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Is the traditional freight forwarding model obsolete?

July 16th 2015, London, UK: A combination of the erratic global air and sea freight market, a growing shift in geographic focus towards the regional and the application of advanced technology and data analysis to the market is bringing the fate of the traditional freight forwarding model into question.

Indeed, Ti’s annual Global Freight Forwarding 2015 report provides a detailed review of these and other trends affecting the global freight forwarding market. Capacity excesses and declining rates describes a tumultuous sea freight market, while air freight celebrated a revival of volume gains in the last half of 2014, though rates remained fairly flat. On average, forwarders gained volumes but translating these volumes into profits proved difficult for some.

Meanwhile it appears the focus on global trade is shifting towards regional flows. The top three trade flows in terms of value are intra-regional within Europe, Asia and North America. Combined, these intra-regional flows comprised almost 50% of global trade in value terms for 2014. As such, we see M&A activity on the rise and growing introductions of new products such as multi-modal transportation to support these growing demands.

Finally the application of technology and data analysis is having a transformative effect on the forwarding market. Many forwarders are in the midst of upgrading and enhancing their individual systems. Some have been successful while others have struggled. As forwarders focus on their IT systems, e-commerce marketplace start-ups that provide shippers the ability to compare rates, book shipments, track in real-time and perform data analysis on results are on the rise. These have the possibility of disrupting the freight forwarding market. However, there are always pros and cons depending on a shipper’s needs.

In the midst of all these changes and potential disruptions, the freight forwarding market reversed its 2013 decline and improved for 2014. According to David Buckby, an economist at Ti-

Volume growth was actually robust in the year. For example, ranked by TEUs and tons, the top 20 in both sea and air forwarding saw average growth of about 5% in 2014. While the sea forwarding market was once again bogged down by year-on-year rate declines which meant another year of negative revenue growth overall, air forwarding rates on average declined only very slightly, permitting market growth for the first time since 2011.

The future of the traditional freight forwarding model is indeed in jeopardy thanks to changing demand and enhanced technology. To survive, forwarders will need to plan, adapt and evolve or run the risk of becoming obsolete.

Notes to Editors

About Global Freight Forwarding 2015

Global Freight Forwarding 2015 contains Ti’s unique analysis and market overview of the sector with unique global market sizing and forecast data, company profiles for the Top 20 market players- with additional SWOT analysis for the Top 10, as well as global trade flow and trade lane information.

About Transport Intelligence (Ti)

Ti is a market research company specializing in global logistics and supply chain. The company was established in 2002 to fill a gap in the market for high quality, affordable market research. Ti’s product range includes a free weekly newsletter service (Logistics Briefing), Market Reports providing trend analysis, market sizing, market share, forecasting and rankings, online Intelligence Portals offering a selection of economic and industry data, consulting services and conferences.

www.transportintelligence.com

Key Contact: Holly Francis, Marketing Executive, E: hfrancis@transportintelligence.com T: +44(0)1666 519900


 

“The Consumer Packaged Goods sector is one of the largest customers for contract logistics. With estimated revenues of over half a billion it is a global business that can make unique demands of logistics services. This report looks at both the size of the logistics operations supporting CPG and the nature of what the CPG demands from logistics providers”according to author and Ti Senior Analyst Thomas Cullen.

  • North America spending 6.7% of total sales on logistics whilst Europe spends just over 10.5%
  • Markets in the emerging economies have much higher cost basis- possibly twice that of the US
  • Obstacle to growth of CPG in emerging markets remains poor efficiency of logistics

26th June, London, UK: The consumer packaged goods (CPG) sector is a giant with global sales exceeding $550bn. The markets that make up this global sector are diverse in character and research for Ti’s latest report, Global CPG Logistics 2015, has identified the key differences between them.

Within the developed world there is a marked difference between the CPG sector in North America and Europe. Ti’s research indicates that the channels of consumption have become increasingly important in determining the logistics cost and nature of CPG supply chains and that this now accounts for the difference between Europe and North America. In fact Ti’s research shows that the CPG sector in North America spends just 6.8% of revenue on logistics, in Europe logistics spend is up at 10.5%, largely because of Europe’s stronger disposition towards e-commerce.

