Retailers are seeking logistics service providers (LSPs) with more than the traditional set of services, as the retail logistics market evolves and grows in the next 3-5 years, according to new survey data published by Blue Yonder.
71% of retailers pick an LSP primarily for the functions they can perform, rather than for global reach (41%) or regional providers (42%). At the same time, retail logistics as a market is being divided between retailers who see LSPs as strategic enablers (52% describe their LSP this way) and those who don’t.
Becoming central to retailers’ strategic plans means greater customer retention and deeper integration in their operations, with opportunities to take over more functions and responsibilities—in short, more revenue, more reliably.
But what wins those deals and what makes an LSP into a strategic enabler? Three factors are now more important to retail logistics deals.
Flexibility and responsiveness
It’s worth stating the obvious: retailers first and foremost need reliability from their LSP partners. It was the top quality sought in LSPs for 26% of retailers, and in the top 3 for 60%. The factors we’re discussing today are about the changing nature of the retail logistics market, and flexibility is a great example.
After reliability, you might think cost is the next logical priority—but in fact, flexibility was in more retailers’ top 3 desired qualities than cost-efficiency (56% vs 46%). It turns out that being able to adapt on the fly to disruption, changing patterns of demand and seasonal peaks is more important to more retailers than solely focusing on cost. Missing out on revenue opportunities because of inflexible capacity is costly in and of itself.
“Their ability to scale capacity quickly across regions set them apart from other providers during our evaluation. During peak seasonal demand, our LSP was able to secure additional linehaul and last-mile capacity within days, whereas other providers required weeks of lead time.”
-Survey respondent
Being able to intelligently manage capacity throughout the network and maximize utilization will help LSPs to demonstrate greater flexibility for retail clients.
Risk management and disruption proactivity through networks
Disruption is the norm, with retailers experiencing supplier issues; economic challenges like strikes and inflation; and operational challenges such as transport delays, like those seen in global shipping bottlenecks like the Suez and Panama canals or the Straits of Hormuz. As a result, retailers are looking for support. They want LSPs who can show them in real time what’s happening, have a plan for risk management, and give prior warnings about disruptions.
When we asked retailers what type of support they require from LSPs, the top answer was end-to-end visibility to support risk management, with confidence across all channels, selected by 69% of respondents. More than half of retailers (55%) now expect pre-warning about disruptions, and more (57%) say they expect risk management planning.
Pre-warning about disruptions is a big ask and requires LSPs to have a sophisticated digital supply chain network that gives them advance notice of upstream disruptions, which they can then pass on to retailer customers. Once that’s in place, LSPs can employ AI to constantly analyze the network and flag potential disruptions before they actually occur, giving their retail clients true forewarning. 83% of retailers expect their LSP partnerships to evolve through digital network expansion, making this a critical priority for future deal success.
Technological investment and improvements
When we asked retailers about areas where they believed LSPs were currently underperforming, technology capabilities (including services offered and ability to integrate) was by far the top response, selected by 40% of retailers. That highlights a massive opportunity for improvement and indicates that retailers’ growing needs and demands are at risk of being under-served by LSPs who haven’t invested sufficiently in technology.
Retailers are investing in technology upgrades across the board and expect their LSPs to invest alongside them. The most common investments they expect are machine learning/predictive AI (49%) and control tower/digital supply chain networks (40%). When operating across a digital supply chain network, agentic AI can support retailers’ risk management by recommending actions such as reallocating loads for shipments at risk of delays or detention fees.
In retail logistics deals going forwards, LSPs who are mature users of these technologies and who can demonstrate tangible results will stand head and shoulders over early adopters and experimenters.
Read the full research report here, and discover how Blue Yonder enables LSPs to become more flexible, mitigate risks that affect service levels and win more retail logistics deals.