The “Relationship Business” Paradox in Logistics
“It’s a relationship business, you can’t automate that with technology!”. In the world of freight forwarding we hear this repeated daily. The fact is, however, that EVERY business is a relationship based business. In the consumer markets major brands build relationships through marketing and earn trust by providing reliable products or services.
Trust gained or lost is the actual “output” of any relationship. Hence, people trust McDonald’s to deliver the same meal in any city at any time of day at a reasonable cost. Similarly, people trust Mercedes-Benz to deliver a reliable product at a premium price that they are willing to pay for such quality. We spend little time interacting with the actual people at these companies with the possible exception of sales people, but even that only happens once we have chosen to enter their retail channel.
In the world of consumer services, things are more complicated. We can invest our hard earned savings through TD Ameritrade for a low cost commission and very little customer interaction from a financial advisor, or we can invest the same money into the very same markets with Merrill Lynch at a higher cost per transaction.
We can get our mortgage through a credit union like PenFed or a major retail bank like Citi. We have a choice when filling our prescription medicines from a neighborhood pharmacy or from Walgreen’s. In all of these instances, neither option is wrong. They are actually all reasonably price competitive (even the neighborhood pharmacy can buy from wholesalers after all). The value unit that actually determines which option is better for you is the relationship.
"The relationship business provides greater customer value"
So that settles it, right? The relationship business provides greater customer value and hence justifies its place as a trusted partner and a market leader. Not exactly…
Relationships Are Personal, Processes Are Not
Whether it’s Merrill Lynch, Walgreen’s or Citi, market leaders have all made commitments to use technology as an enabler of relationship development. On the back end, Merrill Lynch and TD Ameritrade look the same. Despite being an “old” company in the “relationship” business, Merrill’s technology is second to none. They’ll get you 100 shares of Microsoft as fast as anyone else in the market, and they’ll give you an opinion on the right time and price to buy or sell.
Walgreen’s has a neighborhood store, with a pharmacist you can talk to and consult, but the pharmacist has access to your prescription history and can advise you on potentially harmful drug interactions. In each of these cases, technology adds value to the relationship and prevents the company from wasting resources on manual processes that run the business.
Citi’s mortgage platform can access credit histories of loan applicants in seconds and without making phone calls to the credit bureaus. Merrill Lynch and Walgreen’s don’t have armies of workers cataloguing transaction or prescription histories of their customers. Technology allows them to simply focus on a better outcome for their customers which strengthens the relationship.
"Freight and logistics businesses lack adequate technology because profitability is low."
They’re huge companies, they have money. What about us?
It’s a chicken & egg argument in some ways. Freight and logistics businesses lack adequate technology because profitability is low. Profitability is low because of a lack of technology to automate basic business processes. So to survive, freight forwarders, NVOCC’s, 3PL’s etc. pay for talent who can shop for rates aggressively, markup those rates appropriately, and process transactions rapidly and efficiently. Bigger companies can separate those skills into different departments, but smaller one’s can’t.
Fortunately the time has arrived for affordable technological change in the freight business. Thanks to cloud based technologies, previously expensive solutions such as “track & trace”, Purchase Order Management/Visibility and online payments have become affordable for even the smallest businesses in the industry.
The demands that ecommerce are placing on the world’s supply chains are pulling logistics in ways not experienced since the advent of jet engines. All of this new demand and opportunity requires systems that can truly facilitate visibility across the supply chain. That’s where marketplaces and platforms, concepts exclusively enabled by the internet, are now able to help solve the technology challenges faced by freight forwarding and logistics companies around the world.
"Nobody knows the value of freight forwarders and the challenges they face..."
At CoLoadX we’re building the platform for the freight forwarding industry. We’ve started with a marketplace that automates rate management so that freight forwarders can stop sending emails all day long just to realize a “good rate”. We’re giving NVOCC’s access to markets that they can serve, but have been blocked out of for lack of infrastructure, and for those companies who have countless offices and branches just to gain market share, we’re offering sales and process efficiency that has never existed before. And that’s just the beginning.
Nobody knows the value of freight forwarders and the challenges they face like we do. That’s why we’re building the tools to make these businesses more efficient so that they can spend their precious time and resources on running the relationship business.
By: CoLoadX on Nov. 22, 2016, 8:58 a.m.