Customization key to success in logistics

July 5, 2002
Jeff Chung, director of USBX Advisory Services, said staying ahead in the logistics and transportation business may hinge on a company's ability to specialize not only in particular industries but in specific local and regional areas as well. "Building up local and regional expertise in particular geographic areas of the country, along with specializing in a few trade lanes or industries, can become
Jeff Chung, director of USBX Advisory Services, said staying ahead in the logistics and transportation business may hinge on a company's ability to specialize not only in particular industries but in specific local and regional areas as well.

"Building up local and regional expertise in particular geographic areas of the country, along with specializing in a few trade lanes or industries, can become a competitive advantage in the logistics marketplace," said Chung. "The more customized solutions a company can provide, the more protected they can be from competition."

Despite several large logistics acquisitions over the past few years, such as UPS's purchase of freight forwarding giant Fritz Cos. for $510 million in 2001, Chung said there is still a lot of room for small- to mid-sized logistic firms to develop and grow.

The global logistics market is roughly $3 trillion in size, Chung said, but added that only about 15% of it is outsourced.

"The key is that the smaller logistics firms, especially for the logistics divisions of trucking companies, is to provide customized solutions that address client needs," he said. "The flexibility smaller firms have vs. the more rigid hub-and-spoke systems of larger companies like UPS can be an advantage to building relationships with customers."

However, Chung believes trucking companies should be cautious when developing third-party logistics divisions, as many may lack what he calls a "macroeconomic view" of the logistics business.

"It's important to build that regional expertise first before trying to launch into national service," he said. "Having specialization is what will help build a customer base."

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