As the first squadrons of C-47s swooped into Berlin's Wiesbaden airfield to deliver milk, flour and medicine to desperate residents in June 1948, their progress was being watched with interest from afar—and not just by the Soviets who had ordered the city's blockade. Back in the United States, a New Jersey high school student was keeping a careful eye on the events taking place 4,000 miles away, following the daily progress of the Berlin airlift via newspaper and radio accounts as Allied forces moved 2,326,406 pounds of food and other supplies via 278,228 flights into the city. That experience left the student, Bob Delaney, with a fascination with logistics—the complexities of getting vast amounts of materials from point A to point B. In fact, it set the course for his career.
Fast forward to the late '70s, when Delaney found himself on Capitol Hill, advocating for the deregulation of the U.S. transportation industry. As ammunition in the fight, he used statistics demonstrating the potential economic benefits of deregulation. Ultimately, Delaney's side prevailed and transportation was deregulated. But it wasn't long before opponents began mobilizing efforts to re-regulate the industry, forcing him to dust off his economic model, this time using it to track gains in efficiency made possible by deregulation. Those annual tallies eventually grew into his annual State of Logistics report, a nationally recognized study of logistics efficiency that measures total domestic logistics costs as a percentage of gross domestic product.
Today, Delaney has achieved wide renown as one of the logistics industry's true thought leaders. He recently spoke about his career with DC VELOCITY Editorial Director Mitch Mac Donald.
Q: You set a career path for yourself in this industry at a very early age. Why logistics?
A: I was fascinated by the scale of the Berlin Airlift as a kid, which sparked an interest in the military. By the time I was ready to graduate from high school, the Korean War was on. I was only 17, but I figured I would eventually be drafted anyway, so I enlisted as a regular army person. I selected logistics and I selected Germany, and I got both.
Q: So your first immersion in logistics was in a military capacity?
A: Yes. It was at Fort Eustas, Va. In those days, they called it "movements control." Ironically, my son ended up in the same place in the same branch of the military. We like to joke that I put the missiles in the ground in the '50s and he took them out in the late '80s.
Q: I assume you learned a lot about the way logistics operates in the military sector?
A: The methods and procedures we followed were very statistical ly driven. We didn't worry about cost.We just worried about performance. From a performance point of view, we were superb. It's still that way today.
Q: How were you able to apply what you learned later on in the private sector?
A: One of the things I realized shortly after going into logistics for a private company was that transportation regulation led to huge inefficiencies. The military didn't have that problem because its operations were exempt from regulation. They could negotiate their own costs with railroads, motor carriers and so on.
Q: You could foresee how things would change if we switched to a market-driven model way back then?
A: Without question. In the military we had to run economic models to see where we could gain the most efficiency. It shouldn't have been a surprise to anyone familiar with those models that deregulation in the private sector would change things in a very profound way.
Q: Where did you begin your private-sector career in logistics?
A: When I was discharged from the military, I went to what was called the Academy of Advanced Traffic. I studied there for a year and then began taking evening classes at New York University at the same time I started working for Nabisco.
Q: Nabisco seems to be where many, many people cut their teeth in logistics. That was really quite a proving ground at one point, wasn't it?
A: It sure was. They did many smart things to develop in-house talent, some as simple as assigning seats in the company cafeteria. You would meet with the same six people every day. There would be a senior guy in his 50s, there would be some supervisors in their late 30s, and there would be two or three younger guys. The conversati on might be about baseball, but you learned during lunch.
Q: Where did you start with Nabisco?
A: I got into traffic management at their carton plants, one in Illinois and one in New York. Then I became responsible for operations at some ice cream cone plants. The experience at Nabisco, though, expanded on what I had learned about logistics in the military and brought me into the realms of distribution and forecasting.
Q: This was managing essentially what we would call the larger enterprise, which was both the transportation and the distribution center activity?
A: Right. And at about this time, we began to think about logistics, and especially distribution, as a connected whole.
Q: What did you do next?
A: I left Nabisco and went to work for Monsanto in 1962. I was also beginning to develop my graduate degree thesis. But I couldn't use Monsanto as a case study—there were too many confidentiality issues. So I went back to Nabisco and asked if I could use the Biscuit Division's distribution operation as a case study. They agreed.
Q: What was the focus of the thesis?
A: The point of the paper was that you could manage the process without reorganizing the company. You had to have a vision and you had to have integration and you had to have people who understood service and cost control. You didn't have to elect one person to dominate the thing, which had been popular in the day; they call it the one-man theory. Peter Drucker, who was then on the faculty at New York University, read the paper and gave it an "A."
Q: What did you do after graduate school?
A: After I finished graduate school in 1966, I went to St. Louis with Monsanto. Later, I moved to Pet Inc., also in St. Louis, in hopes of get ting a chance to run an overall distribution network. At the time, Pet's chairman was developing an internal consulting team of five or six specialists who could operate inside the businesses and also, if one of the businesses got off track, go in and replace management for a while. Being part of that team was a good job and I learned a lot, but we weren't very popular within the company, as you can imagine. We were almost like " internal affairs" in a police department, showing up only when something was wrong and something unpleasant had to be done.
We didn't know it at the time, but Pet was up for sale. Ultimately, the buyer turned out to be the Illinois Central Railroad, of all things. As the company headed into the acquisition, International Paper came along with a job offer and I accepted.
Q: What was your role there?
A: Well it's interesting the way it evolved. Efforts to deregulate the transportation industry were just getting under way.Most of the companies I had been with had been quietly in favor of deregulating the transportation industry, and International Paper was no exception.
This was all taking place in 1976 and 1977. The Carter White House got behind the idea of deregulation, mostly because they were scared to death that Ted Kennedy, who was taking up the cause, might gain the support of big business at their expense. To avoid that, they assigned a guy named Ron Lewis to work the issue. Lewis asked for help from International Paper. International Paper gave him me. They simply said, "Help him any way you can." They also, of course, wanted to be sure that whatever came out by way of deregulation was favorable to International Paper.
Q: Let's fast forward now to how all this came to a point where you essentially created the annual state of the industry report.
A: That came about in a strange way. In 1973, in the course of updating a textbook they had written, some academics I had worked with created a methodology for calculating logistics growth. When I was given responsibility to try to guide the deregulation legislation, I took that methodology and applied it. What it showed was that we were growing inventories. Logistics costs in total were increasing faster than inflation. Inflation was bad enough, but logistics costs were driving inflation higher. We used those results to prove the economic value of deregulation.
Q: After the deregulatory battle was won, you kept on using the methodology to calculate overall logistics costs. Why?
A: We had to continue. We still had 41 states that were regulating transportation. We also had a lot of anti-deregulation forces fighting hard to win back some ground. They were arguing that we had made a mistake, that the pendulum had swung too far, that it was time to let it swing back. So by updating and publishing the data, we could show not only that we were making progress post-deregulation, but also that there was a lot of potential for furt her progress.
Q: How can we make logistics even more efficient?
A: Finished product inventory is where I have been focusing my attention in the last two or three years. We need to drive down those inventory levels even further. The raw material inventories and the work-in-process inventories are managed efficiently. The finished product inventories are not.
Q: Is there an operations answer or a technology answer?
A: We're still studying that. Ultimately, the answer might be to stop letting marketing issues drive so many business decisions. Consider that when we put lemon flavor in Coke, for example, we created 57 new stock-keeping units! Companies, I think, need to start looking very hard at how big their product line is. Do you need it all? Are all those products contributing to profitability? Lever Brothers is cutting its number of brands from 1,600 down to 400. That's a big gamble the company is making there. They won't be growing their top line, but they are going to be increasing their bottom line.