Size of Company Does Not Make an Organization a Master of Logistics

Results from the annual survey suggest that carriers, driven by a need to maximize profitability, are at a polar opposite with shippers who are focused on reducing costs (Video Above).

This lack of alignment has created a struggle that has resulted in a loss of focus on the bigger prize - being able to compete supply chain to supply chain.

The analogies between the game of “tug of war” and the current state of freight transportation management are almost boundless. Increasing transportation costs driven by a host of factors has now created a struggle between shippers and carriers as each side seeks to achieve their goals.

In fact, the results of the 23rd Annual Study of Trends and Issues in Transportation and Logistics neatly define the tussle, where carriers are pulling hard to maximize their profitability while shippers are focused on reducing rising transportation costs.

Shippers are being pulled into higher rate territory as carriers deal with the impact of compliance, a driver shortage, and increased demand - all of which are driving up their costs.

And to make the situation worse, constantly changing customer requests coupled with increasing demand uncertainty has created an environment where the only constant is uncertainty.

Results from this year’s annual study further point out why the tug of war between shippers and carriers is not a winning game plan for either party.

It’s clear that both parties agree that price is a major factor when choosing a strategic/core carrier. Further, they agree that many of the transportation services provided are highly standardized, which in turn makes standardization of the processes and procedures more straightforward. These factors point to a commoditization of transportation.

While at first glance commoditization of transportation services may seem like a viable avenue for shippers to reduce costs, it may be more costly in the long run as continuous improvement and differentiation of service are needed to compete. For carriers, commoditization will likely drive the relationship to a more transactional one with an emphasis on price.

However, the study results also reveal where opportunity gaps exist to stop the progression towards commoditization.