5 game-changers for logistics service providers

We are at the beginning of the fourth industrial revolution, fundamentally changing the way we live, work and relate to one another. This puts the business model and operations model of the logistics service provider (LSP) under pressure. There are five game-changing trends to watch in the coming years.

Many LSPs operate with a traditional service mindset: a standard service for all customers. The success of a logistics service provider with a focus on standard level of service is short-term at best. In this philosophy the logistics company aims for operational excellence. However, this thinking often results in a competitive race to the bottom in terms of lowest transportation and storage cost. Furthermore a cost priority in customer relations leads to short-term engagements between logistics service provider and customers. Service delivery should address the unique requirements of each customer: customer intimacy with a customised service and different service levels. Instead of operational excellence, logistics companies should shift to customer experience excellence!

LSP organisations are functional focused, meaning they have a freight forwarding division, transportation division, and warehousing/contract logistics division. Individual functional linkages make it extremely difficult to optimise an entire supply chain network for customers. This requires a solution emphasis by LSPs instead.

LSPs have been slow in embracing the value of sharing information in the supply chain. Logistics service providers key contribution in my opinion is that of supply chain orchestrator, where information synthesis is at the core of the solutions provided by the LSP. This requires LSPs to have an IT platform that orchestrates orders across global locations, streamlining inbound, outbound, domestic, and international orders, giving supply chain partners inventory visibility with integration across supply chain networks. LSPs need real-time information to optimise logistics decisions in supply chain networks.

Collaboration is an effective method in optimising supply chains: vertically with supply chain partners in a supply chain and horizontally among similar (competing) supply chains. The logistics service provider should initiate collaboration within and between supply chain networks in generating synergy advantages for their customer’s supply chain networks. Vertical collaboration allows for more effective supply chain risk management, standardisation of assets in a supply chain, and supply chain optimisation. Horizontal collaboration on the other hand allows for sharing of information, pooling of resources and bundling of volumes.

Knowledge is the fifth game-changer for the logistics industry. It is time to replace traditional functional skill development with more broader-based talent development in logistics companies. Logistics companies should be active participating in industry innovation programs with both their customers as well as other LSPs. To prepare the logistics sector in Malaysia for the future, it is timely to develop and test innovative logistics ideas in areas such as city logistics, drones in warehouses, and solar energy powered distribution centres. Make the Klang Valley the logistics lab for Asia!

The logistics industry will look radically different in five to ten years. If you want your logistics solutions to deliver competitive advantage tomorrow, LSPs will have to deal with these five game-changers in the coming years. Service mindset, organisation structure, IT systems, collaboration, and knowledge need to be on top of your agenda. Start today, and map what to do and how to get there!