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The Year Logistics Redefines Itself

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While 2016 left a lot to be desired from a financial perspective for many logistics and transportation providers, it was the year that logistics redefined itself. Economic undercurrents, changing political sentiment and advances in technology resulted in an unusual year for the logistics market – One that forced logistics and transportation providers to rethink their capabilities and service levels.

Globalization Questioned

Global trade, the bread and butter for forwarders, logistics and transportation providers, was questioned throughout the year as political forces such as Brexit and the election of Donald Trump as the next US president came into being. UK’s fear of immigration and the US’ fear of ‘outsourcing US jobs’ as well as immigration played major roles in this mindset. The results of this shift in mindset have yet to totally play out but as we noted in a previous blog post, Trumps’ promises on the campaign could prove damaging for US imports and global trade.

Metamorphosis of the Ocean Freight Market

For several years the ocean freight market has suffered erratic rates and overcapacity. In 2016, the effects of this troublesome duo resulted in Hanjin, a top ten container vessel carrier, declaring bankruptcy. For many industry professionals, it was not a surprise but for shippers not realizing their freight was on Hanjin ships, it proved an eye opening experience.

While we will highlight some key mergers & acquisitions on the next part, there was a marked uptick in such in the ocean freight market as financially-weakened carriers fought to survive by joining forces with larger providers or creating Joint Ventures such as the three carriers MOL, NYK and K-Line . Consolidation is likely not going to end in 2016 as surveys suggest more is expected in 2017.

As the largest carrier swallowed up Hamburg Sud, Maersk’s CEO announced,” Our aim is to become a global integrator of container logistics.” As part of this initiative, Maersk plans to move more ships in and out of APM Terminals, its own global ports operator. Additionally, it will move more cargo inland through DAMCO, its supply-management division handling air freight, trucks and warehouses around the world. This move will likely have major effects on not only other container providers but logistics providers such as DHL, Kuehne + Nagel and Panalpina.

Mergers & Acquisitions

Probably the biggest acquisition of 2016 was the closing of the FedEx/TNT deal. This acquisition will provide FedEx a stronger presence in the intra- European market. Other than the FedEx/TNT deal, 2016 did not see the blockbuster acquisitions such as those in 2015. But, the acquisitions that did occurred, tended to be niche-focused or located in a desired geography. For example, Kerry Logistics spread its wings by raising its stake in Indev to further strengthen its capabilities in India and later in the year, acquiring Spanish forwarder Bofill & Arnan, S.A. to not only expand its reach in Spain but to further enhance its retail capabilities.

Within Asia, the prize was Southeast Asia. CJ Korea Express acquired a 31.4% in Century Logistics Holdings, one of the largest logistics companies in Malaysia while Japanese express provider, Yamato, acquired OTL Group, a cross-border line haul trucking company headquartered in Malaysia.

Even postal providers were involved in acquisitions as PostNord, a company based on the 2009 merger of Post Danmark A/S and Posten AB, acquired Danish logistics provider, G.P. Spedition Aps. The company offers a nationwide distribution network, international trade, airfreight, sea freight, and warehousing and provides services in Denmark, Scandinavia, and Western Europe.

While not an acquisition, Australia Post and Aramex announced a strategic e-commerce alliance. Under the terms of the agreement, the joint venture will target the global e-commerce market, with a particular focus on Asia.

Logistics Embraces Technology

To compete, logistics and transportation providers are investing in technology to become more efficient. In addition, logistics and transportation providers are now facing new competition in the form of online marketplaces, digital freight forwarders and other new online business models that are changing the dynamics of logistics.

Within the warehouse, robots are utilized for inventory management as well as menial tasks such as pick and pack. Drones are delivering items and trucks are becoming smarter. Visibility into inventory and shipments use to be a ‘nice to have’, now it’s expected and in real-time. Even though logistics and transportation is always in motion, now at the touch of a smartphone or tablet, one can monitor the entire flow and movement anywhere in the world.

What’s next?

Stay tuned for our 2017 outlook to be published later this week. Hint – More consolidation and more technology!
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