The shipper-logistics service provider relationship

Shippers and logistics service providers continue to improve the nature of their strategic relationships, recognize the value of technology and innovation, and forecast growth outside their traditional businesses, according to an eyefortransport report.    The 2017 Global Logistics Report has provided insight on the relationships between shippers and logistics service providers (LSP), along with challenges LSP’s continue to face in today’s industry.
   The report is by Haley Garner, Head of Research and Content at eyefortransport (eft), with an introduction and conclusion by Andrew Kirkwood, SVP, Global Logistics and Supply Chain Execution, JDA Software Group, Inc.
   Despite the rapid pace of change in the market, shippers and LSPs continue to improve the nature of their strategic relationships, recognize the value of technology and innovation, and forecast growth outside their traditional businesses, according to the report.
   In regards to a 2017 growth snapshot, 35.6 percent of LSPs said they are seeing the most growth in eCommerce; followed by healthcare, life sciences, and pharma at 19.2 percent; and industrial at 13.5 percent. Broken down by region, 28.8 percent of LSPs said they are seeing the most growth in North America, followed by East Asia at 14.4 percent and Western Europe at 12.5 percent.
   When LSPs were asked about what the biggest threat was to their business growth, for both 2016 and 2017, competitors took the first place slot, followed by stagnant global growth, and commoditization.
   In regards to what is more important to a logistics organization, in 2016, 43.3 percent of LSPs said people, followed by technology at 27.7 percent. By 2017, when LSPs were asked what their biggest priority was, 42.3 percent said technology, while 26.9 percent said people. For both years, process and data took third and fourth place, respectively. “One of the reasons for this is that most logistics companies identified their own short-comings in technology,” the report said. “Data still lags further behind technology in terms of logistics providers’ confidence in their own capabilities.”
   In 2017, when LSPs were asked how they expect to gain most of their new business over the next 18 months, 38.5 percent said through innovating to create new offerings, while 21.2 percent said through working with existing shipper customers to generate new business in new areas for them, and 19.2 percent said by expanding to new industry verticals.
   The report also shined light on the LSP-shipper relationship from shippers’ perspectives.
   When shippers were asked in 2017 what metric they think is the most important when benchmarking logistics providers, 35.8 percent said reliability, 24.5 percent said value for money, and 18.9 percent said customer service and speed of response to queries and problems.
   Shippers were also asked this year what other services – in addition to warehousing and transportation services – they would like to see an LSP offer, with the most common responses including network optimization, followed by integrated warehouse and transportation, and inventory optimization and light assembly tying for third place.
   Overall, relationships between shippers and LSP’s have been strengthening, and between 2016 and 2017, a higher portion of shippers have viewed their LSP’s as strategic partners, versus short-term or mid-term business relationships. “This could translate into longer-term contracts between LSPs and their customers as well as more opportunity for collaborative innovation,” the report said.
   Looking ahead, the future of supply chain and logistics will be discussed in further detail at eft’s 3PL and Supply Chain Summit in Chicago June 14-16.