Why Is Everything More Expensive Right Now? And why this can be dangerous for the Logistic’s industry?
Recently, we have witnessed sharp inflation within almost all merchandise groups (20-40%). It was caused by increased Logistics costs and Lead times as a reflection of the global shipping crisis. A worth reading article here that explains what is happening today.
Nevertheless, we are seeing that many logistic companies are declaring record profits, few read hearings need to be avoided. And the keywords of that are: “Everyone is blaming each other “and “uncertainty, “as this can lead to profit decrease or even increased customer’s churn rates and decreased Loyalty in the future.
Why do we think so?
When the prices and lead times increased dramatically, channel partners started blaming each other, some forwarding and shipping companies even became ignorant to customers. However, we need to forget that every stick has two ends. So when the situation changes (and it will someday), I can bet that many shippers will start looking for a replacement. A good bunch will also look for ways to hedge the future risks by splitting their Logistic’s expenditure pie between more partners. All that will lead to increased churn rates and decreased Loyalty.
The other read hearing is related to uncertainty. When we have a 20-40% inflation, consumers will start choosing what to buy at some point. So it will lead to faster changes in consumers’ buying behavior. And having in mind that Sales and operations planning is becoming complicated, this will lead to import and export map changes or even to bankruptcies of some companies.
Why do we think that some companies will go bankrupt?
Because not every company has a robust or agile supply chain (depending on their situation) at hand to react to all of those changes. Furthermore, many of them are sitting still burning their money and thinking that this will end someday soon.
To reflect on those changes, Logistic’s companies need to:
- Be agile as never before. Reflecting on changing import/export balance and maps, companies will need to move fast by adapting to new lanes, adding new services, investing in technology, etc.
- Start thinking about ways to improve service levels and customer’s Loyalty. This chaos creates colossal opportunities for forward-thinking service providers and threats for those who tend to move along the wave. While most companies are in reactive mode (blaming each other, paying no attention to communication with customers, accepting low service level’s as a norm, using out all possibilities to earn extra margin, etc.). Forward-thinking companies need to turn on the proactive mode, which will flood your business eventually with customers leaving the reactive companies.
- Pay attention to biz dev. I know that it’s a complicated thing today due to increased workloads and capacity issues. Many actually do not have anything to offer to new customers. Nevertheless, it would be best to balance operations between existing clients and new customers. Otherwise, companies may have problems with their pipeline’s in the not-so-far future.
So what do you think is this a threat or a possibility?
If you are looking for proactive ways to balance your business, increase service levels, and speed up biz dev, please book a time to talk with us. We can help to create and execute strategies that will leave your competition behind. You can do this by pressing the link below.
P.S. Do not miss this opportunity to scale your business to new heights. Remember, great companies start investing during economic uptorn, not downturn.