Contract logistics under pressure globally to e-commerce shift: report

‘Truck and shed’ operators seen as falling behind specialist providers

Contract logistics under pressure globally to e-commerce shift: report
E-commerce is seen changing logistics globally


Another piece of the contract logistics puzzle has been added with research showing the global contract logistics market faltering and e-commerce seen as presenting fundamental challenges to service providers.

According to latest report from international logistics publication Transport Intelligence (TI), Global Contract Logistics 2014, the global contract logistics market grew by 2.8 per cent in 2013, down from 3.4 per cent the previous year.

This reflected the ongoing sluggish recovery in the global economy, not least in the Eurozone and the lower than expected growth in the US.

From 2013 to 2017, a compound annual growth rate (CAGR) of 6 per cent is forecast for the contract logistics sector. Regions which are home to a large number of emerging markets have the highest growth rates, with a CAGR of 8.9 per cent predicted for both Africa and Asia Pacific.

However, in findings that bolster a range of similar conclusion in Australia and elsewhere, report author and TI chief analyst Thomas Cullen believes the sluggish growth conceals systemic changes which are occurring in the industry.

"The market for contract logistics in the developed world is undergoing its most fundamental transformation since the 1980s as retailing is transformed by e-commerce," Cullen says.

"In addition, the market for ‘advanced logistics services’ is also expanding as emerging countries move from traditional local markets to modern retailing.

"The combination of these two forces promises huge potential for contract logistics providers but also substantial threats."

The logistics demands of ‘home-delivery’ are immense and quite different from traditional retailing yet many retailers have been left straddling the two in what is described as an ‘omni-channel’ strategy, TI notes.

The result is that spending on logistics in the retail sector is growing rapidly and retailers are in the undesirable situation of ‘throwing money’ at logistics solutions driven by a fear of losing market-share.

"The implications of ‘New Retailing’ for the contract logistics sector are not straightforward," Cullen says.

"Whilst logistics spend is growing, the companies that are benefiting are often specialist providers of fulfilment services or last mile capabilities, rather than the traditional purveyors of ‘trucks and sheds’.

"It is also clear that many of the larger retailers are investing in in-house capabilities rather than outsourcing."

Details about the report can be found here.

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