Cost Cutting Top Goal of Shippers

Sept. 18, 2009
The 18th Annual Trends and Issues in Transportation and Logistics Study shows emphasis on cost cutting

Nearly half of transportation and logistics players see cost-cutting as their primary strategic objective, say Dr. Karl Manrodt and Dr. Mary Holcomb. Their 18th Annual Tends and Issues in Transportation and Logistics Study, sponsored by Capgemini Consulting and JDA Software, also indicated customer focus was declinging.

Georgia Southern University's Mandrodt, and Holcomb of the University of Tennessee, highlighted a significant increase in the number of shippers who said that “cost reduction” is their primary strategic objective, climbing to 44% of respondents in 2009 as compared to 35.5% in 2008. The number of shippers who listed “improved customer service” as a primary objective decreased to 18%—down from 26.6% of respondents in 2008.

Another concern was the continued inability for many respondents to solve the issue of customer visibility. “Despite an ongoing focus on improving customer visibility over recent years, only 40.7% of shippers are able to provide customers with visibility of orders in transit,” said the study authors. “This percentage declines significantly as one moves upstream in the supply chain, with only 18.5% of customers having visibility of raw materials commitments.”

“Given the worldwide recession, it is perhaps not surprising that cost-cutting is dominating the strategic agenda,” said Belinda Griffin, supply chain expert at Capgemini Consulting. “However, shippers need to refocus some effort on the customer as we prepare to emerge from the downturn. The inability, for instance, of many organizations to provide their customers with visibility of orders remains a significant concern.”

“Improving responsiveness will be key to which companies emerge the strongest from the downturn. In addition to optimizing costs, organizations need to be looking at how they can upgrade and innovate their services, give customers advanced support and use technology to plan, schedule and deliver,” added David Johnston, JDA’s senior vice president, manufacturing and wholesale distribution.

“Companies will need to build cross-enterprise approaches to managing supply chain activities; determine the optimal balance between customer-service requirements and the total landed cost of providing that service on an order-by-order basis; and invest in approaches, tools and technologies that enable optimized supply chain decision making,” continued Capgemini's Griffin.

For the first time, the 2009 study looked at similarities and differences that exist between North American and European shippers. Among the key differences, North American shippers are more willing to share data with a typical customer than their European counterparts. Specifically, 28.6% of North American shippers indicated that “anything” or “almost anything” requested is shared versus only 11.9% of European shippers surveyed.

For both North American and European shippers, the top three megatrends that have most affected their logistics strategies over the past year include: the economic downturn, cost of logistics services and increasing customer requirements.

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