Transportation & Logistics: 7 Key Elements of Success in an Economic Downturn
Updated: Aug 10, 2022
Welcome to LDK Global Logistics Blog
John Costanzo, Founder & CEO of LDK Global, is a highly experienced Transportation & Logistics executive who knows what it takes to succeed. With more than three decades senior leadership roles of large domestic and international Transport & Logistics companies, John has dealt with it all - and is ready to apply that experience to help your company ensure your business is able to drive your company's success in the downturn.
In addition to John, LDK's Senior Advisors offer decades of Operations leadership and expertise in Transportation, Delivery and Warehouse Management with several leading global freight and parcel transportation and delivery companies.
Contact us for a courtesy consultation to discuss your company's Transportation & Logistics challenges at: info@LDKglobal.com
In this series, we highlight 7 key elements to success in a downturn... last week's Blog post covered your PEOPLE... this week's post we discuss your CUSTOMERS.
Element #2: CUSTOMERS
Last week we covered the importance of retaining your best people in a downturn. This week our focus is on retaining your customers, your second most important weapon in surviving and thriving an economic downturn.
Despite decades of books, tapes and seminars extoling the importance of customer satisfaction, the state of Customer Service in our industry (and the Service Industry as a whole) has deteriorated over the past 30 years. Why? Because as in other industries the primary focus of upper management is often on the achievement of short-term financial goals like current quarter operating profit, earnings per share, cost of sales, etc. Jack Welch, the former CEO of General Electric, wrote about this problem in an article he published about corporate goal setting where he correctly made the point that revenue and profit growth are the result of the efforts (or not) by upper management to understand the market and to create strategies that differentiate the company from its competitors to capture market share. Not how much profit can be generated within quarter or a year, often encouraging management not to invest in developing and launching new products and services to increase the company's overall market share,
While the Customer Engagement scores and retention rates of the Transportation and Logistics company's I've had the honor of leading were in the high 90% range this wasn't always the case. I learned though experience over the years the importance of paying close attention to what customers valued most about your services... never more apparent than the lesson I learned when a newly appointed VP of a division of Emery Air Freight. At the time, Emery was a leader in the Air Freight sector but had lost momentum and was surpassed in revenue and profit by FedEx, with Airborne (since acquired by DHL) closing fast. Concerned about this trend, our marketing team commissioned a research company to conduct a blind survey of about 20 key service elements, asking the respondents to rank Emery, FedEx and Airborne in areas like, customer service, pickup, delivery, invoicing, etc. The respondents didn't know who had commissioned the survey... they were simply giving their opinion to an independent research company.
The outcome was disappointing... FedEx was rated highest in virtually every element, save one... Customer Service. Emery scored higher than both FedEx and Airborne in this key category, and by a large margin. At the time, customer service at Emery was all "local". Our 160 branches throughout the world had customer service staff, many who had been with the company for 10, 20 and more years. They not only knew our business, but they knew the needs of the customers their branches served so well they were sometimes asked to help break in new their employees... educating them on our services, export documentation, and other more basic functions like preparing Bills of Lading, tracing shipments, submitting claims, etc. In short, they provided a unique value that differentiated us from competitors like FedEx, which introduced the concept of central customer service to the industry... while the speed and efficiency in which FedEx handled incoming calls was superior, the quality of those interactions at the time was lacking.
Emery's president was the CFO of the company before being appointed president... and his focus was on improving our short-term earnings. So, what did he do to leverage the one service element where we had a clear advantage over FedEx and our competitors? He opened a central customer service unit in Kansas City, directed us dismiss all of our local customer service staff, and transferred all local customer service to the call center over just a few months. The outcome of that decision was a disaster, and while I won't blame the eventual downfall of the company (now part of UPS Supply Chain) on that one ill-conceived decision, it was "death by a thousand cuts" of similar actions that eventually destroyed the company's market differentiation and our brand reputation.
So, what does this have to do with surviving and thriving a downturn in the economy? Well, Jack Welch also once said that if your competition's services or products match your own, you are on your way out of business. Recognizing and building upon your strengths in a strong economy is a smart strategy... in a weak economy, your company's survival depends on it as customers shop around for better rates. And if your level of customer service is equal (or lower) to what your customers can get down the street, you will definitely lose customers and profits in a downturn. At minimum, you will be forced to reduce prices and margins just to retain business. On the other hand, if you know your strengths and have differentiated customer service from your competition it will help to defend against competitors aggressively targeting your customers to offset their own declining volumes in a downturn.
So, while belt tightening is inevitable when the economy weakens, the quality of customer service your team delivers during a downturn in the economy can mean the difference between merely surviving and thriving…. so don’t be too quick to sacrifice the power of that weapon and the people that deliver it for short term savings. And like the expression “all politics is local”, a loyal and talented local client support team working closely with your customers, branch and national operations and your service partners can often be a key differentiator vs. your competitors. Retaining customers and higher yields for your business.
I hope you found this week's blog useful... next week we'll talk about the importance of another key element of success in a downturn... Your Partners.