement. Tom took the reins, running the 2014IWLA Convention & Expo, certainly among our most successful conven-tions.

Tom will lead a great Executive Committee, a strategic-thinking board ofdirectors, and a high-performing IWLA staff. Coming off our successesthis past year – increased membership, re-energized councils/commit-tees and financial stability – I look forward to walking the journey withall of you; God bless you all.

A convention that provides value has to be more than

clinking cocktail glasses and canapés, and the 2014

IWLA Convention & Expo certainly was! The event,

titled “It’s About Your People,” emphasized the

importance of investing in employees, embracing

diversity, understanding current issues in employment

law and health care, making professional connections,

and more.

When IWLA surveyed members a couple of years ago,

results revealed that the three most important reasons

to belong to the association are networking and

sharing of best practices, education programs and

management development, and government affairs

and advocacy. The 2014 Convention delivered

all of these things.

T H E 2 0 1 4 I W L A C O N V E N T I O N & E X P O

The 2014 IWLA Convention & Expo: The Story in PicturesBy John Levi

Pre-convention: Saturday, March 22 and Sunday, March 23Board members arrived in Phoenix before other delegates,for a meeting on Saturday. Sunday was a day of both meetings for several committees and councils and networking opportunities, including a golf tournament.

This is how the event looked.

President Steve

DeHaan

reports to the

board of direc-

tors, his first

opportunity to

speak to the

full board since

being hired in

late-fall 2013.

Above: At the

Welcome Reception,

directors greet

attendees entering

the Expo hall for

an evening of

networking.

Members of IWLA’s Executive

Committee–Rob Doyle, Steve

DeHaan, Paul Verst and Tom

Herche (left to right; not shown:

Mark DeFabis, Cliff Otto) – hear

reports at the board meeting from

the association’s councils and com-

mittees. The board meets three

times a year in person, and other-

wise as required on conference

calls, to ensure that the associa-

tion’s efforts are targeted to meet

the needs of members.IWLA’s booth at the Expo, where staff provided information about coming events,

the work of committees and councils, and using the convention app.

It’s not all hard

work serving on

the board!

1914.MagLayout 5/5/14 3:36 PM Page 2


A message from Past Chairman Paul VerstWhoever coined the phrase “how time flies” was absolute-ly correct. As I look back on my year as IWLA chairman,that is exactly how I feel. Further, I would describe theyear as bittersweet, humbling and rewarding.

My chairmanship began in March 2013 with Joel Andersonannouncing his retirement, and ended in March 2014 withmany of our members meeting our new president, SteveDeHaan, for the first time. What happened in between iskind of a blur.

Our association and its membership should be proud of ourmany accomplishments this past year. Some of the high-lights include: a record-setting convention in Orlando;revamping our dues structure to address member requeststo consolidate billings; resurrecting the Sustainability Council; initiating the Diversity Council;returning to financial stability; hiring Steve DeHaan as our new president ... the list goes on.

All of these successes could not have occurred were it not for the support and passion of ourmembers and staff. While there is not enough space to thank everyone, I do want to offer my grat-itude to the following: our Executive Committee members, who provided thoughtful recommen-dations and input to me; our board of directors, for your support during the entire year and, inparticular, for providing guidance to our search committee and remaining focused on our strate-gic plan; our 11-person Presidential Search Committee, for your time, talents and treasures inbeing there whenever and wherever I asked; our committee/council chairs and board liaisons, foryour diligence in moving our efforts forward; Joel Anderson, for staying the course and giving a

110-percent effort after announcing his retirement; our staff, for remaining focusedon the tasks at hand, allowing us to focus on finding our next president; our trust-ed advisors, for your continued commitment on behalf of IWLA members; ourPartner Members for your time, talent and treasures; and last, but certainly notleast, Steve and Karen DeHaan – a big welcome from all of our members.

My time as your chairman is now over, but I cannot think of anyone more qual-ified to lead the IWLA this next year than Tom Herche. Tom is a consensusbuilder, passionate about legal issues impacting our membership, as well asfinancial accuracy and improvement. Tom took the reins, running the 2014IWLA Convention & Expo, certainly among our most successful conven-tions.

Tom will lead a great Executive Committee, a strategic-thinking board ofdirectors, and a high-performing IWLA staff. Coming off our successesthis past year – increased membership, re-energized councils/commit-tees and financial stability – I look forward to walking the journey withall of you; God bless you all.

A convention that provides value has to be more than

clinking cocktail glasses and canapés, and the 2014

IWLA Convention & Expo certainly was! The event,

titled “It’s About Your People,” emphasized the

importance of investing in employees, embracing

diversity, understanding current issues in employment

law and health care, making professional connections,

and more.

When IWLA surveyed members a couple of years ago,

results revealed that the three most important reasons

to belong to the association are networking and

sharing of best practices, education programs and

management development, and government affairs

and advocacy. The 2014 Convention delivered

all of these things.


The 2014 IWLA Convention & Expo: The Story in PicturesBy John Levi

Pre-convention: Saturday, March 22 and Sunday, March 23Board members arrived in Phoenix before other delegates,for a meeting on Saturday. Sunday was a day of both meetings for several committees and councils and networking opportunities, including a golf tournament.

This is how the event looked.

President Steve

DeHaan

reports to the

board of direc-

tors, his first

opportunity to

speak to the

full board since

being hired in

late-fall 2013.

Above: At the

Welcome Reception,

directors greet

attendees entering

the Expo hall for

an evening of

networking.

Members of IWLA’s Executive

Committee–Rob Doyle, Steve

DeHaan, Paul Verst and Tom

Herche (left to right; not shown:

Mark DeFabis, Cliff Otto) – hear

reports at the board meeting from

the association’s councils and com-

mittees. The board meets three

times a year in person, and other-

wise as required on conference

calls, to ensure that the associa-

tion’s efforts are targeted to meet

the needs of members.IWLA’s booth at the Expo, where staff provided information about coming events,

the work of committees and councils, and using the convention app.

It’s not all hard

work serving on

the board!



Monday, March 24 and Tuesday, March 25Two full days of education sessions, keynote speakers, meetings and networking opportunities.


Outgoing Chairman Paul Verst welcomes delegates

to the convention in the opening ceremony.

Labor and employment law experts Kerryann Haase Minton

and Brian Paul give a dramatic, cautionary presentation,

complete with dos and don’ts for employers, focused on hot

issues in employment law. An article written by Haase Minton

and Paul, along with co-author Sarah Flotte Porter, appears

on page 12 of this issue.

At the Annual

Business

Meeting,

outgoing

Chairman Paul

Verst passes the

chairman’s gavel

to Tom Herche.

Above: Exhibitors at the Expo had some pretty positive feedback on their experience:

Roark Janis, ASP Global Services: “Opportunity to speak with clients, prospects and

competitors.”

