Global Logistics is on the Move

March 7, 2008
Oil isn't getting any cheaper, but manufacturers can at least control their transportation costs if they collaborate with their logistics providers.

The global logistics landscape is set to change significantly, according to Chris Morgan, lead analyst with Datamonitor's Logistics and Express division. While China will continue to be the manufacturing hub of the world, other geographic regions will begin to eat away at China's market share, Morgan predicts, which will diversify supply chains even more while increasing the demands made by customers on their logistics providers.

In compiling his study on the state of the logistics industry, Morgan observes that one critical area of concern is the global credit crunch, exacerbated by the crisis over the sub-prime market in the United States tightening the liquidity market. This, he says, has greatly dampened global optimism regarding the prospects for a thriving economy in 2008. The rise in oil prices, too, has left everyone guessing at the short-term future for the economy.

"An outright global recession is unlikely, but what is fairly certain is that 2008 will be a harder year for consumers in the larger economies in the world," Morgan says, and this will have a negative impact on the logistics industry. One likely result will be continued consolidation of the transportation carriers and third-party logistics providers (3PLs).

Since transportation costs have nowhere to go but up right now thanks to high oil prices, 3PLs will be collaborating more closely with both their customers and their competitors, offering more services to customers while sharing routes and loads with some key competitors. The 3PLs will also be looking to make strategic acquisitions in the market, Morgan notes. These strategies will help both the 3PLs and their customers -- largely, manufacturers and retailers -- contain their costs while ensuring more or less regular freight patterns.

In other trends, the Datamonitor report anticipates that technology will play an increasingly important role and radio frequency identification (RFID) will eventually be seen as a standard product offering from logistics providers.

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