Photo by Sean Kilcarr for Fleet Owner

Do shippers really desire more innovative freight service?

March 14, 2017
Survey says shippers want operational excellence instead

Here’s a thought: as the transportation and logistics industry tries to ramp up its freight service with “innovation” largely in the form of new technologies and systems, there may be a large slice of shippers that want nothing to do with any of it.

In fact, an abundance of such “traditional-minded” shippers could act as a brake of sorts on innovation in the freight world.

At least that’s one of the findings from a new report entitled 3PLs Are Buzzing with Innovation: Bridging the Gap Between 3PLs and Shippers compiled by JDA Software Group, Inc.

Now, of course, when the 100 or so shippers in this poll were asked directly if innovation is “very important” to their “relationship” with third party logistics (3PL) providers, some 69% of them said yes.

However, that also means 31% of them don’t think innovation is the most critical factor in their freight relationships.

According to Danny Halim, JDA’s vice president of industry strategy, respondents generally felt that if they had to choose between operational excellence and innovation, they’d choose operational excellence, because customer service and meeting customer promises exceeds the need for innovation – unless it can drive such excellence back into the business.

JDA's Denny Halim

“The data supports a common theme – innovation is not for every customer,” he stressed. “Therefore, a segmentation approach is needed.”

Interestingly, when asked how shippers engage with logistics providers to develop innovation, a “large number” of shippers and 3PLs agreed that 3PLs are allowed to find methods/solutions as long as they achieve the goals. Nearly 64% of 3PLs have a hybrid relationship with shippers, according to the survey, allowing for a prescriptive, yet open, approach to innovation, collaborating on what best fits their needs.

Conversely, nearly 40% of shippers/clients felt their relationship with 3PLs was fairly prescriptive, not leaving much room for innovation, the poll found.

But what is truly “leading-edge innovation” in the logistics field: augmented reality, robotics, 3D printing, or drones? Again, JDA’s survey results are mixed, with many shippers having doubts about providers being able to lead on those innovations, while many 3PLs believe that they should take the lead in such areas.

Nearly 46% of 3PLs believe shippers expect them to offer more advanced technologies, according to this survey, while only 24% of shippers suggested 3PLs should add such capabilities to their service offerings.

Indeed, the key result underscored by JDA’s report is the challenge of balancing innovation that lowers operational costs against innovation that improves business performance.

“Providers want lower costs year-over-year with the perception that innovation drives lower costs instead of new business capabilities,” Halim noted. “However, for regional or niche players, innovation is critical to differentiate from others, particularly as expectations mount from the bigger customers in retail and high-tech industries, driven by omni-channel, customization/personalization and product lifecycle.”

He added that, over the last three decades, logistics providers have been on an upward path of innovation, focusing on scaling capacity by building and consolidating their networks and becoming more efficient and cost-effective in serving their markets.

But now, the focus is on digitization, e-commerce, big data and the internet of things (IoT), Halim said.

“Providers need to keep pace with customer expectations, and invest in innovation that will add value to their services, all in an effort to provide services that improve business performance,” he stressed. “The data backs up our view that logistics services providers need to be on the leading edge of supply chain trends in order to keep pace with the changing needs of shippers.”

Something to keep in mind as digital innovation continues to be touted across the trucking landscape.

About the Author

Sean Kilcarr 1 | Senior Editor

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