In today’s highly competitive logistics landscape, winning significant inbound volumes, such as those from leading Asian platforms, presents a significant opportunity for strategic development in domestic distribution networks. These high volumes can catalyze growth by creating the necessary scale for capacity expansion, closing volume gaps in existing networks and reducing unit costs through economies of scale in core operational processes. However, capitalizing on these opportunities requires a nuanced approach that balances the potential benefits against the inherent challenges.
The challenge of high-volume demands
Winning business from demanding clients, particularly in a competitive market, requires carriers to offer a high degree of customization. This means optimizing lead times and geographical coverage to meet the specific needs of each client. Additionally, it necessitates considering all possible cost synergies and potential savings across all operational processes to remain competitive on both price and performance.
Chinese businesses in particular can push operational capacities and cost structures to their absolute limits, while simultaneously introducing suboptimal solutions in areas such as IT integration or delivery address quality. Consequently, there is a substantial risk of failing to meet client expectations or jeopardizing profitability if operational and cost scenarios are overly optimistic or not properly realized during onboarding. Therefore, understanding how to manage these risks while maximizing the advantages of such strategic accounts is crucial for success.
“From my perspective, when it comes to big accounts the key is flexibility, proactiveness and the right way of communication. That’s something that confirms the customer’s feeling of being important,” says Jakub Grzywacz, head of sales at Post Nord International – Poland.
Managing risks and maximizing advantages
Some tried-and-tested formulas to manage risk include:
- Involving experienced operations staff in negotiations, to avoid promising things that are either not achievable or not cost-effective;
- Ensuring that customization or suboptimal elements (address quality, non-conveyable, badly packed/fragile parcels) are associated with some kind of volume commitment from the customer and that he/she understands the true cost of this customization;
- Seeking to avoid non-standard contract clauses (and for smaller accounts, requiring the use of a standard contract format);
- Linking price to actual volume shipped, rather than declared;
- Piloting any large new business before full-scale operations and having a moratorium on new major accounts during peak;
- Ensuring that any account with a non-standard agreement or price is accepted by the finance and operations directors and, if the account represents more than 5% of volume, also by the company CEO;
- Periodic review of the morphology of the parcels (especially in the first, post-pilot quarter) and addressing of issues or pricing.
For larger companies, managing these risks can begin with the use of smart network simulation engines. Clients that can provide comprehensive historical and forecast shipment data enable logistics providers to evaluate whether the anticipated volumes will indeed create cost synergies. Key metrics such as stop factor, average stop distance, capacity utilization on the last mile and line-haul utilization must be meticulously analyzed to determine potential efficiencies.
George Iordache, head of international sales at Sameday, stresses, “Asian volumes are often high but require time and a deep understanding of each party’s goals, if win-win commercial arrangements are to be made.”
To ensure a successful outcome, such projects need to be interdisciplinary efforts involving operations, IT, finance and customer experience teams from the outset. Relying solely on a sales-driven approach without integrating these critical departments is often the first step toward failure. In instances where external providers such as customs agents are required, their services must be properly tendered in parallel with the development of the overall offer.
All assumptions regarding operational customization, cost levels and the economic impact of the potential business must be both realistic and detailed. This consistency and accuracy must be maintained even during the negotiation phase, where service levels, cutoffs and pricing are subject to change under tight time and market pressures. The primary risk to future profitability often lies in this critical phase, where unrealistic expectations or customer commitments can lead to significant operational and financial challenges down the line.
Building sustainable business
A successful offer must include mechanisms for price adjustments if key shipment parameters, such as volumes, parcel morphology, packaging or EDI/address quality, deviate from those defined in the initial proposal. This ensures that carriers can protect themselves from unforeseen variations that could otherwise affect profitability.
The moment a successful client acquisition is secured should mark the beginning of an interdisciplinary onboarding project. This project should aim to ensure that all necessary operational customization, including capacity expansion, line-haul and sorting facilities, are adequately prepared. Simultaneously, it initiates the mutual onboarding process, linking all major disciplines between the client and provider to establish realistic timelines for implementation.
Unrealistic timelines (or introduction of new volumes at peak) pose a significant risk to successful onboarding, potentially leading to delays and unmet client expectations. Moreover, the new client volumes can often lead to service failures with existing clients and damage to overall reputation and long-term profitability. It is therefore crucial that all stakeholders have a clear understanding of the operational requirements and timelines from the outset to prevent such setbacks.
Achieving strategic goals with high-volume clients
We can see that this is a more far-reaching and important topic than might be initially expected. Carriers that prepare well, protect themselves and other customers against deviations in shipment structures and volumes – and meticulously plan and review against initial assumptions after the start of operations – are the ones most likely to achieve their strategic goals with high-volume clients. Those who fail to manage these elements adequately risk turning a strategic opportunity into a commercial nightmare.
By adopting a comprehensive, interdisciplinary approach that emphasizes preparation, maintaining sight of costs, realism and flexibility, service providers can navigate the complexities of high-volume inbound shipments and unlock significant growth potential in their domestic distribution networks.
About the authors
Marek Różycki, managing partner at Last Mile Experts, is a leading CEP subject-matter expert. He brings fresh perspectives to relevant industry matters, shaping the future of last-mile delivery through Last Mile Prophets videos and consultancy at Last Mile Experts. He is a long-standing contributor to Parcel and Postal Technology International. Connect with him on LinkedIn.
Carsten Siebe, owner of Focus Four Management Advisors, has over 20 years of industry experience, largely related to international key account management in the CEP sector. He has partnered with LME to offer guidance in this area. Connect with him on LinkedIn.