Tamas Perlaky, Integral Group Inc.: “Received our money’s worth within the first 24

hours of the convention ... ideal venue to speak with customers and talk with qualified

prospects.” Economist Brian Beaulieu

presents his forecast for the

North American economy.

He believes that changing

economic conditions will be

favorable to the warehousing

and 3PL industry over the

next few years.

Above: New IWLA

Executive Committee

(l to r): Tom Herche,

Rob Doyle, Mark

DeFabis, Cliff Otto

and Paul Verst.

In his inspiring keynote presentation, Jim Abbott, former pitcher for the

NY Yankees, talks about adapting to challenges. Here, he and André

Thornton, president and CEO of ASW Global, LLC, demonstrate Abbott’s

one-handed method of throwing and catching. (An article from Abbott was

included in the Winter 2014 issue of 3PL Americas.)

Scott McWilliams moderates the “Diversity in the Workforce”

panel discussion; panelists (seated left to right) Karen Blackwell,

Nelson Remus and André Thornton talked about strategies for

building a diverse workforce. See the session-wrap-up article by

McWilliams on page 9 of this issue.

The IWLA Chairman’s Reception

& Banquet closes the convention

on Tuesday evening.

Joel Anderson, former IWLA president and CEO, accepts the first-ever Jock Menzies

Distinguished Service & Leadership Award, surrounded by past and present chairmen of

IWLA and his family. Presenting the award, Tom Herche said, “Joel Anderson dedicated

himself to making IWLA a powerful force in Washington and a leader in providing

educational resources to the warehousing logistics industry.”



Monday, March 24 and Tuesday, March 25Two full days of education sessions, keynote speakers, meetings and networking opportunities.


Outgoing Chairman Paul Verst welcomes delegates

to the convention in the opening ceremony.

Labor and employment law experts Kerryann Haase Minton

and Brian Paul give a dramatic, cautionary presentation,

complete with dos and don’ts for employers, focused on hot

issues in employment law. An article written by Haase Minton

and Paul, along with co-author Sarah Flotte Porter, appears

on page 12 of this issue.

At the Annual

Business

Meeting,

outgoing

Chairman Paul

Verst passes the

chairman’s gavel

to Tom Herche.

Above: Exhibitors at the Expo had some pretty positive feedback on their experience:

Roark Janis, ASP Global Services: “Opportunity to speak with clients, prospects and

competitors.”

Tamas Perlaky, Integral Group Inc.: “Received our money’s worth within the first 24

hours of the convention ... ideal venue to speak with customers and talk with qualified

prospects.” Economist Brian Beaulieu

presents his forecast for the

North American economy.

He believes that changing

economic conditions will be

favorable to the warehousing

and 3PL industry over the

next few years.

Above: New IWLA

Executive Committee

(l to r): Tom Herche,

Rob Doyle, Mark

DeFabis, Cliff Otto

and Paul Verst.

In his inspiring keynote presentation, Jim Abbott, former pitcher for the

NY Yankees, talks about adapting to challenges. Here, he and André

Thornton, president and CEO of ASW Global, LLC, demonstrate Abbott’s

one-handed method of throwing and catching. (An article from Abbott was

included in the Winter 2014 issue of 3PL Americas.)

Scott McWilliams moderates the “Diversity in the Workforce”

panel discussion; panelists (seated left to right) Karen Blackwell,

Nelson Remus and André Thornton talked about strategies for

building a diverse workforce. See the session-wrap-up article by

McWilliams on page 9 of this issue.

The IWLA Chairman’s Reception

& Banquet closes the convention

on Tuesday evening.

Joel Anderson, former IWLA president and CEO, accepts the first-ever Jock Menzies

Distinguished Service & Leadership Award, surrounded by past and present chairmen of

IWLA and his family. Presenting the award, Tom Herche said, “Joel Anderson dedicated

himself to making IWLA a powerful force in Washington and a leader in providing

educational resources to the warehousing logistics industry.”


Convention photos by IWLA staff: Joe de Guzman and Morgan Zenner.


SECURITY IN THE LOGISTICS INDUSTRY has been gain-ing significant attention in recent years – and no wonder. Recent esti-

mates indicate that cargo theft is a $35-billion “industry” on an annual basis in this country. To put this in perspective, annual employee theft is estimated at $15 billion and insurance fraud at $7.5 billion. Bank robberies account for a loss of only an estimated $65 million each year.

Crime as it pertains to the logistics industry is not discriminating; it touches all industry sectors, with food/beverage at the top of the criminal target list, followed by electronics and base-metal products. This article will address certain challenges and provide guidance related to security matters from a legal perspective.

1. The Deceptive Pickup: One area in which there has recently been a tremendous spike in criminal activity is the area of deceptive pickups, with a 763-percent increase over the past few years. Deceptive pickups generally involve thieves assuming the identity of a legitimate cargo carrier, and pick-ing up the loads prior to the authorized carrier arriving on site. This sort of exposure can be minimized by reviewing shipping documentation, and driver and carrier credentials. A formal sign-in/check-out process is helpful in mini-mizing this sort of exposure, with the logistics entity maintaining copies of shipping and driver documentation. Richard Scott, director of transportation for Kenco Transportation Services, has the following advice: “Never hesitate to ask a driver for a copy of his driver’s license for verification. If he challenges your request to provide documentation, beware! It is also a good idea to ask for the shipper (your customer) to provide a dispatcher contact (driver name/contact), which allows you to confirm the driver, carrier and vehicle identifi-cation when the driver arrives to pick up the load.”

2. Identity Theft: One also needs to be prepared for the potential of driver identity theft, which generally ends up with the same result as the deceptive pickup. Scott’s advice as outlined above is also helpful in minimizing loss due to identity theft, especially with respect to having the carrier’s dispatcher confirm drivers. It should be noted that a criminal activity in this area may involve collusion from the inside. Consequently, it is always prudent to moni-tor interaction between drivers and personnel, staging practices and locations.

3. Dropped Trailers: Distinct from the deceptive pickup but closely related is the dropped-trailer scenario. Many 3PLs, as a standard practice and/or as a result of client pressure, will allow trailers to be dropped by carriers. This is really done as a convenience for carriers that might arrive after standard busi-ness hours. A different scenario entails the 3PL loading a trailer in advance, making it available for a carrier to arrive after hours for pickup of the load.

Although providing for dropped trailers is a common practice, it is certainly not without risk – especially if the trailers are placed in an unsecured lot and there is no formal verification process for loads arriving and/or departing. A

3PL SECURITY

Security and the Logistics Industry: Legal ConsiderationsBy Ann Christopher

Crime as it pertains to the logistics

industry is not discriminating.


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3PL could be held responsible for the loss of not only a load, but also the trailer itself in the event that the dropped trailer mysteriously disap-pears and/or is taken under suspect circumstances. This poses a signifi-cant dilemma for the 3PL, especially if it is under pressure to permit the arrival of loads after hours, but with-out client approval for costs associat-ed with keeping the warehouse open during non-standard business hours.

