Art van Bodegraven was, among other roles, chief design officer for the DES Leadership Academy. He passed away on June 18, 2017. He will be greatly missed.
Years ago, a sales outfit for a group of public warehouses developed the following motto: "These firms do more than ship and store." That "more" is what logistics service providers call "valueadded services," the "extras" they offer their customers beyond the basic functions of storage, inventory control, and, perhaps, order fulfillment.
The concept of value-added services originally arose out of service providers' fear that buyers would see their core services as commodity purchases, and that fear is justified. Just as most consumers buy gasoline, milk, or paper based on price rather than brand name or quality features, some buyers of logistics services feel that price is more important than any other factor in provider selection and retention.
But when it comes to value-added services, how much is marketing and how much is truly the service provider's "secret sauce"? And how much is destined to become just another commoditized offering with a short-horizon competitive edge? Is this just a clever way for service providers to enhance revenue? Or is something more fundamental going on in supply chain design and execution? Let's take a dispassionate approach and try to understand just what the idea of value-added services really means.
What are they?
Fundamentally, value-added services are all about problem resolution. The provider gains an edge by developing a service that solves a problem for the customer. It's worth noting that the best of these services are not easily copied or transferred to another source.
For the buyer, a value-added service might be anything that improves productivity and therefore increases sales and profit. A service that attracts more customers adds value. A service that reduces errors and other hassles certainly adds value. Anything that improves morale within any link in the supply chain will add value for the customer.
Two important characteristics of higher-level valueadded services are that they are scarce, and they are complex. Precisely because of scarcity and complexity, they are not easily duplicated by competitors.
When a service is not scarce and not complex, the buyer no longer perceives it as something that adds value. With the passage of time, some special services that were once considered exotic have become widely available and lost their cachet. There was a time when warehouse companies advertised fireproof storage, and later, the progressive ones offered computerized inventory reporting. Promoting either of these as value-added services would be laughable today.
Examples of value-added services
Let's look at some of the services that providers promote as value added.
One of the most frequently discussed is packaging. Relatively few transportation and warehousing providers are also able to offer packaging services. But for the shipper, there can be a significant advantage in shipping product in bulk form and having the final package filled at a distribution center that's located close to the marketplace. Sometimes, the packaging service is simply labeling or branding, converting a can or bottle from "plain vanilla" to a private-label product. In other cases, packaging is simply the assembly and shrink wrapping of multiple consumer packages to provide a "club pack" for the discount retailer.
Another value-added service is marking or recording. A chain retailer may have the retail prices for each item applied at the distribution center rather than at the point of manufacture. When serial number control is important, recording of serial numbers may be performed by the service provider. Similarly, weights—particularly catch weights on variable weight products such as hams—may be recorded as the product is shipped.
In some cases, the value-added service includes light manufacturing, testing, assembly, or kitting. A few also involve sequencing, in which products or components are arranged in the expected order of their use. Still others might entail arranging products and packaging for store-ready display.
A furniture manufacturer might distribute tables or beds in a knocked-down form with final assembly performed just before the product is delivered. A maker of computers may have final assembly or testing performed in a warehouse just before the product is shipped. In some cases, the manufacturing service may convert an item from one SKU to a different one. In other cases, the service provider offers home delivery, field installation, or removal.
When the service provider offers customer fulfillment, a variety of value-added services are performed. The distribution center may operate a call center or receive electronically transmitted orders directly from customers, and the center may be asked to provide information directly to those customers. The distribution center may provide a pick-and-pack service that converts bulk merchandise into a consumer shipping carton. Or the fulfillment operator may process credit card transactions.
For operations whose primary service is warehousing, transportation management is considered a value-added service. For example, the service provider may be asked to select the carriers and to monitor carrier performance. Frequently, they are asked to audit and/or pay freight bills. Some warehouse companies offer freight consolidation and deconsolidation services designed to save transportation dollars for their customers. Others use transportation capabilities to offer JIT (just-in-time) delivery. Merging in transit is another value add, as are pool distribution and cross docking.
Special storage features are always a value-added service, and these include temperature-controlled storage, security vaults, customs bonded storage areas, and hazardous material control. Many providers offer information systems that provide reports on productivity and quality. Information services might include Internet supply chain visibility or handling of EDI (electronic data interchange) transactions. Some providers offer consulting, including transportation network optimization, along with process re-engineering.
A few service providers offer inventory management as well as inventory control. In managing inventory, they will identify slow-moving items and suggest liquidation and simplification of the inventory, in addition to executing replenishment and cycle counting functions.
