Servitisation in the Logistics sector

by NIck Frank on April 28, 2010

At a recent Logistics Conference in Luxembourg, we were asked to review the impact of servitisation on the development of value added logistics. As Logistics is already a service business, what role can servitisation represent?

We found significant relevance at two levels:

  • Customers of logistics companies who adopt or have adopted a servisation strategy require more sophisticated logistics systems
  • Logistics companies themselves can apply servitisation principles to help them develop value added logistics

Focusing on the development of value added logistics.

In today’s logistics world there are services such as freight forwarding and transportation that have become so well defined that the service has in effect been productised. In other words the intangible service has become so well defined and understood by customers and suppliers that in effect it is sold as a product.

As logistics providers struggle to differentiate themselves from their competition they have sought to become more and more integrated with their customer’s processes. This trend  becomes apparent when we look at industry leaders such as Schenkers, Kühne+Nagel and Exel, all of whom position themselves as providers of integrated services or solutions.

However this fundamental shift in strategy often requires an equally fundamental shift in organisational capability. The typical servisation roadmap applies to the logistics sector as well:

  1. Strategy definition: Logistics companies have to understand their current position, and where they feel they need to go in order to competitive in their markets in the future. This defines their strategic organisational gap.
  2. Plan development to overcome challenges: Having understood the strategic organisational gap and challenges, a plan can be put in place. Within logistics businesses the main aspects of the plan tend focus on IT systems and people skills/culture
  3. Execute the plan, under consideration of the following four key aspects that will determine the long term success of the endeavour

Four key drivers for the development of value added services:

  1. Understand customer value: What are the aspects of our service offerings that the customer will particularly value over those of our competitors
  2. Create a robust set of systems and processes: How can we make sure that at no point our service offering falls down over failing infrastructure or organisational breakdowns?
  3. Develop a sales team that understands clients needs: How can we make sure that our sales team will talk the right language to each customer? To many this may sound obvious, but in developing services the discussion of this particular point is key to manage the desired level of integration with the customer’s processes.
  4. Create strong leadership commitment: How can we turn the service strategy into a sustainable competitive advantage? The execution of servitisation plans will invariably encounter some operational and cultural hurdles to be overcome. Strong leadership and long term outcome focus are crucial for the success of any servitisation strategy.

These are some high level strategic considerations to undertake before launching into a full-blown servitisation enterprise. On the other hand, since many logistics business may well do some of this already, the question then becomes:

How can we servitise more effectively and profitably?

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