It is prudent for 3PLs to notify their clients and carriers that they do not recommend or endorse the practice of dropped trailers in a formal communication such as the following.

Dear Customer:In order to provide the most rea-

sonable service and protection to our customer base, Warehouse ABC will immediately implement the fol-lowing procedures:

(1) Warehouse ABC will not ac-cept dropped trailers after hours unless Warehouse ABC employees are available to receive and unload

the trailer;(2) Warehouse ABC will not load

trailers without evidence that such trailers will be picked up by a carrier immediately upon loading; and

(3) Lot access will be restricted to Warehouse ABC personnel.

Should the nature of your op-eration require that alternative ar-rangements be made, Warehouse ABC will require that you sign an addendum to our current warehous-ing agreement identifying any appli-cable risk issues.

Thank you for your support.If a client or carrier continues to

insist upon dropping trailers after receiving such communication, it is advisable to have the company sign a hold-harmless release, indemnify-ing the 3PL from any loss or damage to the trailer and/or its contents.

4. Inventory Management: In-ventory management is a critical component of the 3PL’s function, but one must assess the involve-ment and interaction of the client when determining the 3PL’s ability

to adequately perform this function. For example, a client may wish to perform cycle counting or a physical inventory. However, if the 3PL does not perform these functions directly, the accuracy of the client’s inventory count is questionable. A 3PL must never rely upon inventory counts as performed by its client.

Similarly, one must assess what parties have access to the invento-ry-management system. Is the 3PL operating off a customer system, does the client potentially have ac-cess to the 3PL’s inventory-manage-ment system, or are dual systems utilized? Furthermore, what is the potential for user error or system malfunction? Without question, the more entities that have access to the inventory system the greater the likelihood is for inventory data to be misrepresented or potentially altered. This can be problematic, especially in the event that a client wants to be able to view or monitor its inventory in some manner. One



BY NORTH AMERICAN STANDARDS, Parke Warehouses is a very old company, at 160 years old. To remain viable for so long,

the company has reinvented itself a few times over the years to meet chang-ing conditions. President Bruce Stoddard believes that evolution has been the key to the company’s longevity, and continues to influence its management team’s outlook. “Parke has changed with the times,” says Stoddard, “to take advantage of opportunities present in the time.”

In 1854, Virgil Parke bought a livery business in Decatur, Illinois, and, in 1863, established a retail farm-implement company. In 1886, Virgil and his son, Guy Parke, created a construction-materials busi-ness, which flourished as the industrial city grew. Father and son also operated storage rooms for household goods, making their entry into the warehousing industry.

In 1947, Guy’s son William became treasurer of the company, bringing his longtime friend and associate David Stoddard in as secretary and assistant treasurer. The management group began to commit more to commercial warehousing, primarily storing supplies,

materials and finished products reflective of the city’s manufacturing base, things like rubber, tires, oil, washing machines and so on.

In more-recent years, as Decatur’s manufacturing strength has diminished, Parke turned its focus to the area’s robust agriculture and food sector. The company now concentrates on food and food-ingredient handling, beginning with food-grade warehousing in the mid-1970s. In 1995, approached by a large corn and soybean producer to bag bulk cornstarch, Parke launched itself into the toll-processing business. It has since added blending and packaging to its offerings. This part of the business now brings in 45 percent of the com-pany’s revenue and employs half of its workers.

Looking to grow, Richard (Dick) and Bruce Stoddard, David’s sons – who joined Parke in 1975 and 1996, respectively – established a presence in La-fayette, Indiana, in 2000, with new company 307 Warehousing & Logistics. From a 400,000-square-foot warehouse in this relatively small market, the company offers warehousing and transportation services with same-day ac-cess to many key larger markets in the Midwest. Like Decatur, Lafayette has a strong agricultural base. Having been steeped in the Parke tradition of going where opportunities present themselves, Dick and Bruce extended that think-ing to benefit from prospects in a new location.

With over 800,000 square feet and more than 80 employees in Decatur alone, today’s Parke is the outcome of continued responses to conditions and opportunities.

MEMBER PROFILE

Parke Warehouses: Adapting, Evolving, GrowingBy Kim Biggar

“We need to be good stewards

of the legacy handed to us.”



WHILE STILL IN ITS INFANCY, IWLA’s Food Council can already claim a significant

victory for the third-party-logistics industry in the U.S. At a meeting with the FDA in April 2013, several IWLA members and the association’s Washington, D.C. repre-sentative Pat O’Connor had the opportunity to clarify the role of 3PL providers for the federal agency.

Bruce Stoddard – one of the meet-ing attendees, the Council’s board liaison and president of Parke Ware-houses in Decatur, Illinois – says that legislators and regulators simply don’t understand what 3PLs do; this was made clear by the rules proposed by the FDA to implement the Food Safety Modernization Act. Those rules, as originally written, would have involved “a lot of negative consequences for 3PLs,” says Stoddard, “that were unintended by the writers.”

“The IWLA members who met with FDA’s rulemak-ing team in Washington, D.C.,” says O’Connor, “were instrumental in educating the FDA officials who will write the final rules.”

Responding to the FDA’s proposed rule entitled “Cur-rent Good Manufacturing Practice and Hazard Analysis and Risk-Based Preventive Controls for Human Food,” the IWLA pointed out the role of the 3PL as a service provider to the product owner. The rule’s requirements, says Stoddard, were written with manufacturers or product owners in mind. Participants in the meeting emphasized to the FDA that 3PLs should be exempt from some of the rule’s constraints, and the FDA agreed, asking IWLA to provide the language to appropriately exempt them. Consequently, 3PLs engaged solely in the storage and handling of packaged foods that are not exposed to the environment would not be subject to the controls specified in the rule, if the FDA adopts IWLA’s proposed language.

Several members rallied around this initiative and came up with a potential solid win for the industry. The result is a rule that will help to protect the public, without imposing onerous and unnecessary costs and efforts on 3PL providers.

IWLA COUNCIL UPDATE

IWLA Food Council: Taking on Major Issues As It Ramps UpBy Kim Biggar

■ Establishment of the Food Council“Seeing that the association had something to offer

members in this area,” says Stoddard, “Peter Wilson and I talked to the board about starting the Food Coun-cil.” They and former IWLA president Joel Anderson envisaged a group that would “keep its ear to the rail in Washington” and provide education to members on

food-handling issues.The Food Council met for the first

time in September 2013 at IWLA’s Legislative Fly-in Washington, D.C. So far, membership in the Council is

undetermined, but its value has clearly been recognized. In a recent survey, 202 IWLA members indicated an in-terest in the Council. At the 2013 IWLA Convention & Expo, organizers anticipated the participation in a Food Council session of about 25 people; probably twice that number turned up, and a larger room was needed.

