2017 Global Logistics Report

By: Haley Garner, Head of Research and Content, eft Introduction and Conclusion by Andrew Kirkwood
SVP, Global Logistics and Supply Chain Execution,
JDA Software Group, Inc.
Introduction Executive Summary

While 2016 was a year of opportunity, 2017 is setting up to be a defining year
for shippers and logistics service providers (LSPs). This year’s Eye for Transport
(EFT) report shows that despite the rapid pace of change in the market, ship-
pers and LSPs continue to improve the nature of their strategic relationships,
recognize the value of technology and innovation, and anticipate growth
outside their traditional businesses.
As with previous years, the main purpose of this year’s report is to provide
insight into the critical trends and benchmarks that will help and enable indus-
try stakeholders to effectively navigate the logistics industry in 2017. At JDA, we
strongly believe that the insights included in this report can help and guide us
all, and that is our main reason for sponsoring this important and independent
research.
LSPs are starting to see results from their investments in technology and
innovation
The industry seems to be reaching the consensus that the tech-driven LSP
is the future of the business
Technology investments facilitating industry automation are putting
further commoditization pressures on the industry as these services
become more standardized
Customer service is gaining momentum on innovation and technology in
terms of priority
LSPs are increasingly looking beyond operations for creating margins

Andrew Kirkwood Differentiation is coming from non-logistics specific areas

SVP, Global Logistics and Supply Chain Execution
JDA Software Group, Inc. Operational automation is inevitable for logistics

LSP Perspective
P.4

Shipper Perspective
P.12

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The State of Logistics 2016

What is your company’s annual revenue? What type of business do you work for?

n Logistics Service Provider -

3PL/4PL
29.5% n Other Transportation Service
37.5% Provider (Carrier, Port, Freight
Forwarder etc)
$0–5 m $5–50 m $50–250 m $250–1 b $1 b + n Manufacturer, Retailer or other
user of transportation/logistics
26% 21.5% 13.1% 12.8% 26.6% services (Shipper)
n Other (Consultant, Press,
Academic, Financial Services, Real
23.7% Estate, Technology Provider etc)
What region are you based in? 9.3%

Is your logistics organization asset owning?

19.2%

32.7%
n Yes – Warehouses
n Yes – Trucks
n Yes – Warehouses and trucks 9.6%
n No

38.5%

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Logistics providers perspective

What’s the biggest threat to your business growth?

2016 2017

5.7%
13.5%
10.6%
26.9%
7.7% n Competitors
32.6% n Competitors
n Consolidation
n Consolidation
n Commoditization
n Commoditization 6.7% n Stagnant global growth
n Stagnant global growth
n Technology advancements
n Technology advancements 4.8%
29.8% n Labor costs
n Other
n Other
6.4%
21.2%
19.2%
14.9%

Logistics providers identified similar threats in 2016 as 2017 to their growth. In

2017, however, the number of respondents reporting each of the top threats
(competition, stagnant growth and commoditization) has diminished by up to
6.5%. This would suggest that logistics companies are handling threats better
than previously.

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 What’s more important to a logistics organization in 2016? Which area is your biggest priority in 2017?
2016 2017

7.7%
9.9%
19.1% 23.1%

n Data 26.9% n Data

n People n People
n Technology n Technology
43.3% n Process n Process
27.7%

42.3%

One hint at how logistics organizations are better handling threats than previ-
ously is by way of how logistics companies are defining themselves. In 2016,
people were the clear defining aspect of a logistics company with 43.3% select-
ing them as the most important aspect of a logistics organization. In 2017, this
has shifted to technology.

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 When it comes to change management, how would you rank each of the following at your organization?
2016 2017

Mature Advanced Scaling Entry-level Mature Advanced Scaling Entry-level

‚ ‚ ‚ ‚ ‚ ‚ ‚ ‚

Data 2.63

Technology 2.35

Technology 2.40

Processes 2.24

Processes 2.30

People 2.04

People 2.07

1 2 3 4 1 2 3 4

One of the reasons for this is that most logistics companies identified their own
short-comings in technology. Data still lags further behind technology in terms
of logistics providers confidence in their own capabilities.

