A Shift in Fundamentals: The Changing Direction in Logistics and Transportation Management

The Great Recession of the late 2000s created a turbulent business environment that is forcing managers to reevaluate how to manage their resources effectively and efficiently. In the logistics and transportation domain the primary forces of change include, but are not limited to: rapidly changing customer requirements, increasing energy (fuel) prices, the rising cost to serve, mounting inventory costs, and growing total landed costs. These forces of change have shifted the strategic direction of the firm toward a mixed approach where firms attempt to be “all things to all people,” thereby competing on both cost and service. In contrast, the study results indicate that during and after the recession the primary goal or objective of the firm was cost reduction. Customer service as a primary goal or objective has steadily declined, and has not yet returned to 2008 levels. This can be attributed to rising transportation, inventory, and distribution costs during a time of increasing customer service requirements. Two recommendations for managers are offered: to more fully understand the relationship between logistics costs and differentiated service; and to develop data and analytical capabilities that will enable them to deliver differentiated service of the right product for the right customer, in the right quantity and the right condition, at the right place, at the right time, at the right cost.