North America and Southeast Asia Shines in Logistics Outsourcing
Posted on 16 August 2016 by KenResearch
Logistics refer to the commercial activity of transporting goods or proving required services to customers at their choice of place, at the right time and also in the right condition. Logistics have become a very vital part of the businesses around the world and hence, the global economic system which in turn is causing a significant growth in the global logistics industry. Logistic activities accelerate economic growth and productivity growth. Efficiency of the economy’s logistic sector is a major indicator of its level of competitiveness and is an important determinant of its source of employment.
There are many factors on which companies base their decision of outsourcing logistics such as company size, complication of logistics and relative economic benefits of outsourcing. Particularly the e business web portals have to resort to outsourcing logistics due to their need for on- clock dispatch and delivery. Outsourcing of logistics enable companies to specialize in their areas of operation and focus on their competencies. However, there also some drawbacks associated with this market such as vendor reliability issues.
North America and Southeast Asia are the world’s most lucrative logistics outsourcing market while the rest of the world is showing growth in inter regional logistics. A large number of factors are contributing to the increasing popularity of logistics outsourcing such as globalization, time scarce economy, development of e commerce, improved customer awareness, strategic concerns to achieve more flexibility and better IT infrastructural support. At the same time loss of logistics, poor transportation, local protection regulations and lack of post-outsourcing measurements are some of the factors hampering growth of this market.
Fedex Corp and DHL International were the major two players in the logistics outsourcing market accounting for 50% of the business globally followed by XPO Logistics, Inc. and United Parcel Service, Inc. with a narrower reach as compared to the former two. The global ecommerce logistics market will witness the rise of many new companies. Gati Limited and Clipper Logistics are some other companies which are worth a watch. The global logistics market is expected to achieve a CAGR of 20.6% between 2016 and 2024.
Although the growing emergence of ecommerce in developing countries like that of India and Brazil is boosting the demand for e commerce logistics, there are problems associated with the same such as problems of reverse logistics and problems of infrastructure in developing economies. Reverse logistics refers to the problem of returning the ecommerce goods particularly in the case of free delivery which burdens the reverse logistics chain and cause a hike in the cost incurred by ecommerce logistics companies. These factors are expected to restrain the growth of the global ecommerce logistics market.
On the basis of the type of service, the logistics market is divided into warehousing, transportation, and others of which transportation segment is the largest, accounting for a dominant 51.6% of the market. The major reason for the dominance of this segment is the role of transportation in supply chain. The growing emphasis on last-mile connectivity will give this segment a further boost. The warehousing segment is further split into hubs/delivery centers, mega centers, and returns processing centers. Similarly, the transportation segment is divided into freight/rail, maritime, air/express delivery, and trucking/over road.