Until the Council’s role and activities are defined and its membership quantified, there is no cost to participate in its meetings and initiatives. Whatever cost for mem-bership is decided on – when it’s decided on – Stoddard expects that it will be reasonable and well worth it. The group foresees offering a series of one-hour webinars, as well as occasional in-person seminars.

Co-chaired by Wendy Schaefer, operations manager at Standard Distribution Co. in Cedar Falls, Iowa, and Peter Wilson, president of Sonwil Distribution Center in Buffalo, N.Y., the Council is currently seeking input from IWLA members on what they believe the group’s objec-tives should be. As Schaefer notes, the Council needs to know what the association’s members want in order to direct its efforts. For now, making that determination is a key area of focus.

■ Issues to Tackle

Because the Food Safety Modernization Act (FSMA) is introducing such consequential change to American food-safety law, it will necessarily be the focus of much of the Food Council’s work until the related rulemaking is finished.

For example, another issue for 3PLs in the FSMA re-

Food-safety audits and certifications

are under the microscope of the FDA.


thought is to incorporate contract language that addresses this issue, similar to the following:

In order to assure accountability and control for any inventory trans-actions, Client will supply docu-mentation history to validate any discrepancies that need to be rec-onciled. Client shall provide unique sign-on identification for all of its users, with time and date stamp of all inventories, and receiving and shipping transactions. Should ad-justments be required, system entries can be changed only via a separate adjustment entry. Client will limit menu access to “Read Only” for Client’s managers and staff. Only Warehouse ABC staff will have ac-cess to complete transactions involv-ing inventory balances and status. Warehouse ABC shall have no li-ability for data integrity in the event Client personnel have the potential to manipulate inventory data.

At first glance, one might assume that a client would challenge such language and refuse to agree to in-sert the provision as part of a con-tractual agreement. However, if it is explained that this is for the client’s protection as well (after all, doesn’t

the client wish to monitor users and their activity?), a client is often re-ceptive to incorporating such lan-guage as part of the contract.

5. Crime Coverage: Asking ven-dors, including temporary staffing agencies, to maintain crime coverage is certainly prudent. A 3PL can make this a standard contractual require-ment when negotiating a business opportunity with a vendor. Naturally the 3PL will want to receive a certifi-cate of insurance issued by the ven-dor’s insurance carrier. It is important to verify that the vendor’s crime cov-erage extends to property of others through a third-party endorsement to ensure that coverage extends to inventory in the warehouse environ-ment. It is also a good idea to inquire as to the vendor’s employee-back-ground-screening process. Never per-mit a vendor to be unescorted while on site, if at all possible.

6. All Accounts are Not Created Equal: Last, but not least, all ac-counts are not created equal. In oth-er words, evaluation of the inventory value (including the potential value on the black market) is an impor-tant consideration when evaluating security considerations. Article 7 of the Uniform Commercial Code

lates to the FDA’s proposed rule for its Foreign Supplier Verification Pro-gram. While there’s not much argu-ment from industry that a program of this nature – designed to verify that foreign suppliers are meeting FDA standards – is required, the particular program proposed by the FDA is problematic for 3PLs.

The proposed rule states that veri-fication of suppliers is to be done by the importer of the food or food ingredient. The complication here is that, under the wording of the rule as proposed, U.S. warehouse operators might be construed as “importers” and thus responsible to inspect the overseas facilities of suppliers. The FDA needs to be able to identify the party responsible for a product’s safe-ty and security, but it’s certainly not in anyone’s best interest to consider a 3PL that party. A clearer definition

holds the warehouse operator to the “reasonably careful man” stan-dard. As one would expect that a heightened level of security would be utilized by a reasonably careful man for products such as cigarettes, elec-tronics and pharmaceuticals, a 3PL should discuss security expectations, requirements and costs with its cli-ents. The client should be aware of and approve the facility’s security program. Either the client or the 3PL can suggest enhancements to be im-plemented, at the client’s expense. If the client fails to pay the costs asso-ciated with security enhancements, the 3PL should maintain documen-tation of that refusal and send the client a written disclaimer.

Highlighted above are just a few considerations when evaluating 3PL security from a legal perspective. Of course, the list can go on and on. And, as technology and criminal activity are constantly evolving, so is the importance of addressing secu-rity from a legal perspective.

Ann Christopher is Vice President and Corporate Counsel at Kenco in Chattanooga, Tennessee and can be contacted by email at [email protected].

in this rule of who is really answer-able through the program would be beneficial to 3PL providers, and is currently being looked at by IWLA.

Food Current Good Manufactur-ing Practices (cGMPs) are also being modified through the FSMA. Wilson notes that the Food Council will be monitoring the proposed changes, responding if necessary, and educat-ing members on compliance. The cGMPs cover processes related, for example, to allergen controls, sanita-tion practices, temperature require-ments, maintenance of and access to records, and employee health.

Food-safety audits and certifica-tions are under the microscope of the FDA. Stoddard refers to the cur-rent situation in the food industry as “an alphabet soup of auditing standards and agencies,” particu-larly on a global scale, rife with dif-

ferent standards and no easy way to determine which are adequate. The reality of global food supply chains makes obvious that a worldwide auditing standard would be a boon for the industry.

There are several standards – in-cluding those of AIB International, the Global Food Safety Initiative, the British Retail Consortium and the Safe Quality Food Institute – that are recognized, say Wilson and Stoddard, as rigorous and compre-hensive; these are the standards that many 3PLs are already adhering to, and being audited against, having been spurred on to do so by their customers. Food-safety audits of 3PL operations are not currently required by law, but both customer requirements and risk-management planning point to the value of adopt-ing high audit standards.

SECURITY from page 23


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Editorial and Advertising

Disclaimers

The editorial contents of this publi-cation are educational and informa-tional in nature, and not intended as minimum standards, or legal or other professional advice.

The International Warehouse Logis-tics Association has endeavored to include appropriate and accurate statements, but disclaims any and all warranties and/or responsibility for the statements or their applica-tion. Users should confer with their professional advisers for specific in-put and assistance concerning their respective projects.

Any expressions of opinion or per-spective by authors of articles in-cluded in this publication are not necessarily those of the IWLA.

The inclusion of commercial adver-tisements in this publication consti-tutes neither a recommendation nor an endorsement of the product or service advertised. Although the In-ternational Warehouse Logistics As-sociation will not knowingly publish a false or misleading advertisement, no attempt has been made to verify the contents of advertisements in-cluded in this publication unless other than as set forth in writing by IWLA.

■ Current Operations

Under the leadership of Dick and Bruce Stoddard, who’ve worked to-gether at Parke’s helm for 18 years, the company has expanded its op-erations in food processing and han-dling, investing in robotic and other technologies specific to those func-tions.

When Parke set out in the toll-processing business, employees were hand-stacking 50-pound bags of blended corn starch on pallets. Recognizing that this practice was both unsustainable for workers and production-limiting, management committed to this new line of work, purchasing robotic palletizers that allowed for increased output. The company has since installed food-grade equipment to weigh and blend both dry and liquid ingredients, and is looking at options for new soft-ware to further information flow and scheduling in its toll-processing work.

