Will 2010 Be the Year of the Logistics Service Provider?

There’s a lot of buzz right now about growth opportunities in the Logistics Service Provider (LSP) sector. While clearly not at historic levels, consensus is that the sector will return to growth.

Taking that into consideration, the question in my mind is this: With renewed focus on growth, will the future bring higher customer satisfaction for shippers and greater financial returns for LSPs?

It seems to me that a lot of LSPs have grown more opportunistically than strategically – and it’s been a rocky road for many. With glimpses of growth opportunities now on the horizon, I hope the LSPs will step back, look at where they’ve been and where they want to go, and ask themselves these key questions:

1) Have we analyzed the market segmentation: by profitability, by customer or customer group, by service, and by geographic region?

2) Have we identified best opportunities for growth in terms of our capabilities, capacity, and talent?

3) Are we in tune with our customers’ needs, wants and future strategies?

The good news is that I am seeing some laser-focused companies that are systematically addressing their markets. They know exactly what they want to do and who they want to serve. They are investing in the people, processes and technologies required to meet and exceed customer expectations. They are willing to walk away from deals that don’t match their strategic focus, and they invest in the talent and tools to pursue the deals they want.

Investors looking at this space are interested in growth in non-asset services such as transportation management and truck brokerage. The midmarket is especially attractive now that cloud computing is delivering affordable technology solutions. At the same time, shippers, concerned about future capacity constraints, are citing a preference for owned assets. It will be interesting to see how this plays over time.

Regardless of which asset strategy is chosen, LSPs who count their customers, their carriers and/or their drivers among their most valued assets – and treat them accordingly – in my view, will be best able to deal with the uncertainties that lie ahead.

I am such a believer in customer advocacy, and the benefits that well planned and executed programs can deliver. In a recent interview with Eye for Transport, FedEx Supply Chain’s President & CEO discussed their Market Champion program in which FedEx officers around the world are assigned to specific markets where they regularly meet with customers to get their feedback.

This is a great way to keep a close pulse on the market, to test new service ideas, and to develop those all-important relationships. Good account plans come in many shapes and sizes, but the importance of the voice of the customer should not be overlooked. The same can be said for dealing with carriers or company drivers. Understanding the needs of these groups, and developing programs to address them, can pay back in spades.

While most LSPs seem to feel the worst is behind them, there is still cautious optimism about the future. LSPs will continue to be diligent about controlling costs and about hanging on to valued customers. Many exhibited great agility during the recession, reacting quickly to changing market conditions and coming up with fresh ideas such as new multi-modal offerings, better tools to help customers with supply chain visibility, and right-sizing facilities to cut fixed costs.

When we look back on 2010, I hope we will say that this is the year in which LSPs really got smart about their business and their customers.

We’ll learn that they had well-defined and well-executed strategies. They stopped chasing every RFQ that came along. They really understood their business, and they exited unprofitable relationships and invested in valuable ones.

Some entered new markets, and some exited markets. Some added services, some launched new services, and some made acquisitions.

The LSP industry really listened to the customers and was recognized for innovation. LSPs received the highest customers satisfaction scores since the industry began measuring them. And they achieved greater levels of profit than ever before.

Now wouldn’t that be nice?

Valerie Bonebrake

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