By Ian Putzger

Logistics providers are looking to leverage innovation to strengthen their competitive position – but they are also fearful of it. The State of Global Logistics report for 2016, tabled  recently by Eft (Eyefortransport), shows logistics firms feel threatened by technological innovation, yet looking to it as a tool to attract customers.

In a market where stagnant global growth and competition are seen by logistics service providers (LSPs) as the biggest challenges for their own growth, many of them look to innovation as a key factor to avoid commoditization and distinguish themselves to attract new business. Of the LSPs that participated in the survey, 27 per cent reported that in the past 12 months they gained new business through leveraging technology to expand or develop new services. Looking forward, 46.1 per cent expect to gain most of their new business in the 12 months ahead through innovation.

For their part, participating shippers signalled that they were looking to their LSPs for some drive in the technology area. Just over one-fifth (21 per cent) expect them to perform predictive analysis, and 15 per cent indicated that they looked to their LSPs to help them manage their e-commerce portals. On the other hand, shippers did not show a lot of esteem for the technological proficiency of their logistics partners. They identified innovation as the area where LSPs came up short most often – few bother to benchmark their providers in innovation and technology, the Eft study shows.

In fact, shippers’ chief benchmarking criteria are value for money (cited by 35.6 per cent) and reliability (28.8 per cent). Although most contracts are for two or three years, a renewal rate in excess of 90 per cent indicates that most shippers look for strategic relationships with their LSPs.

“The many positive trends documented in this new report from Eft show that customers are looking to gain more value from their LSPs and, in fact, want to engage with their LSPs more strategically than before,” noted Todd Johnson, Chief Customer Officer of JDA Software Group.

While innovation is viewed by LSPs as a competitive tool, they are also deeply wary of it. Technology advancement in automation and intelligent software is regarded by 11 per cent of them as a potential threat to their business, which ranks only slightly below commoditisation (named by 14 per cent). Brandon Fried, Executive Director of the US Airforwarders Association, attributed much of small and mid-sized forwarders’ reluctance to embrace automation to financial constraints, citing fears that their investment might be rendered futile by new developments.

There is also a sense that the logistics sector overall remains averse to change, in part because of a strong emphasis on the human element. Asked about their most important asset, 43.3 per cent of LSPs named people, well ahead of technology (27.7 per cent). Still, the authors of the Eft study anticipate change there. “While undoubtedly logistics is a people business, as automation and digitization continue to drive significant ROI, we might start to see this scale shift,” the author wrote.

This shift will likely accelerate when millennials move up in LSP organisations. Of those surveyed, 67.3 per cent think that millennials are going to change the way how consumers buy, which in turn will change how supply chains are managed; 56.1 per cent reckon that their understanding of technology will lead to many new innovations within supply chain organisations; and 38.8 per cent agreed with the notion that how millennials communicate and feel as employees will necessitate the need for major changes in how supply chain departments are managed.

Reprinted courtesy of The Loadstar (