Porter’s Five Forces Analysis of Logistics Industry 

Logistics Industry is an area of supply chain management that focuses on the forward and backward flow of products, goods, and information from the manufacturing facility to the end users. Logistics bridges the gap among various activities of the supply chain process. Today, we’ll discuss Porter’s five forces analysis of Logistics industry; bargaining power of suppliers and buyers; threat of new entrants and substitutes; and intense rivalry as competitive forces in strategic management.

Activities involved in the Logistics Industry

• Product procurement
• Moving and transporting goods
• Storing raw materials and semi and finished goods
• Warehousing
• Inventory management
• Delivering Finished goods

Types of Logistics

• Inbound logistics
• Outbound logistics
• Procurement logistics
• Advance logistics
• Global Logistics
• Distribution logistics
• Disposal logistics
• Reverse logistics
• RAM logistics
• Asset control logistics
• Humanitarian logistics
• Production logistics
• Construction logistics

Statistical facts and figures of Logistics Industry

• The market size of the global logistics industry – 10.41 trillion USD
• Contract logistics market size – 237.5 billion Euros
• Prediction – 13.7 trillion Euros (2027)
• Green logistics market size – 1.3 trillion USD (2022)
• Prediction of green logistics – 2.9 trillion USD (2032)

Companies in the Logistics Industry

• Kenco Logistics Services
• Lineage Logistics
• FedEx Supply Chain
• GEODIS North America
• Ryder Supply Chain Solutions
• Americold
• DHL
• GXO Logistics

Porter’s five forces analysis of Logistics industry would analyze the bargaining power of suppliers and buyers; the threat of new entrants and substitutes; and intense rivalry as competitive forces in strategic management. Here’s Logistics industry Porter’s five forces analysis of supply chain, logistics, and distribution business as follows;

Porter’s Five Forces Analysis of Logistics Industry

Let’s discuss Porter’s five forces analysis of Logistics Industry as competitive forces in strategic management and they’re as follows;

Bargaining Power of Suppliers in Logistics Industry

The bargaining of suppliers is lower in the Logistics Industry as competitive forces in strategic management. Some of the main factors impacting the bargaining power of suppliers in the Logistics Industry Porter’s five forces analysis of supply chain, logistics, and distribution business are as follows;

I-Multiple Suppliers

Some of the main suppliers of logistics companies are as follows;

• Forklift
• Crane
• Trucks
• Heavy Transportation vehicles
• Lightweight vehicles
• Warehouses
• Tools
• Accessories

The tools, supplies, and equipment used in the logistical operations are easily available in various countries across the world. In fact, the logistics operating tools manufacturing companies make sure that their supplies and equipment are available in leading markets of various countries across the globe. Easy availability of supplies and suppliers decreases the bargaining power of suppliers.

II-Long Term Contracts

The logistics companies build long-term contracts with the logistics tools and equipment manufacturing companies. It allows them to ensure that smooth supply of tools, equipment, and accessories for managing operations. However, it further decreases the bargaining power of suppliers.

Bargaining Power of Buyers in Logistics Industry

The bargaining of Buyers is Higher in the supply chain, logistics, and distribution business as competitive forces in strategic management. Some of the main factors impacting the bargaining power of suppliers in the supply chain, logistics, and distribution business five forces analysis of the Logistics industry are as follows;

I-Multiple Logistics Providers

Various logistics companies have established their warehouses and retail collecting and distribution offices in various cities and countries across the globe. Individual customers and e-commerce businesses could easily find and contact logistics distributors in various countries across the globe. The easy availability of logistics service providers increases the bargaining power of customers.  

II-Time & Cost

The cost of logistics services is dependent on the time and urgency of the service the customer wants. For instance, if the company or customer wants urgent service that requires an airplane or speedy mode of transportation; the cost of urgent logistics service is higher. The cost is lower for a normal delivery time.

Threat of New Entrants in Logistics Industry

The threat of new entrants is Low in the supply chain, logistics, and distribution business and Logistics industry as competitive forces in strategic management. Some of the main factors impacting the threat of new entrants in the supply chain, logistics, and distribution business 5 forces analysis of Logistics industry are as follows;

I-High Initial Investment

When it comes to launching the logistics company, then it requires a significant amount of high capital investment. It would be in the form of purchasing logistics tools, supplies, equipment, and vehicles, recruiting employees, and procuring logistics software. Adding up all of these costs becomes a significant amount of high capital amount.

II-Network

Along with high initial investment, logistics companies need to build a worldwide network. It comprises of setting up collecting and distributing offices, recruiting staff in those offices, building warehouses, and distribution centers, and training all employees to use the centralized logistics and distribution software. However, it is much easier said than done. The complexity of the network and higher costs push away many competitors.

Threat of Substitutes to Logistics Industry

The threat of substitute products and brands is higher in the Logistics industry as competitive forces in strategic management. Some of the main factors impacting the threat of new substitutes in the supply chain, logistics, and distribution business five forces analysis of Logistics industry are as follows;

I-Multiple Logistics Companies

There are multiple logistics companies operating their business in the Logistics Industry. They all offer the same types of logistics, distribution, and delivery services to customers and businesses at almost the same price. Customers could easily switch from one service provider to the other without incurring any cost; they do so after completing the delivery with one company.

Competitive Rivalry in Logistics Industry

The competitive rivalry among Logistics companies is very high in the Logistics industry as competitive forces in strategic management. Some of the main factors impacting competitive rivalry in the supply chain, logistics, and distribution business five forces analysis of logistics industry are as follows;

I-Competition

The Logistics Industry has become highly competitive over the years. In order to gain a competitive edge, logistics companies offer various types of loyalty programs, marketing and promotional campaigns, and cost packages to the customers to attract the attention of customers.

Conclusion: Logistics Industry Porter’s Five Forces Analysis |5 Forces Analysis of Logistics Industry

After an in-depth study of Porter’s five forces analysis of logistics industry; we have realized that the Logistics Industry is the world’s highest-growing business. If you are learning about the Logistics industry 5 forces analysis of supply chain, logistics, and distribution business; then you should keep in mind the abovementioned bargaining power of suppliers and buyers; threat of new entrants and substitutes; and intense rivalry as competitive forces in strategic management.