Focused on Price in Logistics? You're Missing the Point
According to a recent editorial written for the Journal of Commerce by our CEO, Fauad Shariff (subscription required but highly recommended), those who think logistics startups, existing stakeholders, and their customers are solely focused on price are missing the point.
Mr. Shariff pointed out that while it is too early to know which companies will revolutionize the world of logistics, technology has never failed to transform an industry. And with the $260 billion ocean freight and logistics industry, there are likely to be multiple winners.
The article was written in response to two recent columns from JoC’s Hugh Morley and Peter Tirschwell, who both articulated that the jury is still out on which business model is making the most difference in ocean container shipping and which one is most likely to prevail.
A common industry response, cited by both articles and in many industry discussion groups, is that technological innovations, especially in the form of marketplace-driven business models, are solely aimed at driving down freight costs and compressing profit margins of existing freight forwarding and logistics companies. In his analysis, Mr. Shariff challenges this reasoning by pointing out that no business can succeed if its sole objective is to drive down price, as this completely ignores the other types of value delivered by freight forwarders.
no business can succeed if its sole objective is to drive down price, as this completely ignores the other types of value delivered by freight forwarders.
If not price, then what is the focus of today’s logistics startups and large entities such as Amazon, AliBaba and Walmart? The answer, according to Mr. Shariff, is velocity of goods. While the world of ecommerce has made a retail transaction possible on a mobile device in 30 seconds or less and offers same-day or overnight delivery, the world of logistics continues to operate over a network of ERP systems, relaying data via EDI, through a lengthy order-to-cash cycle with multiple cut off dates and staging points.
Solving this problem by accelerating the individual steps in a shipment will ultimately speed up the entire shipment process. This, not price commoditization, is what all companies, from to startups to global forwarders and shippers alike, are truly looking to achieve with today’s technology.
Read the complete article here on Journal of Commerce.
By: Petere Pamela on June 28, 2017, 11:09 a.m.