It seems certain that the companies at the top of the logistics service provider (LSP) food chain in the immediate future will be bigger. They will also have fewer (albeit bigger) competitors. John Allan, chief executive of the new DHL Logistics ? which comprises DHL Exel Supply Chain (for outsource logistics), and, for express services, DHL Global Forwarding ? is used to explaining why everyone in this space is bulking up. But it’s people who will make the real difference, John Allan, chief executive of the new DHL Logistics tells Institute Editor Stephen Tierney

He points to three important factors that have led to this.

The first is globalisation. Most big, successful companies are now global companies, global in their operations, in their manufacturing and in their sourcing.

One logical result is that any supplier, including LSPs, that wants to support these global efforts, has to be global itself.

Not every shipper needs this, Allan points out. But big customers do.

The second factor is that customers, big and small, now want their LSP partners to offer a broader range of services, reaching ever further into their up- and downstream supply chains. This often requires extra people around the world, extra expertise, extra presence, which a smaller LSP would struggle to deliver consistently across geographies and across the span of vertical industries.

Then there?s technology. ?Many of the solutions customers want are very information-rich,? Allan argues, ?so we have to have significant IT capability, and you have to be a certain size of organisation to be able to achieve that.?

This point has led many observers of the industry to question the effectiveness of the response technology providers have been able to give to the logistics industry up till now.

Allan says he?s optimistic, and confident that the technology provider community can deliver what the industry needs. He concedes, however, that this is ?a big and important question, one that would merit a one- or two-hour conversation in its own right?.

Of course size helps here. John Allan?s new responsibility is a corporation with EUR20 billion of assets, which makes it easier to provide a significant war-chest to the IT team. ?We can afford to make the necessary investments, and we will do,? he says.

These ?necessary investments? will have to include spending money on making sure the separate IT landscapes of Exel and DHL form one coherent picture.

However, this deal, and the other mergers and acquisitions the industry is experiencing now, may throw up an ever tougher challenge. If it?s difficult to make IT platforms work together, perhaps it?s even harder to make people do so.

Allan?s view is as follows: ?It?s very difficult to generalise, but of course it?s true that when companies combine, it does bring different cultures together. What we are keen to achieve is the amicable blending together of all the talents and skills we now have available to us.?

He goes on to say that it?s far too early to tell how successful DHL Logistics will be in this task, and warns that it may take as much as five years for the outcome to become clear. However, once again, he describes himself as ?extremely optimistic?.

His competitors will face a similar test, although not on the same scale (Allan has 150,000 people working for him). ?Some will do it well; others will do it less well,? he insists. ?And this will be an important part of the differentiation between large global logistics service providers.?

Source: Global Institute of Logistics

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