Between the developed world and emerging markets the principal differences are the sophistication of logistics services available, the costs and limitations inherent in those services and the disparity in growth rates.

Naturally the developed world’s long standing middle class has for decades demanded immediate access to CPG, leading to long term moderate growth after the initial boom. In contrast the emerging middle class in developing nations is only now beginning to find its appetite for CPG. As this trend continues Ti expects it to constitute one of the major drivers of growth in the global CPG sector and consequently in demand for complex logistics services. Demographic projections suggest that by 2030 emerging markets will account for some 90% of the global middle class and therefore much of the demand for CPG and associated logistics services.

Just as Ti found significant differences in the characteristics of CPG logistics in the developed world, the company’s research has also uncovered considerable gulfs between different emerging markets. This is clearest when looking at the scale and buying power of the middle classes in China and South East Asia, which massively outstrips their counterparts in India and Brazil. These differences in demand are also reflected in the disparity in the sophistication of logistics services between developing markets. For instance Ti’s in depth examination of the service offerings of LSPs in emerging markets showed significantly more complex solutions on offer in China than in Brazil or India.

The report shows that the CPG sector is quite stable in the developed world but that changing channels of consumption mean that there is scope for new service offerings and solutions to be implemented. Meanwhile in emerging markets there is a surging demand for more sophisticated logistics services to cater for growing demand for CPG.

Notes to Editors

About Global CPG Logistics 2015

Global CPG Logistics 2015 offers insight into the consumer packaged goods market, with analysis of the main CPG businesses and their supply chains, as well as the logistics providers they do business with. In addition, Ti has sized the CPG market and, based on bespoke research, is sharing its estimate of logistics costs across developing and emerging markets.

About Transport Intelligence

Transport Intelligence (Ti) is one of the world’s leading providers of expert research and analysis dedicated to the global logistics industry. Utilising the expertise of professionals with decades of experience in the mail, express and logistics industry, Ti has developed a range of market leading web-based products, reports, profiles and services used by all the world’s leading logistics suppliers, consultancies and banks as well as many users of logistics services.

www.transportintelligence.com

Key Contact: Holly Francis, Marketing Executive, hfrancis@transportintelligence.com


 

May 15th 2015: The Philippines is poised to become a major growth market for logistics services providers over the next year, according to a new report by Transport Intelligence. But this will only happen if its political rulers take steps to improve trade flows, not least by investing heavily in the archipelago’s outdated infrastructure.

The Philippines currently lags behind its regional competitors in South East Asia terms of logistics performance. However, Ti’s latest report - Philippines Transport & Logistics 2015 – argues that if policy changes can be made that encourage inward investment by manufacturers, and if this is supported by more investment – especially from the private sector – in infrastructure, then contract logistics and forwarding demand will surge.

“Ti believes that if the Philippines can overcome many of the infrastructure difficulties it currently endures at its ports and airports and, especially, on Luzon’s blocked highways, then it has every chance of becoming a major growth region for manufacturers to migrate towards,” said Michael King, Ti’s Head of Operations in Asia.

“It boasts a fast growing economy and a thriving consumer market driven by its growing middle class, remittances and the off-shoring of back office functions by many knowledge and financial institutions. As such, by removing existing logistics performance issues and the many obstacles to doing business in the country, Ti believes it is well placed to become a growing market across the various logistics sectors.

“A lot will depend on the determination of whichever candidate wins the looming Presidential elections to drive through policy reform.”

Ti’s market sizing analysis looks at each key logistics sector using three growth scenarios over 2013-20. The realisation of a scenario (low, medium or high) is dependent on the Philippines’ Logistics Performance Indicator reaching a certain threshold. Vast differences in growth rates are predicted when LPI scores differ.

At the upper range of LPI improvement, we believe the size of the Philippines’ contract logistics market increase from €478m in 2013 to €1,412 by 2020. The latter sizing would represent a CAGR of 16.7% over 2013-2020. However, should its political leaders fail to pursue business-friendly reforms, instead this would see its CAGR over the period increase by 10.5% to total €962m.

