Today’s manufacturing giants know that without an efficient logistics partner their distribution chain and speed to market will come to a grinding halt. Global logistics operations involve a complex web of vendors, warehouses, distribution centers, service operations, transportation routes and hubs which means that logistics services come at a steep cost at about four to five percent of total manufacturing costs. The complexity of global supply chains result in increased pressure on manufacturing margins. This pressure is passed on to logistics service providers who are in turn forced to offer competitive pricing models to secure the big ticket contracts, thus squeezing profit margins.
According to a new study conducted by the global strategy and marketing consultancy Simon-Kucher & Partners, price pressure is higher in the logistics industry than in other sectors. Logistics companies with strong pricing power achieve on average 17 percent higher margins than their competitors.
How can a Logistics Service Provider (LSP) catapult itself into a position where it is able to command a strong pricing power? Faced with the constant pressure of reducing costs without increasing logistics risk, LSPs can combat this by utilizing the right technology tools and freight management software for effectiveness as well as greater efficiency.
By deploying an effective freight management solution/software, LSPs can strengthen their market positioning by standing out from a crowd of ‘me-too’ service providers. Effective freight management technology solutions enable LSPs to offer not just differentiated but also superior services which puts them in a better position to command a price premium for value plus services. This greatly improves a company’s pricing power and guarantees international business success.
Another effective solution to leverage on a cost advantage is by using Cloud-based logistics management software. This ‘pay as you go’ model allows LSPs to drastically cut down on their hardware and technology acquisition costs. In addition, by offering simplified and automated services LSPs can reduce human errors, resulting in customers who are willing to pay a premium for a reliable and more effective logistics service.
New age freight management software that is developed by a specialist with a keen insight into the complexities of the logistics world and offers third party integration and single window access speeds up processes. Increased automation means reduced dependence on manpower costs which are forever escalating. By cutting down on operational costs, LSPs can compete with other companies and offer a competitive pricing structure along with a great service, an unbeatable combination that offers a win-win solution to LSPs as well as their customers.