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New business for logistics organization

How did you gain most of your new business in the last 12 months?
2016 2017

n Outbidding or winning n Outbidding or winning contracts

0.7%
contracts from competitors
n Innovating to create new
12.8% business areas (ie. leveraging
technology to provide new
services, or expanding service
5%
33.3% offering such as adding white
6.7%
0.7% 3.5% glove services)
n Working with existing shipper
3.8%
customers to generate new
business in new areas for them
17%
n Inorganic growth/acquisitions
n Expanding to new geographies
27%
n Expanding to new industry
verticals
n As customers’ business has
grown, so has ours
n Other
2.9%
from competitors
n Innovating to create new
business areas (ie. leveraging
9.6%
technology to provide new
3.8% 25.0% services, or expanding service
offering such as adding white
glove services)
n Working with existing shipper
customers to generate new
business in new areas for them
n Inorganic growth/acquisitions
20.2% n Expanding to new geographies
27.9%
n Expanding to new industry
verticals
n As customers’ business has
grown, so has ours
n Other

Another indicator of how logistics companies are getting better at coping with
threats to growth is through their acquisition of new business. In 2016, the
primary way logistics businesses were gaining new business was through outbid-
ding competitors. This clearly creates a vicious cycle in which providers become
each others biggest threats as well as source of new business. In 2017, there’s
clearly a shift taking place where innovation is now a key driver for new business.
This is happening both in terms of using pure innovation to gain new business as
well as working with existing customers to create business in new areas.

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 How do you expect to gain the most of your new business in the next 18 months?
2016 2017

1.9%

n Outbidding competitors
9.2% 10.6%
n Innovating to create new
14.2% n Outbidding competitors 19.2% offerings
10.6% n Innovating to create new
n Working with existing shipper
offerings
customers to generate new
n Working with existing shipper
4.3% business in new areas for
customers to generate new 5.8% them
business in new areas for them
n Inorganic growth
n Inorganic growth 2.9% 38.5% n Expanding to new geogra-
15.6% n Expanding to new geographies
46.1% phies
n Expanding to new industry
n Expanding to new industry
verticals 21.2% verticals
n Other

It must be highlighted that logistics providers aren’t out of the woods yet.
Innovation as a percentage of areas logistics providers are gaining business
actually dropped 2016-2017. Effectively, it suggests that logistics businesses are
diversifying their new business acquisition across a number of different areas,
but are still probably too reliant on outbidding each other.
Over the next year and a half, we see a similar trend. Innovation continues to lead
the way, but there’s a flattening of the chart as a whole as logistics companies
look across different areas for new business. Outbidding competitors, however,
dropped again as a method for gaining new business – a further sign that this
method is unsustainable and contributes to the commoditization of the industry.

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Growth snap-shot

In which vertical are you seeing most growth? In which region are you seeing the most growth?
2017 2017

1.9% 5.8% 7.7% 11.5% n Africa

1.9% 6.7% n eCommerce
n East Asia (China, Korea, Japan,
n Hi-tech
etc.)
n Industrial
3.8% 35.6% n South-East Asia (Thailand,
n Healthcare/Life 14.4%
Vietnam, Cambodia, etc.)
5.8% Sciences/Pharma 28.8%
n South Asia (India, Sri Lanka,
n FMCG/CPG
Bangladesh, etc.)
n Fashion
9.6% n Western Europe
n Aerospace
n Eastern Europe
19.2% n Chemical
n Middle East
5.8% n Food/beverage
9.6% n North America
n Other 4.8%
13.5% 1.0% n South America
12.5%

