The Logistics Self-Service Quandary
Welcome back to the third 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. 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.
Last fall, I was moderating a panel with a shipper, a forwarder and a software provider. All three had interesting perspectives, but my main priority during the session was to suss out one specific piece of information from the shipper: how much did this person want to be managing freight procurement for a multi-billion dollar global company in the same way he handled buying plane tickets or picking a movie on Netflix?
A more straightforward way to ask this question would have been: how much self-service capability did he actually want? His answer, while not necessarily surprising, was illuminating. Essentially, the shipper said “I don’t want to be procuring online all the time. Our procurement process yields value, and the people involved in it are highly skilled and hard to replace with technology alone.”
I don’t think large, global multinationals are necessarily inclined to gravitate toward a self-service model any time soon. The promise of more direct control over logistics has hovered over the industry since the dotcom boom, out of which a number of now brand-name logistics software companies fully entrenched in the global logistics industry’s collective consciousness were born.
That promise never fully materialized for a couple of reasons: one, forwarders adapted and kept themselves irreplaceable to shippers that don’t actually want to control everything. To wit, many of the platforms that sought to enable shippers to become self-service eventually started selling their software to forwarders. But second, and more significantly, the dynamics in global logistics change faster than shippers can actually manage if they want to control everything in-house.
Let me put a finer point on this: imagine a logistics director and her team getting to grips with the constant changes to the foundational elements of their job. Now, imagine adapting to the changes created by an inexorable migration of sales to e-commerce and direct-to-customer channels (including in B2B transactions). Now, layer in the COVID-19 pandemic, where that migration to online has accelerated to hyper-speed.
Is that logistics manager truly equipped to manage those layers of complexity internally, especially when they are coming so fast? From a resource perspective, an expertise perspective, a technology management perspective? Maybe so. But more likely the pace of change requires turning to a third party that specializes in managing that pace of logistics change, letting the large shipper focus on the core business of product development and sales.
The tail of the market is a different story, and that’s why self-service SaaS-based approaches seem like a good fit there. But, this creates its own conundrum for the logistics software industry. Target a segment of the market that’s more receptive to your approach, or tweak the approach to land customers in a more lucrative segment of the market, acknowledging that those shippers don’t want and actually can’t managing everything in a self-service fashion?
The good news for those software providers is the market is so wide and diverse that there is definitely room for different approaches and different models. Even if one in 10 global shippers wants a self-service option, that’s probably enough for a software provider or a 3PL buying off-the-shelf software to justify offering one.
Some recent online discussions I’ve been involved in:
https://www.joc.com/uncharted/uncharted-episode-11
Here’s a roundup of pieces I wrote for JOC.com the past week (note: there is a paywall):
Don’t miss my colleague Bill Cassidy’s comprehensive two-part look at digitization in the LTL industry:
And here are some recent discussions, reports, and analysis I found interesting:
https://medium.com/maersk-growth/why-air-cargo-flies-in-winds-of-change-d400840d0f13
https://ckthoms.substack.com/p/no-1-understanding-portfolio-construction
Disclaimer: This newsletter is in no way affiliated with The Journal of Commerce or IHS Markit, and any opinions are mine only.
Regardless. whether a shipper or 3PL, the entire indsutry has to automate the transportation life cycle process and move to a digital environment. Some shippers will build their own control towerss and others will use the 3PL as the control tower. In either case, its all about the data, real time data and normalized across all modes and carriers. The shipper can do their annual or bi-annual prorement exercise to ensure capacity, service levels and budgeted costs, but will have to use technology, along with the strategic relationships they have built with carriers or 3PL's, to manage disruption and may use online spot market tools to compliment the annual procurement event. it is still about the ecosystem of partners( carriers, 3PL's, technology providers) that will enable companies to balance self service vs outsourcing portions or all of their transportation fuctions and the old "build vs buy", what's my core competency, and ROI questions.
I know when we tried to spin up a self-serve LTL TMS at Cerasis, we didn't see a lot of demand for it. People wanted service (for exception management) tied in. They saw value in that service but were happy to also have a tool to execute.