From cost centre to profit centre: reinventing the transport industry
The transport industry in Australia is under enormous pressure to reassert its relevance and add value to its clients. We have become a commodity. Rather than an essential service we have been reduced to targets on a spreadsheet and, sadly, those targets are becoming lower and lower as time goes on. When your entire existence is seen as a cost that needs to be further and further reduced, then something needs to change and change fast.
In my view, the answer lies in moving away from the ‘race to the bottom’ on rates that too many transport operators are currently involved in and, instead, seeking to become end-to-end logisticians for our clients. If we can show them how eliminating middle layers and complicated steps in their supply chains can optimise their efficiency and performance, then they get the savings they need without the requirement to cut transport rates. If we don’t, then we continue down the unprofitable path we are on and, eventually, we become obsolete.
So, how do we do it? The key to getting clients to view their supply chain differently is technology. Supply chains used to comprise almost exclusively of internal systems and processes but the proliferation of computer networks and Internet tools over the past two decades have opened the door for true collaboration.
Firstly, think in terms of global opportunities for procurement of goods and services. Think outside the box and look at multiple channels for sourcing logistics requirements instead of traditional local sources.
Secondly, concentrate on core strengths and outsource everything else. Focusing on your core competencies will help grow your business and relying on a specialist third party provider will realise better value in the long term.
Thirdly, reduce inventory, improve margins and profitability by using data to forecast and test for optimality across all sorts of areas of your business. We have access to big data and we should be sharing that insight.
Fourthly, using mobile-based technology to record and share critical information about products such as provenance, manufacturing methodology, local content, and even environmental credentials that allow you to connect directly with your customers and enhance your own brand.
Finally, building a responsive supply chain that uses data like point of sale and social media to identify trends and demand changes much earlier allowing the supply chain to respond faster to increase sales, improve service levels and reposition inventory.
We can do all of that, if we accept our role is not simply to move goods from A to B, but to show a logistics mindset to improve every aspect of your business. The challenge is to make the transport operator a profit centre instead of a cost centre and that requires a much deeper and much more meaningful business partnership.
If you don’t already have the skills required, then you need to get them. I would suggest when you next consider investing in a new fleet or facility, that you ask yourself if that really is an investment in the future or if you need to make another kind of investment altogether.