To help achieve its productivity targets, Parke also uses what Bruce Stoddard describes as “the latest in WMS software” to benchmark and measure performance against its KPIs. Measuring productivity is critical, notes Stoddard, to man-aging and improving performance. While productivity is important, it is the third of three components in the company mantra for employees – “Safety, quality, productivity” – and is emphasized in that order, says Stoddard.

Because Parke’s warehousing business is largely pallet in/pallet out, its picking and packing require-ments are relatively low compared with industry norms, meaning that

its staffing requirements are lower than might be expected of an opera-tion of its size. Of its 80 employees, half are engaged in the more-labor-intensive toll-processing work, on one of three daily shifts.

A longstanding company run by a succession of owners involved for prolonged stretches, Parke has de-veloped a culture that values long service. (Guy Parke was at work on the day he died at age 98; David Stoddard worked until the week before he died at 92.) The company has several long-term employees – apart from the owners – who, says Stoddard, “know the operations in-side and out.”

While Dick and Bruce anticipate being involved in some way as long as they have a financial stake in Parke, they foresee handing off day-to-day management well before their predecessors did. They have, in fact, already brought Gavin Stoddard, Dick’s son, on board as treasurer and CFO, and are grooming him to eventually take over. When they leave, he and his brother, says Bruce, will lend their experience to the in-coming management team, but will “get out of the way.” He believes that the team will be very capable, having been educated and trained to carry on to the benefit of the compa-ny. Clearly, a solid succession plan is in place. Bruce takes that seriously: “We need to be good stewards of the legacy handed to us.”

“Fresh ideas and bright young minds will develop this business to best suit future needs,” says Stod-dard. He believes that Parke will, as it always has, adapt to meet new conditions and profit from new op-portunities, and thrive regardless of what’s in store.■

In July 2013, the FDA published a proposed rule to establish a pro-gram for accreditation of third-party auditors to conduct food-safety au-dits. The Food Council will certainly be keeping an eye on developments with this rule.

For Schaefer, being involved in the work of the Food Council is crit-

ical for at least a couple of reasons. Staying informed about and having an impact on legislation that affects her company and its customers is key to doing her job as well as pos-sible. Beyond that, it’s also crucial to ensuring that consumers have safe food that they don’t have to worry about eating.■

PARKE from page 24


THE TERM “LEAN” was used by researchers to describe car manu-facturer Toyota’s business model in the 1980s. The most basic definition

of lean management is the elimination of waste to provide the highest level of value to customers. Although manufacturers were the first to adopt lean principles, the application of key strategies is beneficial to any type of ware-housing or distribution industry, including the 3PL industry.

The nature of the 3PL business drives inefficiencies. There is no guarantee that a customer you have today will be with you eight months from now. The type of inventory handled also changes, so it is not uncommon to plan to re-ceive pallets and then find that the product is in cases. These scenarios make storage profiling and long-term planning difficult.

Unfortunately, the majority of 3PL facility owners have yet to implement any lean principles. Unlike industries that may have stable, predictable in-ventories and long-time customers with needs that do not change frequently, 3PL storage warehouse owners do face some challenges that require tailoring activities to fit their needs.

While larger companies have more resources to implement a comprehen-sive lean management program, smaller operations can use an à la carte ap-proach to select specific strategies that can be easily implemented to produce efficiency improvements as a beginning step. There are four key areas of focus in lean warehousing and distribution operations that produce efficiencies for 3PL storage facility owners:

1. Storage

Profiling product and storage needs helps owners develop the best con-figuration to optimize space utilization and to make it easy for employees to locate bins, pick items and complete orders.

Addressing storage inefficiencies is one way small warehouse operators can put themselves on par with larger operators. Not only is space used efficiently, but organizing storage to help employees work faster and more accurately also expands the volume the warehouse can handle.

While larger companies may have staff and technology to evaluate space, profile storage needs and design storage layout, smaller companies often do not have staff to perform these tasks. Contracting with an outside expert to perform the analysis is a viable option. The contract could be month to month or for a one-time effort. It is important to remember that storage profiling is most effective when it is ongoing, so if an expert is hired once, plan to repeat the profile and analysis when the company adds a new customer, handles a new product, or adds a number of new SKUs to inventory.

OPERATIONS MANAGEMENT

Improve Customer Service and Reduce Costs with Lean Management PrinciplesBy J.P. Joei

Unfortunately, work measurement is

one task that most 3PL warehouse

operators do not see as necessary.


2. FoundationSetting the foundation for a lean

organization depends on the com-mitment and ability of the manage-ment team. The process involves knowing your business, standardiz-ing business practices, organizing the work environment to enhance pro-ductivity, utilizing tools to support change and establishing processes to promote continuous improvement.

While some organizations may choose to hire a lean manager, the transformation to a lean organiza-tion can occur without dedicated lean staff. The real requirement is top-management support of the phi-losophy and inclusion of all employ-ees as the initiatives are developed and implemented. Engaging all staff – top management, supervisors and front-line employees – leads to the creation of the foundation for a lean organization.

The first step is a thorough re-view of your business to identify business processes that are in place, methods used by employees, areas in which opportunities for improve-ment exist, cost reductions that can be achieved by increasing efficiency and tactics that make life easier for employees.

One important tool for organiz-ing your business is the 5S principles:• Sortation – Keep things sorted

and separated properly. Remove unneeded things, materials and merchandise.

• Straightening – Arranging, orga-nizing, streamlining, simplifying your processes and methods to make it easy for workers to work in the most efficient manner.

• Shining – Your operation needs to be clutter-free, trash-free, with housekeeping maintained at its highest. Keeping your warehouse clean is not a process, it’s a men-tality.

• Standardization – Standardiza-tion has to do with the consistent application of the first three S’s. It’s monitoring and making sure that we continually apply our best practices and maintain the consis-tency of the way we do things.

• Sustaining – Sustaining is the maintenance of a productive, sta-bilized work environment as a process of continuous improve-ment. Goals and standards should require sustained compliance. Monitor constant buy-in of your employees.Creating a foundation for a lean

warehouse operation requires an investment of time to educate and train employees. For this reason, top managers need to drive the process throughout the business to prevent the excuse of “we are too busy to attend training.” When the philoso-phies of reducing inefficiencies and continuously improving are identi-fied as key components of everyone’s responsibilities, the value of invest-ing in lean management strategies is realized.

3. Just-in-Time

In manufacturing, Just- in-Time (JIT) is a strategy to reduce the amount of unused inventory to lower costs in the business. In warehouse operations, JIT addresses inefficiencies in work processes and labor management.

The first step is to perform a de-tailed and systematic analysis of every aspect of an operation through direct and close observation of the work and consultation with manag-ers and employees. It is impossible to get a feel for the many tasks per-formed in a warehouse in any other way. Following observation, the cre-ation of process charts and standard operating procedures set the stage for work measurement.

