2019 was a year replete with hiccups for the logistics industry in Asia-Pacific. The industry which was badly hurt post the US-China Trade war went through an unexpected slowdown. However, the industry hopes for a brighter future in 2020, and has already started taking steps towards achieving its goals.
This article talks about Eight noteworthy Trends driving Logistics in 2020 for the Asia-pacific region.
Booming M&A Trend: The aggressive trend of M&A within the logistics industry will continue its momentum, in response to developing economies of scale, improving digitalization through technological improvements and geographical and vertical diversification. Consolidation will be driven to be able to offer end-to-end and integrated solutions. The availability of private equity (PE) and funds has enabled players to raise cheaper capital for M&A activity.
Collaboration: In 2020, more collaboration will be expected between the shippers and Third-Party logistics companies. The focus will be on creating long-term partnership models, enabling a win-win situation in terms of cost and service. The trend of 2PL and 3PL players collaborating among themselves will create an ecosystem for cost-effective and efficient solutions.
Ecommerce: Ecommerce will remain a strong driving force in 2020, especially in Southeast Asia. As players such as Amazon, Lazada and Shopee push their expansion in the region, Rhenus can see a shift from air freight to ocean freight on short sea distances. In order to be able to replace existing air freight consolidation for e-commerce, a strong focus on lead times will become more and more important. On top of that, strong systems and operational excellence are needed to ensure the fastest handling possible. Major e-commerce players will also rely even more on direct airline co-operations.
Infrastructure: Rhenus expects huge investments in infrastructure by the government and private enterprises, especially in India and Indonesia. This will lead to ease of movement and substantial improvement in the quality of infrastructure.
Innovation and IOT: Innovative solutions will be introduced to reduce inefficient processes; the big focus being sustainability. The use of IOT in the industry, such as sensors, will become more prevalent in logistics, enabling a much higher degree of transparency, from inventory tracking to RFID tags which measure location, temperature or humidity. This increased visibility will decrease reaction times and highly improve decision making.
Sustainability: 2020 will be a “green” year for logistics. As different industries take the lead on becoming ever more sustainable in recent years, it has directly impacted logistics, which must adapt to their customer trends. The industry will see a need for greater accountability in their environmental impact and measures. The ocean freight industry will especially feel this impact, as from January 1st, Sulphur in fuel oil used on board ships will be reduced from 3.5 per cent to 0.5 per cent, reducing the overall Sulphur pollution from shipping by 80 per cent. In the area of warehousing management, companies will need to look at developing innovations to raise operations efficiency, labour management and waste management.
Supply Chain: Leaner and agile supply chains with end-to-end visibility will be implemented through the latest technology. Price-driven freight will move to digital platforms while service-driven or integrated services-driven business will move to logistics players. There will be increased differentiation between solution-oriented service providers versus capital / infrastructure-intensive service providers.
Ripple Effect of China-US Trade War: In 2019, the adverse effects of the trade war between China and US was felt not only in the economic growth of these two giants but globally as well, and the ripple effects will continue well into 2020. China continues to be the second biggest region in the world for Foreign Direct Investment, in particular the high-tech industry, such as semiconductors, pharmaceuticals. Even as China moves away from its image as the “world’s manufacturer”, the country’s homegrown products will be seen competing with the best in the global market. Shanghai, with almost 70 per cent of the import business of entire China, will continue to be an investment haven. As will Hong Kong, which continues to hold strategic business importance for companies investing in the Greater China market, despite the ongoing disturbances. Similar to 2019, Taiwan, Thailand and Vietnam will be the beneficiary of the trade war, with even more investment from Mainland China companies in ever-growing industries such as automotive, telecom, and computing.
This article is authored by Jan Harnisch, COO, Global Products Air & Ocean, Rhenus Asia-Pacific