Written by Garry Honey, founder of Chiron risk management, speaking at the 10th Cool Logistics Global Conference & Exhibition
Is London the money-laundering capital of the world? Stung by foreign criticism of the UK banking culture, its regulator now requires banks to adopt a policy of KYC: Know Your Customer. The aim is to reduce or inhibit money laundering through the City, but the sentiment is pertinent to other industries beyond banking. This has less to do with money laundering and more to do with common sense and commercial sustainability.
The transport logistics industry, especially the sector for perishable food products, operates in the middle of a complex global supply chain linking producers and consumers. Any chain is only as strong as its weakest link and the supply chain for perishable food products has many links. Operators in the middle of this chain suffer an inherent vulnerability as they control neither supply nor demand but must respond to both. This demand for flexibility puts enormous strain or resources, which leads to cost reduction being a high priority, but then it is easy to forget who your customer really is.
There is an old adage: ‘When you are up to your neck in alligators, it is hard to remember than you actually set out to drain the swamp’. The transport logistics industry is experiencing a period of consolidation with recent mergers of shipping lines seeking to reduce operating costs. However as the UK banking industry learnt ten years ago, acquisitions can bring problems, look at Lloyds and HBOS or RBS and ABN AMRO. Big is not always better. In focusing on cost reduction and economies of scale it is often the customer who gets forgotten in this ‘race to the bottom’.
I had my own experience of how transport logistics offers the customer choice based transporting a car from Preston to Winchester a journey of 230 miles (380km) using an aggregator website called Shiply (www.shiply.com). I was able to make a choice from around 20 different transporters based on price alone, but I had no idea of anything more to give me reassurance of the method, vehicle, time or other variant. Fortunately the car arrived on a single low loader, it had not be been bulk shipped on a car transporter or stored overnight at a depot. It was not scratched or dented and I was relieved but should price the only factor offered to the customer in transport decisions?
Oscar Wilde is famous for his quip that the cynic is ‘the man who knows the price of everything yet the value of nothing’ . As a customer I value information to reassure me that the shipping agent is not only confident but also competent. In an industry where consolidation brings bigger and bigger players it is quite probable that the customer will have less choice. It is in this market environment that listening to customer needs makes a difference. Look at the way on-line retailers now offer drop-off collection points at rail termini acknowledging that home delivery is not always practical.
In speaking at the Cool Logistics conference in Antwerp I shall be addressing the risk of rushing towards consolidation as this distorts a market and can cause unforeseeable future problems. As consumers are championed by large retailers and producers are championed by termini & ports developers, then the middle ground that remains for logistics as a discrete operation comes under pressure from both ends of the chain where logistical capabilities encroach. More than ever now is the time to know your customer: are you working with the producer or consumer end of the chain?
Garry Honey is the founder of Chiron risk management (www.chiron-risk.com)