Logistics consulting: selling judgement by the day or by the result

Clients buy capability they cannot justify keeping

Network redesign, tender management, provider selection, contract renegotiation and post-merger integration are episodic. A company may need deep expertise in them once every few years, which is precisely the pattern that makes hiring unattractive and buying sensible. A second and less discussed motive is political: an external recommendation carries weight in internal argument, and a decision to change providers or close a site is easier to make when an independent party has documented the case.

Three ways the work is priced

Time-based charging bills the days spent and is safest for the adviser, but it caps earnings at the hours available and invites the client to scrutinise every day booked. Fixed-price projects sell a defined deliverable and reward efficiency, provided the scope holds — and scope creep is the standard way a profitable project becomes a loss. Contingent and shared-savings arrangements tie the fee to measured improvement, which sells well to sceptical buyers and shifts the argument onto the baseline, the measurement window and what counts as attributable. Retainers sit alongside all three, providing continuity income between projects at a lower effective rate.

Utilisation is the operating metric that decides everything

The cost base is people who must be paid whether or not they are on a chargeable engagement, plus the partners and principals whose time is split between selling and delivering. A consultancy that keeps its team busy on well-priced work earns comfortably; the same team idle between engagements loses money at almost the same rate. This is why proposal effort, pipeline discipline and the length of the sales cycle matter more in this model than the day rate does, and why firms use associates and subcontractors to flex capacity rather than carrying it.

Independence is an asset with a price attached

Advice on which provider to select is only valuable if the adviser has nothing to gain from the answer, which rules out referral arrangements, implementation revenue from the chosen provider, and equity relationships that the client would want to know about. Firms that both advise on selection and sell implementation face a permanent question about their motives. Some accept it and disclose it; others keep the two apart deliberately, accepting slower growth to keep the advisory position clean.

Escaping the hours: products, data and tools

Every advisory firm eventually tries to earn from something other than time. The usual routes are proprietary benchmarking data, modelling tools licensed to clients, training programmes, subscription research, and methodology packaged so that less senior staff can deliver it. These convert expertise into an asset that earns without a partner in the room. They also require investment the partnership must fund from the same profits it would otherwise distribute, which is why so many firms talk about the transition and so few complete it.

Dependencies and risks

The business runs on reputation and relationships held by individuals, which means the departure of a senior figure can take a book of clients with them. Beyond that sit the concentration of revenue in a few large engagements, the discretionary nature of advisory spend when trading conditions tighten, professional liability where a recommendation causes loss, and the specific hazard of contingent fees: a project delivering real improvement can still end in dispute if the baseline was never agreed precisely enough. Where advice touches customs procedure, safety obligations or employment transfers, responsibility for the regulated act stays with the client and its advisers must say so plainly.

Frequently asked questions

Why do firms pay for advice they could produce internally?

Because the need is episodic rather than continuous, and because an independent recommendation carries weight in internal decisions that an in-house analysis does not. Keeping that expertise on the payroll between projects rarely pays.

What makes shared-savings fees risky for the adviser?

Everything depends on the agreed baseline and on attributing improvement to the advice rather than to market movement, volume changes or work the client did anyway. Disputes about measurement are common and arrive after the work is finished.

Why is it so hard for consultancies to grow beyond their senior people?

Clients buy specific judgement, and the people who hold it are also the ones selling. Escaping that requires packaging method, data or tools into something that earns without their time, which needs investment the partners would otherwise take home.