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Innovation practices

When it comes to cutting-edge technologies (drones, driverless vehicles, 3D printing, etc.) what type of adopter are you?
2016 2017

n Innovator (we’re the ones

5.1% n Innovator (we’re the ones creating
the cutting-edge technology)
19.5% n Early adopter (as soon as the
15.3% technology is on the market, we’re
getting involved)
n Early majority adopter (we’re involved
in new technologies as soon as we
see others moving towards it)
n Late majority adopter (we get
27.1% involved in new technology once we
see a critical mass of adopters)
33.1% n Laggard (we adopt cutting-edge
technology only once it’s an industry
standard
creating the cutting-edge
6.7% technology)
21.2% n Early adopter (as soon as the
technology is on the market,
18.3% we’re getting involved)
n Early majority adopter (We’re
involved in new technologies as
soon as we see others moving
towards it)
24.0% n Late majority adopter (we get
involved in new technology once
29.8%
we see a critical mass of adopters)
n Laggard (we adopt cutting-edge
technology only once it’s an
industry standard

Logistics providers continue to struggle with innovation. Between 2016 and How do you perceive tech-driven logistics companies
2017 there was a drop in confidence for logistics providers in terms of their (logistics tech start-ups that use software to replace
adoption of cutting-edge technologies. Given the prioritization of technology as traditional logistics processes and services)?
2017
a defining characteristic of logistics companies, LSPs are going to have to work
1.0%
hard to ensure they stay ahead of the curve in this department. This is espe-
cially important given the disruptive nature of tech-driven logistics companies.
48.1% of respondents felt that such companies were the future of the industry. 19.2%
An additional 31.7% of logistics respondents felt that such tech-driven compa-
n The future of the industry
nies were a threat to replace traditional logistics businesses. Logistics companies n A threat set to replace traditional
that are going to successfully stave off the threat of technology-driven competi- 48.1% companies
n An opportunity for acquisition
tors are going to have to themselves become technology leaders.
n A fad set to disappear

31.7%

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Logistics customer perspective
Each graph or chart below was compiled from retailer or manufacturer responses only. There were 74 shipper respondents.

How important is it for your solution provider to be ‘Full-

service’ ie. a one stop shop for all your logistics needs?
2017

3.8%

7.5%
7.5%

n Total importance
n Very important
26.4% n Somewhat important
n Not very important
n Not important

54.7%

Manufacturers and retailers (shippers) continue to look at a full-service offering

from their logistics provider favourably. Integrated warehouse and transportation
now ranks as the top offering shippers look for in their providers. Order optimiza-
tion and demand planning also rise up the ranks perhaps reflecting the influence
of eCommerce on how businesses are run. However, when benchmarking logis-
tics provider, reliability, rather than value for money is now the top priority.

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In addition to warehousing and transportation services, what other services would you like to see an LSP offer?
2017
70%

60%
62.3%
50%
52.8%
40%

30%
30.2% 30.2%
20%
22.6%
10% 18.9%
15.1%
5.7%
0%
Network Integrated Inventory Light assembly Supply planning Order management Management Demand planning
optimization warehouse and optimization of your online
transportation eCommerce portal

When benchmarking your logistics providers, which metric do you think is the most important?
2017
40%

35%

30%

25% 35.8%
20%

15% 24.5%
18.9%
10%

5% 9.4%
3.8% 3.8% 3.8%
0%
Reliability Value for money Customer Service Leadership/Mana Innovation / New Flexibility – ie. IT Capabilities
& Speed of gement & ideas and ability to ship
response to Relationship solutions earlier/later as
queries and Development require
problems

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 Customer service in favor of innovation

Where do LSPs most often come up short?

