CRM: The Overlooked Lynchpin in Logistics
Welcome back to the 15th edition of The LogTech Letter, a weekly look at a particular aspect of the impact technology is having on the world of global and domestic logistics. Last week, we discussed the reality of how automation will affect the number and type of jobs in the logistics industry. This week, I’ll explore a favorite topic of mine - the importance of CRM software for logistics providers.
As a reminder, this is the place to turn on Fridays for quick reflection on a dynamic, software category, or specific company that’s on my mind. You’ll also find a collection of links to stories, videos and podcasts from me, my colleagues at the Journal of Commerce, and other analysis I find interesting.
For those that don’t know me, I’m Eric Johnson, senior technology editor at the Journal of Commerce and JOC.com. I can be reached at eric.johnson@ihsmarkit.com or on Twitter at @LogTechEric.
I’ll start off with a provocative statement: logistics service providers (LSPs) are better served investing money in customer relationship management software (CRM) than a transportation management system (TMS) or visibility solution, and maybe even a revamped website.
First, let me be clear. This is not a binary situation. I’m not saying LSPs only need one type of software. Rather, what I’m saying is that LSPs are better served orienting their technology investment strategy around a tool that tethers them directly to their customers than a tool that operationally assists their customers. I wrote about this concept way back in early 2019.
Traditionally, LSPs have viewed their ability to serve their customers as their key differentiator, which has led to billions of dollars of investment globally into TMSs and visibility platforms designed to enable high level shipment execution. That mindset springs from the fact that LSPs, in general, don’t focus on marketing. They succeed by delivering for customers and grow via word of mouth. It goes back to something I wrote in this newsletter a few weeks ago, that incumbent providers have a tough time explaining to the market how they innovate.
That operational execution mindset is great, but technology in the past decade has changed the nature of customer interaction, most notably in B2C environments, but also in B2B. The ubiquity of Salesforce and Hubspot as CRM and marketing platforms is testament to that. It’s probably not enough anymore for an LSP to be excellent at the service it provides. It also needs to understand its customers, in a data-oriented way, like never before, and leverage that data to get deeper with customers and attract new ones.
I’m not presuming that LSPs don’t have some sort of CRM, whether Salesforce, another third party software, or an internal system or hack they use to keep track of customer engagement. Having nothing at all is suicide these days. But what I am presuming is that there is a relatively small number of LSPs that put CRM at the core of their business. For most, CRM will be an ancillary tool used by a discrete set of employees, not a backbone system used by most, if not all, of the organization.
I’d argue that for service organizations, especially non-asset-based ones, CRM should be that backbone system, with operations an off-shoot of that customer engagement and retention strategy.
Let’s think of this like rings on a tree. Traditionally, the TMS and operating system (or spreadsheets for those without an OS) has been the inner ring of the tree, around which customer engagement (and other systems) is layered. This isn’t meant to belittle all of the outstanding operational software providers out there, but those operational tools aren’t so differentiated anymore, particularly now that a slew of subscription-based SaaS tools have entered the market.
If I’m a small forwarder, tomorrow I could pull out my credit card and buy visibility software, rate management software, invoice auditing software, a TMS and an online quoting skin. Those are all vital but they aren’t the differentiator that internal customer knowledge capability is. The ability to know what a customer needs, when it needs it, how it likes to be reached, via what channels. That’s the differentiator going forward.
Again, let me reiterate that this isn’t a question of buy or develop a CRM and then ignore everything else. Rather, those operational tools should feed into the CRM, so that a relationship manager can pull information from the operational relationship an LSP has with a shipper directly into its interaction on the sales side. The question, as an LSP, shouldn’t be “what can we do for you?” followed by a list of services the LSP provides. It should be, “it looks like this is what you struggled with, and this is how we’ll solve that.”
This change isn’t as tectonic as it may seem. It’s more of a mindset challenge than an architectural one. Flip the thinking to go toward a “customer data equals customer knowledge equals operational service” mindset and away from a “we provide great service and the customer will ultimately recognize that” one.
Here’s a roundup of pieces on JOC.com the past week from my colleagues and myself (note: there is a paywall):
This was a big one in the world of supply chain software. I’ve covered LLamasoft for a decade, and it was just acquired by procurement software provider Coupa for a whopping $1.5 billion.
I spoke with the CEO of Twill, Maersk’s erstwhile digital forwarder that has pivoted to become a micro-shipper sales channel for the container line.
More on Maersk here, particularly how its broad integrator strategy means its competitive or complementary interface with various segments of forwarders is far from uniform.
My colleague Bill Cassidy spoke with Echo Global Logistics CEO Doug Waggoner about freight bidding. Well worth a read.
Everybody’s favorite topic - Amazon - is analyzed here by my colleague Cathy Morrow Roberson, as she examines its warehouse and fulfillment expansion.
Program alerts:
I’ll be discussing how technology is reshaping the freight procurement environment with Anshu Prasad, CEO of Leaf Logistics, at 2:45-3:15 pm EST Nov. 11, during the online version of JOC Inland. Register here for the entire event, which is free to attend.
I’ll also be involved in a panel at the SmartPorts conference Nov. 17 at 1:30 pm CET, joined by two shippers, MSC’s Andre Simha, and DCSA’s Thomas Bagge. Here’s the agenda for the whole event.
Note: I’m on vacation next week, so there may not be a LogTech Letter next Friday (pending how bored I get during my staycation!).
Disclaimer: This newsletter is in no way affiliated with The Journal of Commerce or IHS Markit, and any opinions are mine only.