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Global Logistics: On The Move

In both GDP and e-commerce logistics, Asia is expected to recover faster from the economic effects of Covid-19 than the rest of the world

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The world today is vastly different from the one we knew before Covid-19 struck. Just as the different facets of life, the corporate world too has undergone significant changes in the wake of the pandemic, which has compelled companies and individuals to reinvent themselves to remain relevant. As with most other industries, the outbreak has transformed global logistics in profound ways. But unlike most other industries, the decline in economic activity during the pandemic has not impacted the global logistics too adversely. The consumption of goods, medicines and other essential stuff — and thus the corresponding logistics needs — remained relatively unaffected.

Numerous research firms affirm that the pandemic has been an inflection point for the transport and logistics industry too, thereby compelling organisations across the world to focus more closely on gaining end-to-end visibility in their business operations, fleet management, asset tracking, and shipment monitoring.

While the logistics sector caters to multiple segments such as consumer goods, retail, food and beverages, IT hardware, healthcare, chemicals, construction, automotive, telecom, oil and gas, and others, manufacturing represents the largest segment, accounting for the majority of the global share. The growth this year will be largely driven by sectors like ecommerce, pharma and life sciences, food processing, etc.

Some of the key global players of the booming logistics market are J.B. Hunt Transport Services, C.H. Robinson Worldwide, Ceva Holdings, FedEx, United Parcel Service, Expeditors International of Washington, XPO Logistics, Kenco Group, Deutsche Post DHL Group, Americold Logistics, DSV Air & Sea, Ryder Supply Chain Solutions, etc.

“The disruptions caused by Covid-19 are making global companies rethink their supply chain strategy. Two major areas that are likely to see great traction are improved visibility across supply chains (both for cargo shipments and documentation) and drawing a balance between just-in-time and just-in-case. India has a long way to go to catch up with the latest market trends whilst catering to the evolving needs of overseas buyers,” says Sanjay Bhatia, Co-founder & CEO at Freightwalla, a digital freight forwarder.

Market size
While the world GDP is expected to grow at 3-4 per cent in the next five years, the growth of logistics sector is poised to be around 1.5x.  Various research firms peg the industry size differently. A recent study by Allied Market Research says the estimated size of the global logistics industry will grow from $7.64 trillion in 2017 to $12.97 trillion in 2027, registering a CAGR of 6.5 per cent.  As per IMARC Group, the global logistics market reached a value of $5.2 trillion in 2020 and looking forward, the market is expected to grow at a CAGR of 4.6 per cent during 2021-2026.

“The logistics sector is anticipated to show good growth projections as people are getting back to work-from-office routine. The key growth drivers for the global logistics market are growing use of multimodal transport, high customer expectation and demand, growth of e-commerce and innovation in mobile technologies. Moreover, the increasing cloud-based operations are the major drivers for the market which simplified the supply chain management from small-scale to comprehensive businesses,” Karan Chechi, Research Director with TechSci Research, a research based global management consulting firm, says.

Tech avalanche 
Whether it is automotive, financial services, food or grocery delivery, technology has always been the biggest disrupter in any industry and the logistics space is no different. As more advanced technologies are getting rolled out, industry pundits reckon that business processes are getting streamlined for companies to deliver better efficiencies. The advancements in technology, such as automated material handling equipment, biometrics, GPS, etc, aid organisations and businesses to work proficiently, thereby spurring the growth of the logistics market across the globe.

As per a recent study by HERE, examining the key priorities of the industry revealed that approximately a third of logistics companies in the Asia Pacific (APAC) region are considering IoT (37 per cent), warehouse automation (33 per cent), and electric vehicles (32 per cent) as key investment priorities in the next two years. From an India standpoint, 38 per cent of companies will be channelling more investments in IoT, while 29 per cent are showing high interest in warehouse automation and 10 per cent in electric vehicles.

“With the emerging technologies within transportation and logistics space and the resultant market disruptions, customer expectation is continuously evolving. This inevitably positions the industry for exponential growth in the coming years,” says Abhijit Sengupta, Director & Head of Business, India, SAARC region and SEA, HERE Technologies, adding, “While GPS, RFID, and QR codes are commonly used in fleet management, IoT is swiftly gaining popularity in the region. Two out of five logistics companies will be implementing IoT solutions across all assets over the next two years, as per our recent study.”

Asia Pacific rules 
As Asia is on course to drive 40 per cent of the world’s consumption, this continent is expected to account for half of the world’s trade growth by 2030, according to a Mckinsey report titled ‘Asia: The highway of value for global logistics’. The same report claims that the trade growth between Asia and the rest of the world will contribute about 55 per cent, with intra-Asia trade growth making up the rest. The Asia e-commerce logistics market will account for 57 per cent of total market growth from 2020 to 2025, the report posits.

“We project that global companies with a strong logistics presence in Asia or those with a robust Asia-focused logistics plan will continue to perform better than their more conservative peers. Missing out on Asia will mean not only missing out on the opportunities Asia provides but also losing relevance when it comes to matching the demands of global customers, since Asia plays such an integral part in global supply chains,” the Mckinsey report states.

Projected outlook
While infrastructure readiness and technology are expected to be the key drivers of growth for the worldwide logistics industry, a number of trends will drive this growth and all will involve the adoption of technology for tactical and operational decision making. As per CARE Ratings, the industry’s size stands at $11 trillion and is expected to grow at around 5 per cent over the next five years.

As Sudarshan Shreenivas, Director, CARE Ratings puts it, “The pandemic provided a boost to the online market. Since the conventional stores were closed consumers moved online to buy goods creating a surge in demand for last mile delivery services. Thus, the B2C segment of the supply chain/express delivery flourished. Accordingly, the need for warehouses increased mainly near to the consumer.” He adds, “Companies are building higher inventory levels near the consumer to safeguard supply chains disruptions. This led to significant demand for warehousing assets.”