The logistics industry is going through huge changes. Unfortunately some companies have been blind to the fact, and well, the outcomes have not been favorable.
Although there seems to be a relative calm, the needs and demands of shippers are growing. Same day delivery, sometimes down to hours and hyper local (point to point), is the new norm. Shipping is no longer a tactical decision driven by cost. New considerations are more strategic, factoring in the likes of customer expectations, sales volume, and/or product mix. Shippers want logistics partners that can operate across their diverse supply chains and distribution networks, while maintaining a high level of performance during high demand or disruptive periods, like ‘Singles’ Day or labor disputes.
The expected exponential growth of eCommerce, and the inroads it’s making in b2b and cross border activities, is causing great complexities where transparency and tracking requirements are critical. We are seeing an expanded need for services that manage perishables, high-margin valuable and/or sensitive products, such as groceries, electronics, pharmaceuticals, high value fashion and electronics that require exceptional handling, refrigeration, security, reliability and tracking across all partners.
These trends are creating new demand patterns for the commercial freight transportation and logistics industry. Here we talk about 5 reasons why your business could potentially disappear and how you may be able to prevent that from happening. Small or large, all are susceptible.
Even the largest global forwarder is feeling the pressure. Roger Crook the CEO of DHL global forwarding quit back in April 2015, under mounting pressure of their failed IT project. More recently, it was thought that DHL global forwarding might be up for sale.
Freight carriers face five different types of disruptors; here are strategies to defeat them.
New nimble competitors are entering the market. They provide new and different services at a competitive rates that leverage innovative technology and are quick and reliable. These providers are the niche or disruptors in the industry.
1. Local network builders: The biggest move here is Amazon. They are building a network of localized warehousing and distribution requirements that enable speed and flexibility. This is similar to retailers executing click and collect or delivery directly from store. It is really about getting the last mile distribution closer to the end consumer. This is what gives you the speed and flexibility at a competitive cost. Shipper are actively looking for these types of services.
2. Crowd sourced solutions: UberRush is the new player here. The interesting thing, is an entire business can disappear overnight. There are many crowd source solutions that are making an impact in the industry, see below.
These organizations have flexible models for workforce management, non-union individuals. They leverage mobile or new technologies to connect shippers to carriers or providers. Time will tell how it goes.
3. New start up carriers: These companies fly under the radar of the large carriers. They target new and small shippers that have small volumes but require a specific and differentiated product and service. Their offerings often go beyond shipments to a broader set of logistics activities, such as website design and online channel management.
4. Big data solutions: You have to leverage the power of data, real time data integration, analytics and modern cloud solutions. When managed well, these services can also yield substantial cost savings for the carriers and logistics companies that provide them. With speed and agility you can provide a greater level of service to your customers.
5. Full service providers: These providers are looking to provide or meet the demands of all customers with a range of services, forwarding, line haul and last mile. They can scale there business to meet demand, leasing assets as needed to complement their own controlled equipment. To expand lines of business they are looking to acquire assets and make smart acquisitions. Through these acquisitions, they can grow profits while reducing overhead. We have seen many instances of this in the last 18 months. -DSV acquires UTi Worldwide for $1.35 billion. -XPO logistics acquires Con-way freight for $3 billion. -UPS acquires Coyote Logistics for $1.8 billion. -Fedex acquires TNT express for $4.8 billion. -Japan Post acquires TOLL holding for $5.1 billion.
It doesn't stop there, the list is long.
What are you going to do to meet this changing world? How can you strengthen your operations and grow your customer base? Just like Amazon many capable organizations are going to rise. This means there is a substantial need for you to develop and implement a number of capabilities that will allow your organization to transform. This is critical, because the needs from our customers simply demand this. If you don’t you are gone.
Addressing customer demands come in the level of service we can provide them. This starts with giving your people the tools they need to do their job beyond the customer’s expectations. You must, however, balance customer needs and operational efficiencies. Empower and encourage frontline employees to address shippers’ challenges within the framework of their daily duties. They should be able to provide shippers with greater visibility and maneuverability with respect to the timing and mode of shipments, and they should automatically aid shippers with global, cross-modal solutions — perhaps by mixing and matching owned and third-party services.
The recent acquisitions mentioned above were all strategic in one way or another. Your thought process must be the same. Understand your market, your competitors and the new entrants. When you identify product, operational or services gaps, consider acquiring companies that may fill those gaps. When doing so make sure you have a concise and quick plan for integration.
You have to take on new technology, cloud technology. Technology that can be deployed quickly and scale with the business at minimal cost. Cloud data integration and analytics will allow you to capture data across your value networks and analyze it in real time. This provides a broad and more in depth view of operations. Integrate this data with your customers and third party provider systems. As a result, all will have greater supply chain visibility. On top of analytics, implement proactive alerting to monitor processes.
Look at your overall business and operational model. Think outside the box. Develop your own local shipping networks, establish alliances and build partnerships. The more dynamic methods like hyper local, trunk delivery or drone delivery. Create small networks to address the needs of customers like same day or scheduled hourly delivers or swaps. These networks are more flexible and can adapt or absorb supply chain disruptions.
Making these capabilities part of your logistics strategy, or a combination of them, could save you and make you the disruptor in town. Don’t sit back. Logistics challenges are only going to grow. Start planning now.