Home > Staying competitive in logistics isn’t just about price [op/ed]

Staying competitive in logistics isn’t just about price [op/ed]


Marius Toma, Senior Business Development Analyst/ Account Analyst Manager for WiseTech Global, explains that competitive pricing and increasing profits don’t have to be mutually exclusive.

It's obvious why everyone talks about staying competitive on price. On the one hand, always assume customers want everything cheaper and strive to satisfy them, while on the other, focus on your need to grow your business. Though it may seem like a conundrum, it does not always mean reducing the price. Theoretically, the price is set by the market, but in the real world, the price is influenced by many other variables.

Competitive businesses that sell similar products or offer similar services do use competitive pricing. But, pricing pressure can ease if there is a differentiator based on parameters such as quality, sophistication, or value. It’s worth considering the impact of choice or a value proposition on customers in an environment where everyone wants to commoditise everything. It’s wrong to assume that customers only want cheap services; some customers will pay more than the market price if the value warrants it, but the market doesn’t determine your value. Customers do. It’s up to you to prove it to them.

Segmenting your offer so customers are able to select from the price-to-value spectrum is another way to reduce price. This keeps customers happy by allowing them to select what is important to them and keeps your business healthy. Segmenting your service offerings using technology will simplify the process and avoid new workload burdens for your operations.

Collaborate with your customers and integrate your systems to meet their needs. When you increase their data quality and access speed, you simultaneously increase yours. Essentially, enhancing their business enhances yours. Produce exactly what they ask for: customised, quick, and quality services. Today’s advanced affordable technology solutions will not only reduce your operational costs but can also offer functionality to deliver all these additional services without breaking internal processes and confusing staff with thousands of internal, manual tasks. Provide real-time visibility of every movement in the supply chain as well as detailed analysis such as landed costing to the cent. Ensure documents, emails and EDI messages flow automatically to the right recipient at the right time. More services and efficiency lead to more value, and more value means more pricing flexibility.

However, if you really must cut prices, don’t do that at the cost of quality by cutting staff. Introduce changes to your processes instead to increase efficiency and reduce prices without compromising on the quality of your services. For example, technology automation can easily increase productivity of current staff, and also lets you focus on growing your business with the new available capacity. Workflow automation tools allow staff to concentrate on customer service and new business development rather than on manual, repetitive tasks. These tools help you cope with unforeseen work volumes and load surges, reduce per-job operational costs, increase profit margins, keep service providers and agents up to date, and enhance the customer experience. Put together, your business value is enhanced.

Logistics businesses tend to make excuses for their lack of action. Reasons such as the operation not being big enough or not having the buying power with carriers to stay competitive on price are cited. Do you have the visibility to see if all your shipments are moving efficiently through your company? Surprisingly, some shipments do not utilise company-owned channels. Dealing with multiple, costly application issues (covering purchase order management, customs, forwarding, warehousing, trucking or other supply chain segments) can muddle departmental communication and put pressure on pricing.

By consolidating everything under a single, centralised technology solution across multiple offices or departments, countries, and regions, you can gain visibility and control; you can create buying power and stronger customer synergy; and you can construct a more collaborative approach. Through shared data, you build a gateway effect, even if you do not run an actual gateway operation.

The right solution will offer compliance functionality without the need to integrate multiple software applications or hire an army of experts to deal with customs, accounting, or local requirements in your worldwide offices. If you rely on a network of agents, make them part of your operation. An integrated technology platform will cement relationships as well as provide faster data processing and reporting. In the end, your customers win. Less cost for you means more value for them. If you did need to cut that price, you did not cut your actual profit. You might have actually increased your profit margin.

In your relationship with service providers, use a workflow process tool such as exception reporting to monitor supplier quality and activity volumes. Seen from another perspective, integrating the service providers’ systems with yours brings an end to manually processing information and job-tracking, which ultimately leads to cutting operational costs and time. Additionally, modern cloud solutions eliminate a lot of the headaches of support software and underlying infrastructure while remaining current and reliable.

It can be safely concluded, being price competitive is more complex than simply reducing price. In a dynamic world, smart businesses need to work on multiple fronts at the same time, seeking dynamic partners, dynamic solutions, and dynamic pricing strategies.

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