if he's heard F.Scott Fitzgerald's dictum "there are no second acts in American lives," Dr. Robert C. Lieb has paid it no heed. Nearly 40 years ago, Lieb, a professor of supply chain management in Northeastern University's College of Business Administration, designed and implemented the Bostonbased school's first transportation and logistics program. Then, 20 years later, he launched a groundbreaking series of studies on third-party logistics services that have earned him international acclaim.
In addition, Lieb has written seven books, including Third Party Logistics: A Manager's Guide (2000), and numerous articles in academic journals. His research has been cited in The Wall Street Journal, BusinessWeek, The Journal of Commerce, and The Financial Times. He is on the editorial boards of a number of logistics and transportation journals, including the Transportation Journal, The Journal of Supply Chain Management, and The International Journal of Logistics: Research and Applications.
Lieb's primary areas of research and consulting are third-party logistics, global logistics, and strategic planning. Each year, he conducts surveys in the United States, Europe, and Asia that focus on the state of the third-party logistics industry. In recognition of his work in the field of third-party logistics, in 2000 he was selected as a finalist for The Outsourcing World Achievement Award by PricewaterhouseCoopers and Michael F. Corbett Associates.
Professor Lieb received his B.A. in Commerce from Duquesne University, and his M.B.A. and D.B.A. from the University of Maryland. He spoke recently with DC VELOCITY Group Editorial Director Mitch Mac Donald about his work in education and research, and offered a tongue-in-cheek take on what we'll be calling supply chain management in the future.
Q: As a career academic, how did you come to specialize in logistics and supply chain management?
A: I was an undergraduate in what they called "commerce nature" at Duquesne University in Pittsburgh. I wasn't really planning to be an academic. I came from a railroading family—my father, my grandfather, and all the uncles were in rail operations on the Pennsylvania Railroad. Clearly, there was some gene pool influence on my career path.
I had no interest in the field at all until my senior year, when I took a course in transportation. It really piqued my interest. I asked the professor who taught the course where one might go if interested in graduate-level studies in this area. At that point, Maryland was one of the stronger programs in the area, and he suggested that I apply there. I did and managed to get into the program with an assistantship. The thought process was that I was going to do a quick two-year M.B.A., get out, and make a lot of money.
Q: Of course, what college kid doesn't? When did that change?
A: Part way through the program, they called me in and said "We think you ought to think about teaching." I had never for one minute thought about teaching. They wanted to give me a fellowship for somebody who wanted to teach at the university level. I basically argued with them for about two months, saying that I didn't have any intentions of ever teaching. The guy said, "I want you to take it anyhow." We went back and forth, back and forth. Finally, I agreed to give it a try. I went into the classroom, the light bulb went on, and that was it.
Q: You tasted it and you loved it.
A: Immediately. A couple of years later, I was about to hit the job market. I interviewed with probably a dozen schools that had established programs at that time. I talked to all the programs and had a bunch of offers in hand, but I didn't necessarily like any of the programs, so I decided I wanted to start my own. Almost everybody I talked to in the graduate school thought that was a terrible idea. They advised me to go someplace that had an established program and spend a few years there and then maybe some years down the road, go off and start my own.
Q: Sounds like reasonable advice.
A: It was, but I didn't take it. I went to the American Economic Association's annual meeting. They have these things just before Christmas in New York. I ended up at lunch sitting down between Roy Sampson and Martin Farris, who had authored a book that was sort of the classic transportation book for years and years.
These guys were probably in their 60s at that time and I was in my early 20s. I sat with them and explained my little dilemma. I asked them, "If you guys were my age, what would you do?" Without hesitation, both of them told me to go start my own program. I finally found an opportunity to do just that at Northeastern University. So in 1970, I went to Northeastern with the idea of building a transportation and logistics program.
Q: Which was all new at the school?
A: All new for them. They had no courses in the transportation or logistics areas at all.
Q: So there it is.
A: So here we are, 38 years later. My thought was I would probably be there for three or four years and then move on.
Q: Well, you were only off by three or four decades! Over the course of developing the program at Northeastern, you embarked on a lot of research initiatives, most notably your work on third-party logistics services. How did you come to focus on that?
