Since the 1980s, container transport services have offered intermodal solutions and, only recently, have logistics companies given these activities a more central planning and strategy role in serving client needs. As a result, container transport services are now able to be competitive with other operating carriers. Known as bundling, organizations using this strategy have proven to hold an upperhand on their competition by offering door-to-door service handled all by one company.
The Benefits for Carriers to Move Into Logistics
Improved Market Share
By offering customers a comprehensive solution, container transport service providers are able to land new business and improve customer retention rates which equates to an increased market share over those who are not offering the combined services.
Improved Pricing for Customers
With one integrated solution, customers will receive a much better price as opposed to seeking out container transport services and logistics services separately.
Increased Shipper Demand within Integrated Supply Chains
In order to fulfill just-in-time manufacturing and make-to-order production, container transport services must be integrated in order for the retailers to maintain their delivery dates to retail stores and warehouses.
This type of model helps carriers and their customers manage the unpredictability of business and plan for the chance of unforeseen changes in the most cost-effective manner.
Not all major container transport service providers offer integrated functionality. Therefore, those organizations that do, can offer their customers a more precise and streamlined level of service than they could get at competitors’ outfits.
Stabilization of Revenue
Logistics activities offer another source of stable revenue when compared to the high volatility of freight revenue. Therefore, carriers who include logistics services are able to better pad (and possibly circumvent) freight fluctuation risks.
Although there are many benefits, moving to a bundling strategy is not without its challenges. These include:
- Operational difficulties when combining two different services: container transport services (a highly competitive industry with tight costs and maximization of assets and logistics) AND logistics (an asset-light and organizationally-heavy industry with a focus on customer needs.)
- Disbelieving shippers requiring cost breakdowns and maximum transparency.
- Complications from competing with 3PLs while supplying them shipping capacities to fill larger transport mediums.
- Regulatory jurisprudence from a reduction in competition is not viewed well by the industry.
Despite these challenges, the perception of this industry is positive and encouraged as noted by some of the top global carriers. Given that this type of strategy offers tighter control of the supply chain, container transport services are able to provide door-to-door solutions within a single price. This strategy has proven to be successful across a number of industries including, computer hardware and software, mobile technology and throughout the different sectors of manufacturing.
Bundling is a practice that has been motivated by price advantage, demand, differentiation, the potential for higher margins and the need for better control. Like any type of service, there is risk involved when carriers do not offer the highest level of efficiency. However, for those few organizations that have implemented and perfected the practice, the risk is minimized and the benefits are high.
Moving towards a bundled services offering isn’t the best option for all providers. It requires a depth of knowledge and breadth of experience that younger companies may not have. So if you’re considering using one company to handle all of your transport and logistics needs, it would be best to do your due diligence to ensure that the company you’re looking to partner with will be able to deliver a competitive advantage over your company simply sticking with its current lineup of vendors.
Download our Desktop Service Guide for a comprehensive guide to the Los Angeles and Long Beach ports, as well as related warehouse and transportation logistics information.