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21st Annual Study of Logistics and Transportation:Partnerships add value to the Masters of Logistics

By Mary C. Holcomb, Ph.D., and Karl Manrodt, Ph.D., Contributing Editors
September 01, 2012

Mixed performance results
The data presented in Table 1 show that TL and LTL reported basically the same performance relative to on-time delivery. The likeness ends there, however, as TL performed better on percent of correct invoices and damage as compared to LTL.

With an 89.2 percent on-time delivery record, rail has the worst performance of the seven modes reporting this statistic. (See Table 2 for air freight and ocean.) While performance for this metric improved from the previous year, it still lags significantly behind the other modes. Intermodal also reveals one its areas of weakness, as its on-time performance trails TL and LTL.

Compared to the 2011 performance data, some significant changes have occurred—most of which are positive. For LTL and rail, on-time delivery substantially improved from 2011 to 2012. These same modes also posted meaningful increases in performance for correct invoices and damage.

In a business environment where eliminating waste is a key initiative, the decline in the rate of damage for freight is an appreciated outcome. On the negative side, on-time delivery for TL declined year-over-year. In 2011, TL on-time performance was 95.9 percent. As Table 1 indicates that metric fell to 93.9 percent for 2012.
The same mixed results were also reported for the international transportation modes. On-time delivery for ocean was in the same range as intermodal, while air freight’s performance was similar to trucking.

Of particular interest was the percent of correct invoices for air freight. This metric was significantly lower than any of the other modes, and it represented a major decline in performance from the previous year. Ocean, on the other hand, turned in a substantial improvement in performance for correct invoice and damage for 2012 as compared to last year.
Getting performance to the required level is the basic foundation upon which differentiated service is built. Without the ability to perform as required differentiated service will lose either some, or all, of its value. Coupled with this is the need to provide that service based on strategy and market segmentation—this is a fundamental key to delivering service at the “right price.”

Two primary observations can be made regarding the data in Table 3. First, the absolute difference in performance between best and average customers is fairly low. Namely the level of service a best customer receives compared to an average customer is not significant. 

The small gap represents an opportunity for delivering differentiated service, which in turn could possibly result in cost savings as the “right” service levels are provided to the best and average customers. Second, the difference between best and average customers has remained relatively unchanged, with the one exception of over/short/damage where respondents have reported dramatic improvements over the past three years.

What are the Masters doing? Interestingly, except for on-time delivery, the gap between best and average customers is greater for the Masters compared to all of the respondents. In this case, differentiated service is being realized.

Putting value in the driver’s seat
The study results show an emerging trend by the Masters of Logistics to set themselves apart from their competitors through differentiated service. Transportation plays a critical role in enabling the firm to deliver differentiated service of which a prominent feature is being able to respond to changing condition. As such, it positions transportation as a vital part of value creation.

Findings from the study also indicate that logistics is less capable of adapting and altering in response to changing supply and demand conditions. While other factors have certainly affected the relationship between carriers and shippers, it is irrefutable that the value created through differentiated service is a driver in moving these two groups towards a different type of association.

The balance of power that currently exists between carriers and shippers—primarily the Masters of Logistics—defines this as a unique time. However questions remain to be answered: Will other companies follow the lead of the Masters? And if so, will the balance of power be a lasting change?

About the Author

Mary C. Holcomb, Ph.D., and Karl Manrodt, Ph.D.
Contributing Editors

Mary Collins Holcomb, Ph.D., is Associate Professor of Logistics and Transportation at The University of Tennessee.  Dr. Holcomb was also a member of the faculty in Transportation and Logistics at Iowa State University, Ames.  She holds B.S., MBA, and Ph.D. degrees from The University of Tennessee.  Her professional career involved some eighteen years at the Oak Ridge National Laboratory in transportation research and policy issues for the U.S. Departments of Energy, Transportation, and Defense.  Dr. Holcomb’s background also consists of various industry experience with the former Burlington Northern Railroad, General Motors, Milliken & Company, and two years of collaborative research with Procter & Gamble.  She is a principal researcher in one of the longest running annual studies – Logistics and Supply Chain Trends and Issues – that has been conducted for more than 14 years.  Dr. Holcomb is the former editor of the Transportation Energy Data Book, author and co-author of numerous reports and articles in the area of transportation policy and logistics systems design.

Karl Manrodt, Ph.D., serves an Associate Professor in the Department of Management, Marketing and Logistics and Georgia Southern University, located in Statesboro, Georgia.  Prior to joining Georgia Southern, he served as the Executive Director for the Office of Corporate Partnerships and the Supply Chain Strategy Management Forum in the Department of Marketing, Logistics and Transportation at the University of Tennessee.  Degrees include a B.A. in Philosophy and Psychology, Wartburg College, M.S. in Logistics, Wright State University, and his Ph.D. at the University of Tennessee.  He is the recipient of the Chancellor’s Citation for Professional Promise, the Walter Melville Bonham Dissertation Scholarship, both at the University of Tennessee, and the E. Grosvenor Plowman Award awarded by the Council of Logistics Management.


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