Executive Briefings

Contract Logistics 'Needs New Mindset', Report Suggests

The global contract logistics market grew by 3.4 percent in 2012 to €159.35bn ($213bn), according to Transport Intelligence's Global Contract Logistics 2013 report. However, this figure hides an increasing divergence in the performance of regional markets, with growth in emerging markets much higher than those in Europe or North America.

For example, the Middle East grew at 5.7 percent, whilst the Asian contract logistics market grew at 6.0 percent due to an emphasis on intra-Asian trade. This contrasts with growth in North America, which was only 3.0 percent, and an even weaker 0.9-percent growth rate in Western Europe.

This gap in performance is set to widen with the outlook for emerging markets through 2016 remaining strong. Europe's 37-percent share of the market is likely to fall to just 31 percent in 2016, whilst Asia's share will increase by 5 percentage points to 36 percent over the same time scale. According to the report's lead author, Cathy Roberson, the changing market dynamics will require a new mindset from contract logistics providers, with the need to focus their strategy on these emerging markets.

"In the aftermath of the 2008 global recession, the contract logistics market must evolve once more. Whilst nobody can doubt China's enormous potential, a second tier of economies is developing, as manufacturers look to produce and source goods from a range of low-cost markets. Trade lanes are shifting away from the U.S. and Europe in favour of emerging markets such as Brazil, Russia, South Africa and the Middle East. Logistics providers must develop their service offerings and expand into these new geographic markets," said Roberson, senior analyst at Transport Intelligence.

However, penetrating the new emerging markets will not be straightforward. "When entering an emerging market, logistics providers have to overcome the challenges of developing new solutions, such as an e-commerce offering, while at the same time dealing with undeveloped infrastructure, bureaucracy, corruption, security and a volatile business environment. The rewards are obvious, but a thorough understanding of the risks is essential," Roberson said.

Source: Transport Intelligence

For example, the Middle East grew at 5.7 percent, whilst the Asian contract logistics market grew at 6.0 percent due to an emphasis on intra-Asian trade. This contrasts with growth in North America, which was only 3.0 percent, and an even weaker 0.9-percent growth rate in Western Europe.

This gap in performance is set to widen with the outlook for emerging markets through 2016 remaining strong. Europe's 37-percent share of the market is likely to fall to just 31 percent in 2016, whilst Asia's share will increase by 5 percentage points to 36 percent over the same time scale. According to the report's lead author, Cathy Roberson, the changing market dynamics will require a new mindset from contract logistics providers, with the need to focus their strategy on these emerging markets.

"In the aftermath of the 2008 global recession, the contract logistics market must evolve once more. Whilst nobody can doubt China's enormous potential, a second tier of economies is developing, as manufacturers look to produce and source goods from a range of low-cost markets. Trade lanes are shifting away from the U.S. and Europe in favour of emerging markets such as Brazil, Russia, South Africa and the Middle East. Logistics providers must develop their service offerings and expand into these new geographic markets," said Roberson, senior analyst at Transport Intelligence.

However, penetrating the new emerging markets will not be straightforward. "When entering an emerging market, logistics providers have to overcome the challenges of developing new solutions, such as an e-commerce offering, while at the same time dealing with undeveloped infrastructure, bureaucracy, corruption, security and a volatile business environment. The rewards are obvious, but a thorough understanding of the risks is essential," Roberson said.

Source: Transport Intelligence