![]() Increased premium-service demand during the pandemic indicates a higher willingness to pay. If they do, logistics companies with agile pricing operations will be better suited to ride this wave. At the start of the crisis, many procurement tenders and contract negotiations were delayed these may eventually resurface. Pricing systems have a significant decision-making advantage.įurther volume surges, even if temporary, are possible at the early stages of recovery. Therefore, mature companies with real-time This kind of uncertainty will remain business as usual for some time to come. 3 Airfreight Rates – Tac Index, Air Cargo News, accessed November 10, 2020,. For example, air freight prices from Asia to Europe doubled during the first months of the pandemic but then returned to precrisis levels. A strategic and analytics-based pricing transformation can generate positive returns-though uncertainty remains around prices, volume forecasts, and premium services.Īmbiguity and price fluctuations have made dynamic pricing more valuable. This is a challenging environment for the industry, and full recovery is likely to take approximately three to five years. The COVID-19 crisis has intensified the urgency to improve pricing strategies and may have increased the value at stake. In fact, results have already been rapid, and the carrier realized one percentage point of margin increase within the first year of the transformation program. ![]() Some initiatives-such as investing in digital solutions and changing company-wide mindsets-will take time to deliver, but the impact from pricing improvements is generally faster than from other levers due to several quick wins in pricing. The carrier had experienced pressure on yields and margins, but pricing improvements are now expected to boost margin by two percentage points. An example of an industry disruptor is Freightos, whose application programming interfaces allow a variety of providers to share real-time pricing data, providing increased transparency to the market.įor example, a leading global air cargo carrier underwent a comprehensive yield-management and pricing transformation. ![]() Disruptors are also active in the market: logistics technology has attracted significant investor interest, and the sector continues to be strong, despite the pandemic. Logistics companies now face a well-timed starting point for more sophisticated pricing strategies (Exhibit 1). ![]() We observe leaders upgrading legacy systems (for instance, to best-in-class integrated transportation management systems), streamlining digital architecture, removing data silos (for instance, among their transport management, inventory management, and enterprise resource planning systems), and adding new business insight capabilities on top of legacy systems. However, logistics companies have recently made significant investments in technology and data infrastructure. Companies have traditionally taken a “cost plus” approach to pricing. 1 Companies that adhere to predominant market prices. In addition, fragmentation in the sector, the complexity in different goods, and the absence of a strong global industry association to lead standardization and pricing transparency have led most companies to consider themselves price-takers. Time to reap the full reward of data infrastructure investmentsĭigitization in logistics has historically been low. Here, we make the case for reforming pricing and outline a five-step process to achieve it. However, achieving this upside requires a strategy that tackles the entire pricing cycle. Logistics companies that transform their pricing could increase revenue by 2 to 4 percent, translating to as much as a 30 to 60 percent increase in operating profit. However, recent investments in data infrastructure have now opened a window for more comprehensive pricing transformation. Fragmentation and a historically low degree of digitization have been challenges in developing more complex approaches. Pricing strategies in logistics have been less mature than in other sectors.
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