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After the Crisis: New Demands on Logistics

Thanks to the trend of volatility that has emerged over the last few years in transportation and logistics, it's nearly impossible to make accurate forecasts based on historical data. One major global logistics supplier told logistics professionals Tuesday that their industry faces four new realities that will have a long-term impact on supply chain management.

Volatility was one of the trends identified Tuesday by Detlef Trefzger, member of the Management Board of Germany-based Schenker AG, responsible for Contract Logistics and Supply Chain Management, during the Eyefortransport's 8th annual 3PL Summit in Atlanta Tuesday.

Trefzger addressed the new demands being placed on logistics as we come out of the global recession. "There are excellent opportunities for the global logistics industry to benefit from these developments," said Trefzger.

1. The role of emerging economies. "We're not talking about G8 anymore, about eight big economies that impact and influence global developments and economic developments -- we're talking about 20." Regions such as China and India, parts of Russia and Saudi Arabia are expected to see their economies grow at a rate of 8 to 12 percent, he said. These regions will have and will also demand a more significant role in the global economy. This is expected to result in new business opportunities for the logistics industry, a case in point being the automotive sector. Many manufacturers are now moving parts of their production to these countries.

2. Increased volatility in external factors and demand. Another new reality he identified results from the strong fluctuations in world trade, on the commodities markets and in production costs. As an example, he pointed to oil prices. Prices were stable for almost 30 years after WWII, until they hit a spike in the '70s, and another two years ago. "In 2008 we experienced the highest oil price ever -- AND the lowest oil price in 10 years. In the same year!" Trefzger said. "This volatility is going to continue."

These changes will lead to fluctuations in global freight flows and the demand for warehousing services. "The result is increasingly less time to plan logistics processes," explained Trefzger. Permanent change is becoming the order of the day in planning. "Those who miss the boat by not diversifying broadly enough and not adopting a global stance will face difficulties."

3. Increasing role of 3PLs. Outsourcing is growing considerably. Logistics companies are continually taking on more of the customer's workload and the associated responsibilities. "We're talking about 3PLs becoming an extension of the customer's operation," he said. And you ahve to do this globally."

Increasing expertise is needed to handle these tasks and deliver the quality and productivity levels expected. Success very much depends therefore on having qualified employees. Good talent management is in demand. "We have to invest in skills and know-how and in the right people who can deal with those challenges."

4. The emergence of truly global supply chains. The strong demand for standardized logistics solutions on a global scale is the fourth market reality. Trefsger compared it to a chain hamburger -- "the recipe and the standards are set globally; the ingredients come locally." He also cited the automotive industry. In the past, he said, production sites abroad were isolated and did much of their own decision-making. That, he said, has changed. And 3PLs must recognize and take advantage of those changes.

"Delivering consistently high standards of service quality will be one of the fundamental requirements in contract logistics. This will apply to all standard solutions, but also increasingly to customer-specific solutions," Trefzger continued.

"Actively driving change, exploiting talent and innovation; and ensuring continuity in the provision of services and quality to the customer - these are the new post-crisis requirements for logistics service providers," Trefzger concluded.

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