2016 2017

1.9%
5.9% 5.7% n Innovation / New ideas and
6.8% n Innovation / New ideas and
2.5% solutions solutions
n Leadership/Management & 11.3% n Leadership/Management &
Relationship Development Relationship Development
37.7%
n Reliability n Reliability
15.3% 47.5% n Customer Service & Speed of n Customer Service & Speed of
response to queries and response to queries and
problems 20.8% problems
n Value for money n Value for money
11% n Flexibility – ie. ability to ship n Flexibility – ie. ability to ship
earlier/later as require earlier/later as require
n IT Capabilities 11.3% n IT Capabilities
11% 11.3%

Historically, logistics providers and their customers have had difficulties with
innovation – assigning responsibility and ultimately driving it. Innovation
continues to be the top choice for where shipper customers found their LSPs to
come-up short, but interestingly, compared with 2016, this choice has dropped
in popularity. Customer service on the other hand has risen significantly since
2016. Customer centricity has become a significant priority for many businesses
in recent years on the back of new technology enabling customers more visibil-
ity over the services they use.

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 How would you rank the capabilities of your logistics provider in each of the below?
2016 2017

Mature Advanced Scaling Entry-level Mature Advanced Scaling Entry-level

‚ ‚ ‚ ‚ ‚ ‚ ‚ ‚

Technology 2.35 Technology 2.38

Processes 2.53 Processes 2.28

People 2.37 People 1.96

1 2 3 4 1 2 3 4

Innovation is not necessarily dependent on technology, but there is certainly a

close relationship between the two. According to respondents, they are grow-
ing more confident of the technology capabilities of their logistics providers. It
appears that logistics providers are catching up to the technological needs of
their customer counterparts.

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Strategic partnerships increasing

How would you classify your relationship with your logistics provider(s)?
2016 2017

n Short-term focussed with an 13.2% n Short-term focussed with an

16.9% emphasis on cost, operational
effectiveness and using the
service as a commodity
n Mid-term focus where the
43.2% emphasis moves away from cost
towards effectiveness of the
solution and long-term
39.8% collaboration
n Strategic Partner - your logistics
provider plays and active, integral,
long-term role in your strategy
emphasis on cost, operational
effectiveness and using the
service as a commodity
n Mid-term focus where the
49.1% emphasis moves away from cost
towards effectiveness of the
solution and long-term
37.7% collaboration
n Strategic Partner - your logistics
provider plays and active,
integral, long-term role in your
strategy

Clearly LSPs are beginning to shake off some of the reputation they had earned
for being backwards technologically or laggards when it comes to innovation.
The consequences of this are also beginning to manifest themselves: LSPs are
increasingly seen as strategic partners. This could translate into longer-term
contracts between LSPs and their customers as well as more opportunity for
collaborative innovation.

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Tech-driven LSPs represent an opportunity to save money
and drive efficiencies
How do you perceive tech-driven logistics companies
(logistics tech start-ups that use software to replace
traditional logistics processes and services)?
2017

24.5%
n An opportunity to save money
and drive efficiency
n Not as good as traditional
logistics businesses
58.5% n I haven't yet looked at these
17.0% types of companies

47.6% of logistics respondents felt that tech-driven LSPs were the future of the
industry. Given the response shippers have given on the companies, we are likely
to see this number increase. Shippers overwhelmingly classified tech-driven LSPs
as an opportunity to cut costs. With the abilities shippers have at driving the
industry this could have a transformative effect on logistics businesses.

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The state of commoditization is evolving

Which of the following services that you use by way of an LSP would you consider commoditized?

80%
71.7%
70% 2016 2017

59.8%
60%
52.8% 52.8% 53.8%
50.9% 50.0%
49.1%
50% 46.2%
47.7%
45.3% 45.3%

40.2% 40.9%
40% 37.7% 38.6%
35.8%
31.1% 32.1%
30.3% 30.2%
30% 26.5% 26.4%
25.8%

20%

10%

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The shipper response to tech-driven LSPs suggests that this industry shift might
have a commoditizing effect on the industry. It is, however, only part of the
commoditization picture which is in a state of flux. Warehousing, for example, has
dropped as a service considered commoditized whereas forwarding has jumped.

