The chemicals industry is one sector right in the middle of the transition to such a customer-focused approach. Chemical companies, especially those operating in high-cost regions, are seeking competitive advantage through differentiation. They are exploring a broad range of new service offerings, including custom packaging and labeling, vendor-managed inventory programs, direct delivery of smaller quantities to end users and the premixing of products to meet the needs of the customer’s downstream production activities. A key challenge for such companies lies in ensuring that they get these offerings right for every customer. Offering customers services that they don’t really need risks eroding profitability and competitiveness by adding unnecessary cost.
A new DHL white paper entitled “Differentiated Logistics Services” describes two new tools that can help companies avoid those pitfalls. Developed by Kompetenzgruppe Chemielogistik, an independent team of experts in chemical logistics, and chemicals company Evonik Industries, the two tools – the Logistics Service Cube and the Cost-Benefit Scale – are designed to help chemical industry stakeholders make the best decisions whilst exploring relatively new and untapped territory.
The Logistics Service Cube helps companies segment their offerings by product type, supply chain offering and service level. It gives companies a structured framework that allows them to identify the best logistics approach for each segment in collaboration with their customers and service providers.
Assessing the true value of differentiated logistics offerings is difficult, because they have an impact on multiple dimensions of both the customer’s and supplier’s business. The second tool – the Cost-Benefit Scale – helps companies understand and explore those trade-offs for different types of service. Guaranteed availability services, like vendor-managed inventory approaches, for example, inevitably incur additional storage and handling costs for the provider of the service. Those costs must be set against the benefits of the approach, which include the elimination of repeated order processing activities, simpler planning and the opportunity to drive long-term customer loyalty.
For Evonik, these tools are providing the analytical rigor it needs to target its investments in differentiated logistics services. “To successfully shift from familiar logistics services to modern logistics service bundles, we first need to evaluate the positive and negative effects on our own company as the basis for sound decision-making,” says Hans Fraats, Head of Strategic Logistics Management, Resource Efficiency, Evonik Industries. — Jonathan Ward