Subscribe to our free, weekly email newsletter!


Global Logistics: The resurgence of emerging markets

The recovery in Asia’s rapid growth markets, especially those of China and India, is gradually leading the world out of recession. In many developing economies, output is already above pre-crisis trends and logistics investment is vigorous—suggesting that expansion is under way.

“Shippers must align goals in Mexico and other countries for the both the long-term and short-term. That means that they must develop a mutual understanding of value chain goals, as well. In other words, there is no single solution. Each emerging market demands a customized logistics strategy.”
— Ed Fieitzinger, president of contract logistics and distribution for UTI

By Patrick Burnson, Executive Editor
February 01, 2013

While emerging markets felt the slowdown in global economic growth in 2012, they generally continued to grow at a faster pace than traditional developed ones. Indeed, U.S. shippers can continue to concentrate on this area of enterprise say a variety of consultancies and research firms.

However, among the revealing facts contained in the Emerging Markets Logistics Index, compiled by prominent London-based think tank Transport Intelligence (Ti), is that shippers are still taking a cautious approach to investment.

“Trade and logistics professionals surveyed for the index remain wary about prospects for global growth in 2013,” says Jon Manners-Bell, Ti’s chief executive officer. “Forty-six percent said they believe there will be modest expansion, with 47 percent predicting global GDP would be flat. Prospects for the European Union (EU) continue to look bleak.”

Tellingly, 68 percent of the survey respondents said the Eurozone would experience no growth or continue to contract in 2013, while only 2 percent foresee growth in Eurozone economies. By contrast, 59 percent see a year of modest growth for the United States, and 6 percent see resumption of strong growth in the U.S.

China, India, and Brazil, three of the so-called BRIC countries, remain the most dominant emerging markets for investors, exporters, producers of consumer goods, and logistics providers,” says Manners-Bell. “For the second consecutive year, logistics and trade professionals ranked these countries as the likely places to emerge as logistics hubs over the next five years.”

But it is worth noting that this year’s index had Indonesia climbing to No. 5 from No. 10; Bangladesh shot to No. 12 from No. 25; and Thailand rose to No. 14 from No. 29. Manners-Bell adds that this means that the BRICS can’t afford to let their guard down.

Despite their size, growth, and relatively sophisticated logistics networks, China, India, Brazil, and Russia need to do more to address underlying weaknesses that could hurt performance and dim their attractiveness as an increasingly competitive group of second-tier markets—Saudi Arabia, Indonesia, UAE, Malaysia, Mexico, and Turkey—becomes more alluring.

“China confronts rising labor costs, a skills shortage, and a growing gap in income disparity,” says Manners-Bell. “India’s weak infrastructure and bureaucracy threaten its prospects. Brazil’s export sector is slowing, and Russia remains overly dependent on energy exports.”

Strategic sourcing evolves
U.S. manufacturers face an increasing dilemma when it comes to locating production, say Ti analysts. The savings and efficiencies gained by “near-sourcing” on the doorstep of large developed markets—such as producing in Mexico to be close to the U.S. or in Turkey for proximity to the EU—must be balanced with their ability to tap into the growing consumer class in the emerging markets of Asia, the Middle East, Latin America, and Africa.

In fact, 62 percent of trade and logistics professionals surveyed for this year’s Emerging Markets Logistics Index see production eventually going away from China to other emerging markets.

“According to respondents, economic growth remains the leading driver of a country’s prospects as a logistics market, but cheap labor is no longer as important,” says Essa Al-Saleh, president and CEO of Agility Global Integrated Logistics. “They identified foreign investment and trade volumes as greater barometers of a country’s potential than labor costs.”

Agility, which has sponsored the index for the past four years, notes that ongoing political unrest has done grave damage to the “Arab Spring” countries of Egypt, Bahrain, and Tunisia, leaving them less competitive and less attractive as markets and destinations for investment. Egypt was the biggest loser, plummeting nine spots in the index country rankings. Bahrain fell five places while Tunisia dropped three spots.

Mark Pearson, managing director of Accenture’s Supply Chain Management practice, and a regular contributor to Logistics Management, maintains that by 2020, 57 percent of the world’s economic growth could come from emerging markets.

Emerging market household incomes are expected to increase by a total of $8.5 trillion between 2010 and 2020,” says Pearson. “And if emerging-market-to-emerging-market exports continue to increase at their current rate, they will outpace developed-country-to-developed-country volumes this year.”

Accenture analysts say that at the company level, their findings were no less striking. There are now 117 emerging market companies in the Fortune Global 500, a six-fold increase since 2000. Twenty-two emerging-market multinationals replaced companies from more-developed markets over the past two years.

About the Author

image
Patrick Burnson
Executive Editor

Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at .(JavaScript must be enabled to view this email address).


Subscribe to Logistics Management magazine

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your
entire logistics operation.
Start your FREE subscription today!

Recent Entries

When it comes to the chances of the December 31, 2015 Positive Train Control (PTC) deadline being extended, something which railroads say is badly needed, it appears they need to be prepared to be disappointed. That was the chief takeaway of a statement from Sarah Feinberg, acting administrator of the United States Department of Transportation’s Federal Railroad Administration (FRA).

It’s said that innovation will lead the economy out of its current funk. But how does an organization become a perpetually innovative company? That’s one of the questions Kai Engel and his co-authors at A.T. Kearney set out to answer in their new book Masters Of Innovation.

At $2.843, the average price per gallon was down 1.6 cents, following last week’s 1.1 cent drop and a cumulative 7.1 cent cumulative drop over the last five weeks.

LM Group News Editor Jeff Berman caught up with UPS Freight President Jack Holmes at the National Shippers Strategic Transportation Council’s (NASSTRAC) Annual Conference and Exhibition. Berman and Holmes spoke about various aspects of the less-than-truckload sector (LTL), as well as related freight transportation news and trends.

In the third-party logistics (3PL) sector, the ongoing trend of merger and acquisition (M&A) activity never seems to take a break. That is apparent in recent weeks alone, with XPO Logistics recent acquisition of Norbert Dentressangle for $3.53 billion, Echo Global Logistics scooping up Command Transportation for $420 million, and Kuehne+Nagel buying ReTrans for an undisclosed sum.

Comments

Post a comment
Commenting is not available in this channel entry.


© Copyright 2015 Peerless Media LLC, a division of EH Publishing, Inc • 111 Speen Street, Ste 200, Framingham, MA 01701 USA