Two to three years is the average logistics provider relationship. The leading reason a shipper becomes dissatisfied with its provider is the lack of strategic initiative. Strength in planning and execution simply does not provide enough value to maintain a relationship over the long term. Innovation—the application of better solutions that meet new requirements, unarticulated needs or existing market needs—is required to avoid stagnant results and costs within a supply chain. Too often shippers are left weighing the cost of change and the challenge of finding a new provider against the savings potential when aligned with a true supply chain partner. Companies cut cost to survive; they innovate to prosper.
In a business where the length of the contract usually determines the length of the relationship, it is important to consider why supply chain cost savings flatten after a year or two. At the onset of the relationship, shippers consider savings potential and are often focused on procurement savings, including the promise of continuous improvement, that can be delivered by a new provider.