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The Logistics Shift: From Cost Center to Profit Center

The Logistics Shift: From Cost Center to Profit Center

The logistics industry has shifted and today’s companies are seeing logistics as a profit center rather than a cost center.

Andy Moses, senior vice president of product management at Penske Logistics, said that in the early 2000s logistics teams were part of sales, but that is no longer the case. “There has been a shift. Today logistics is viewed as having to be cost justified and carved out as a profit center or at least treated as a business rather than a service center,” he said.

Today’s companies are looking to drive efficiencies as they navigate the high-cost environment. “It is not service at any cost,” Moses said. “It is, ‘Let’s be prudent with the service that we can deliver.’ There is a difference in the mindset.”

Rick Blasgen, chief executive officer of the Council of Supply Chain Management Professionals, said, “At one point, logistics was a cost to be managed, and now we’re on the revenue generating side. Our leaders are becoming increasingly responsible for bigger parts of the company, and that is great to see.”

Blasgen says supply chain leaders have become a more significant part of the development of the supply chain strategy. “It is not about only the horizontal flow of inventory and information, but it is about the financial end of things. Our leaders are becoming much more financially astute about how companies operate because they can impact so much,” he said while speaking at the CSCMP annual conference.

The shift comes at the same time as shippers are moving goods to more destinations and at faster speeds than in the past. To keep up with demand, logistics providers are investing in new technology and top supply chain talent. However, the supply chain and logistics industry faces an unprecedented talent shortage, ranging from truck drivers and warehouse workers to technologists and supply chain engineers.

During the CSCMP conference, Penske Logistics President Marc Althen said 60 million individuals will be retiring from the industry, and only 40 million will be coming back.

Penske Logistics President Marc Althen and CSCMP CEO Rick Blasgen discussed the supply chain talent shortage and its implications for the industry during the Council of Supply Chain Management Professionals annual conference.

Althen said, “Unfortunately, people really don’t know what supply chain management is.”

To attract people, Penske offers competitive wages and benefits. “That is a given,” Althen said. “Then we have to enhance our training efforts. We have to enhance our recruiting efforts and our staffing. We want to make sure we have robust career planning and development programs so that when people do enter into Penske they see a career path.”

Blasgen said he sees continued growth opportunities for the industry. “For me, I think an effective supply chain is a market share opportunity. It is a growth opportunity.”

Penske Logistics President Marc Althen and CSCMP CEO Rick Blasgen discussed opportunities within the supply chain that are driving growth, including e-commerce and the omni-channel segment of the industry.

Today, the logistics industry represents a $1.45 trillion industry, which is 8.3 percent of the U.S. GDP. Penske Logistics has experienced a growth of 24 percent this year with growth across all of its segments, Althen said.

By "Move Ahead" Staff