Analyst Q&A: Transport Intelligence Part 1

Analyst Q&A: Transport Intelligence Part 1

Transport Intelligence is a market leading research specialist which offers high quality innovative solutions to companies operating within the global supply chain. Ti solutions are delivered through subscription to an online knowledge centre, off the shelf reports, bespoke consultancy and partnership programmes. Ti values their longstanding relationships and delivered outstanding customer service to achieve 90% repeat business in 2016.

We spoke to Lilith Nagorski, Head of Research and Alexander Le Roy, Analyst about how technology is transforming the global logistics market and the impact e-commerce is having on traditional logistics services.

 

Q1. What have been the most important technological developments in the global logistics market over the past ten years? How has technology improved logistics and what further developments can we expect? (Answered by Alexander Le Roy (ALR))

The rise of cloud computing has underpinned the disruptive start-ups seeking to ‘hack’ the logistics industry. Whilst many of the high profile companies offering services in this space, such as Deliveroo, are focussed on serving the consumer, there are an increasing number of successful companies engaging with the enterprise space. Examples include Xeneta, Flexport and Flexe.

With regards to existing businesses, cloud computing has made complex management systems (TMS, WMS) accessible to a much wider base of customers than before, as well as having slashed the cost of such systems, and it underpins most efforts to provide shipment visibility throughout the supply chain. That latter point is crucial, because “improving shipment visibility” is so often ranked as the top priority for companies operating in the supply chain.

Technological advances have created business opportunities and improvements in many unforeseen areas, including supply chains. Technologies to monitor closely include the Internet of Things, Big Data, Blockchain and Additive Manufacturing (3D printing). Supply chain professionals should expect continued improvements in visibility, predictive modelling, security and automation as a result of these technologies, with many more unforeseen consequences arising from their development.

 

Q2. What kind of impact is the arrival of e-commerce logistics service providers having on the market? How are traditional logistics companies responding? (Answered by Lilith Nagorski (LN))

From its inception as an online book retailer, to being the world’s biggest e-commerce company, Amazon’s influence and control over the sector has been almost absolute. Logistics service providers (LSPs) have profited from aligning themselves with the e-commerce giant’s rapid growth. However, as both Amazon and customers evolve, LSPs risk being left on the shelf. As consumers continue to place their items in Amazon’s basket in ever-increasing numbers, LSPs simply cannot afford to cut ties with the e-commerce giant without losing significant volumes.

It isn’t just Ti’s Global Freight Forwarding 2016 report highlights that the next few years could see root and branch changes in the composition of the industry as new market entrants, such as Amazon, eye up opportunities and efficiency savings.

  • Japan Post has responded to the expansion of the e-commerce market by developing new services and acquiring Toll Holdings Limited
  • UPS has developed its cross-border e-commerce services, offering consumers in 100 countries the ability to shop online in the US and UK as if they were shopping in their own country
  • XPO Logistics has developed a presence in e-commerce logistics via acquisition and serves customers through its Last Mile and Logistics Divisions.

 

Q3. How will logistics service providers answer the demand for Consumer Packaged Goods services in emerging markets? Do you expect to see older or newer service providers dominate this market, or a mixture of both? (LN)

It is a common perception in the CPG market that ‘emerging markets’ provide the growth for the CPG sector in the medium-term. These markets have, in many cases, achieved a level of income per head that places them in the ‘global middle-class’. However, the rise in prosperity in emerging markets should not be exaggerated, with the market largely oriented to selling ‘staples’: basic items at a very low price. Not all emerging markets are so simple. China and parts of Southeast Asia are much more developed, whilst India and even Brazil are markets still very much focused on selling basic items. 

One of the major problems that the CPG sector faces in emerging markets is the poor efficiency of logistics. Transport is often expensive and high quality warehousing can be scarce. The major CPG producers are in the early stages of heavy investment in most emerging markets. This includes the construction of both manufacturing and warehousing infrastructure.

The growth of CPG sales is a major opportunity for large logistics service providers who are able to operate in these difficult markets, and who have the capital to acquire large and complex distribution centres that offer even the largest CPG companies the depth of service they need.

 

Conclusion

As we can see from the answers provided, the global logistics industry is greatly benefiting from the accessibility offered by cloud computing technology. Both new and existing businesses are taking advantage of new opportunities arising from technological advancements, and established logistics service providers are expanding their operations to answer the demand for e-commerce services. Further growth awaits the logistics service providers who take the risk of investing in emerging markets.  

Remember to check back tomorrow for part 2 of this Q&A, where we’ll discuss the influence of UAVs on the market and the threats such technology faces.

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Published by Research and Markets

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