LTD Management
Logistics & Supply Chain Management Consulting Global Solutions That Work

3PLs and LOGISTICS PROVIDERS — Strategy in a Time of Disruption and Transformation—

What Is Happening. Logistics is a commodity business. 3PLs and logistics service providers are dealing with significant industry disruption. It comes from two fronts. One disruptor is external, customer generated. This is the e-commerce speed of order delivery that is increasing and growing across industries and markets. The focus is on the end-to-end supply chain and how to make goods move across it more quickly—supply chain velocity with its inventory velocity and order delivery/restock velocity.

That is a change from logistics being the dominant emphasis in supply chain management. This could redefine, for example, the 3PL niche to 3PSCM—or SCMaaS (Supply Chain Management as a Service).

Two, another disruption comes from within the field. Technology is adding new requirements, new ways, to what firms must do, from digitalization to blockchain. It is also developing new competition who use technology, including platform businesses. Also, logistics providers in a niche are expanding their reach into other niches.

There is also the dual use disruptor, shippers who are taking control of their logistics and bringing activities inhouse. Think of it as a type of reverse outsourcing. In turn, such dual-use actions could mean shippers taking their logistics capabilities to outside retailers and manufacturers—and taking business away from present logistics providers and 3PLs based on proven end-to-end supply chain results.

The results of the disruptions are threats to these firms, including disintermediation. At the same time, it is opening new opportunities. Against the perception that logistics is a commodity business, the challenge is how to adapt and to transform.

This reasons questions on what a firm should do, in what context is should be a service, and how to differentiate it. It is about strategy. Some say it is being agile, which often means doing something the firm was not designed to do or is within their operations capability. Agile is not a substitute for transformation and strategy.

Strategy. First, digital is not a strategy. With technology, it is a topic of it enables and is utilized in the business.

That said, the discussion can advance. All logistics providers—3PLs, transport, forwarders, warehouses, logistics centers, ports and other--and whether they are asset based or non-asset based—should have a strategy. The strategy identifies challenges, issues and risks with markets and their dynamics; and, going forward, can set the direction where the company is going for new markets and new business and customers to grow sales and profits.

A strategy does not have to be long-term. Given the rate of disruption and change, five years or less is a good time frame.

Surprisingly, despite the purpose and benefit, many service providers do not have a viable, current strategy. Instead they view developing one as too much work, react to what customers ask or what competitors are doing, or have one that is outdated. In a way, they letting business vagaries drive their direction and future. Having no strategy can be a risky approach, especially if competitors, established and the potential new entrants, have a well-done strategy and especially given the reality of global economic change.

The strategy can be operations focused or it can be a significant change, to transform the company. Which strategy is developed can be based on and reflect risks for the business or for the service sector, competition, or changing customer and/or market segments.

There are two parts to a successful strategy—first, developing it and second, executing it. Developing a strategy comes from serious, formal strategic planning process. It involves a blend of financial and non-financial objectives. The plan should also focus on the present business, and how it will adapt to the future and new services and opportunities. It identifies where the company is going—and where it is not going-- and what it takes to succeed in that service arena.

Planning. The starting point is where the business is now as to present dynamics with trends, markets, services, and customers; value proposition, and competitive positioning, coupled with sales and profits. At any stage of the planning process, at the minimum, a SWOT (Strengths, Weaknesses, Opportunities, and Threats) is useful for the present and potential future scenarios.

Planning contains mistakes that can limit the ability to develop a worthwhile strategic plan. Some of the shortcomings that can lead to a bad strategy include:

Execution. Strategy implementation is critical. The best strategy, without good execution, will struggle to succeed. And the more dramatic the strategy is with scope and impact, the greater is the challenge for sound execution. An operations strategy has an internal capabilities and requirements, perhaps best-in-class. The significant change strategy has both internal and external requirements. Each strategy carries different proficiencies to implement and creates challenges for present executives, managers and employees to have the skills to implement the strategy.

Conclusion. The times they are a changing. There is a new reality in supply chains, and as a result, in logistics. Call it chaos or disruption. Talk adapting or transformation.

Customers are doing more and expect more with the new reality they are dealing with. Business as usual is vanishing. Established practices are being replaced.

There is risk in doing nothing. The best path forward is to develop and execute a strategy.