Many of the same drivers of contract logistics market expansion will determine growth rates for forwarding. Ti concludes that the total freight forwarding market can grow by a CAGR of 15.1% over 2013-2020 under our ‘high’ LPI increase scenario, but only by 9% under our ‘low’ forecast.

“Ti believe that if the next Philippines’ government embraces policy change to address is current LPI performance, then it will become a major regional growth engine for both contract logistics and forwarding,” said King. “

“The trend could be further enhanced by the free trade options that will become possible as the Asean Economic Community takes shape and current trade and population movement restrictions are removed or reduced.

“All of this should boost economic growth and transport demand. But the Philippines will only see the benefits of this if it takes steps to improve trade flows.”

Notes to Editors

About ‘Philippines Transport & Logistics 2015’

Ti’s latest, Philippines Transport & Logistics 2015, report offers unprecedented insight into the competitive environment for forwarders and logistics service providers operating in one of South East Asia’s largest and fastest growing economies. It includes analysis of which companies are already major players and what barriers market entrants face. In addition, the report features in-depth analysis of the road, rail, sea and air sectors including Ti’s exclusive market sizing and demand forecasts.

About Transport Intelligence

Transport Intelligence (Ti) is one of the world’s leading providers of expert research and analysis dedicated to the global logistics industry. Utilising the expertise of professionals with decades of experience in the mail, express and logistics industry, Ti has developed a range of market leading web-based products, reports, profiles and services used by all the world’s leading logistics suppliers, consultancies and banks as well as many users of logistics services.

www.transportintelligence.com

Key Contacts

Sophie Brady, Head of Sales, Asia

+61 (0)2 8003 7208 or email: sbrady@transportintelligence.com  

Michael King, Head of Operations & Senior Analyst Asia

E: mking@transportintelligence.com


 May 1st 2015, London, UK- Innovations and economic growth spurs on North America's contract logistics market

Inefficiencies within the transportation and logistics industry have resulted in disruptions from new business models and technologies so notes Ti’s latest report, Global Contract Logistics 2015. Amazon, Uber, augmented reality, drones and autonomous cars are all changing how we look at the this industry and by all indications it is likely the transportation and logistics industry today will be quite different in ten years’ time.

As such, the contract logistics market is growing and embracing these ‘disruptions’. DHL, the largest contract logistics provider in the world, has been a leader in innovations – trialing new ideas such as augmented reality in select warehouses, drone delivery of pharmaceuticals and partnering with Amazon and Audi to deliver packages to trunks of cars.

In addition, m&a activity is on the rise as the contract logistics market worldwide consolidates. This was highlighted just this week by US-based XPO Logistics acquiring the French logistics provider Norbert Dentressangle, a leading contract logistics provider in Europe.

For North America the contract logistics market represents almost 26% of the global market. In 2014, the US, the largest contract logistics market, grew at 3.8%. Market dynamics in the US contract logistics sector boosted growth. For instance, the fear of a capacity crunch caused by truck driver shortages has increasingly led shippers to shift to dedicated contract carriage solutions.

While the market is one of the most fragmented, DHL Supply Chain/Exel, Neovia and UPS are among the top contract logistics providers for North America. But making an entrance in the top 10 this year is FedEx thanks to its recent acquisition of Genco.

The North American contract logistics will continue to play a major role in the global market through 2018 growing an estimated average 5.5% each year for the period. However, the even stronger growth in APAC will result in North America’s share of the global contract logistics market to decline to 24.6%.

Commenting on the report’s findings, Ti analyst, David Buckby, said: ‘The contract logistics market has really benefited from stronger economic fundamentals in most key markets. We have also seen the positive influence of trends such as e-retail which has increased the role and importance of logistics. We believe that global contract logistics growth will steadily accelerate in the coming years, although this relies heavily on European and US economic performance improving and merely a gradual slowdown of the Chinese economy.’

Notes to Editors

About Global Contract Logistics 2015

Global Contract Logistics 2015 provides industry-leading research into development and innovation within the global contract logistics market. Providing unique analysis of global, regional and country level contract logistics market sizes as well as detailed profiles on some of the leading logistics players.