The ultimate value-added service is for a logistics service provider to become the lead provider, hiring and overseeing subcontractors that offer additional services. Such services might include customs brokerage, duty drawback, and cargo insurance—or even the basics of transportation and/or DC operations in geographies in which the lead provider does not have a presence.
Taking the long view
Actually, we might take the position that there's nothing particularly special about value-added services. Functionally, there's nothing new here. Packaging has always been done somewhere by someone, for example. Price marking has always been done, maybe at the store, maybe at the DC, and now by a third party. What we're seeing now is part of the continuing evolution of supply chain structures for all the usual reasons: cost, speed, quality, flexibility—many of the essential attributes of supply chain performance that are always in continuous improvement mode.
Although in the longer term, these valueadding steps are simply repositioning where in the supply chain certain tasks are accomplished, in the short term, they are different and can be competitive differentiators. And those entities that are flexible and innovative enough to get out in front of this particular parade will be leaders in fact, as well as in perception.
But make no mistake, today's breakthrough is tomorrow's commonplace. The leaders will be looking ahead to tomorrow's breakthrough—the next functional repositioning within the greater supply chain.
The way that shippers and carriers classify loads of less than truckload (LTL) freight to determine delivery rates is set to change in 2025 for the first time in decades, introducing a new approach that is designed to support more standardized practices.
But the transition may take some time. Businesses throughout the logistics sector will be affected by the transition, since the NMFC is a critical tool for setting prices that is used daily by transportation providers, trucking fleets, third party logistics providers (3PLs), and freight brokers.
For example, the current system creates 18 classes of freight that are identified by numbers from 50 to 500, according to a blog post by Nolan Transportation Group (NTG). Lower classed freight costs less to ship, ranging from basic goods that fit on a standard shrink-wrapped 4X4 pallet (class 50) up to highly valuable or delicate items such as bags of gold dust or boxes of ping pong balls (class 500).
In the future, that system will be streamlined by four new features, NMFTA said:
standardized density scale for LTL freight with no handling, stowability, and liability issues,
unique identifiers for freight with special handling, stowability, or liability needs,
condensed and modernized commodity listings, and
improved usability of the ClassIT classification tool.
The new changes look to simplify the classification by grouping similar articles together and assigning most classes based solely on density – the most measurable of the four characteristics, he said. Exceptions will be handled separately, adding one or more of the three remaining characteristics in cases where density alone is not adequate to determine an accurate class.
When the updates roll out in 2025, many shippers will see shifts in the LTL prices they pay to move loads, because the way their freight is classified – and subsequently billed – might change. To cope with those changes, he said it’s important for shippers to review their pricing agreements and be prepared for these adjustments, while carriers should prepare to manage customer relationships through the transition.
“This shift is a big deal for the LTL industry, and it’s going to require a lot of work upfront,” Davis said. “But ultimately, simplifying the classification system should help reduce friction between shippers and carriers. We want to make the process as straightforward as possible, eliminate unnecessary disputes, and make the system more intuitive for everyone. It’s a change that’s long overdue, and while there might be challenges in the short term, I believe it will benefit the industry in the long run.
Business leaders in the manufacturing and transportation sectors will increasingly turn to technology in 2025 to adapt to developments in a tricky economic environment, according to a report from Forrester.
That approach is needed because companies in asset-intensive industries like manufacturing and transportation quickly feel the pain when energy prices rise, raw materials are harder to access, or borrowing money for capital projects becomes more expensive, according to researcher Paul Miller, vice president and principal analyst at Forrester.
And all of those conditions arose in 2024, forcing leaders to focus even more than usual on managing costs and improving efficiency. Forrester’s latest forecast doesn’t anticipate any dramatic improvement in the global macroeconomic situation in 2025, but it does anticipate several ways that companies will adapt.
For 2025, Forrester predicts that:
over 25% of big last-mile service and delivery fleets in Europe will be electric. Across the continent, parcel delivery firms, utility companies, and local governments operating large fleets of small vans over relatively short distances see electrification as an opportunity to manage costs while lowering carbon emissions.
less than 5% of the robots entering factories and warehouses will walk. While industry coverage often focuses on two-legged robots, Forrester says the compelling use cases for those legs are less common — or obvious — than supporters suggest. The report says that those robots have a wow factor, but they may not have the best form factor for addressing industry’s dull, dirty, and dangerous tasks.
carmakers will make significant cuts to their digital divisions, admitting defeat after the industry invested billions of dollars in recent years to build the capability to design the connected and digital features installed in modern vehicles. Instead, the future of mobility will be underpinned by ecosystems of various technology providers, not necessarily reliant on the same large automaker that made the car itself.
