THOUGHTS

Five Steps to Success in the Evolving Logistics Industry

Aug 30, 2016

The archetypal boundaries between carriers, freight forwarders, and third-party logistics providers are becoming increasingly difficult to navigate as many companies are entering new markets, offering additional value added services and diversifying service offerings. In this new environment, there are five key strategies that companies in the logistics industry can implement to ensure continued success moving forward.

The logistics industry is evolving and the structural lines dividing sectors within the market are becoming increasingly blurred. This trend is likely to put continuous pressure on overall profit margins and will create the need for companies to differentiate themselves seamlessly. In the logistics industry, service providers, asset or non-asset based, will have to diversify their activities in direct response to customer needs. Although the brick and mortar distinction between forwarding and logistics services is diminishing, there are ways that companies can adapt to cope with this change.

The services side of logistics is evolving from freight forwarding stronghold to more evolved roles like Third and Fourth Party Logistics (3 PL/4 PL), wherein many service providers in the logistics industry are assuring customers end-to-end cargo management capabilities, as they also establish asset ownership in key parts of the cargo value chain. India has a huge potential for outsourcing and hence is more reliant on 3 PL services.  4PLs and Lead Logistics Providers (LLPs) are the newest entrants in the supply chain universe.

The increasing competition requires companies to improve their services, understand customer demands, and find ways to separate themselves from their competitors. In an evolving industry with less well-defined sectors, companies need to approach these issues strategically.

Five Strategies for Success

In order to differentiate services while remaining relevant to customers, there are five key strategies companies can utilize. Solution selling, better partnerships, sharing best practices, competitive differentiation, and leveraging available IT solutions are all things companies can do to set themselves apart from competitors as new market trends emerge. Below are the five key strategies for success that can help companies achieve greater profits and improve customer retention in the evolving logistics industry.

1. The first strategy involves solution selling. Customers today are expecting more from logistics companies, and in order to meet this demand companies need to be more consultative when selling solutions. Personnel must be able to identify customer needs and then position their solutions accordingly in the global supply chain. An emphasis on cross-training and skills development for personnel would help companies gain a competitive edge in the industry.

2. The second strategy revolves around building and sustaining more substantial partnerships with customers. Today’s customers demand more knowledgeable sales personnel who understand how their business operates across multiple levels. Logistics companies that understand the total supply chain, technologies, industry trends and competitive factors, organizational structures, as well as internal and external business drivers of their customers can build much stronger relationships and set themselves apart from the competition. Working with customers on an end-to-end basis rather than focusing on one product or standalone area will also help companies set themselves apart from their competitors in the eyes of customers.

3. The third strategy creates an opportunity through the sharing of best practices. By sharing best practices companies can capitalize on local knowledge and experience, which are areas of significant importance in an increasingly globalized world. Through structured training programs, either in-class, online or both, departments within organizations can disseminate knowledge and best practice strategies to improve the overall performance of the company.

4. The fourth strategy that can help companies capitalize on new market opportunities is competitive differentiation. As new trends emerge and the market evolves, traditional services are becoming increasingly more commoditized. This amplifies the importance of value-added services that companies can provide, as well as the importance of customer partnerships that can be developed. In an industry with notoriously low contract renewal rates, value-added services need to improve, customer relationships must be strengthened, and operational capabilities and technology must be developed further to ensure effective management.

5. The fifth and final way companies can distinguish themselves from competitors and develop competitive advantages is by leveraging IT services. It is vital to educate and train employees to ensure they are knowledgeable of the basic technological offerings and service capabilities that often go unused or unrealized as it can provide a significant competitive edge. Employees that understand how IT services can be optimized within the industry and the international supply chain, and then communicate their potential to the customer can put your company ahead of the pack.

The Future of Logistics Industry

Implementing the five key strategies outlined above can give logistics companies the competitive advantages they need to remain successful in the evolving logistics industry. As the structural lines that divide different sectors within the overall industry begin to blur, companies need to become more flexible, knowledgeable, and customer-oriented. Today’s customers are demanding more from logistics providers; value added services and strong customer partnerships will be essential for success moving forward.

The future of the logistics industry will rely more heavily on 3PLs, especially as strategic partners. As companies increasingly focus on asset returns and costs, while also focusing on their core competencies and building customer centric business models, the share of 3PL is expected to increase. 3PLs will likely take the role of strategic partners who can be lead service providers by offering a plethora of services including optimization of supply chain, cycle time reduction, and unprecedented customer responsiveness.

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