Logistics Outsourcing 2012:
Words with Friends

Do you ever play word games? There are plenty of them around. Many are solitary activities – crossword puzzles, Jumble, Word Game and other daily news standards.

Now the platform has reached a whole new level with games like Words with Friends. Currently the #1 mobile word game, it was big news in late 2011 when actor Alec Baldwin was tossed off an American Airlines flight because he couldn’t/wouldn’t tear himself away from this addictive online game.

So what does all this have to do with Logistics Services? When a new year comes around, all the usual predictions, trends and resolution articles abound. So, for all of you who are out there with that defective “logistics” gene reading this article, you deserve some fun too.

Let’s play the Logistics Word Game and review what’s up with Logistics Outsourcing in 2012 and learn the most effective ways to create value.

L is for LEVERAGE.

Leverage is defined as “the action of a lever” or “positional advantage” or “power to act effectively”. Whether it's channel expansion, service expansion or geographic expansion, Logistics Service Providers (LSPs) are leveraging client relationships, capabilities and emerging markets to find new opportunities for growth.

O is for OPERATIONS EXCELLENCE.

Demonstrating continuous improvement is not enough. Leading LSPs are benchmarking performance to identify highest priority opportunities to leapfrog performance and differentiate through innovative solutions that drive bottom line results. Clients are pleased to see their 3PLs going beyond reporting on logistics activities via contractual KPIs. Benchmarking enables 3PLs to validate performance vs. industry peers and relevant shipper-managed operations. Utilizing benchmarking to identify the best opportunities for supply chain performance improvement is a great tool to help 3PLs retain and grow with key accounts.

G is for GEOGRAPHY.

In the newly published 2012 3PL report, shippers and LSPs agree that China, India, Brazil and Mexico are the top emerging markets. These markets are ripe with opportunity, but fraught with challenges. Entering or expanding in these markets requires the right strategy, the right structure, and the right partners, to be successful.

I is for INTEGRATED SOLUTIONS.

Today’s supply chains are global. Shippers need their LSPs to provide integrated solutions in order to reduce complexity and to effectively manage their supply chains end-to-end. Whether you call it “Lead Logistics” or “4PL,” bringing the right parties to the table for effective integrated solutions within or across geographies will pay dividends. If you are a large Global LSP with a silo-style service portfolio, this means you, too.

S is for SUPPLY CHAIN RISK.

Shippers and LSPs alike have learned a lot about this the last few years. Disruptions caused by volcanoes, earthquakes and tsunamis (to name a few) have caused changes in sourcing strategies and put greater focus on the importance of contingency planning to reduce risk. LSPs that have good plans in place and can demonstrate agility in responding and adapting to disruptions should make sure the value for this important capability is recognized and rewarded.

T is for TRANSPORTATION.

Many shippers right now are examining their networks. Getting the right product to the right place at the right time for the right price, damage free, has never been more important. Getting transportation right for many shippers can mean the difference between profit and loss. This area is rich with opportunity for 3PLs to help shippers improve service and cost. Uncertainty surrounding rates, fuel cost, capacity and regulations will not abate throughout 2012. Shippers will continue to look to LSPs for innovative solutions to reduce cost and improve performance.

I is for INFORMATION.

This is a great follow-on to transportation. Those LSPs who can turn data into information and then use that information to help clients develop new strategies for effective and efficient supply chain management will win the game.

C is for CLOUD COMPUTING.

Much is being written about the increasing adoption of Cloud Computing. This is an area in which we will continue to see M&A activity as traditional providers look to gain capabilities fast. It will be increasingly important for shippers and LSPs to keep up with – and take advantage of – continuing innovation in cloud computing services.

S is for SERVICE PORTFOLIO. And, S is also for STRATEGY.

New service strategies require time and effort – and the right balance of organic and M&A growth for short-term and long-term success. M&A is alive in logistics. Financial players have put a stake in the ground and are snapping up LSPs to add to their portfolios. Strategic buys are also occurring as LSPs look to add capabilities, geographies or new channels to their portfolios.

For LSPs, 2012 will a challenging but rewarding year. It is only by pursuing strategy and supply chain transformation that 2012 will be a success for you and your company. Keeping the Logistics Word Game in mind will keep strategy priorities at the forefront and help LSPs create the greatest value for them and their clients.

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