We have noticed several trends in the logistics market. These trends can be divided in four areas:
Changing customer expectations:
Customers are more demanding than ever, for several years there has been a shift from a market push (delivering products and services of which the organization thinks the market will ask for) to a market pull. End users do not only expect quality products against low cost, they demand a bigger range of products to choose from with more and more additional services. More and more consumers want to customize products to their own wishes and needs while demanding higher quality, faster delivery and in case of consumers at low or no delivery cost. With these changing expectations the logistics industry is under pressure to deliver higher service at an ever lower cost: The challenge of the Last Mile. This now also influences supply chain collaborations higher up the value chain within the B2B context.
Developments in the area of Information Technology (IT), specifically in Internet, Big Data and Internet of Things (IoT) have a major influence on the Logistical industry. The influence is twofold, first thru the internet the possibilities in logistical networks are transparent for customers. Internet gives the possibility to compare services and cost from a vast amount of logistical service providers. This will further put the pressure on prices for logistical services. On the other hand, Logistical companies can exploit the possibilities of new technologies like Big Data and IoT to further improve operational excellence and lower the cost of services. Besides lowering cost, new innovative services can be developed, improving customer experience, using these technologies.
New entrants to the industry:
Technological breakthroughs almost always result in new business models and new entrants in industries. In the logistical industry most of the new entrants are asset less service providers offering benchmarking of freight rates or matching shippers with available capacity. With respect to the last mile, new entrants are using technology to utilize what is called the “Sharing Economy” by matching available capacity with delivery needs. Not all new entrants in the market are startups. Some customers of the logistical industry are deciding to take the delivery process into their own hands.
New ways to compete or collaborate:
The logistical industry adapts to rising customer expectations, and new entrants in the market by utilizing new technologies in order to improve the way they can collaborate and compete to increase efficiency.
The business challenges for logistics companies
In the B2B segment customers expect more and more from the manufacturing industries with respect to efficiency and performance. Customers expect more sustainable supply chains and are willing to explore new kinds of collaboration with their LSP. In the B2C segment customers expect low cost personalized service with real time visibility and free choice of delivery channels. Consumers are used to being more and more digitized and expect (on line) retailers to provide the same level of customer experience. In both segments customers expect efficiency, speed and digital fitness. Industry 4.0 is leveraging the IT potential of the modern world. Continuous innovation is here to stay. These customer expectations are causing the need for more efficient processes and differentiating services resulting in different and new ways to compete. Traditionally when companies compete for a dominant market position there are three strategies to follow; operational excellence, product leadership or customer intimacy. In the current logistical market is being a leader in one of these three areas not enough. Internet (and globalization) and the transparency it caused, has resulted in logistical companies competing in Cost, quality, reliability, flexibility and even innovation.
What do these challenges mean for logistics companies?
The challenge logistics companies face is to attain operational excellence while differentiating in services and retaining the flexibility to adapt to the customer needs. There are three dominant scenarios for competing in the changing logistic market.
- Cost efficiency dominance: Acquiring smaller players, achieving scale through consolidation and innovation through acquisition of smaller entrepreneurial startups. Increasing efficiency by streamlining the operations, optimizing the core processes taking full advantage of existing technologies like ERP, TMS and WMS.
- Collaboration with competitors based on a move to standardization of shipment sizes, systems and sharing information. Logistical companies are looking for ways to create unique value propositions. Collaboration, which facilitates benefits such as innovation, resource sharing and access to economies of scale, is a strategy that is increasingly being advocated.
Enabling digital transformation: using IT as a driver for change
a. Innovate: Need to enable new technologies alike IOT, AI, Mobile, Robotics, Voice systems etc
b. Fast: Need to be delivered fast for competitive onboarding of new collaboration models for your clients
c. Integrated with core systems: Necessity to integrate with main systems, primarily ERP, WMS and TMS and also others…..
d. Cheap: While this is continuous innovation, platform need to adapted continuously but still be cost competitive
The three scenarios make smarter use of (new) technologies necessary. Despite of the complexity, the technological developments provide the possibilities to face the challenges for the logistical market. The technology can help the logistical service providers be more efficient, collaborate and transform into an innovative and agile company.