Achieving high

performance in
Freight Forwarding &
Contract Logistics

A controlling presence in key growth markets and the flexibility to respond swiftly and
innovatively to customers evolving needs distinguish the high performers in Freight
Forwarding & Contract Logistics. In the future, their deep expertise in their customers
industries, and the cost control discipline they have developed by using shared services
across their business functions will be more critical than ever. High performers will
differentiate themselves further by offering supply chain management as a shared
service to customers. And in order to drive the continuous innovation of customer-facing
applications, they will leverage IT-driven process management collaboratively with those
customers.
Accenture High Performance Business research in the Freight Forwarding & Contract
Logistics industry covers the period 2008-2011.1
The future outlook
Over the next five years, growth in the Freight
Forwarding & Contract Logistics industry is
expected to continue to outpace the growth of
global GDPthough by a less significant margin
than in the previous five years (1.5 percent vs. 2.5
percent to 3 percent). After recent sharp declines in
revenues for air and sea freight forwarding, the
sector should return to pre-crisis growth levels
within two years; though yields will improve only
slowly while freight rates remain under pressure.
As trade routes become more competitive and rates
fall, the industrys traditional bargaining power
with its shippersvolumewill be challenged.
Shippers are expected to continue to be willing to
pay more for a premium service, but only in return
for contract price transparency, and increased

information and delivery reliability. Industry players

will also need to show the customer that they are
able to shape attractive solutions by outsourcing
key services.
The key to achieving growth and profitability will
be the ability to respond with speed and agility to
growing customer needs for advanced logistics
capabilities, and industry-focused solutions. This
will not only require superior IT capabilities to
maintain internal process efficiencya capability in
which the high performers already excel. It will also
require using their balance sheet strength to
acquire niche players in key trade routes and key
(especially emerging) geographies. In addition,
leading players will need to drive ongoing
innovations in interfacing technologyworking
with customers and partners to achieve real-time

information exchange (including supply chain

platforms in the cloud) and mutually optimized
processes, end-to-end, right across the supply
chain. Above all, top companies will need to
develop deep expertise in their customers
industries and business processes.
Accentures High Performance Business methodology analyzes
performance across five metrics: (revenue) growth; longevity (or total
return to shareholders over time); profitability (or ROIC); consistency (in
revenue growth, economic profitability and annual future value) over five
years; and positioning for the future (a measure of investors expectations
of the value of future returns). In Freight Forwarding & Contract Logistics
we analyzed a peer set of 19 publicly-held global companies with annual
revenues in excess of 1 billion euros (more than 60 percent of which are
generated outside their home markets) to identify those that had
consistently outperformed their peers over economic and industry cycles
and changes of leadership.
1

The industry background

Changes in customer behavior and expectations
are transforming Freight Forwarding & Contract
Logistics. The industrys four, core customer
segmentshealthcare and pharmaceuticals,
electronics and technology, automotive and
industrial equipment, consumer packaged goods
and retailare all continuing to globalize. And as
they enter new and especially emerging markets
they are demanding much more than traditional
transportation and warehousing services from
Freight Forwarding & Contract Logistics providers.
The ability to offer such new, value-added services
as warranty processing, returns management and
light manufacturing is now a differentiator as
critical as being able to provide customs and
insurance brokerage, or trade and transportation
managementif not more so. Leading logistics
companies are also becoming integrators of
specialized service solutions, building scale and
expanding, both by acquiring other players and
by investing in new logistics infrastructures and
customer-facing technologies.

The high performers

Against this background the high performers have
maintained industry leading operating profit margins
and above average capital efficiency ratiosa result,
we believe, of their tightly controlled operating
expenses and strong working capital management.
In contrast to most of the industry, whose top-line
growth suffered significantly in the global downturn,
the high performers managed a CAGR of 13.4
percent over the past three years. They also returned
a total of 7.5 percent to shareholders over five
yearsin contrast to negative returns for the
rest of the industry peer group.
4

The building blocks of high

performance
Like high performers in all the industries Accenture
has studied, these companies owe their success to
mastery of three building blocks (see Figure 1).
Figure 1: Presence in growth markets, deep industry expertise and leveraging IT extensively for all
internal and business service functions are key for high performance in freight and logistics
Market focus & position

Presence in key markets

A presence in key growth markets and control of key trade lanes and transport modes

Distinctive capabilities

Flexible business model

Innovative, fast and efficient
response to customer
requests/demand

Performance anatomy

Deep expertise in key

customer industries
Knowledge of customer
industries that extend beyond
transportation to in-plant
logistics and product
knowledge

High performance procurement

Efficient buying of transportation capacity

360 degree control using IT

IT has emerged as a key
differentiator for internal
process management and for
giving control and visibility
for customers

Shared services
Shared services are being used beyond
corporate management functions: for key
supply chain functions and for controlling
operating expenses

Market focus & position

Thanks to a mixture of organic growth and
strategic acquisitions, the best performing players
not only have a strong presence in such key
emerging growth markets as Brazil, Russia, India,
China and Mexicothey also exert control over the
most profitable trade lanes: Europe to Asia, for
example, or North America to both South America
and Asia. Moreover, by leveraging dominant
positions in domestic freight (air & road), they
have managed to maintain volume growth without
compromising revenues.

