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Logistics service providers (LSPs) with retail clients could see demand for new services that were previously relatively unusual for retailers to outsource, according to recently published Blue Yonder research.
Today, LSPs are well used to handling warehousing, transportation, inventory management and fulfilment for retailer clients. But when asked about what else they’d consider asking LSPs to do for them in 3-5 years, retail supply chain and logistics leaders had some unexpected answers.
The data suggest that across the non-core services (i.e. services other than warehousing/transportation/inventory management/fulfilment), which are currently outsourced to LSPs by less than half of the retailers we spoke to, there is a huge amount of room for growth in coming years. In every function we asked about, at least 21% of retailers were considering outsourcing, and in several areas that figure was significantly higher.
Retailer demand for outsourced order management, for example, could be set to nearly double, with 30% of retailers saying they’d consider using LSPs to manage orders in the next 5 years.
Analytics services were the most likely to be considered as a future LSP responsibility (by 39% of retail leaders), followed by order management (30%), technology integration (27%) and customs brokerage (26%).
Our research found that the market in retail logistics is split in two. A little over half of retailers (52%) see their LSPs as strategic enablers. The rest do not.
What’s happening is that LSPs who are going beyond the essential requirements of their retailers are winning ground. They’re becoming embedded more deeply in their clients’ businesses, retaining more customers, and winning more new business. That requires consistency and efficiency at the core, of course, but it also comes from the broader variety of services they’re able to offer. Retailers value flexibility and responsiveness even more than cost-efficiency, according to the survey data.
To take advantage of retailers’ willingness to outsource more functions, LSPs need to be sure that their technology is in the right place. Technological capabilities were at the top of the list when we asked retail leaders what, in their experience, LSPs currently underperform in – beating cost efficiency, commercial model flexibility, and sustainability as the key area of underperformance, named by 40% of respondents.
This means that to offer a variety of non-core services and adapt them to each customer, LSPs are going to need to prove to retailers that they have a strong technical footing. They’ll need to find solutions that are natively cloud-based, designed for complex multi-client environments, to enable the scaling of differentiated workflows across customers and sites.
Mastering the complexity of different services (and maximizing the efficiency of core operations) also requires two fundamentals: an end-to-end approach underpinned by unified data, and a platform that is not just ready for AI, but which actively embeds agents into the whole execution suite. These agents deliver immediately actionable recommendations across labor management, warehousing, transportation, returns and exception management – helping LSPs to deliver improved SLA performance, rapid reactions to disruption, and exception resolution.