Productivity improves under a measurement program, not as a re-sult of faster motions, but rather as a result of encouraging employees to apply themselves more continuously to the task, to develop the proper skills and to avoid time-consuming interruptions.

A contractor can help with the detailed and systematic analysis of the business operation, as well as de-velopment of standardized process-es. This does not require a long-term commitment and it does give 3PL

facility operators access to expertise and breadth of knowledge that most companies do not have in-house.

Unfortunately, work measure-ment is one task that most 3PL warehouse operators do not see as necessary. The reasons are varied, but the fact that most warehouse managers have come up through the ranks of the company means many managers assume they know what is happening in the business.

While there are technology solu-

A Few Minutes of Wasted Time (Over and Over) Equals Big Costs

One of the benefits of a detailed review of what happens during a work day is the discovery of “little” things that add up. A typical example of wasted time is the five minutes at the start of a shift, at the first break, at lunch, at last break and at close out. While the few minutes are not obvious wastes of time, the effect is dramatic. Say you have a crew of 15 pickers. Each picker wastes 5 minutes five times a day= 25 minutes per person per day= 375 minutes per day for 15 people= 1,875 minutes per week= 8,437 minutes per month= 141 hours per month= around $32,000 per year, depending

on pay rate

tions for work measurement, or-ganizations without a warehouse management system can collect the data required for analysis with pen and paper. The staff at New Orleans Cold Storage’s Houston facility dis-covered the benefits of measuring work when they used a simple form to track work by each employee. Re-viewing the wide variation in results from employee to employee helped staff identify and investigate reasons for the differences. Not only did NOCS’s work measurement identify opportunities to support workers; the act of tracking their performance also increased employees’ sense of accountability. NOCS posted re-sults, indicating average time to


accomplish tasks and identifying which employees were above and below the average.

Production increased throughout the workforce, as employees became more aware of performance expec-tations. Also, we are all competi-tive; knowing that someone else is performing the job more efficiently inspires everyone to improve.

The NOCS staff used the follow-ing strategy that I recommend. At minimum, on a daily basis, a 3PL facility management team should:• Track hours worked in each area

(not including breaks/lunch)• Track total pieces or units worked

(cases, pallets, etc.)• Calculate each area’s units per

hour (UPH)• Post results for everyone to see (if

allowed)• Once, if not twice, a week, talk to

each employee individually who has a UPH that is below the aver-age of the group, and ask why they are below and what they need to improve

• If you want to set a standard, take the average UPH and increase it by 20 percent. Talk to employees who are below the “standard.”A common concern of 3PL facil-

ity managers who do not have an automated system to measure work is the time it takes to review and analyze handwritten forms. A com-pany that has two shifts each day with 25 employees working each shift will have 50 forms each day, or a total of 250 forms each week. While a staff member must take the time to extract data and input it into a spreadsheet, the return on invest-ment of time is well worth it. On average, it will cost you five percent of productivity to use a manual pro-cess; however, you have the potential of getting a 10-percent improvement in productivity, if not more, by do-ing so.

When measuring work, don’t for-get to have regular conversations with employees. Those who are per-forming below the standard may be able to identify issues you can address to improve performance.

Lighting levels, clear identification of item locations, access to equip-ment throughout the warehouse or an inefficient work process are just a few issues employees may be able to bring to your attention. Employees who are routinely top performers can provide insight to their success, which helps management develop best practices to implement across the workforce. As the process of work measurement continues, em-ployees will become more proac-tive and suggest opportunities for improvement, even if they are high performers.

4. Culture

Although lean tactics, tools and strategies can be implemented in stages, a 3PL warehouse or distribu-tion company can become a lean organization only by transforming the company’s culture. A lean com-pany’s culture has the following at-tributes:• Customer first – Goal is to provide

high-quality, high-value service• Learning/training centric – Ensure

staff is well-prepared for their re-sponsibilities

• Principled leadership – Leaders are open with employees about goals, expectations and results

• Trust and respect – The work en-vironment promotes open com-munication between all staff

• Team driven – One person does not drive the process

• Continuous improvement – Suc-cesses are celebrated but processes are constantly reviewed for more improvement opportunities.A Burris Logistics facility dem-

onstrates the benefits of pursuing lean transformation. The facility implemented a comprehensive lean program that incorporated auto-mation of many tools through its warehouse management system. A 15-to-20-percent reduction in the cost per case was the result, as the company focused on becoming more efficient. Automation of the measurement process also enables real-time monitoring of employee performance, so a supervisor can

see if an employee is not meeting performance goals. Talking with the employee during the shift in which the problems are occurring gives the supervisor a chance to remove barriers affecting the employee’s per-formance.

■ Why lean?

One of the greatest myths about lean management is that it focuses only on employees and tasks. In reality, lean benefits the entire orga-nization and actually improves the management team’s performance. In a lean organization, management is responsible for removing barriers to employee productivity. Rather than blame employees for not perform-ing, managers and supervisors use the data and the tools they have available to address issues affecting efficiency. Just as employee produc-tivity is measured, a supervisor or manager who is not doing a good job supporting workers is easily identified in a lean organization.

Throughout implementation, remember that lean initiatives are people-centric. Education and ongo-ing communications to share infor-mation and solicit input are critical. The best approach is to get everyone involved. Implementation may take longer when time is spent training employees, but the results are more substantial and are sustainable when everyone understands the program. This team approach is a core com-ponent of lean management.

Taking an intentional step to im-prove your company throughout all areas provides value to your custom-ers, reduces employee turnover and improves your bottom line. Start small by addressing storage and just-in-time initiatives that produce im-mediate successes. As enthusiasm for the process grows, the foun-dation for a sustainable continu-ous-improvement environment is established and the long-term goal of transforming the culture can be achieved.

J.P. Joei is president and CEO of Argent Consulting Group.


EXECUTIVE COACHES and leadership consultants who encour-age positive thinking often encounter cynical, hard-driving executives

with a close eye on the bottom line.But positivity coaches have come a long way since author Norman Vincent

Peale preached his positive philosophy of faith and miracles. Today’s positive-psychology movement is founded on empirical evidence. Social scientists have documented the benefits of optimism, emotional intelligence and happiness in multiple work settings, including the executive suite and diverse corporate departments.

Positive leadership is no longer seen as a feel-good ideal with little bearing on business results. Mounting evidence reveals that leaders who focus on their people’s positive contributions, while concomitantly achieving tough goals through measurable tasks, enjoy higher performance outcomes.

While positive leadership is gaining traction among CEOs and executive teams, it’s often poorly understood and implemented. University of Michigan management professor Kim S. Cameron, PhD, offers a cogent definition of the term in his new book, Practicing Positive Leadership: Tools and Techniques That Create Extraordinary Results (Berrett-Koehler Publishers, 2013):

“Positive leadership refers to the implementation of multiple positive prac-tices that help individuals and organizations achieve their highest potential, flourish at work, experience elevating energy and achieve levels of effective-ness difficult to attain otherwise.”

