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by Don Dovgin

This month's article refects on the dynamic positioning that is taking effect in the transportation industry.

Who Will Be the Mega-Players in Transportation

Transportation service providers are rapidly changing their corporate missions from being operations-driven to customer service-driven. Their role is now being extended through all segments of the pipeline. Reliable, predictable, door-to-door service is what both shippers and consignees are demanding.

The world-class transportation providers offer various service levels, all with guaranteed arrival times and flexible pricing options. More and more, shippers view their provider as an extension of their “inventory control and management” functions. As such, the transportation service provider will need to respond with transit inventory management capabilities.

Shipper demands are becoming more complex and global in nature. In response, world-class transportation service providers must provide a full range of logistics services. As part of the overall trend in business toward outsourcing non-core-competence functions, shippers who traditionally might have managed their own private fleets will begin to outsource their fleet management, traffic, distribution, warehousing and inventory management functions to logistics providers. These services will provide transportation service providers with badly needed revenue growth in the coming years, but will require a significant investment in infrastructure.

The transportation industry will continue to undergo a shakeout and consolidation of weak players. The result may be an industry dominated by a few “mega-players”. While many of these mega-players will be multimodal, others will require strong alliances with the different modes to provide seamless door-to-door service.

Transportation costs and complexities are increasing. Today, companies are reducing inventories to free up working capital, expanding globally to increase revenue potential, and reducing costs to increase shareholder value. As a result, traditional ordering patterns have changed as smaller orders are placed more frequently and travel greater distances. In addition, customers continue to demand lower delivered costs with more delivery services.

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