If you would read any business book, all are saying that to succeed in business, you need to niche down. Many logistics service providers follow this advice, and of course, there are many successful ones. But is this still viable during rapid changes in global supply chains, omni-sales channel usage, turbulent economics, and unstable geopolitical situations? In our opinion, the answer is no. We agree that niching down is crucial when a logistics company starts the business, but later on, if a company wants to grow and hedge all the future risks, adding new services and entering new markets is a bulletproof strategy.
The article below will provide five significant tendencies that point us to this conclusion.
Earlier (10-15 years ago), the competition in the logistics sector was not so harsh. Nowadays, the market is an entirely different place. We witness the brutal consolidation of big players (Kuehne+Nagel, DSV – Global Transport and Logistics), and shipping lines are becoming vertically integrated (A.P. Moller – Maersk, CMA CGM). Let’s not forget all the digital players that have entered the market and the Gig economy. In contrast, nowadays, anyone from anywhere in the world can become a freight forwarder, dispatcher, etc.
So now, if a company provides a narrow service package, especially general services like FTL, LTL, general lanes, and SPOT-only market participants, it becomes hard to differentiate from the competition; therefore, growing the business becomes harder. Whereas logistics service providers using out upselling and cross-selling opportunities grow faster.
2nd. Shippers are implementing robust and agile supply chain strategies
Earlier robust and agile supply chain strategies were implemented only by multinational companies. But the pandemic and generally changing consumer behavior is changed everything. More and more companies are implementing those strategies, whereas core principles are nearshoring, outsourcing, supplier diversification, different delivery modes selection, control tower view, etc. All this increases complexity. Therefore, working with a logistics service provider that eliminates complexity, which often means more quality services and the ability to serve different markets, becomes a life-savior for many shippers.
3rd. Sustainability policies
The path of the logistics sector towards net zero is quite apparent. The most recent developments in some parts of the world, where each product must declare the emissions and offset them, point to the conclusion that net zero is a real long-term strategy. Many logistics services providers have declared a net zero by 2035. But let’s not forget that the transition will be pretty challenging, as there isn’t sufficient infrastructure, and of course, it is an expensive venture. Therefore, a shift towards multi-modal transportation in the transition period will happen.
If a logistics company cannot arrange such kinds of services, be it it’s own or with the help of partners, it will mean lesser business in the upcoming years.
4th. More shippers are implementing omni sales channels strategies.
Earlier trading and manufacturing organizations usually used up to two sales channels (own stores and intermediaries). Today we have a completely different situation, whereas shippers are selling and receiving at brick-and-mortar stores, selling it in their e-commerce sites or through Marketplaces. And this trend will strengthen in the future with further development of warehouse automation and MFC.
Therefore those logistics service providers covering different channels will gain more significance in the value chain.
5th. Changing geopolitics.
And lastly, we need to remember geopolitical tensions and polarization. We are discussing the tensions between USA and China, new strong countries’ emergence, etc. Those changes will start changing import and export balances. If logistics service providers cannot adjust and offer flexibility for trading and manufacturing organizations, they will become less attractive.
To sum up the above tendencies, I want to draw your attention to the fact that we are not saying that niche down is an entirely wrong thing, as there will always be opportunities, but we believe that being able to cover more markets, more chains and provide more services can be a far better option.
Tomas Ananjevas is a supply chain professional with 15 years of experience purchasing and selling Logistic services and building a supply chain from scratch. He founded a consulting, training, and staffing company that works exclusively with the logistics industry. Tomas is helping logistics companies implement the necessary changes to ensure business growth and continuity. You can arrange a time to talk with Thomas by clicking here.