Several years ago, before “logistics” became a buzzword in the transportation industry, a group of journalists was asked to a Truckload Carriers Association annual meeting to try predicting the future. Some of those predictions, such as the one that Jerry Brown, now mayor of Oakland and then governor of California, would be elected president, fell flat. One, that information would almost become more vital to truckload carriers than trucks and trailers, has come true with more force than anyone ever expected.
Motor carriers now can track loads and communicate with drivers. They can track untethered trailers and control refrigeration units at a distance. Integrated into other information systems, carriers can maintain constant control of operating costs. Food distributors, with their fleets home daily, may have even more control as a result of the recent flood of information technology. These businesses, in particular, have been able to take advantage of information systems to reduce inventories and squeeze excess costs from their operations.
However, access to information is not the only key to success. To survive in the highly competitive North American third-party logistics market, logistics providers — from trucking companies to Internet-based operations — must focus on developing profitable businesses and remember that people and processes, not just technology, make success possible.
Managers need to use all the information available to make decisions about their business, to walk away from some business if it is not profitable, says Robert Delaney, vice-president of Cass Information Systems. The alternative is to take on an account and hope that profitability will come along later. That usually doesn't happen, he says.
Competition in the logistics arena is so stiff that many companies will accept initial losses simply to gain market share. This is particularly true in instances where 15 to 20 providers are bidding for an account, Delaney says. With competition so intense, using information to determine when, where, and how to compete is essential.
Contract logistics is a huge business and will continue to grow. Since deregulation of trucking in 1980, the logistics market has expanded from $2 billion a year to more than $56 billion. Many projections suggest growth can remain at 15% to 20% per year.
The addition of Internet technology to the logistics mix placed great emphasis on technology. However, Delaney says that success may depend on changing the focus from technology to people and processes. If the right systems are not being used correctly by the right people, the technology won't save a questionable account. Information technology and supply chain optimization skills receive a great deal of attention, especially in the logistics and transportation press, but if the technology is not used by highly skilled managers its value is questionable, he says.