Logistics service provider wake up!
“Times they are a changing”, Bob Dylan mentioned it already in 1964, but would he be aware of the enormous increase in speed of the changes happening? I doubt it, but change and the speed of change has become a fact of live these days. And what an impact will these changes have on the supply chain industry.The supply chain industry will be impacted significant. Are the logistics service providers in this industry reacting to these changes? Large part of this specific sector seems to be bound by the position they, willingly or unwillingly, have manoeuvred themselves in decades ago.
The position I am referring to is a cut-throat competition on pricing. The services LSP’s provide are not perceived to be differentiating from one another, resulting in a commodity perception towards buyers. Over the last years this market place, a red ocean, as Renee Mauborgne and W. Chan Kim described in their best selling management book “Blue ocean strategy”, resulted in an ongoing focus of the LSP’s on process improvement, operational excellence and cost down initiatives. Little to none has been invested in research & development. Anybody not entrapped in the industry would understand this is a recipe for disaster and a bottleneck to adapt to changes happening.
As an example Stryker, a global medical technology company is investing around 6% of total revenue every year in R&D ever since 2000. They believe that cutting down on current shareholder value is the only way to maintain shareholder value in the future, they believe this will maintain profitability and competitive advantage over years. They are not competing on cost, they are competing on product leadership. What LSP can stand up firmly and hold a 6% investment of annual sales in R&D?
LSP wake up, change is happening, get on the bandwagon, adapt your organization and take a step forward to invest in innovation, getting ready for the changes required. For freezing is a step backward and before you know it your position is taken by the competition. Probably not from within the industry, but a young tech company with an innovative solution to the customer needs you are currently fulfilling. Your neighbours’ smart tech savvy son might be running away with your business before you know it.