About Transport Intelligence

Transport Intelligence (Ti) is one of the world’s leading providers of expert research and analysis dedicated to the global logistics industry. Utilising the expertise of professionals with many years experience in the mail, express and logistics industry, Ti has developed a range of market leading web-based products, reports, profiles and services used by all the world’s leading logistics suppliers, consultancies and banks as well as many users of logistics services.

Key Contact

Holly Francis, Marketing Executive, E: hfrancis@transportintelligence.com


May 1st 2015- Contract logistics market growth accelerated in 2015, claims new report

According to the latest report published by Ti, Global Contract Logistics 2015, the global contract logistics market grew by 5.4% in 2014, to reach €177.6bn. If prices and exchange rates were held constant at 2013 levels (real growth), then the market would have expanded by 4.4%.

Overall contract logistics growth of 5.4% compares favourably to growth of 2.8% in 2013.

The increase was largely driven by the performance of the largest markets (Western Europe, the US and China) which was markedly better than in 2013. Together, these markets accounted for about 65% of the global contract logistics market.

The real turnaround was the strengthening of the European economy, which was a critical factor in the growth of the overall contract logistics market. EU real GDP growth improved from just 0.2% in 2013 to 1.4% in 2014, resulting in an increase in volumes. More specifically retail sales (excluding the automotive sector) and vehicle production growth displayed positive trends.

The US contract logistics market also enjoyed a strong year where market dynamics in the US contract logistics sector boosted growth. For instance, the fear of a capacity crunch caused by truck driver shortages has increasingly led shippers to shift to dedicated contract carriage solutions.

Chinese growth was also a key driver of the global contract logistics market. China’s market size is thought to have grown by 17.7% year-on-year (real growth of 16.6%), to reach €18.9bn. Concerns over China’s economic performance in the year were generally overblown. Industry reports show that measures of capacity utilisation, inventory turnover, average inventory, new orders and logistics service charges were all higher on average in 2014.

The most disappointing region in terms of market growth was South America and its performance was described by the report’s authors as ‘terrible’. Its contract logistics market is estimated to have grown by just 2.4% in the year largely down to Brazil’s economic performance in 2014 significantly undershooting expectations.

Commenting on the report’s findings, Ti analyst, David Buckby, said: ‘The contract logistics market has really benefited from stronger economic fundamentals in most key markets. We have also seen the positive influence of trends such as e-retail which has increased the role and importance of logistics. We believe that global contract logistics growth will steadily accelerate in the coming years, although this relies heavily on European and US economic performance improving and merely a gradual slowdown of the Chinese economy.’


 April 29th 2015- John Manners-Bell reflects on XPO Logistics' acquisition of Norbert Dentressangle

News broke overnight that XPO Logistics and Norbert Dentressangle have entered into an agreement for XPO Logistics to acquire a majority interest in Norbert Dentressangle and launch a tender offer for the remaining shares in a deal with a total value of €3.24bn.

Reflecting on the acquisition Professor John Manners-Bell, Transport Intelligence’s CEO, said: “Our prediction that there would be a number of transformational deals in 2015 has proved right. The acquisition of Norbert Dentressangle by smaller US company XPO catapults it into the ‘Big League’ of global logistics providers. In much the same way as the FedEx-TNT deal, it is a sign of confidence in the European economy, especially the UK where Norbert Dentressangle is so strong.”

“The strength of the dollar no doubt helped the deal, but we suspect that it would have happened anyway. XPO has been behind a wave of acquisition activity in the US and there were fears it was running out of steam. However it has clearly turned its attention internationally in order to meet its ambitious growth targets. However Norbert Dentressangle was not the finished article – it has been growing its freight forwarding business and is weak in Asia – so we can expect its new owners to continue with in-fill acquisitions to address these whitespots,” Manners-Bell concluded.

XPO’s acquisition of Norbert Dentressangle, one of the providers featured in Global Contract Logistics 2015, demonstrates the value such a company holds within the market. With its contract logistics business, strong European road network, established e-commerce solutions and growing freight forwarding operations across Asia Pacific and the Americas as well as in Europe, Norbert Dentressangle makes for an interesting acquisition target.