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Conclusion
After years of slow technology and innovation development, logistics
providers are starting to catch up. After years of investments and process
changes, shippers are starting to slowly recognize LSPs for their technology
and innovation abilities. However, one of the key changes also seems to
be the success of technology-driven logistics providers. That is, asset-light
logistics companies that utilize technology as the central offering of their
business are gaining noticeable traction within the industry. The increase in the
number of these types of companies has gone hand in hand with the general
technological advancements of the industry – perhaps even playing the role of
a driver within.
However, a conundrum is quickly developing. For years, from the perspective
of logistics providers, commoditization has been one of the biggest challenges
they face. That is, logistics services have increasingly been squeezed as supply
chains look to cut costs. The technological advancements and automation of
logistics has played a role to help businesses differentiate themselves. However,
as automation becomes standardized across logistics businesses, it translates
into both cost savings and cost cutting putting increased commoditization
pressure on the industry.
But unlike in previous years, logistics providers appear to be on top of it. So
while technology might facilitate commoditization, logistics providers are
turning to non-traditional areas of their businesses to differentiate themselves.
One area gaining early momentum is in terms of customer service, emphasizing
the personal nature of the business.
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“Commoditization has been one of the main themes of most logistics-related
conversations in the past several years. While it continues to be a hot topic
today, the focus is shifting towards technology and innovation as critical
differentiators as well as enablers to grow the business. Shippers continue
to recognize that their LSPs can provide the necessary innovation to deliver
and service their customers faster, and better. LSPs are also starting to shift
from the traditional business of outbidding their competitors to expanding
services with their existing shippers by leveraging thought leadership, best
practices and technology to add more value to the relationships. Today, there
are more LSPs offering non-traditional logistics services, such as forecasting,
inventory management and light manufacturing, which deliver high-
impact bottom-line results for the shippers, such as service level and working
capital improvements. Both shippers and LSPs continue to invest in their
strategic relationships. This investment is redefining the previously service-
oriented partnership, and transforming into a more solution-oriented and
collaborative relationship.
“Changing consumer behaviors, further advances in technology and volatile
regulatory climates will continue to disrupt the manufacturing and retail
landscapes. But in 2017, both shippers and LSPs, together, are in a much
better position to adapt, respond and grow.”
Andrew Kirkwood
SVP, Global Logistics and Supply Chain Execution
JDA Software Group, Inc.
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Want to learn more?

Join us at the 3PL and Supply Chain Summit: Chicago (14-16th June) Hear from:

Technology continues to transform logistics. From LSPs starting to see real
results from technology and innovation, to a sense that the tech-driven LSP is
the future of the business, much remains to be seen as to how the industry will
play out.
Digitalization and technology in logistics will be covered in more depth at the
3PL and Supply Chain Summit: Chicago where industry experts deep-dive into
the challenges and opportunities which they will bring and share their take on
industry innovation, evolution and technological change.
Anthony Levandowski, Co-Founder, Otto
Ed Feitzinger, VP Global Logistics, Amazon
Steve Sensing, President, Global Supply Chain Solutions, Ryder System, Inc
Mehran Ravanpay - VP, Global Supply Chain Logistics, Schneider Electric
Thomas Schmitt, Member of the Board of Management (Contract Logistics/SCM),
Schenker AG
Joanne Wright, VP IBM Supply Chain, IBM
Brad Jacobs, CEO, XPO Logistics
Mike Buseman, Chief Global Logistics & Operations Officer, Avnet
Andrew Clarke, CFO, C.H. Robinson
Ryan Miller, VP Global Ecommerce Strategy, Rakuten
Jerome Lorrain, COO, Global Ground and Managing Director, North America,
CEVA Logistics 
Darrell Edwards, Senior Vice President and Chief Supply Chain Officer, La-Z-Boy
Kerry Byrne, President, Total Quality Logistics

Discounts are available on tickets to the 3PL and Supply Chain Summit:
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