#Logistics China#China is Leading Global Growth in Contract Logistics
The Asia-Pacific region is set to unseat Europe as the world’s largest contract logistics market as growing consumer demand in China and other countries pushes companies to build more sophisticated distribution channels, according to a new report.
United Kingdom-based Transportation Intelligence Ltd. said it expects the overall market for firms that provided a combination of warehouse and transportation services to grow at a rate of 6.8% a year from through 2018, driven by expanding demand in emerging markets for contract logistics services.
The research group, also called Ti, said the contract logistics market grew 5.4% by revenue in 2014, faster than the 2.8% growth in 2013 and outstripping the growth pace of the global economy.
The market is led by companies including Kuehne & Nagel AG and Deutsche Post AG of Germany and Netherlands-based CEVA Logistics, a division of CEVA Holdings LLC.
Ti expects the overall contract logistics market to grow 6.8% per year from 2014 to 2018, driven by Africa, the Asia Pacific, and Central America, which are all expected to grow more than 10% a year on average. The Asia Pacific market could be larger than Europe, where sophisticated logistics services have been entrenched for many decades, by as early as 2016, the group said. And by 2018, the revenue for contract logistics in the Asia Pacific will grow to $96.1 billion, the majority of growth coming from China, while Europe will grow to $82.7 billion.
The projection of rapid growth for the higher-end services in China and emerging markets suggests deeper changes in those economies, including greater demand for pricier consumer goods and perishable foods that require logistics management that includes better security and handling.
Contract logistics has traditionally been centered on developed economies with high domestic consumer demand and a longer history of outsourcing such services, while companies in most emerging markets have kept those operations in-house for lack of good infrastructure and third-party logistics options, the report said.
“Infrastructure is still very poor in many of these countries, and the potential is great. That’s where the population growth is, and the middle class is expanding in these markets,” said Cathy Roberson, Roswell, Ga-based analyst for Ti. A lot of companies are moving into these markets to meet growing demand, which leads to growth in demand for contract logistics.
A string of recent mergers and acquisitions in the industry is expanding the reach of some providers, and will likely continue to do so, the group said. “Overall, the market is highly fragmented,” but “the market will gradually become increasingly concentrated over time,” the Ti report said. “This process could accelerate in the coming years, especially as the appetite for major logistics acquisitions intensifies.”
This consolidation will expand logistics services to more regions and fuel the growth in Asia and emerging markets, as well as more global connections. For example Japan Post Holdings Co., Japan’s state-owned postal service, announced in February that it would acquire Australian logistics company Toll Holdings Ltd. for $5.1 billion, which gives it international reach.
“They basically have acquired Toll [customers] not only in Asia, but in the U.S. and Europe as well,” entering the logistics and freight forwarding business, Ms. Roberson said.
Add a comment...