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Logistics services in need of new revenue model

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Erik Drissen
Erik Drissen
Business Consultant
More articles by Erik Drissen

Traditional revenue model of logistics service providers in need of change

With sustainability on the one hand and ever-higher customer demands on the other, the industry finds itself in a considerable split. The sector is therefore looking for answers. Which earnings model is future-proof? And how do we set that change in motion? In my opinion, the right approach ensures that you get more opportunities.

Working sustainably is a must

Sustainability is no longer a non-binding option, it is the path we are taking as a society. Logistics service providers have to go along with it. Transporting goods by air is a thing of the past, and making a profit on the largest possible volume is hardly compatible with sustainability requirements.

Sustainability: opportunity or threat?

This means a lot for the margins in the industry. Shipments will increasingly consist of smaller packages and ultimately fewer pallets. Much better for the environment, but it is at odds with the current earnings model. The smaller the packaging, the more effort is required to load a truck. In the near future, I also expect to see regulations on minimum load factors for trucks. The question is whether the current profit model of a fixed price per truck is still realistic.

Adding value provides opportunities

However, the strong demand for optimal loading can also work to your advantage. If you manage to increase efficiency in this process, you can load optimally at minimum cost. Your customer will have to pay for fewer pallet locations or space in the warehouse. Less volume means less turnover in the short term, but you recoup (part of) that loss through more efficient working methods. But more importantly, you invest in the long term, in a partnership with your customer. You show that you are thinking along with your customer about their sustainability objectives, and that is what benefits your customer.

The key is a more efficient packaging process

Such an efficiency improvement is easily achieved by automating the process of order picking, stacking and loading. A software programme supports you in the efficient planning and execution of this process. The first priority is to minimise the number of packaging units, and then detailed calculations are made of how the available volume can be used optimally. Your employees no longer need to think out the loading plan themselves, but can get straight down to work. This time saving pays off immediately. Moreover, the loading is now automatically optimal, and your storage costs are reduced while your customer satisfaction will skyrocket, guaranteed. Because not only are you helping the customer to transport more sustainably, but the chance of errors is also considerably reduced by automating the process and the instructions.

The profit of automation

As soon as the order is entered, you are told exactly the optimum load, the number of boxes, pallets, weight and volume. This means that you can plan much more effectively in terms of FTEs, shelf space and transport. Clear packing instructions save time in the packing process. Furthermore, your performance will improve considerably, because the correct loading will prevent transport damage. Moreover, the delivery is guaranteed to meet all individual customer requirements. Employees cannot possibly know all customer requirements by heart; for a software programme this is a piece of cake.

Extra added value for your customer

I also see opportunities in sharing information. The more knowledge you share with your customer, the better you serve them. If you automate your packaging process, information about the number of boxes, pallets, weight and volume is already known when the customer places the order. Share that knowledge with your customer, and he too can plan his FTEs, shelf space and transport more effectively. And is the pallet, box or container not yet optimally loaded? Then you indicate this immediately in the order confirmation, so that the customer can increase his order for a more efficient – and therefore more sustainable – loading.

How do you see the future?

This is your chance to show that you have more to offer as a logistics service provider: you can help your customer to do business in a more sustainable way. I am curious how you see this. Does the solution lie in offering added value in combination with a more efficient process? Do you also feel the urgency to start the change process now? Please share your views on this with me and my colleagues!

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