Disrupted: the future of logistics service providers
You can read this article in 9 minutes
This article is about why logistics service providers are being disrupted and how they need to change.
I love logistics people
I worked 28 years in the industry, and I have worked with extraordinarily dedicated, resourceful and smart people with fantastic can-do spirits. I admire them, and I am thankful for the friendships I made over the years.
Today, I work with organizations on psychological topics. Through my work with very different organisations (e.g. in social media, pharma, hospitality and of course logistics), I have experienced how organizations can function much better by taking new approaches. There is a lot of inspiration to be found outside the logistics world.
I tell you this, so that you know that what I am about to write comes with sincere and constructive intentions.
Forwarders beg to be disrupted
Seen from the outside, freight forwarders organise themselves more or less in the same way, and their cultures only differ marginally. Masculine behaviours, focus on the own bottom line, silo thinking and cheating on profit sharing are hallmarks of most organizations. This environment does not foster deep collaboration and innovation. Forwarders think and operate with a mindset of scarcity and have little imagination.
1000s of logistics people move between different logistics companies every year, because it’s easy to find more or less the same job in another logistics company. Ideas and customers are carried from one company to the next, and the result is that services are exchangeable and customer relationships are not developed with value generation for the customer in mind. This is a real problem for freight forwarders, but something that few talk about openly.
For outsiders, it is difficult to be accepted in a logistics organization, as they do not fit into the traditional boxes and have different mindsets and skills. They find it hard to bring in their ideas and change things, and often leave soon again. Therefore, logistics organizations miss out on much needed new perspectives and capabilities, which they need to transform their business.
We need more imagination
Currently, the industry experiences two “disruptions” that I hope will change how logistics companies think, do business and work with their people.
Firstly, Maersk transforms its business model, and many forwarders complain that Maersk is now a competitor. Their scarcity mindset kicks in, they focus on what they may lose, offer lower rates and “shelter” for Damco customers. Such behaviours are symptomatic for how forwarding companies think. Instead, forwarders could approach the new situation with imagination and develop something constructive themselves.
Secondly, the so-called “Digital Forwarders” is another disruption that freight forwarders do not appreciate. They belittle the capabilities of these companies, and claim that they are not inventing anything new. Many forwarders say that they have been doing “digital disruption” since years, which I think is a very flattering way to describe how they have mostly just optimised the systems they already had. Only a few forwarders are notable exceptions to this.
These defensive behaviour are exactly the reasons why the industry can be disrupted by companies like Amazon, Maersk, Forto, Flexport etc. These companies have the imagination to create new ways of selling and operating logistics services, and they do not let themselves be caught in a scarcity mindset. They attract talents from outside the industry, and they promote logistics in a much more engaging and appealing way. Whether you like it or not, these organizations bring new ideas and new blood into the logistics world, which is badly needed.
Both Maersk’s transformation and the Digital Disrupters, lead the way for how logistics services may be marketed and operated in future. Different types of ecosystems will emerge, similar to what happened in the travel industry with ecosystems like Tripadvisor and Kayak. Maersk bets on having the power to create what looks like a “closed ecosystem”, and my view is that this strategy can work both with large MNCs who want supply chains stability, as-well as with SMEs who want the ease of doing business. The many Digital Disrupters will show customers how logistics can be done in a different way, often operated by non-logistics professionals.
As a result, providing logistics services will never be the same again.
Move people, not only containers
By doing business in a different way, these “disrupters” also function and organise themselves differently. Probably Maersk could have been clearer in explaining how this will look and impact customers, but maybe this unclarity was intentional, in order to be able to move under the radar. My point is, that what we see with these companies are new types of logistics organizations, that we cannot compare with traditional freight forwarders.
People and organizational development have a high importance in these companies, because they know that they can only be successful if they enable their people to truly collaborate. Despite the lay-offs that we will likely see at Maersk, this will not fundamentally decrease the sense of safety and belonging in the organization. If they continue to drive their transformation with care for their people, the organization will soon move even closer together.
Being a logistics provider of any kind, is about trust, and trust emerges between people. The entire process of winning, implementing and operating a logistics business depends on people, how they trust each other and how well they collaborate. And yet, logistics companies notoriously under-spend on their people development initiatives, do too little to evolve their cultures and develop their leaders. 100s of millions are spent on systems, but only a fraction of that on people development. That is absurd, and it is the Achilles’ heel of traditional logistics companies.
Let me put it this way: Logistics is about moving people first, containers second.
What logistics companies must change
When we researched almost 2.000 global logistics people over the last 10 months, it became clear that there is need for changes in 3 people related areas.
1 – logistics employees give more than what they get.
Employees rate their experiences at work at a mediocre 54/100 level, but their Engagement level is much higher at 70/100. This imbalance is unsustainable, and make it unattractive to work in a logistics company. That’s why organizations need to become much better at developing engaging cultures and positive employee experiences, and then use this energy to create great customer experiences.
2 – logistics leaders are uninspiring and “old school”
Up-to 43% of employees say that they do not experience Inspiration, Constructive Feedback and Confidence Building from their leaders. This is „old school” and it demotivates people and obstructs collaboration. Logistics business is about collaboration – Command & Control leadership is obsolete. And that’s why logistics leaders must become much better at enabling people and the way they collaborate.
3 – women are the biggest potential, but they have a hard time
Female leaders are rated higher than men on 6 out of 7 leadership competencies, but they report a 10% lower Employee Experience. Female talents are under-utilised, and there is an unhealthy gender imbalance on all manager and leadership levels. Only a few companies, e.g. Geodis, Maersk and DHL, are seriously trying to change this and evolve their cultures. We need many more concrete steps to accelerate female talents and leaders.
When organizations address these 3 challenges with conviction and imagination, they will automatically become more attractive, inspiring and engaging places to work. But we need to be bolder in how we develop cultures, leaders and organizations. We need to take better care of employees and develop leaders who have the mindset and abilities to enable people around them. Only then will logistics service providers perform at their full potential, and be harder to disrupt.
I realise that some may feel that I step on a few toes with this article. But I mean no disrespect. When I say that leaders are uninspiring, then it’s because this is what our survey results show.
I am happy to share more information with you on our research of the Employee Experience in logistics, just reach out to me.
Henrik Kofod-Hansen has held senior leadership positions with several global logistics companies in Europe and Asia, and today works globally to enable organizations to evolve their cultures and grow leadership capabilities.
Photo credit @ Pixabay