Has logistics sector downturn hit the bottom?

There are a few signs that the downward cycle currently being experienced by the global freight and wider logistics industry may be coming to an end. That is not to say that a recovery is due any time soon, just that the bottom of the trough may have been reached. Over the past few weeks a number of positive stories have emerged, which although providing only anecdotal evidence may give a welcome boost to confidence in the industry such as media reports suggesting that container rates in Asia-Europe trades are increasing, as the capacity which shipping lines have taken out of their fleets has finally had an impact. China, which was an important driver of growth in the industry right up until the last quarter of 2008, has also seen encouraging signs. Better than expected economic and export growth figures suggest that the stimulus package announced by the Chinese authorities has started to work. Chinese domestic airfreight is also believed to be picking up. While it may be premature to announce the start of the economic upturn but there is an increasing body of evidence to suggest that the downturn is approaching its nadir.

China’s logistics industry being rationalised

China is undertaking a series of measures to spur its logistics industry, which has such importance to the national economy. Although it was thought worldwide that China met the challenge of last year’s snowstorm pretty well many commentators suggest that under the heavy weight of snow and sleet, the seemingly strong logistics system ground to a halt. Policy-makers have learned a lesson from the transport crunch. The State Council has devised a revitalization program for the next three years in an effort to make the transport system more efficient, and more importantly, boost the entire logistics industry. It is the first time the government has created such a major package, laying out long-term goals for the industry. And analysts say it could serve as a curtain raiser for future policies in the sector.

RFID Market Still Shows Growth

Analysis from ABI Research shows that the RFID market is growing despite the downturn in the economy. ABI’s report, RFID Annual Market Overview, contends that in 2009, the total revenue earned from RFID transponders, readers, software and services will amount to more than $5.6 billion. The study identifies that some companies are reducing or moth-balling some projects, but overall the market is still growing. The ABI study highlights that RFID technology is the best option for cost savings in the supply chain for businesses. This assumption is only valid if vendors of RFID technology persuade customers that the cost of implementation will give them significant long-term benefits. If the current economic downturn continues past 2009 or if global conditions worsen, businesses may forego new technology if the benefits are not as quantifiable as vendors promise.

Hiring Expectations report by Hudson

According to The Hudson Report, China continues to report the highest expectations, with 30% forecasting headcount growth this quarter but the proportion of respondents expecting to cut staff has risen from 8% in Q1 2009 to 21%. Hong Kong expectations to hire are lowest since The Hudson Report began in Q4 1998, to just 14% this quarter. Singapore expectations are also falling less sharply than in recent quarters: 20% will grow headcount in Q2 2009 compared with 23% the previous quarter. Around half of the employers surveyed in all four markets have cut HR-related costs in the last six months. Reducing headcount is the most widely implemented cost-cutting initiative, followed by lower bonus payments.

Ernst & Young releases report on supply chain management

Ernst & Young has released a report, Global Supply Chain: Balancing Cost Reduction and Performance Improvement, which includes responses from 250 supply executives from global companies. Ernst & Young assert that the slower economy demands increased supply chain efficiency. Cost reduction is an essential agenda item for senior executives, explains Ernst & Young, noting that pressure to improve performance originates in profitability, globalization and other factors. Survey results indicate a divide between what executives require of their supply chains and what they see being delivered. More than 60% of respondents report supply chains are expected to play a key role in building credibility with investors by positively impacting the bottom line. Only half of these respondents are confident that their supply chains are capable of managing the business issues associated with this role. The report continues with the statement that cost cutting alone will not provide growth opportunities. Cost reduction efforts succeed less than one-third of the time, Ernst & Young asserts. High-impact initiatives pay off quickly through cost-reduction efforts, and initiatives that optimize and transform the supply chain provide long-term growth and profitability.

China’s maritime sector

China’s maritime sector is growing from strength to strength. From securing a 5.5% share of world fleet (in DWT terms) in early 2004, it increased its share to 6.77% in early 2005 and has continued its surge subsequently. Maritime infrastructure in China continues to be developed at a breakneck pace in step with ever-increasing trade. Its ports are continuously expanding and engaging in strategic alliances to widen their connectivity. Underlining this tremendous growth, seven Chinese ports are in the list of the world’s top 20 container terminals. Mainland China-based COSCO and China Shipping are two of the world’s top ten container service operators in terms of fleet size and total shipboard capacity (TEUs). The growth of Chinese ports has displaced established ports like Kobe and Yokohama from the list of the world’s top twenty. Moreover, even Hong Kong, the world’s busiest port since 1992 and a beneficiary of the China boom, has been growing at a lower rate than Shanghai and Shenzhen, which experienced increased throughput more than threefold from 1999 to 2004.

NZ port plans

Ports of Auckland is gearing up to take advantage of larger vessels arriving in New Zealand in the future.

The port has applied to deepen a ship berth at its Fergusson container terminal. The move follows the 2007 completion of a major project to deepen the Rangitoto shipping channel, enabling it to cater for larger container ships carrying up to 6,000 TEU.

Ports of Auckland managing director Jens Madsen says: “One effect of the global recession may be that, as shipping lines consolidate their operations, larger vessels arrive in New Zealand sooner than anticipated.”

He says a resource consent application is being prepared now so the port can move quickly to construct the berth when required.

Schenker Opens New Logistics Centre in Vietnam

Schenker Vietnam has opened its USD5.5 million joint investment with Vietnamese partner Gemadept Corporation in Song Than Industrial Park I of Binh Duong Province. Schenker first entered the Vietnam market in 1990, and has since grown into a 200 strong country organisation across 6 locations throughout Vietnam, offering a full range of Air and Ocean freight, Contract Logistics and Supply Chain Management, as well as Project Logistics and Relocation services. 

Global Survey on Outplacement Services

In these uncertain economic times with lower orders and reduced shipping volumes, some companies need to reduce staff to improve their cost levels. It is important for companies to recognize their own employer branding value in dealing with staff downsizing. Therefore, affected employees should be well supported in their transition out of the organization. What are the current outplacement policies? Which are the most important benefits of the outplacement services? Europhia Consulting is launching a Global Outplacement survey to understand how companies in the sector are managing downsizing of employees and what type of support matters most to affected employees. The survey is accessible online at http://europhia.com/outplacement_survey.html.

Tesco takes part of its logistics in-house

Tesco has decided to take some of its distribution operations in-house, resulting in the closure of the Fastway distribution centre in Daventry, Northamptonshire, central England, at the end of March. The move follows a review of the company’s supply chain strategy which concluded that the refrigerated and rail-connected warehouse at that facility was not able to deal with the increasingly diverse range of goods sold in Tesco outlets or its expected volumes. The centre was run by DHL Exel Supply Chain which, as a result of Tesco’s decision, has been forced to make 150 jobs redundant, with a further 150 staff being redeployed to other parts of the company. Tesco stated that the economic downturn had meant that fewer jobs could be relocated than previously anticipated.