The Challenge for Global Logistics

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Global Trade

There are some industries, as there are some products, which have long promised but failed to deliver. Think of robotic house servants: Ever since the 1960s, the idea of robots to clean your home has been supposedly just on the cusp of becoming a reality and yet here we are at the start of 2008 and they are still tantalizingly out of everyday reach. The Global Logistics market may seem a long stretch from domestic robots, but the idea of a seamless global logistics service from factory production line in Chongqing, China to shop shelf in Omaha, Nebraska has been a concept on the verge of reality for decades. Sure, Wal-Mart has achieved phenomenal profitability by creating just that level of sophistication, but they are the world’s largest retailer, and in terms of resources and focus, they are in a class of their own. The 3PL market, however, even with recent consolidations, is still a fragmented industry with many small to medium players covering restricted geographic areas or with niche expertise in certain supply chain functions. The top dozen logistics providers worldwide only account for 16% of the market, leaving many small to medium players lacking the financial muscle to invest in technology and infrastructure.

The 3PL market faces many challenges, not least the growing trend of the largest retailers and manufacturers to demand not commoditised transport and warehousing services but integrated global supply chain expertise. As more retailers source from Asia and more manufacturers move basic manufacturing functions to low labour cost countries, the demands on the global logistics market has exploded both in terms of the tonnage of goods moved and the sophistication needed to maintain a manageable minimum level of disruption to the extended supply chain. This has required a level of capability way outside many smaller traditional freight companies. Hence the drive for consolidation and critical mass we have seen in recent years as 3PL’s strive to achieve geographic presence and technological capability to deliver a seamless service. The vast majority are still, like our robotic house servants, falling short of becoming a reality while only the largest have moved beyond to become 4PL’s, integrating into their clients supply chain, buying in their name, managing inventory and providing real-time visibility and responsiveness. This means they are increasingly focusing on larger and larger clients in order to achieve the revenue stream necessary to fund their large operating costs and technology investments. This leaves the middle market poorly served and the challenge for the 3PL market will be in assimilating the technology and creating the partnerships to provide services approaching the sophistication of the majors like UPS, DHL, Ryder, and so on. Logistics is often an overlooked component of the global supply market, yet one that too often can be the difference between success and failure for many of our clients in the metals markets. We hope to bring you more articles about this critical component of global trade, as well as how to identify the right 3PL partner for your business. The times they are ‘a changing, lift up your feet, here comes the robotic vacuum.

–Stuart Burns

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