Date published: 01.09.08 - not release date

Logistics companies and their customer living in different worlds

The belief that the major logistics companies are meeting their customers’ needs by the recent spate of mergers to form mega-logistics service providers is not shared by the customers they serve! That is the clear finding of the recent survey conducted in the UK by SCALA Supply Chain and Logistics Consulting www.scalagroup.co.uk.

In conjunction with the SCALA Annual Logistics Debate which was supported by the Chartered Institute of Logistics and Transport SCALA undertook an industry wide survey which has highlighted some very real differences in perspective between logistics companies and their customers. John Perry MD of SCALA said “The significant finding is that logistics companies see benefits in growth through being able to provide a wider range of services; a more integrated service with further benefits from increased synergy; and operational cost benefits. Unfortunately a large proportion of their customers do not see it that way,” Mr Perry said

He added that in spite of all the growth of the major logistics companies almost all (91%) of the customers responding used more than one logistics company - and the three main reasons they gave for this were that no one company could provide the full range of services; different companies were better in different aspects or geographical areas; and, most significantly, 72% say that from a strategic business perspective they would not want to move to a single company.

Mr Perry said that there were significant areas where both logistics providers and customers broadly agreed. These include the fact that more than 90% of both groups said that future choice would be reduced as a result of the mergers. Almost 80% believed that there would be even more cost pressure on the smaller contractors; and less than 10% of both groups believed there would not be any resulting improvement in management capability and customer service levels.

Just over 66% of all companies had direct experience of the impact of the consolidation taking place in the marketplace. Of the logistics companies - 97% said there had been client synergy benefits and 83% said this had resulted in operational cost reductions. From the customers perspective just 24% said they had seen synergy benefits and 28% cost benefits. Mr Perry commented, “If the logistics companies are seeing such benefits and their customers aren’t there's a real need for the customers logistics service users to ask the simple question ‘Why Not?’ “. He added: “One of the main arguments for these mergers has been to bring about significant cost and service benefits for customers. Why have they not materialised?”

In addition 95% of logistics companies said that the range of services offered had been extended – but only 25% of customers agreed, with the rest saying this was not the case or was irrelevant. “There seems to be a serious mismatch between the expectations and experience of service providers and users” Mr Perry added. “There were also very significant differences in the perspective on integrated supply chains. While 94% of all logistics contractors claimed to offer a fully integrated supply chain service – just 7% of all the customers said their contractors could provide this!”

Finally what about that much sought after “pro Active” approach? Every Logistics company responding said they adopted a pro-active approach within the contract with 94% saying they were also proactive in areas outside the contract. Their customers said this was not the case with just 21% saying their contractors were proactive within the contract – and dropping down further to 6% outside the contract!

It is reasonable to assume that the results fairly reflect the views of both customers and logistics companies. The problem is each reflects their own perspectives and objectives and at times they seem to be operating in different business worlds !!
John Perry says “ All too frequently success for logistics companies does not equal success for the customers – and vice versa. The contract objectives of the Logistics Providers must be totally aligned with the business objectives of the customer”

For further info contact:

Denis O’Sullivan
NetworkedWorld
Tel:07710-820-979
Email: denis_osullivan@btopenworld.com

or

John Perry
Scala Group
Email: john.perry@scalagroup.co.uk
Tel: 01484 422084

www.scalagroup.co.uk