Like their counterparts in the U.S., third-party logistics providers in Europe, Asia-Pacific and Latin America enter 2010 with lower growth expectations.
European and Asia-Pacific 3PLs that reported layoffs in 2009 averaged work force reductions of 12 and 9 percent, respectively.
Three-year growth forecasts for regional European 3PL markets have shrunk from 6.5 percent in 2008 to 4.9 percent this year, according to the 2009 14th Annual Third-Party Logistics Study, released by Capgemini Consulting and the Georgia Institute of Technology.
Company growth projections for the three-year period fell from 10 percent to 8.7 percent.
For Asia-Pacific 3PLs, three-year growth projections fell from 23 percent in 2008 to 16.7 percent in 2009.
Amid the gloom, there are positive signs. Shippers in Europe, the Asia-Pacific and Latin America spend a higher percentage of their logistics budgets — 66, 62 and 51 percent, respectively — on outsourced logistics than North American shippers’ 47 percent.
3PLs in all the regions can expect to capture a bigger share of overall logistics spending. Expenditures on outsourcing as a percentage of total logistics costs are expected to rise to 72 percent in Europe by 2011 and 74 percent by 2014. In the Asia-Pacific, expenditures on outsourcing as a percentage of total logistics costs are forecast to grow to 65 percent by 2011 and 70 percent by 2014; and in Latin America, 55 and 60 percent, respectively.
In Latin America, the percentage of shippers who use 3PL-provided freight billing and auditing services doubled last year from 2008, to 28 percent.
Logistics is a key industry cluster in China’s long-term ongoing economic development plans. The sector has grown by an average 14 percent annually for most of the past decade, according to the China Federation of Logistics and Purchasing.
According to a January report in the China Daily, the National Development and Reform Commission reported total revenue from the nation’s logistics industries grew 20 percent year-over-year in the first nine months of 2009.
With a 40 percent annual growth rate in demand for time-definite logistics services, there are huge opportunities for foreign and domestic 3PLs in China, said Nicholas Pechet, vice president and head of China operations for Global Intelligence Alliance, a Helsinki, Finland-based strategic consulting group.
Foreign 3PLs with carefully crafted strategies can succeed in China’s highly fragmented market. In the past decade, foreign 3PLs have captured nearly 80 percent of the nation’s time-sensitive export logistics business, Pechet said at the December 2009 opening of Shanghai-based Huier Logistics’ logistics park in Qingpu, near Shanghai.
Penske Logistics is one of the success stories. The company operates in 15 Chinese cities, providing services to more than a dozen customers, said Angela Yang, managing director, Asia-Pacific. Penske operates about 240,000 square feet of warehousing space in China and handles approximately 2,500 annual TEUs.
Challenges include evolving standards for trucks, regulations for domestic transportation and toll-fee structures that vary from province to province.
“New customers entering or expanding in the Chinese and Asian markets are seeking cultural fits and consistent service levels across the globe,” Yang said.
According to China’s State Administration for Industry and Commerce, there are more than 700,000 registered logistics companies in the country. Cosco Logistics, which had the highest annual revenue in the industry, equal to around $17 billion, accounted for less than 3 percent of the nation’s total logistics market.
Logistics costs, including transportation, storage and management account for 18.3 percent of the nation’s GDP, according to China’s 11th Five-Year Plan — approximately twice as much as in the U.S. and European Union.
The high costs are driven by fragmentation, rising fuel costs and a lack of supply chain expertise among tens of thousands of export-oriented companies that expanded rapidly during the past 20 years. In a 2009 survey of 100 Chinese exporters in six major industries, 80 percent reported being unsatisfied with their ability to meet the basic service demands of their overseas customers, such as on-time and accurate product delivery. They also report low levels of collaboration with suppliers and customers.
The study was conducted by global management consultants A.T. Kearney and the Chair of Global Supply Chain Management at Tongji University, Shanghai.
Logistics costs are even higher in Latin America, ranging from 18 to 34 percent of product value, compared with a 9 percent average for the 30-plus members of the Organization for Economic Cooperation and development, according to the World Bank.
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