2016 looks to be a year of great opportunity for logistics service providers (LSPs). That view is confirmed by new industry research from Eye For Transport (EFT) that shows that LSP customers are looking to gain more value from their service providers and, in fact, want to engage with their LSPs more strategically than ever before.
As the EFT research report shows, both LSPs and their customers have an accelerating interest in innovation, technology, eCommerce and talent management.
Innovation Helps Grow Your Business
29.8% of survey respondents say that stagnant global growth is the biggest threat to their business growth in 2016; 32.6% say it’s their competitors. And in directly competing for each other’s customers in a stagnant economy, they are in effect commoditizing themselves. 14.9% already see commoditization as the biggest threat to their growth.
So how can LSPs maintain margin in a market with increasing commoditization? Through innovation. The survey reveals that 33.3% of respondents said innovating to create new business areas was how they gained most of their new business in the last 12 months. And a stunning 46.1% of respondents say that innovating to create new offerings is how they expect to gain the most new business in the next 18 months.
Technology is an Important Enabler
EFT defines innovation as leveraging technology to provide new services or expanding service offerings, such as adding white glove services. 2016-2017 is going to be critical as cutting-edge technologies that have grabbed headlines over the last five years start to become significantly more strategic and begin driving increased ROI. Further, the growing focus on innovation and the adoption of enabling technologies help LSPs play a more strategic role to their customers. Leading LSPs can now offer the breadth of capabilities that customers need to adapt to a rapidly evolving market.
eCommerce Changes the Customer Relationship
In addition to the maturation of cutting-edge technologies, major shifts in supply chain verticals create significant opportunity for innovative logistics providers. 34.8% of respondents say e-commerce is the vertical in which they see the most growth potential. Other verticals, including healthcare/life sciences/pharma and industrial, continue to show strong growth potential but eCommerce prompts logistics providers to help shippers redefine how they interact with their end-customers by becoming more responsive to their needs.
It’s important to note that while LSPs see innovation as essential to differentiating their services and avoiding commoditization, “value for money” is the most important metric (35.6%) used by shippers when selecting an LSP. eCommerce is a strong growth segment but fulfilling profitably can be one of the biggest challenges for the industry. Utilizing a fully integrated warehouse, transportation and order management strategy is a critical initiative for solving the profitability challenge. In fact, the vast majority of shippers (67.8%) who responded to the survey said that integrated warehouse and transportation services are the capabilities they most desire from their 3PLs.
A New Generation of Talent
While only 14.2% of respondents said millennials (employees under age 33) had become a majority in their workforce, 44.9% said they’ve already adjusted their on-boarding processes to reflect millennial values. Those values include preferences for how they like to interact with technology, embrace innovation, use data for decision making and take more ownership of their work, among others. This is critical for not only attracting new employees but retaining them. Innovation is the key to making the logistics workplace millennial-friendly.
Navigating Through the Coming Year
The new insights provided by the EFT 2016 Global Logistics Report confirm what we believe is the best approach for 3PLs to navigate their way through the coming year. Six key steps can help combine the positive vision of 3PLs becoming strategic partners to their customers with the realities of what it takes to put the necessary capabilities in place:
- Gain as much information as possible about what systems, technologies and cloud platforms are available in the marketplace.
- Hold executive-level meetings with customers to learn what their strategic objectives are and not just their tactical needs.
- Honestly assess internal capabilities and capacities, and compare this with what is needed to support customers’ strategic objectives.
- Engage outside experts and/or technology vendors to identify options, costs and timeframes for filling the gap between current capabilities and customers’ strategic visions.
- Implement the new solutions as quickly as possible, considering the best deployment options, including cloud platforms, which meet both your financial objectives and customers’ strategic needs.
- Repeat these steps on a regular basis to make sure your capabilities continue to support customers’ strategic objectives.
2016 is going to be an exciting year in logistics services. We’re looking forward to seeing the many positive trends revealed in this new study come to fruition.
To read the full report, access: EFT 2016 Global Logistics Report.