As you’ll soon see, positive leadership is a bit more complex than express-ing a positive attitude, celebrating progress, encouraging team spirit, fostering positive relationships and espousing inspirational values.

■ The Problem-Focused OutlookUnfortunately, positive practices are truly rare in today’s businesses and

organizations. Two key factors explain our natural resistance to them:1. Physiologically speaking, our brains have a built-in negativity bias.

We’re hardwired to pay more attention to issues that threaten our survival (negative trumps positive). Crises and problems dominate work agendas. Managers’ daily tasks necessitate solving problems.

2. Leadership pressures steal attention from positive practices, in spite of our best intentions. Successful leaders must override the tendency to focus on problems. Only then can they experience the high performance that positivity can unleash.

While positive executives are perceived to be better leaders, they’re none-theless in the minority in today’s competitive business environment.

■ Finding the Right Feedback RatioA wave of research reveals that “soft”-sounding positive management

practices – including conversations focused on dreams, strengths and pos-sibilities – motivate people to achieve higher performance levels. In fact, the more positive the message, the better the outcome.

LEADERSHIP AND MANAGEMENT

Put Positive Leadership into ActionBy Chip Scholz

Positive leadership is no longer

seen as a feel-good ideal with little

bearing on business results.


But managers are charged with pointing out what’s not working and solving real problems – a mandate that presents a potentially frustrat-ing leadership dilemma: How can you focus on the positive when con-tinually forced to make corrections?

Richard Boyatzis, PhD, a profes-sor of organizational behavior at the Weatherhead School of Man-agement at Case Western Reserve University in Cleveland, offers a pragmatic solution: “You need the negative focus to survive, but a posi-tive one to thrive. You need both, but in the right ratio.”

Let’s quantify this ratio. Effective leaders should provide three to five positive messages for every negative message they deliver. Your commu-nication must skew heavily toward the positive, without sounding in-congruent or inauthentic.

If you fail to “accentuate the posi-tive” (to borrow a World War II-era song title), you remain stuck in nega-tive feedback patterns that demoti-vate your staff.

■ Positive Benefits

Barbara L. Frederickson, PhD, a psychologist at the University of North Carolina, Chapel Hill, has found that positive feelings expand our awareness of a wider range of possibilities. Instead of looking at what needs to be fixed, we learn to focus on what’s right and needs to be reinforced. When we emphasize pos-itive deeds, using positive language, achievement builds upon itself.

From a neurological standpoint, positivity activates reward centers in the brain, triggering the release of mood-elevating neurotransmitters like dopamine. As we experience pos-itive feelings, we begin to crave more of them. This cascade propels us to chip away at the small steps needed to achieve our larger goals and ulti-mately sets the stage for success.

Indeed, Dr. Frederickson’s psy-chology research shows that a positive focus bestows greater at-tentiveness, more flexible problem-solving, enhanced creativity and improved teamwork.

■ Two Opposing Brain FunctionsWhen we’re involved in technical

conversations or analytical tasks, the brain’s frontal lobe is engaged. When conversations shift to people, feel-ings and social considerations, the inner brain – which controls emo-tions and memories – is activated.

Neurological imaging confirms that results-focused leaders give their frontal lobes a greater work-out, while socially minded leaders exercise their inner brains more dili-gently.

In general, organizations tend to promote leaders for their technical prowess – not their social skills. Sur-veys show that goal-oriented bosses have a 14-percent chance of being perceived as great leaders by their employees. The number drops to 12 percent for socially skilled bosses.

But when bosses are both socially and technically adept, they have a 72-percent chance of being viewed as great leaders. The bad news? Only 1 percent of bosses excel at both skills in the real world.

■ A Trickle-Down Process

Positivity is a principle, not a concrete process like Six Sigma or TQM. Successful implementation, therefore, requires clearly defined action steps.

Think of positive leadership as a funnel. It starts with the organiza-tion and its overarching mission and values; permeates leadership teams through the expression of positive values and goals; helps managers im-plement and track progress; and en-sures individuals know what needs to be done to ensure rewards.

■ Organizational Positivity

You can identify companies that have implemented positive practices throughout history and compare their mission statements with those of their less successful counterparts.

Positivity clearly appears in mis-sion statements that value societal contributions over the desire to be No. 1:• Ford Motor Company: democra-

tize the auto (1900s)• Boeing: bring the world into the

jet age (1950s)• Sony: obliterate the image of poor-

quality Japanese goods (1960s)• Apple: one person, one computer

(1980s)Compare those mission state-

ments with the following:• GE: be No. 1 or 2 in every market

we serve• Walmart: become the first trillion-

dollar company• Philip Morris: knock off R.J.

Reynolds as the No. 1 tobacco company

• Nike: crush Adidas• Honda: destroy Yamaha

Improving your leadership pos-itivity starts with your organiza-tion’s mission statement. Ask “why” you and your organization are here; then, ask yourself and your col-leagues what you/they want on a deeper level:• Which values merit coming to

work each day to give your best?• How will you inspire staff and

customers to make contributions that benefit the world?

■ The Language of Positive Conversations

Begin to transform your team by attaching everything you say and do to higher goals and values. Leaders, managers and staff become more positive when they pay attention to the language they use. Rephrase statements in a more positive way, without sacrificing honesty or real-ity.

If you’re in a management posi-tion, everything you say – or don’t say – is magnified, making it even more important to boost your posi-tive/negative ratio. Aim for at least a 3:1 (ideally, a 5:1) ratio of positive to negative statements. When you adopt this approach, others will fol-low suit.

■ Show Frequent Appreciation

Instead of seizing on what your people do wrong, start to verbally



OPERATIONS

Tactics to Reduce Small-Parts Picking ErrorsFrom Cisco-Eagle

SMALL PARTS are more difficult to count, measure and handle than larger items. They tend to

involve more errors than case picking and larger compo-nent orders do. If you are having errors, you should try to define the causes – and the suspects abound. Can you find out what’s causing the errors? Once you do, what hap-pens next? Here are some common causes and solutions to this issue.

Consider the DMAIC (Define, Measure, Analyze, Improve and Con-trol) process of Six Sigma as you start the pathway toward process improve-ment. The first step of DMAIC is “de-fine.” So define your error problems: Why are the counts off? Is it because wrong SKUs are picked, or incorrect quantities? What are the common mispicks? What are the root causes of the various errors?

When you know that, you can systematically pursue and eliminate the problems.

Are similar parts slotted too close to each other?Solution: Slot items that are visually different or dif-

ferent sizes next to each other so that mispicks based on size or appearance are minimized. If you mix the slot bin so that small and large SKUs are side by side, it is more difficult to make mistakes and easier to get the order right. For instance, a shelving unit could mix bins for small parts with bulk storage of larger ones, either on dif-ferent shelf levels or beside each other on the same level.

