Logistics costs are too high!

If that sounds like a declaration of war, it should. Industry has been trying to take costs out of its distribution and transportation operations for years. Despite those best efforts, it's not working as well as some have expected.

"The one business area where costs are going up as a percentage of sales is logistics," said John Jazwiec, company results leader of RedPrairie, last month at RedShift, the supply chain execution sofware provider's annual user conference.

What's more, Jazwiec added, the results of too many information technology projects have not matched the promises laid out in the sales presentation.

It's not surprising that many cynical executives are reluctant to make new investments, he adds.

The answer: software providers need to evolve from companies that sell and implement software, to partners who work with their customers after the sale to achieve measurable logistics results. "It all comes down to ROI," said Jazwiec.

That message was echoed by several keynote speakers. Bruce Richardson, senior vice president at AMR Research said that he was recently asked by a reporter whether supply chain management was just another dot-com fad that burst along with the Internet bubble.

"How can the supply chain be a fad when you're competing against Wal-Mart and Dell?" Richardson asked. "Order fulfillment is now the center of performance and profitability for many companies. Logistics will only become more visible in the future."

Some attendees at RedShift had already heard that message and were achieving measurable results for their companies.

Patrick Byrnes, director of distribution and inventory management, Georgia-Pacific, described how G-P used a combination of materials handling equipment, and transportation and warehouse management systems to save more than $10 million in transportation costs; reduce labor costs by 10%; and increase service levels by 8%.

Meanwhile, Hershey Foods has demonstrated real reductions in distribution costs after implementing a gain sharing program with their network of third- party logistics providers, according to Ken Miesemer, Hershey's director of distribution operations. Under the incentive program, Hershey shares a percentage of measurable savings in its logistics costs with its third-party logistics providers.

While the results of those and other cost-reduction programs presented at RedShift were impressive, they were merely successful cost-cutting battles. For the company that wants to stay ahead of the competition, the war to achieve measurable logistics results will continue. Supply chain execution systems and materials handling equipment are the tools that will help them win, agreed presenters.