Transportation and logistics firms operate in a highly competitive environment where margins are thin (generally less than 5%) and customer demands for service are high. These factors make it exceedingly difficult for logistics service providers to invest in novel technologies that could address some of the other challenges that they face while still meeting customer requirements that are based on cost and service level. A number of studies have indicated that the logistics services industry is becoming a commodity industry where competition is based solely on price and that innovation is something that suffers because of this (Cahill, 2007). Given the complex nature of logistics service contracts with their tight service level requirements and pre-formulated key performance measures, it is not too difficult to understand why LSPs might not wish to focus on any other performance parameter except cost.
Source: Kuehne + Nagel and McKinsey