Expert says logistics providers must change focus

Jan. 3, 2002
To survive in the highly competitive North American third-party logistics market, logistics providers – from trucking companies to Internet-based operations – must focus on developing profitable businesses and remember that people and processes, not necessarily technology, are critical to success. "In order to succeed, companies need to have the courage to walk away from business that is not profitable,"
To survive in the highly competitive North American third-party logistics market, logistics providers – from trucking companies to Internet-based operations – must focus on developing profitable businesses and remember that people and processes, not necessarily technology, are critical to success.

"In order to succeed, companies need to have the courage to walk away from business that is not profitable," said Robert Delaney, vp of Cass Information Systems, in a recent speech. "Instead, they do the deal and hope that their profitability will improve over time. That is not happening."

Delaney said the competition for logistics business is intense particularly in North America, where the typical deal involves requests for proposals from 15 to 20 logistics providers.

"The competition is intense – it is a tough environment," Delaney said, to the point where companies will accept losses in order to win business. "I have seen cases where the winners lose money right from the outset of the service. That's why knowing when, where and how to compete is crucial."

One reason for the stiff competition is the amount of money involved. Over the past 20 years, the market for contract logistics services in the United States alone has grown from $2 billion annually to over $56 billion a year, Delaney said, with projected year-over-year industry growth to remain in the 15% to 20% range.

Yet the key to succeeding in contract logistics today, Delaney said, may lie in changing the industry's focus from technology back to people and processes.

"If you do not have the process right and the people right, the technology will not save you," he said. "Information technology (IT) and supply chain optimization skills receive a great deal of attention, especially in the logistics and transportation press."

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