Regular online readers of DC Velocity and Supply Chain Xchange have probably noticed something new during the past few weeks. Our team has been working for months to produce shiny new websites that allow you to find the supply chain news and stories you need more easily.
It is always good for a media brand to undergo a refresh every once in a while. We certainly are not alone in retooling our websites; most of you likely go through that rather complex process every few years. But this was more than just your average refresh. We did it to take advantage of the most recent developments in artificial intelligence (AI).
Most of the AI work will take place behind the scenes. We will not, for instance, use AI to generate our stories. Those will still be written by our award-winning editorial team (I realize I’m biased, but I believe them to be the best in the business). Instead, we will be applying AI to things like graphics, search functions, and prioritizing relevant stories to make it easier for you to find the information you need along with related content.
We have also redesigned the websites’ layouts to make it quick and easy to find articles on specific topics. For example, content on DC Velocity’s new site is divided into five categories: material handling, robotics, transportation, technology, and supply chain services. We also offer a robust video section, including case histories, webcasts, and executive interviews, plus our weekly podcasts.
Over on the Supply Chain Xchange site, we have organized articles into categories that align with the traditional five phases of supply chain management: plan, procure, produce, move, and store. Plus, we added a “tech” category just to round it off. You can also find links to our videos, newsletters, podcasts, webcasts, blogs, and much more on the site.
Our mobile-app users will also notice some enhancements. An increasing number of you are receiving your daily supply chain news on your phones and tablets, so we have revamped our sites for optimal performance on those devices. For instance, you’ll find that related stories will appear right after the article you’re reading in case you want to delve further into the topic.
However you view us, you will find snappier headlines, more graphics and illustrations, and sites that are easier to navigate.
I would personally like to thank our management, IT department, and editors for their work in making this transition a reality. In our more than 20 years as a media company, this is our largest expansion into digital yet.
We hope you enjoy the experience.
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In this chart, the red and green bars represent Trucking Conditions Index for 2024. The blue line represents the Trucking Conditions Index for 2023. The index shows that while business conditions for trucking companies improved in August of 2024 versus July of 2024, they are still overall negative.
FTR’s Trucking Conditions Index improved in August to -1.39 from the reading of -5.59 in July. The Bloomington, Indiana-based firm forecasts that its TCI readings will remain mostly negative-to-neutral through the beginning of 2025.
“Trucking is en route to more favorable conditions next year, but the road remains bumpy as both freight volume and capacity utilization are still soft, keeping rates weak. Our forecasts continue to show the truck freight market starting to favor carriers modestly before the second quarter of next year,” Avery Vise, FTR’s vice president of trucking, said in a release.
The TCI tracks the changes representing five major conditions in the U.S. truck market: freight volumes, freight rates, fleet capacity, fuel prices, and financing costs. Combined into a single index, a positive score represents good, optimistic conditions, and a negative score shows the opposite.
A coalition of truckers is applauding the latest round of $30 million in federal funding to address what they call a “national truck parking crisis,” created when drivers face an imperative to pull over and stop when they cap out their hours of service, yet can seldom find a safe spot for their vehicle.
According to the White House, a total of 44 projects were selected in this round of funding, including projects that improve safety, mobility, and economic competitiveness, constructing major bridges, expanding port capacity, and redesigning interchanges. The money is the latest in a series of large infrastructure investments that have included nearly $12.8 billion in funding through the INFRA and Mega programs for 140 projects across 42 states, Washington D.C., and Puerto Rico. The money funds: 35 bridge projects, 18 port projects, 20 rail projects, and 85 highway improvement projects.
In a statement, the Owner-Operator Independent Drivers Association (OOIDA) said the federal funds would make a big difference in driver safety and transportation networks.
"Lack of safe truck parking has been a top concern of truckers for decades and as a truck driver, I can tell you firsthand that when truckers don’t have a safe place to park, we are put in a no-win situation. We must either continue to drive while fatigued or out of legal driving time, or park in an undesignated and unsafe location like the side of the road or abandoned lot,” OOIDA President Todd Spencer said in a release. “It forces truck drivers to make a choice between safety and following federal Hours-of-Service rules. OOIDA and the 150,000 small business truckers we represent thank Secretary Buttigieg and the Department for their increased focus on resolving an issue that has plagued our industry for decades.”