Distinctive capabilities
Flexible business model
The high performers know that time to market is
critical in their industryand they have the
flexibility to respond with speed and agility to
their customers need for convenience. The high
performers have established new ocean freight
links to such growth geographies as Africa. And
they have opened multiple new service links that
span the key global trade routes over which they
enjoy dominance.
Deep expertise in key customer industries
This capability is becoming critical as customers
extend their supply chains in response to
globalization. And the high performers have
been leaders in developing extensive expertise in
the industries they servewell beyond their
traditional transportation and warehousing
solutions. Consider, for example, initiatives to
acquire perishables logistics specialists in order
to serve the retail and consumer packaged goods
sectors better. Or witness similar acquisitions in
6

the healthcare cold chain, which maintains such

vital pharmaceutical industry products as
vaccines at the right temperatures. Some leading
players are contracting with manufacturers to
carry out quality control activities on their
behalfor even acquiring licenses to
manufacture basic devices.
360 degree control using IT
The high performers have moved well beyond
using IT as an internal process management
differentiator. They actually use their proprietary
customer-facing technologies to empower their
customers, offering them end-to-end visibility
right across the supply chain. Cases in point:
Global order-to-delivery systems for the
automotive industry that can standardize
ordering and forecasting processes and help
achieve time-based deliveries for vehicles; or
customer-facing information platforms that
customers can integrate with their own systems
and use for advanced tracking or process
optimization purposes.

Performance anatomy
In this industry, performance anatomy not only
relates to overall operational excellence, but also
to such procurement practices as the purchase of
transportation capacity, as well as to the
innovative use of shared services. Thanks to their
relentless focus on productivity improvement, the
high performers are masters of operational
excellence, achieving significantly higher gross
profit conversion. They place much greater
emphasis on process automation, and on finding
the right balance between volume commitments
and spot buyinga strategy that gives them the

most competitive rates in the most important

trade lanes. And they have been enthusiastic
adopters of shared services, and not only for
internal processes. They have also expanded the
concept to embrace customer services and supply
chain management.

Are you ready for high

performance?
Accenture research shows that the high performers
in this industry owe their success to a combination
of dominance over profitable trade lanes, strategic
growth in key emerging markets, and business
models that are supported by operational
excellence and designed both to empower
customers and to develop expertise in their
industries. But which business levers can help
you achieve such superior capabilities?
Figure 2 illustrates some of the key elements
that underpin high performance in Freight
Forwarding & Contract Logistics industry.

Figure 2: Key business levers for high performance in Freight Forwarding & Contract Logistics industry

Building blocks on high performance

Business levers
Control on profitable trade lanes

Network optimization
Competitive carrier network
Product innovation

Market focus & position

Strategic growth in emerging

markets

M&A or partnership with synergistic players

One stop services

Seamless integration of IT

Flexible business models

Value added services (supply chain shared services)

Higher control to customers

Easy to integrate technology

Distinctive capabilities

Proactive alerts/better exception management/better reporting

Customer industry expertise

Industry specific technology/tools

Industry specific business process models (alignment with customers
operations, processes, and industry know-how)

Productivity improvement/
Operational excellence

Better EDI* connectivity/cloud platform

Effective transport procurement
Shared services and control tower

Performance anatomy
Robust internal IT

Integration of IT infrastructure
Global and standardised operations systems (e.g. TMS or WMS**
implementation)

* Electronic data interchange

** Transportation management system, Warehouse management sytem

About Accenture Research

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organization devoted to economic and strategic
studies. The staff consists of 150 experts in
economics, sociology and survey research from
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2011. Our Internet address is www.accenture.com

The Freight Forwarding and Contract Logistics study

was done by the Accenture Research team
comprising:
Sreejith Sreedharan, a manager in Accenture
Research, leads Air, Freight & Logistics, Travel
Services research. He is based in Bangalore.
s.sreedharan@accenture.com
Abhishek Gupta, a specialist in Accenture Research.
He is based in Bangalore and in the Air, Freight &
Logistics, Travel Services research group.
abhishek.gp@accenture.com

Contacts
Rob A. Knigge
Accenture Partner Freight & Logistic Europe
rob.a.knigge@accenture.com
Adriana Diener
Global Accenture Partner Freight & Logistic
adriana.diener@accenture.com
Jrg Junghanns
Accenture Freight & Logistic, Germany
joerg.junghanns@accenture.com

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