by Poonam Datta, Chief Commercial Officer, Globe Express Services
The logistics industry is an essential part of the business landscape and a well-established logistics management directly affects a company’s cost, quality, scheduling and flexibility. Recently, more attention has been directed towards the management of logistics in recognition of its vital role in reducing operational costs, improving delivery performance, enhancing customer satisfaction, and increasing competitive advantage.
Logistics also continues to take centre stage in light of rapid globalisation. The world becomes increasingly moreconnected as companies are developing and expanding into more sophisticated networks following more pronounced international trade, manufacturing and distribution activity. According to a recent study, the global logistics industry is estimated to be worth US$300bn and the current annual logistics costs aboutUS$3.5tr. For most national economies,the annual logistics cost varies between nine and 20 per cent of the GDP.
Although the sector is still in its early stages, there is an enormous potential for growth within the market. The logistics sector will be greatly cultivated if management can properly strategise to address vital and essential points, including stable pricing, operational costs, low returns, human resources and erratic and ever-evolving customer demands and call for value-added services, not to mention infrastructure and legislative challenges.
Providing more than just logistics
For logistics companies to continue their steady and positive trend and to set themselves apart from the competition, they must provide relevant value-added services and direct their attention towards clients that can provide high profitability in the long term. Additionally, they must learn how to network and establish partners that can complement their service offerings and geographic scope to be able to provide their customers a wider range of options and ensure successful supply chain integration.
There is also a number of emerging factors that must be taken into account.
The first is the impending Safety of Life at Sea (SOLAS) regulation. With only around three months before the container weight regulation will be implemented, it is very concerning to see the lack of clarity on SOLAS guidelines. The authorities need to set clear expectations for all entities affected by this change, particularly the logistics sector. Lots of shippers are concerned and it is still unclear whether they have to make amendments and improve upon the existing infrastructure, considering it is going to be a substantial expense. There is no doubt safety is of utmost priority; the world of logistics better prepare itself for a slowdown due to the impending change.
In addition, the industry needs to understand the free-falling, free-falling rates and how this is affecting the freight forwarding world. The volatility in the market is causing a lot of disruptions in both the ocean and air freight industry. Ocean carriers try and implement General Rate Increase (GRI), however, it is not always adhered to. On the other hand, airlines stay away from the GRIs, trying to remain flexible instead. The biggest challenge forwarders are facing is satisfying customers who are constantly getting bombarded every day with promises of better rates and services for all sorts of outfits. The key is for forwarders to stay proactive with clients or they will slip and slide away.
For forwarders, investment is the way forward. They must have faith in their products and must adapt well so they can adjust the cost base to match what was sold. A good product person can still compete with the mega-forwarders by cultivating relationships and providing value-added services, such as reporting, tracking and tracing, which are some of the carriers’ weaknesses. There is a big push these days to become more efficient with the application of technology in operating systems; however, companies, like DHL and UTi, have witnessed disappointing results in their moves to apply newer technologies, which may be attributed to the lack of knowledge or lack of proper resources to assist them in the implementation.
It is greatly beneficial for forwarders to connect shippers, airlines, truckers and customs to cut down multiple data entry and streamline information faster and smoother. Information is power, so having the information faster only makes you more powerful than your competition. Apart from this, forwarders need to find new and better ways to make customers’ lives better and further set them apart from their competition.
The current instability in the alliance structure has also sent the shippers scrambling for reliable lead times. Shippers are having to constantly adjust their inventory levels causing a major disruption in their supply chain. However, air freight will make up for the inconsistent lead times, causing an upswing in the freight spend. The need of the hour is for the carriers to strike a good balance between supply and demand and do whatever it takes to bring in much needed consistency in rates and lead times.
Carrier and freight forwarder consolidations are another important aspect of logistics management that must be carefully monitored. Some of the significant potential mergers were spearheaded by FedEx and TNT, UTi and DSV. This means current forwarders need to start strategising about what they would do if there were more mergers, be aggressive and go after new businesses in the merger chaos or build moats around the existing businesses.
The never-ending need for improvement must continue to drive the growth of the logistics company. It is important for companies to adopt transparency when it comes to cost-structures, and to convince their clients on the efficiency and benefits of quality assets and new technologies, such as Radio Frequency Identification (RFID) and Global Positioning Systems (GPS), which will greatly facilitate operations. Lastly, attracting, recruiting, training, motivating and retaining strong management are also important aspects that will help logistics companies meet their long-term growth. If companies are able to address these key areas and remain flexible in light of the emerging trends, the logistics sector will continue to expand at an unprecedented rate.
About the Author
Poonam boasts of an excellent career, spanning 25 years of professional growth and learning. Prior to joining GES, she was the CCO of a regional port and logistics service provider. She was also the Founder and CEO of International Management Consultants. In the past, she has worked with Maersk Group, where she successfully rise through the ranks to become one of the Group’s youngest managing directors.