A: I was always involved in research writing. I had done books on labor in the transportation industry, on mergers, acquisitions, and things like that. I had been reading about a company that was starting to think about outsourcing as a logistics activity. I decided to look at how widely these types of services were used. You couldn't tell from the articles whether this was something that two companies were using or something that 200 companies were using. I decided to find out. I contacted the UPS Foundation in 1989 to get a grant to do a survey of the Fortune 500 companies to find out if they were using any third-party logistics services. UPS came back and said, "Why should we care?"
Q: Not a warm response, eh?
A: Not at all. After their initial response, I told them they might very well want to get into the third-party logistics business themselves. They said "OK," and gave me a check. I did the first survey in 1990 and it turned out 38 percent of the respondents were already using some third-party logistics services.
Q: That was probably a surprise.
A: It was more than a surprise. It was shocking. Interestingly, almost a year to the date of their awarding me the research grant, I got a phone call from a guy saying, "I'm with UPS in Atlanta and I would like to come have dinner with you." I asked: "Why? Who are you?"He said: "I am the head of the new third-party logistics unit for UPS." So within a year, they went from funding a study of third-party logistics providers to setting up a dedicated 3PL unit.
Q: When did you decide to turn your work into an annual study?
A: I thought it was going to be a one-shot type of thing. I did the study, gave a presentation on it, and wrote a couple of articles on it. Then the phone started ringing on a daily basis. Companies that were thinking about becoming 3PLs, companies that were thinking about using 3PLs, and companies that were thinking about building alliances with 3PLs all wanted more information. That went on every day for the next couple of years. It was clear there was a lot of interest. We launched the second survey in 1994 and expanded the research to include both a survey of 3PL users and a survey of 3PL providers.
I wanted to get the providers' take on this emerging trend so I would have perspectives from both sides of the field. For the next 10 years, I ran both of those surveys in parallel. But then, a whole bunch of other surveys on the users' side of the business started cropping up. So in 2004, I decided to focus on just the provider side of the business. We started doing annual surveys of the 3PL CEOs in North America, Europe, and the Asia Pacific region. That work continues on an annual basis today.
Q: Based on your most recent survey of these 3PL CEOs, what do you see happening in the market?
A: The top 25 or so companies worldwide have really gone through a metamorphosis over the past decade from sort of a very limited service package and a limited geographic area to covering all the major geographies in the world with a full range of services. Now, I think, they are moving to the next stage of their lives, if you will. The annual study is focusing a lot of attention right now on branding in the 3PL field and how they attempt to differentiate themselves from everyone else in the business. There is some concern because you have so many people out there in the marketplace that maybe the customers and prospects look at them as commodities.
Q: What other challenges are they facing?
A: The problems that the industry faces on a global basis are pretty consistent from year to year and pretty consistent across geographies. They all deal with things like price compression, pressures to continually expand the company's geographic footprint, and trying to manage the IT piece of the business, which is very expensive to support but something customers have come to expect as part of the package.When I ask the CEOs about the challenges they're facing, those three things have consistently appeared at the top of the list for the past 10 years.
At the same time, I think that the individual companies constantly go through this process of asking themselves whether they can be everything to everybody or whether they should focus on specific niches in the marketplace or certain industry verticals where they can be better than anybody else. You know, can we integrate the services better than anybody else? Those are the kinds of things that they are dealing with at this particular point.
Q: These problems have lingered now for, as you mentioned, close to a decade. Nonetheless, when measured by revenue, aren't 3PLs the fastest-growing segment of the logistics service market?
A: Yes, they are. It's difficult to put a number on the size of that market. Everybody has one, but the question is who, if anyone, do you believe? The growth rates have been dramatic. I get the companies each year to give me estimates of the growth rates by geography for their companies. The growth rates have certainly slowed down over the last decade, but the base from which you are operating now is dramatically larger than it was. These are still growth rates that most other industries would kill for.
Their growth, though, brings with it another set of problems they need to manage. Certainly near the top of the list every year is the human resource element of the business. They struggle at times to figure out where they're going to find enough talented people to support their growth. To a certain extent, that ties into the academic side of things because increasingly, the 3PLs are showing up on campus to interview students. If you go back a decade ago, that was very uncommon.