Global Contract Logistics 2015 contains industry-leading research into development and innovation within the global contract logistics market. The report includes detailed profiles of the leading contract logistics providers including Norbert Dentressangle and its direct competitors. 


 March 20th 2015- Latin America: Region of Extremes, Region of Opportunities

  • Cold chain opportunities are increasing due to the importance of agricultural exports such as flowers and growth in pharmaceuticals handling and clinical trials.
  • Mexico surpassed Brazil as the region’s top producer of automobiles.
  • Brazil and Mexico are the largest countries in the region. Combined, these two countries comprise almost 60% of Latin America’s GDP.
  • The widening of the Panama Canal has brought opportunities and economic benefits, not only to Panama, but also to the countries surrounding it.

A region of extremes, Latin America is geographically and culturally diverse. However, Ti’s latest report, Latin America Transport and Logistics 2015 finds that a recurring theme throughout this vast region is the need for infrastructure improvements and loosening of regulatory requirements. Indeed, opportunities are great but will be missed if infrastructure and regulatory requirements are not addressed. For example, cold chain needs are growing thanks to the rise agricultural exports and in pharmacuetical handling and clinical trials expanding in the region. As a result, there is a need for temperature-controlled warehousing and transportation. In addition, the widening of the Panama Canal is bringing new opportunities into the surrounding area including expansion of ports and airports to meet the potential transshipment needs.

According to lead writer of the report, Ti senior analyst Cathy Roberson, “The region’s greatest enemy is itself. In order for Latin America to reach its true potential, it will have to overcome its infrastructure issues once and for all as well as its bureaucratic and corrupt practices.”

While the opportunities are great, supply chains are unique for this region as companies work around infrastructure and regulatory issues. Many of these supply chains encompass Brazil and Mexico which combined, comprise almost 60% of Latin America’s GDP. However, the disparity between these two large economies is widening as Mexico enjoys its close proximity to the US and Brazil becomes further mired in taxation, regulations and strikes. Once the region’s export leader in electronics and automobiles, Brazil has now taken a back seat to Mexico.

Ti’s Trade Analyst, David Buckby notes that this disparity between the region’s largest economies will likely grow further as more companies move production to Mexico to take advantage of NAFTA credits as well as lower labor costs.

However, despite the heavy dependence on trade with North America, global trade is changing for this region. Trade with emerging markets in Asia, Africa and the Middle East is on the rise. Furthermore, intra-region trade is considered the fourth largest trade partner behind North America, Europe and Asia. But, as noted by a few supply chain practitioners, managing customs clearance between countries is difficult at best as much of it is still not automated.

Still, while there are challenges to operate in this region, its growing middle-class with its purchasing power combined with improving social and health programs are presenting new opportunities. How it will overcome itself as its major enemy will be played out in the years to come as Latin American countries look towards government reforms to stimulate a region rich in opportunities.

To coincide with the publication of ‘Latin America Transport and Logistics 2015’, Prof John Manners-Bell, Ti’s CEO, will be speaking at the forthcoming 2nd Brazilian Supply Chain and Logistics Summit in Sao Paulo on the limitations of Brazilian infrastructure.

About ‘Latin America Transport and Logistics 2015’

Ti’s latest report provides research and analysis into Latin America’s key industries along with country and top logistics profiles. New to this report is a comparative analysis of leading logistics providers. In addition, the report includes Ti’s market sizing of the region’s contract logistics, e-commerce, express/small parcel and freight forwarding sectors.

About Transport Intelligence

Transport Intelligence (Ti) is one of the world’s leading providers of expert research and analysis dedicated to the global logistics industry. Utilising the expertise of professionals with decades of experience in the mail, express and logistics industry, Ti has developed a range of market leading web-based products, reports, profiles and services used by all the world’s leading logistics suppliers, consultancies and banks as well as many users of logistics services.

