A report published at the beginning of June by Mercer Management Consulting shows that the profitability of logistics service providers does not depend on the level of capital commitment, but on the business model. The dynamics of individual segments of the logistics market vary significantly: the courier parcel market is dominated by four global giants: UPS, FedEx, Deutsche Post, and TNT. This segment is the most profitable. In contrast, in the highly fragmented freight transport market, margins are under strong pressure. The report identifies 6 business models represented by companies offering contract logistics.
Here is a brief description of them:
Courier services with contract logistics
In this business model, the company does not specialize in specific services but uses its own network of land, sea, and air connections, offering services related to contract logistics. The achievable margin is 7.3 percent.
Comprehensive logistics solutions
This specific business model is represented by Deutsche Post. This operator’s offer covers all segments of the logistics market. The margin is at the level of 6.4 percent.
Contract logistics combined with a land transport network
In this model, logistics operators focus on serving one or more customer groups (e.g., the company Dachser operating in the area of food and chilled product logistics). For specialized logistics operators, the margin is at the level of 5 percent.
Land transport with contract logistics
Freight forwarders focusing on land transport but also operating in the area of contract logistics (Geodis, DSV, Schenker) achieve margins of 3.5%, which is only slightly higher than companies carrying out traditional transport activities.
Air and sea freight forwarding combined with contract logistics
Globally operating freight forwarding companies that specialize particularly in air and sea transport (Kuehne + Nagel, EGL, Nippon Express) achieve an average margin of 4.6 percent.
Contract logistics
According to the report, the lowest margins in the industry (2.5 percent) are achieved by operators working in the area of “pure” contract logistics.
An article analyzing the results of the Mercer Management Consulting report will appear in issue 5/2005 of the magazine “Logistyka”.