Logistics operators: an overview

Logistics Operators, sometimes referred to as Logistics Providers, are key players in trade activities at a national and international level. As a result, they contribute a lot to the business success of companies engaged in this trade, especially in terms of helping them gain a competitive advantage. Logistics Operators come in many different forms and take different names, but they all have the same objective: to assist companies working in the transportation, storage, shipment and distribution of goods from seller to buyer.

The market size of the European logistics sector totalled €1,050B in 2016 and, in mature markets, it’s outgrowing the annual GDP rate. The biggest markets in Europe are Germany, UK, France, Italy and Spain, as shown in Figure 1:

Figure 1: The Ten Biggest Logistics Markets in Europe, according to total logistic expenditure volume in Billion Euros in 2016. Source: Fraunhofer SCS.

While Logistics Operators are integral to the global supply chain, as Skender e.a. suggest, the differences between different types of Logistics Operators are not very well-understood. So let’s dive right in: what are the different categories of Logistics Operator out there?

The Different Types of Logistics Operators

Generally-speaking, Logistic Operators aggregate several types of services connected to the transportation supply chain, including but not limited to:

• Warehousing;
• Packaging/Labelling and Repackaging and relabelling;
• Picking;
• Labelling;
• Inventory - supply chain optimisation;
• Customer Service;
• Aggregation of different providers of varying transportation modes.

Depending on the amount and level of integration of the services they provide, Logistic Operators can range from first-party to fifth-party logistics providers as can be seen in the graphic below:

Logistics Operators can also be split into the following three principal categories:

Warehousing Services

Companies don’t only seek help from Logistics Operators for transportation services but also for managing their inventory - in other words, storing their products before or between shipment(s) and cataloguing and tracking their inventory until it is delivered. This not only requires storage space (the warehouse itself) but also a reliable and efficient cataloguing and tracking system. Warehousing is a fundamental part of logistics and often needs to be flexible, depending on how much space Logistic Operators’ clients need for their products and how long they need it for. Some Logistics Providers have their own warehouses, whereas others rely on a third-party provider for this.

Freight Services

Freight services are used for large items and large orders (large quantities). This often requires a combination of vehicles, including trucks, aeroplanes, trains, cargo ships, and more. Drayage services, the short distance transportation of goods from, for instance, a ship to a warehouse to storage, are typically involved in freight services. As with warehousing, freight shipping involves continuous fluctuations in demand, labour shortages, shipping times, etc which requires flexibility on the part of the Logistics Operators. As major players in the business of transporting goods, some logistics operators own transportation equipment themselves. Others - like Freight Forwarders - do not own equipment, instead acting as agents to arrange transportation.

Courier Services

Courier shipping is most people’s idea of what a "shipping company" is. It’s generally reserved for smaller, time-sensitive orders that require a higher level of care, Shipping smaller orders, rather than the larger quantities involved in freight shipping, is, however, more expensive. As a result, courier services tend to be used exclusively for last-mile logistics, where individual orders go directly from the warehouse to the buyer or end-user.

An Integral Part of the Global Transportation Chain

Logistics Providers not only add value but are crucial intermediaries in the global transportation and supply chain. As coordinators of many different services (as noted above), Operators, especially those that are 3PLs and above, are in close collaboration with many links within the supply chain and are thus indispensable to most trading businesses. In this sense, they differ from pure transportation companies in their complex and multi-service role as a transportation intermediary, rather than straight transportation provider.

How Ontruck Can Help Logistics Operators

As a Logistics Operators gradually evolve into more complex creatures (3PL onwards) the tangible part of their business with less added value - in other words, road transportation - is rapidly becoming a less integral part of their activities. Instead, they’re beginning to invest in more high added value, intangible assets and services. In some cases, these involve a high degree of IT complexity. These services offer a greater competitive advantage.

This increased complexity means investing heavily in order to reach a higher level of optimisation. To do this, many are looking for digital solutions that will allow them to optimise more efficiently and effectively, scale faster and attract bigger business and clients. In particular, 5PL businesses are focused on optimising the whole supply chain, moving away from an asset-based model towards a service/consulting-based company.

That’s is where Ontruck comes in. Already working with major Logistics Providers from XPO and Kuehne Nagel to Dascher, DB Schenker, Hellmann, and DHL, Ontruck can assist both asset and service-based Logistics Operators in optimising their operations. Ontruck enables access to higher-value services: flexibility, traceability, digital PODs, data analytics, and more, at a fair price. In an increasingly volatile and “real-time” global supply chain, Logistics Operators need to optimise and become more flexible in order to survive. Opting for a proven digital solution like Ontruck is a quick and effective way to do this.