Since January 2020, shipping delivery service UPS began a collaboration agreement with the United States Postal Service.
Through this partnership, they're able to expand their capabilities to offer 7-day delivery and provide other enhanced services to their customers, such as more access point locations. This is just one example of industry giants leveraging collaboration for growth and more benefits.
These type of connections yield curiosity and some questions that we want to explore:
Is collaboration a route that should be explored by freight forwarders and other 3PLs?
In the paper titled "The Future of Logistics" published by PwC, the answer seems to be that more collaboration and consolidation drives efficiency, quoting that:
"For many industries, the standard assumption is that a larger number of competitors is beneficial for customers. However, in certain logistics sectors, there are substantial benefits in having more consolidation, not less. According to one estimate, a 10% to 30% increase in efficiency in the EU logistics sector would translate into €100-300 billion in cost savings for European industry."
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What are the benefits of collaboration within the logistics industry?
In our interview with the Director of the research on Digital Supply Chain Transformation at the MIT Center for Transportation and Logistics, Dr. Maria Jesus Saenz explained that:
"Logistic Service Providers (LSPs) can become connectors, as a way to overcome difficulties linked to low margins and low access to investment."
Known as horizontal collaboration, an approach that furthers collaboration across logistics and supply chain, could provide the following benefits:
Cost reduction:
Partnerships and collaboration include the possibility of sharing costs. As processes become more efficient and improved, companies are also able to cut down on unnecessary expenses.
Reach economies of scale:
Horizontal collaboration may expand the business and reach economies of scale, with all that it represents in terms of improved efficiency and cost reductions.
Overcome legal and regulatory barriers:
International collaboration may result in overcoming legal barriers and help the company to explore and exploit new markets.
Business development and growth:
As companies join forces, they're able to share knowledge and ideas that could generate innovative revenue streams. Additionally, they can offer new products, cover new markets and reach new customers.
Enhanced customer service:
By exchanging responsibilities, each company can focus on its previous and new customers by providing top customer service and improved solutions for its clients.
How and where can logistic professionals find new opportunities to collaborate?
As we have often mentioned, we believe technology is a facilitator that should be exploited by freight forwarders and 3PLs, as a way to find and explore innovative ways to develop their business.
The identification of key players that could help in advancing your business forward would be the first step to take when looking for new collaborations and partnerships.
Also, we see a lot of promise is being placed on the Physical Internet, here's a video by The Port of Rotterdam that explains how it could transform operations in logistics.
It would rely on a network of decision-makers to help optimize various operations procedures in a way that they are more efficient.
We think that utilizing networks and technology to your advantage is also a great place to start when looking for new connections.
Our client Tech Cargo is really leveraging their platform to connect forwarders from different routes and parts of the world. And in doing so, they have been able to cover an immense area of the market and increase their bottom line. We're happy to see our clients using our technology to enhance their response speed to provide top service to their clients.
When it comes to finding new opportunities, we need to remember that the logistics industry relies on trust and having a common ground and goals. As a way to enhance and encourage collaboration, new technologies, such as blockchain, can provide and superpower that needed trust for collaborative purposes.