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3PLs -- Change and Traits of Leaders

Change is a fact of business. Only the rate of change is an issue. For the Top 50 of the Fortune 500 for 1991, only 15 companies are still there in 2011. Not only have companies changed in the Fortune 500 rankings, but so have industries. What does that mean for 2021 or 2031?

The importance of "green" logistics is growing. Manufacturers are evaluating deglobalization and onshoring. What does it mean for outsourcing and services required? Foreign firms are using Direct to Market (D2M) to sell direct to consumers in other countries by using ecommerce, thus increasing profit margins and creating brand identity. How will 3PLs handle and manage diverse customer portfolios? What is the sales and operations approach for customers that have differing customer segments with multi-channels? How do these logistics service providers move past their comfort zone with its familiar customers and market and go beyond what they perceive as "core competencies"? What is their route-to-market plan to assist customers? What is sustainable, and how is it achieved?

Against this backdrop of continuous change, too many 3PLs practice a lemmings-like methodology and do nothing until there is mass migration in a certain direction. This is the situation in times of global economic turmoil or robust growth. The followers have no strategy or have a conglomeration of ideas, some rehashed, and that is really bad strategy. Not coincidentally, these firms deal with high customer turnover and eroding margins. They have little or no competitive differentiation in a commodity service market. Slogans and tag lines are viewed as value proposition for key customers or market sectors. They are more internally focused and less customer centric.

Some 3PLs not only see trends, but they also assess how to position themselves to exploit changes and their opportunities. Why do some logistics providers take the lead to change, align, adapt, and renew themselves while many others basically mimic and follow?

Leaders have traits that enable them to grow, to profit, to be resilient, and to transform. The traits are not about how many offices they have or how large their warehouses are or how many trucks they operate. They are distinguishing and complementary features that intertwine-

  • Strategy
  • Balanced Organization
  • Value Proposition of Blended Customer Centric and Supply Chain Channel Focus
  • Change Management

Strategy. Reacting to potential opportunities and leads can only go so far. Strategy is more than a list of objectives and sales approaches. It is not an accumulation of ideas from different country managers or from other business segments. Strategy is needed in order to know what to do, why to do it and how to do it. It is important in order to build and maintain a dynamic portfolio of activities.

Strategy has two parts--strategy development and strategy execution. They understand the hubris that planning can generate with over expectations and under delivering results. Creating and advancing a strategy includes recognizing and removing impediments, both internal and external, to success.

Balanced Organization. Organizations and organization structure can create internal, myopic barriers that can restrict focus beyond the short term. Leaders recognize the conflict between demands for short-term financial results and those for long-term viability. They have strong metrics (both hard and soft), a creative environment, a cohesiveness of purpose--both tactical and strategic, the combination of focus and flexibility, and the agility to balance existing activities with new opportunities. All of these form a culture to support and drive change, create synergies and keep the business poised for the present and for the future.

Value Proposition of Blended Customer Centric and Supply Chain Channel Focus. Leaders know that profits and growth are a mixture of what they do and what customers require. The "what they do" is their base and generates 80%-90% of sales turnover. This is also where everyone competes for the same customers-that commodity service arena defined by price. But they also understand that higher margins and improved customer retention can be and is achieved.

They have a customer centric value proposition. It is based on what customers require with regards to their businesses and their successes. This transcends the usual focus with regards to freight rates or with in/out storage charges or other price delineator. Leaders move beyond the forwarding, warehouse, transport or whatever primary logistics service and have a supply chain focus like customers have. Those that create and implement credible value propositions-and the competitive differentiation that it gives rise to--also have the foundation to adapt and to transform.

Change Management. Transitioning to new opportunities is not quick and is not easy. Beginning change takes planning; maintaining change is difficult. Since change is ongoing, the real issues are establishing a culture of continuous change and having the commitment by top management.

3PL leaders understand the similarity with strategy in that change also has two parts-planning and execution. They recognize and balance the two change issues with financial performance and with people.

Conclusion. Leading logistics providers are in the forefront of transforming their businesss to adapt to various business, economic and social changes. The traits that leaders apply to 3PLs and to all logistics providers-from forwarders to logistics hubs and for all service niches.

Change is a requirement, not an option. Companies have to choose to either be leaders and to grow and transform their business or to choose to be followers. Those who follow will continue the cycle of high customer turnover, eroding margins and little or no competitive differentiation.

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