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Customers of logistics services are seeking greater reliability at lower total cost consistently – whether across the globe or in one sub-continent. But as higher performance from greater end-to-end integration, supported by better visibility tools, becomes more attainable, the approaches of providers are diverging.


More customers are recognizing that to realize the full value of the potential trade-offs from outsourcing, they need to broaden their span – from purchasing many piecemeal transportation and warehousing services, to fewer, bigger contracts with much wider scope.

In response, the Logistics Provider industry has been evolving to offer greater scope and more complex solutions. However, for the more demanding customer segments – those seeking greater integration and higher degrees of process conformance – there is often a gap between buyer needs and provider capabilities. Often, providers market and represent capabilities that they have not yet implemented, so they over promise and under deliver.

For the more demanding customers, the provider model must be reinvented. So providers increasingly must choose between serving a large commodity segment and the growing, but more demanding, high process conformance segments.


The journey toward value starts with having strategic clarity about the market segments in which to participate (see Figure 1). It involves an overlapping sequence of activities to develop enhanced provider capabilities, including:


Strategic clarity – Rigorously align target market segments and value propositions with organizational culture, business model, core competencies, asset planning and performance measures.

Standardization and integration – Proactively sell the value of standardized and integrated global processes and shared user services – internally and externally.

Componentization – Provide customized solutions from a set of standardized – but configurable – process, information, work flow and value-added components.

Global governance – Improve global deal consistency by moving such contracts to global Profit and Loss statements (P&L's) and reserving traditional country P& L's for narrow scope activities.

Service innovation – Invest in new capabilities (such as visibility, supply planning and control; dynamic synchronization and optimization of business processes; a virtual supply chain information platform).

Teaming capability – for the emerging "Synchronized Providers" – Invest in teaming skills in the new era of "co-opetition," where the value and breadth of services offered to their customers will amplify as the service provider's network of partners grows.


No provider today can complete this transformation as a "single project." It is a strategic journey. The journey will need to be broken into manageable chunks of initiatives which can be realized in well-defined time lines and at relatively low risk. Where any one provider begins will depend upon its own business goals, market pressures and the maturity of existing capabilities.


Business processes will be standardized and systems integrated. There will be better visibility of end-to-end supply chain information and integration with partners and customers. The industry will have effective, shared metrics to continuously measure performance and handle exception management more easily through event monitoring linked to business rules. And at long last, providers will have a single view of their larger global customers. To read the full report or an executive summary version, download a PDF file at the top of this page.


"Warehousing management system, transport management system and enterprise resource planning (ERP) system commanded the largest portions in logistics companies' IT solution spending in 2005, respectively accounting for 24.7%, 18.5%, and 17.5% of the overall solution market. Nevertheless, with increasing market saturation and stabilization, the combined share of these three solution segments will fall from 60.6% at present to 59.3% in 2010. In the logistics industry, this specifically applies to the movement of goods—by plane, train, automobile, container ship, or 18-wheeler—in an efficient and timely manner. EDI plays a big role in the handling of these details, providing a means for better communications between distribution centers, shippers, transportation carriers, and other industry players.


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