Key Contacts

Michael Clover, E: mclover@transportintelligence.com T: +44(0)1666 519900


March 7th 2015 - Investment in infrastructure could see the growth of Indonesia’s logistics and forwarding markets rapidly accelerate over the next five years, says new Ti report  

  • Indonesia’s contract logistics market could grow at a compound annual growth rate (CAGR) of up to 14.4% over 2013-19
  • Total forwarding market to expand by a CAGR of up to 14.7% over 2013-19
  • Ocean and air markets to see double digit growth
  • Express and contract logistics markets to potentially grow by CAGRs of more than 20% and 14%, respectively, over 2013-19

Indonesia’s new government needs to remove obstacles to investment in its transport and trading infrastructure to realise its enormous economic and logistics potential, according to a new report by Transport Intelligence.

By most rankings Indonesia lags behind its regional competitors in South East Asia terms of logistics performance. However, Ti’s latest report - Indonesia Transport & Logistics 2015 - A New Dawn? – argues this could soon change if the new government of President Joko ‘Jokowi’ Widodo follows through on its promises to fund new transport and infrastructure investments and attract private investors and operators.

“Ti believes that if the country’s logistics performance could be improved by boosting investment, Indonesia’s low land and labour costs, huge domestic market and easy access to neighbouring ASEAN markets could make it a highly attractive location for manufacturers seeking alternatives to China,” said Michael King, Ti’s Head of Operations in Asia. “This would have huge benefits for all sectors of the logistics and forwarding business.

“However, if the new government does not follow through on its pledges to push through business-friendly reforms, then Indonesia’s economic and trade growth is likely to underwhelm.”

Ti’s market sizing analysis looks at each key logistics sector using three growth scenarios over 2013-19. The realisation of a scenario (low, medium or high) is dependent on Indonesia’s Logistics Performance Indicator reaching a certain threshold. Vast differences in growth rates are predicted when LPI scores differ.

At the upper range of LPI improvement, TI’s analysis found that the total forwarding market in Indonesia could increase by a CAGR of 14.7% over 2013-19. Also under the ‘high’ scenario, the contract logistics market in South East Asia’s biggest economy could increase by 14.7% over the study period, while the combined domestic and international express market could be worth €9,236m by 2019, up from just €2,923m now.

Indonesia’s air and ocean forwarding markets in the report’s ‘moderate’ (expected) forecasts are expected to grow by CAGRs over 2013-19 of 9.2% and 13.5%, respectively. However, under Ti’s ‘high’ forecast, this could rise to 11.5% for air forwarding and 16.9% for ocean forwarding.

“Low hanging fruit for the new President in terms of trade facilitation and logistics performance includes customs reform, encouraging adoption of a national single window and easing the process of setting up a business in Indonesia,” said King. “Land acquisition also urgently needs examining.

“But the key differentiator between our ‘low’ and ‘high’ forecasts is infrastructure development. For much of the last decade Indonesia’s ports, railways, airports and roads have been neglected. The privatisation of transport has stalled, starving the sector of investment and leaving inefficient state-owned enterprises in monopolistic positions that further discourage private operators from entering the market.

“If ‘Jokowi’ can address these failings then domestic and international trade and logistics demand across all verticals will rapidly accelerate.”

Notes to Editors

About ‘Indonesia Transport & Logistics 2015 – A New Dawn?’

Ti’s latest report offers unprecedented insight into the competitive environment for forwarders and logistics service providers operating in South East Asia’s largest economy, including analysis of which companies are already major players and what barriers market entrants face. In addition, the report features in-depth analysis of the road, rail, sea and air sectors including Ti’s exclusive market sizing and demand forecasts.

About Transport Intelligence

Transport Intelligence (Ti) is one of the world’s leading providers of expert research and analysis dedicated to the global logistics industry. Utilising the expertise of professionals with decades of experience in the mail, express and logistics industry, Ti has developed a range of market leading web-based products, reports, profiles and services used by all the world’s leading logistics suppliers, consultancies and banks as well as many users of logistics services.

Key Contacts

Sophie Brady, Head of Sales, Asia

+61 (0)2 8003 7208 or email: sbrady@transportintelligence.com.

Michael King: mking@transportintelligence.com

Head of Operations & Senior Analyst, Asia

 

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