How do you deal with high-quantity picks?It’s much easier to pick three of an item than it is 43,

and as workers get deep into long shifts, picking mistakes become increasingly common even for the most focused, best workers. Counting can be interrupted; focus can be lost. It’s one of the more difficult challenges related to picking problems.

Solutions:1. Voice picking systems may be greatly helpful. Some

voice systems will serve as a calculator. With a quantity of 43 fuses, for example, the user can pick five fuses at a time and inform the system with each pick of the quanti-ty selected; the system will ensure that the user completes the job with the correct quantity.

2. Without a voice picking system, a system of buddy checks or double counts is advisable when it comes to keeping pace with large quantities of small items.

3. Prepackage small parts into bags, in rounded quan-tities. When a quantity order of 53 comes in, the picker can simply grab five bags of ten and three loose parts to

fill it. This means that whoever packs the bags must be right, but that can be done outside the pressure of fill-ing active orders. Your suppliers may agree to provide prepackaged parts so that you don’t have to do this job when you receive the inventory. If you sell odd quantities, you’ll have to have

two slots for each item, one for the loose pieces and one for the bagged parts.

(a) Separate the each-picks and the bag-picks on your pick lists. This way, you can pick one bag of, say, 25 parts on one line, and the remaining individual picks on another. This takes away the need for order pickers to do any quick math on the quantity, since it’s separated for them into different items on their lists.

(b) Provide clients incentives to buy in your desig-nated quantities. For instance, if your sales history says that you frequently sell 25 or fewer of a SKU, provide discounts at 15 to encourage customers to purchase the bagged quantity, rather than 12 or 13. Some operations simply require a minimum purchase or fixed quantity of an item to simplify picking. The potential for this concept depends on your market and situation.

Do you have adequate space for picking and packing?Are the pick zones and pick towers maxed out? When

pickers are crowded, they tend to make more errors.Solution: Find ways to slot and move pick positions

so that there is ample operating room, particularly in storage positions where many small parts are picked. Clutter and crowded workstations breed mistakes. This is certainly an instance where 5S, or lean layouts, can help, by giving people a work space organized for ef-ficiency and effectiveness. You should consider conveyor workstations that help organize the work area, providing space by tightly slotting packing and other supplies into designated areas, and away from the work surface.

You want people’s minds engaged as

they pick orders, so it’s a good idea

to vary jobs, pick positions and so on.


acknowledge what they’re doing right. Track and recognize progress. Most people perform better when they know they’re appreciated.

This doesn’t mean you should suppress bad news. Instead, learn to deliver it in ways that are less likely to provoke defensiveness. Your ex-ecution will improve with practice. You’ll gain respect and better per-formance outcomes, whether you’re participating in official performance reviews or simply engaging in casual conversations with employees.

■ In Search of Best Practices

If we want to staff our organi-zations with executives who can deliver results and demonstrate su-perior social skills, we need to start identifying them during the hiring and promotion processes.

Hard-driving, results-oriented ex-ecutives can learn to improve their social skills by retaining an experi-enced executive coach. Additionally, organizations can improve their ef-fectiveness by:1. Hiring for both technical and so-

cial skills2. Training equally for social skills

and technical savvy3. Rewarding goal attainment and

displays of social skill4. Promoting those who demon-

strate social prowessCEOs and upper management

must realize that rewarding achieve-ment alone has its limits. Organiza-tions must provide incentives for behaviors, even when people take risks and “fail up.”

Leaders are most effective when they demonstrate social intelligence. Luckily, they can be trained, coached and rewarded for improving their fa-cility in this arena. Specific areas of emphasis should include:1. Day-to-day conversations2. Performance reviews and feed-

back3. Incentives, rewards and pay4. Connecting mission to values

Identify and implement action steps on multiple fronts, from the seemingly simple communication efforts to the more complex ones. Changes at the individual level will begin to transform your working environment into a finely oiled ma-chine that values both results and social relationships.

Employing positive leadership practices will allow employees at all levels to flourish at work, sustain energy and reach peak performance. Conversations that highlight peo-ple’s strengths, desires and dreams generate emotions and energy that drive us to work harder. The more positive the discussion, the more positive the outcome.

Chip Scholz is head coach of Scholz and Associates, Inc. and serves on the IWLA board of directors.

LEADERSHIP from page 32

Are order pickers sliding into a rut?People doing the same thing for

long hours, day after day can get into a rut; things blend. This is a serious problem in small-parts picking oper-ations, since many components are so similar. Mistakes are easier to make.

Solution: You want people’s minds engaged as they pick orders, so it’s a good idea to vary jobs, pick positions and so on. Change the slot or bin location when errors with a particular part emerge. This forces the picker to pay more attention to the location, rather than rely on what she thinks she knows.

Is it possible for pickers and pack-ers to switch jobs, to help them un-derstand each others’ situations, and to vary the workload and avoid the kind of visual and mental “blend-ing” that plagues functions? Bonus: You start to cross-train your people so they have a greater understand-ing of the various types of parts and roles in their workplace.

If you are picking by weight, is the equipment properly calibrated?

Conveyors with integrated weigh scales and an acceptable tolerance can be extremely accurate, if your system is correctly configured. Your system may allow you to route “ex-ception” lanes when the scale senses an incorrect weight. If you utilize scales, be sure the scales are regu-larly calibrated to ensure accuracy.

Solution: Routinely maintain, check and calibrate any in-line or freestanding scales used in the order-picking process.

Are there just too many employee errors?

People sometimes make mistakes no matter what processes are in place, and small parts is one of the likeliest places for quality-control issues.

Solution: You don’t need to set up multiple checks for every order. You can focus on what’s most important and what is most likely to be wrong. Utilize manual quality-control pro-cesses, double-counts and personnel changes to reduce error rates. This

may include a mix of the following:1. Check the work of pickers who

have a history of errors. Find ways to improve or remove those pickers.

2. Assign permanent employees to check the work of seasonal temps or new employees. Your experienced team members can often correct is-sues related to the technique or lack of knowledge of new workers.

3. Use your best workers to do the most important work. For “hot” orders, highly important customers or critical orders, utilize your most experienced pickers and double check their work.

4. Focus on the worst offenders.

For problematic parts, assign qual-ity control/double checks every time until you have reduced error rates.

5. Do your pickers believe pro-ductivity is more important than quality? Find out if the picking team feels pressure to increase through-put to the point that it could cause errors. If pickers believe that man-agement is more concerned with productivity than quality, error rates can increase.

This article is provided by Cisco-Eagle, a national material-handling-systems and equipment provider headquartered in Dallas, Texas.

Pallet Racks Platforms and Pick Modules

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Jeff Andrews, VP Sales 714-315-0009 [email protected] www.elitestoragesolutions.com

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