Logistics servants

Why do logistics service providers keep moaning about having too much work to do? The complaints about driver shortages are also dragging on, yet companies in the manufacturing, wholesale and retail industries seem to be managing to sustain their revenue and profit growth despite having similarly high levels of vacancies. Meanwhile, the average load factor of European trucks is stuck at 50% and empty trucks account for 30% of trips.

A director of a transport company recently told me that his post-COVID turnover is the same as before the pandemic. Although the number of orders for transport increased during this period, the shipment size – and therefore the efficiency – actually decreased. Obviously, he has not (sufficiently) increased his prices and has been unable to smartly consolidate partial loads (e.g. through online logistics platforms). In short, many logistics service providers and transport companies are failing to profit from the market shortage, probably because they are – mistakenly – afraid of losing customers.

Logistics capacity

During a recent presentation in the Dutch town of Hoofddorp, Matthias Hanke, Managing Partner for the logistics market at consultancy Roland Berger, made it painfully clear where the problem lies. According to his own capacity index, global logistics capacity shrunk by 18% between 2019 and 2021.

Many large logistics providers have insourced road transport and set up academies for drivers. But looking at the share prices of logistics companies, only a small number of them are financially benefiting from this tighter market. FedEx’s share price is rising thanks to explosive growth in e-commerce. Maersk and Hapag-Lloyd have seen their profits skyrocket thanks to a massive hike in their ocean freight rates between 2019 and 2022, e.g. from $1,900 to $15,000-$20,000 for the Shanghai-Rotterdam route. Maersk is using its unexpected billion-dollar profit to transform into an end-to-end integrator, for Unilever among others, by buying up e-fulfilment providers and acquiring cargo planes.

Innovative business strategy

But what many logistics companies lack is an innovative and competitive business strategy. The strategy of Operational Excellence based on the cheapest proposition is a dead end, so the only option left for a logistics service provider is the strategy of Customer Intimacy based on the best total solution. The strategically offensive logistics players will dictate the market. Meanwhile, traditional logistics ‘servants’ will continue to lose market share and may even be swallowed up.

Martijn Lofvers, Chief Trendwatcher Supply Chain Media
martijn.lofvers@supplychainmedia.nl