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models in logistics
More customers are using logistics to gain a competitive advantage,
opening up opportunities for providers that choose the best path to growth
By Franois Rousseau, Franois Montaville and Franois Videlaine
This strategic shift opens up significant growth opportunities for logistics providers, with winners using different
paths and business models to foster growth. The major
challenges for providers are aligning corporate strategy
with the right organizational model and matching that
strategy to targeted customer segmentsby size, footprint, vertical category and market. Leading logistics
providers excel at understanding key customers needs
and purchasing behaviorsand they know that understanding is a key ingredient to building a solid strategy and defining the most efficient commercial approach
and offerings. This report will examine both the market
and winning models used by providers.
Figure 1: Outsourced logistics activities (contract logistics, freight forwarding and transportation)
are deeply interconnected, with some overlap
Customers supply chain and logistics segments
End client
Supplier
Supplier
Production
Warehouse,
cross-docking,
customs
End client
Inbound flows
Warehouse,
cross-docking,
customs
Warehouse/
distribution
centers
Supplier
End client
End client
Contract logistics
Freight forwarding
Transportation
Figure 2: Contract logistics suppliers have extended their traditional core into extra value-added services
Contract logistics main activities along customers supply chain
Production
(on client site)
Warehousing
Picking, packing,
labeling
Synchronous logistics
(vendor inventory
management)
Kitting
Light assembly
Packaging
Co-packing
Quality control
Roof logistics/
distribution centers
Inbound flows
Outbound
Aftermarket
(after sales, reverse)
Flows
management
Freighting
(road, rail)
Cross-docking
Synchronous logistics
Warehousing (standard
and dedicated to specific
sector requirements)
Picking, packing,
labeling
Flows
management
Freighting
(road, rail)
Transport (collection,
consolidation, return)
Warehousing
Customs
Customs
Payment
services
Installation
After-sales services
Repairing
Customer management
Scrapping
Warehousing activities
Kitting
Light assembly
Packaging
Co-packing
Preconfiguration
Postponed manufacturing
Success lies in fully utilizing trade lanes, not the overall network size. An extensive network of trade lanes
isnt enough for sea and air freight providers to succeed.
Winning requires having significant freight capacity
on a given route to obtain preferred freight rates and
fully utilizing the route by pooling enough orders from
various customers.
The challenge of rationalizing historical networks.
Freight forwarding is moving away from its original
Figure 3: The groupage business model employs a network of depots, where parcels are collected and
distributed for multiple customers
Full-truckload
Part-load
(about one to two tons to full-truckload)
Area A
Collecting
platform
Area B
Area B
Area C
Dispatching
platform
Figure 4: Almost all the major third-party logistics players evolved from a historical core business into
37.9
14.7
14.3
1.3
2.0
80
Allocation
of sales by 60
business
(2010)
40
7.0
6.8
10.9
3.1
3.4
5.9
6.6
5.7
5.2 5.2
0.9
0.6
0.6
3.8
4.2
0.4
1.0
1.1
2.4
13.0
2.4
4.5
2.3 2.2
3.4
7.1
14.0
1.2
0.6
4.5
9.4
20
3.4 2.5
2.8
0.3 0.3
3.7
2.4
2.7
1.6
Freight forwarding
Transportation
Other
Con-way
Agility
Dachser
Expeditors
Panalpina
Toll
DSV
UTi
N. Dentressangle
Wincanton
Geodis
Ceva
C.H.
Robinson
DB Schenker
Logistics
Kuehne
& Nagel
DHL
excl. Mail
The geographically based management model helps Reduce the organizations structure and centralized
providers develop a global network around targeted trade
head office to a minimum
lanes and grow that network by attracting a broad range
of customers. It enables providers to take advantage of Standardize decentralized processes and IT to
streamline operations and closely monitor costs
cross-selling opportunities, as well as win over global
Contract
logistics
Transportation
Revenue allocation by
customers in search of solutions that integrate different
business not available
Implement
an aggressive incentives plan
Freight forwarding
Other
logistics activities.
For Model 2, geographically based management, success
depends on outstanding management and optimization
of a large-scale worldwide network:
Group
VP FF
VP Transportation
VP CL
Business
line
Freight forwarding
Contract logistics
Transportation
Head office
Head office
Head office
Local
business
units
Region/
Country
Region/
Country
Sales
Sales
Operations
Operations
Group
VP Road
VP CL
VPs vertical markets
Region
Head office
Region
Head office
Region
Head office
Sales
Sales
Sales
Dir. FF
Dir. FF
Dir. FF
Dir. CL
Dir. CL
Dir. CL
Dir. Transporation
Dir. Transporation
Dir. Transporation
Vertical markets
Vertical markets
Vertical markets
Area
Local
business
units
Country
Sales
Country
Sales
Ops. FF
Ops. FF
Ops. CL
Ops. CL
Ops. Transportation
Ops. Transportation
Vertical markets
Figure 7: The two organizational models create different competitive advantages, but both require a
Integrated
offers
Model 2
Cross-selling
Model 1
Monobusiness
Local flows
Intercontinental flows
Needs and
purchasing
schemes
High
potential
for
integrated
needs
Mainly
monobusiness
needs
Type of flows
Consumer goods
(soft drinks,
home furnishings,
apppliances,
beauty)
Retail
Automotive
(excluding transport Healthcare
of finished vehicles) (medical
Healthcare
devices,
(chemical
biotech,
drugs)
generics)
Industry*
(*dependent
on industrial
sub-segment)
High tech
Aerospace
Consumer goods
(clothing, toys,
alcoholic beverages)
Defense
Local
Regional
Intercontinental
Conclusion