Q: I'd guess that your research has given you a unique perspective on the evolution of the 3PL business over the years.
A: Sure. It's not rocket science. If you looked at the industry from the top down, you could see what was going to happen. One example would be the need for the 3PLs to offer global services in order to continue to grow. As recently as 10 years ago, many of the CEOs I interview every year for the research study were still indicating they didn't anticipate a need to expand beyond U.S. markets, but it was becoming very clear from a look at the buyers' side of the market that the choice really wasn't going to be theirs to make. It was easier for me to see than it was for them, I guess, that although they had large customers who were satisfied with the service they were getting domestically, those customers were eventually going to want them to offer the same thing internationally. I told them that if they didn't, customers were going to go to another provider—and not just for the global services part, but for the whole thing. Not only did they risk losing a global growth opportunity, but they risked losing their domestic business, as well.
Now looking back 10-plus years later, some might tell you that the 3PL industry as a whole saw this coming and deliberately mapped out a strategy for expanding into global services. In some cases that may be right, but in many instances, it can be argued that it was much more a case of their being pulled rather dramatically by large customers who were saying that you'd better have this kind of service capability in place.
Q: Let's shift over to your role as a teacher. You already mentioned your work in starting a transportation and logistics program at Northeastern. Can you tell us a little more about how that program has evolved since you put it in place in 1970?
A: Well, in the 1970-71 academic year, we started out by offering an undergraduate concentration that we called Transportation and Physical Distribution Management. Literally, I was a one-man shop for a couple of years. The students reacted pretty positively to it, and the employer community did as well. We ended up changing the undergraduate program's name at least three times in subsequent years. We wanted to reflect what the market was looking for, so we not only changed the name, but also the structure and content. We went from "Transportation and Physical Distribution" to "Transportation and Logistics" to "Logistics" to "Supply Chain Management."
Q: I've been watching that migration over the years as a journalist covering the field, and I'd be willing to bet we'll be calling it something else down the road.
A: I gave a talk to some Raytheon people a while ago and they asked me what I thought it would be called 10 years from now. I said, "Intergalactic Molecular Transfer."
Q: I guess even that wouldn't surprise me! Beyond the changes in the program's name, how has the curriculum itself changed?
A: The curriculum, quite candidly, looks nothing like it did in 1970. And the changes have reflected the changes in the industry, the changes in how logistics and supply chain are viewed within the business world. We took a big step in 1996 in introducing a graduate certificate in supply chain management. That allowed M.B.A. candidates to take four electives in supply chain studies to become certified.
Q: That was 12 years ago, Bob. That was back when the term "supply chain management" was just starting to emerge!
A: It absolutely was. And since that time, we have probably put 300 or so people through the graduate certificate program. We've capped the size of it to about 25 people a year.
More recently, within the last two years, we have had two pretty dramatic successes. I had been toying with the idea of trying to put together a full-blown graduate degree program for a number of years. Two years ago, the faculty decided that we should restructure our M.B.A. program. Now, our M.B.A. program has three tracks that the students can take when they come in: marketing, finance, and supply chain management. Additionally, we now have a required course for all M.B.A. students in supply chain management. This past year, the faculty voted that starting in the fall of 2009, we would have a required course in supply chain management for everybody in the undergraduate business school.
Q: How far we have come!
A: Yes, and it has been a struggle every step of the way. Now, it's my goal to put together the best faculty in the country. By the time I hang it up, I want that to be in place.
Q: Any closing thoughts?
A: I think the only thing I would say is that it has been an interesting experience. This field is every bit as interesting and exciting as it was when I entered it, which is a long, long time ago. I think that the level of sophistication is dramatically higher than it was. I think the analytical capabilities are much greater than they were, but I think in the final analysis, it comes down to the people who use the tools and the analytics. From an academician's perspective, knowing that we've sent people out into the marketplace who are now, in many cases, at the director or VP level is about as good as it gets. I have no intention of slowing down and retiring at any time in the foreseeable future because I still find the classroom as exciting as ever and the research stuff as interesting as it ever was.