Understanding the Challenges of Logistics Service Providers

The Blume Global Team | July 12, 2019

Logistics Service Providers (LSPs) are facing a rapidly changing industry. Increasing customer demands, expanding global supply chains, fleet and capacity restrictions and high fixed and variable costs all impact on your organization’s success. Technology can solve many of these issues—if it’s used in the right way.  As you face competition and disruption from freight forwarders, in house logistics teams and well-funded startups, it’s worth exploring what you can do to meet these unique challenges as you scale your logistics business.

 

Freight Forwarding is Evolving, LSPs Need to Change Too

Freight forwarders are among the biggest competitors for logistics clients. Forwarders tend to act as brokers, negotiating pricing and contracts between third parties and clients. Legacy freight forwarding brokers are likely to fade away or be absorbed into larger businesses. Meanwhile, freight forwarders are accelerating technology adoption, moving to digitize and automate as much supply chain management as possible.

LSPs can compete by introducing digitization programs of their own. Your logistics organization can realize huge efficiencies through automation, integration, reporting, and communications. This is the single biggest change an LSP can make, but it’s central to maximizing competitiveness with freight forwarders.

 

The Main Logistics Service Provider Challenges

Most of the challenges an LSP faces will fall into one or more of:

  • Visibility: Understanding how shipments are progressing, providing real-time updates to clients and centralizing information and data
  • Capacity: Ensuring there’s enough capacity across your fleet, particularly for road transportation and driver availability
  • Costs: Increasing the predictability of variable costs and building both fixed and variable costs into profit margins and client quotes
  • Customer value: Differentiating your services with the client and building trust through customizing your offerings

 

Managing Fixed and Variable Costs Will Enhance LSP Profit Margins

LSPs take on large fixed and variable costs, all of which need to be priced into quotes to ensure profitability. Greater insight into where you’re spending money makes it easier to price services and ensure budgetary planning for increasing demand and growth. LSPs can take advantage by:

  • Understanding fluctuating transportation costs like fuel and maintenance
  • Getting transparency on charges levied by third parties like storage or port facilities
  • Figuring out logistics staff costs including salary, benefits and expenses
  • Calculating operational and behind-the-scenes costs from support staff and functions
  • Withholding appropriate taxes

A centralized view of all these areas will help you build an up-to-date, complete, comprehensive cost model that will help you maintain profit margins and bring costs down. Financial insight also allows you to plan for growth, based on forecasting future customer demand and your current capacity. You can take action early to ensure you have the vehicles, operators and support in place to scale up.

 

Centralizing Logistics Communications and Data Transfer Means Fewer Errors

LSPs need to manage enormous amounts of data. When you’re storing and transferring huge volumes of information, it’s easy for human error, duplication and other issues to creep in. At the same time, manually communicating everything creates enormous overheads and is extremely time consuming.

Centralizing all of your information and communications onto one commonly shared logistics platform will help enormously with managing data, understanding issues and ensuring all stakeholders understand what’s happening.

  • Integrate with multiple technologies, systems, third parties and others
  • Have “one view of the truth” that’s constantly updated with the latest data
  • Ensure visibility through notifications and real-time reporting
  • Analyze data to identify and resolve potential issues

Providing shipment visibility, logistics reports and real-time status updates to your clients will make sure they know exactly what’s happening at all times.

 

Providing Accurate Quotes and Personalized Services Keeps LSP Clients Happy

As the global supply chain expands, clients want to work with LSPs that they trust. Effective ways to build that trust include:

  • Providing complete, robust, end-to-end logistics pricing
  • Enhancing transparency by breaking down costs and charges
  • Listening to a client’s needs and developing customized services
  • Meeting commitments around price, quality of service and speed

The right LSP digital platform will let you provide fast, accurate quotes based on your cost models and desired profitability. You can build some buffers into your pricing to ensure you’re able to meet the quote you’ve agreed with the client.

Many clients are also seeking personalized services. Visibility into every part of your supply chain means you can offer these services with confidence. Sharing logistics reports with clients demonstrates you’re meeting their KPIs and thresholds for timeliness, cost, quality and accuracy.

 

Complying with Global Logistics Regulations Means Avoiding Issues and Penalties

Logistics compliance varies widely between modes of transportation, regions and countries. Health, safety, environmental, financial and other regulations are vital parts of meeting your commitment to your employees, clients, stakeholders and the public. With an ever-expanding supply chain, it’s important to understand regulatory needs wherever your LSP operates. Use your logistics platform to integrate with compliance and risk management software to ensure you’re meeting all necessary regulations.

 

Improving Business Processes Across Logistics Means Greater Efficiency and Reduced Waste

Logistics businesses have lots of overhead and it’s vital to reduce extraneous resource usage, costs and delays as much as possible. If you want to enhance business and logistics processes, you’ll need a self-contained improvement project or an ongoing continual improvement function in your organization.

Improvement only works if you have the right measurements, analysis, ideas and stakeholder support to make the necessary changes:

  1. Identify the specific business process or logistics function you want to improve
  2. Centralize your logistics and business process data reporting
  3. Put metrics in place so you can measure exactly how things are performing right now to set a baseline
  4. Analyze the metrics, talk to employees and understand the factors that create problems in your logistics processes
  5. Make small, incremental changes to improve accuracy, reduce costs or speed up operations
  6. Continue measuring to check if the changes have been effective
  7. Put controls in place so you can see that logistics processes are continuing to improve

Running this type of improvement project across your entire logistics operations will allow you to streamline your LSP processes, reduce waste, increase profitability and delight your clients.

A powerful, centralized logistics platform will help you to manage risks and meet logistics challenges head on. You can take a high-level view of your logistics business and drill down into the areas that will drive the most value for your clients and your organization and develop a customer-centric supply chain.

 

Through a global ecosystem of multi-modal carriers, trading partner orchestration and intelligent recommendations, we enable Logistics Service Providers to manage and track real-time events and costs across every mode and every node. Learn how Blume Global can revolutionize your logistics business.

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