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Logistics providers are looking to leverage innovation to strengthen their competitive position – but they are also fearful of it.

The State of Global Logistics report for 2016, tabled yesterday by Eft (Eyefortransport), shows logistics firms feel threatened by technological innovation, yet are looking to it as a tool to attract customers.

In a market where stagnant global growth and competition are seen by logistics service providers (LSPs) as the biggest challenges for their own growth, many of them see innovation as a key factor to avoid commoditisation and distinguish themselves to attract new business.

Of the LSPs that participated in the survey, 27% reported that in the past 12 months they gained new business through leveraging technology to expand or develop new services. Looking forward, 46.1% expect to gain most of their new business in the 12 months ahead through innovation.

For their part, participating shippers signalled that they were looking to their LSPs for some drive in the technology area. Just over one-fifth (21%) expect them to perform predictive analysis, and 15% indicated that they looked to their LSPs to help them manage their e-commerce portals.

On the other hand, shippers did not show a lot of esteem for the technological proficiency of their logistics partners. They identified innovation as the area where LSPs came up short most often – few bother to benchmark their providers in innovation and technology, the Eft study shows.

In fact, shippers’ chief benchmarking criteria are value for money (cited by 35.6%) and reliability (28.8%). Although most contracts are for two or three years, a renewal rate in excess of 90% indicates that most shippers look for strategic relationships with their LSPs.

“The many positive trends documented in this new report from Eft show that customers are looking to gain more value from their LSPs and, in fact, want to engage with their LSPs more strategically than before,” noted Todd Johnson, chief customer officer of JDA Software Group.

While innovation is viewed by LSPs as a competitive tool, they are also deeply wary of it. Technology advancement in automation and intelligent software is regarded by 11% of them as a potential threat to their business, which ranks only slightly below commoditisation (named by 14%).

Brandon Fried, executive director of the US Airforwarders Association, attributed much of small and mid-sized forwarders’ reluctance to embrace automation to financial constraints, citing fears that their investment might be rendered futile by new developments.

There is also a sense that the logistics sector overall remains averse to change, in part because of a strong emphasis on the human element. Asked about their most important asset, 43.3% of LSPs named people, well ahead of technology (27.7%).

Still, the authors of the Eft study anticipate change there. “While undoubtedly logistics is a people business, as automation and digitization continue to drive significant ROI, we might start to see this scale shift,” the author wrote.

This shift will likely accelerate when millennials move up in LSP organisations. Of those surveyed, 67.3% think that millennials are going to change the way how consumers buy, which in turn will change how supply chains are managed; 56.1% reckon that their understanding of technology will lead to many new innovations within supply chain organisations; and 38.8% agreed with the notion that how millennials communicate and feel as employees will necessitate the need for major changes in how supply chain departments are managed.

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  • Michael White

    August 27, 2016 at 3:09 am

    Small forwarders are on the verge of new capabilities that will allow them to big players. Technology developments that use cloud-based systems is becoming easier that large companies are not taking advantage of. Messaging in the background will allow for real-time tracking, alerts, paperless processing and electronic partnering with other forwarders around the world. Times are changing and shppers and forwarders are starting to really understand to automate!

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  • Richard Rendell

    September 11, 2016 at 1:56 am

    Port of Portland West Coast longshoreman consider unloading bankrupt Hanjin ships for free so North West small business get their cargo.

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