Andrea Robinson, Business Development Manager-UK for CargoWise’ edi, a leading provider of integrated international supply chain logistics management systems, says that in today’s global economic environment, logistics service providers (LSPs) are finding it more challenging to maintain their performance levels, increase’business opportunities and improve bottom line profits. In large part, she says, this is due to the substantially changing global business models of their shipper client base, increased operational overheads, rising costs and advanced IT-based reporting demands throughout the supply chain process.
“The solution for international LSPs to optimize performance levels in order to meet shipper demands,” says Robinson, “is to implement innovative technology into their operating platforms to enhance communications with customers, better understand the nature of changing business requirements within the marketplaces and improve supply chain visibility. As business models change and pricing pressure continues, LSPs are competing to recover ahead of the market. The need for strong, reliable and innovative business partners is increasing. Those LSPs that have, or will implement, advanced software systems to offer increased technological capabilities will undoubtedly have an advantage in providing improved service levels for their customers.”
Given the current worldwide economic volatility, shippers are increasingly assessing their’supply chains’ effectiveness and seeking robust value-added software solutions and lower prices as they review their current vendor contracts or look for new partners. A recent report on global outsourcing released by consulting company Capgemini, in association with several logistics firms and institutes, found that 82 percent of shippers were cutting costs, and 60 percent of them were rethinking their supply chain strategies and vendors as a result of IT visibility gaps in their supply chains, says Robinson.
“Clearly, shipper-LSP relationships are being impacted by instability in the global marketplace,” she says, “and LSPs are now seeking ways to achieve internal efficiencies as a means of combating economic conditions and achieving the right technologies and supply chain innovations required to meet new and more responsive supply chain visibility requirements—not only for today’s challenges, but those of the future. Business models and economic conditions will continuously change, and success in adjusting to new and unknown environments requires LSPs to proactively think ahead and adjust to evolving business models with flexible operating procedures through solid and creative logistics strategies that achieve both short- and long-term growth goals for their companies.”
Robinson reports that the same study found that 88 percent of shippers feel that IT-based logistics services are critical to optimizing their success, but only 42 percent of shippers are satisfied with the IT capabilities of their current logistics provider. Many shipper respondents reported a capability gap with their LSPs, often citing a lack of key performance indicators (KPIs), reporting alerts and the supply chain agility and visibility required to meet changing logistics needs. At the same time, many LSPs reported similar difficulties in obtaining the data and commitment they needed from the shippers they serve.
“Industry analysts generally agree that reputations and testimonials carry little weight with the customers of logistics service providers. Performance analytics and data reporting technology is the most important factor in selecting a software provider,” says Robinson. “Yet that same view is not always shared by LSPs when evaluating their role in the supply chain process and how they are viewed by their customers. EyeForTransport has reported that a large majority of LSP customers have made it clear that they place a greater significance on the quality of provider service than cost, with only 18 percent choosing lowest price as the most important factor in selecting an LSP. Eighty-s