Home » Across Borders » Logistics Industry Concerns for 2010

During the PortCalls Cargo Economics Conference held last October 15, 2009, we made a presentation on the key industry concerns for 2010. We have summarized below the highlights of our presentation entitled “Key Industry Concerns for 2010 Going Forward’.

2009 Situationer

Next year will be a swinging balance between more difficulties and slow recovery. Year 2009 started with global economic slowdown of 2008 and will end with the numerous natural disasters hitting the country.

For the industry, this year will be marked by increased spending for logistics outsourcing compared to last year. We are also seeing the continuing integration and collaboration among logistics players – airlines, carriers, 3PLs, 4PLs – and the increasing growth of 4PLs and supply chain management.

For importers and exporters, governments are implementing various securing measures across the supply chain even as customers are demanding greener supply chains.

Logistics Outsourcing

Early this year, the Georgia Institute of Technology released the results and findings of its 13th annual study entitled “The State of Logistics Outsourcing: 2008 Third Party Logistics”. The study identified the latest key trends and views of the 3PL industry but mainly from the perspective of 3PL users. In addition, it provided a discussion of the current state of the 3PL market by:

  • Summarizing the current use of 3PL services;
  • Identifying customs needs and how well 3PL providers are responding to those needs;
  • Understanding how customers select and manage 3PL providers; and
  • Examining why customers outsource, or elect not to outsource to 3PL providers.

We have outlined below the findings of the study:

  • Companies find relationship with 3PL as beneficial to growth and development;
  • 3PL promotes cost savings on fixed assets and provides shorter order cycles (clear service expectations and metrics);
  • 3PLs are expected to improve offerings particularly on technology investment and cost reduction;
  • Customer relation and strategic logistics will remain in-house;
  • 3PLs are the main source for integrating processes, technology, people and services without painful management changes and substantial capital expenditures (especially for complex supply chains);
  • The decision not to outsource may be due to a combination of factors such as loss of control, visibility and internal competency, or fear of dependency on the 3PL provider;
  • Governments are concerned more with threat of terrorism while 3PL users are focused on theft in the supply chain;
  • Additional concerns cover potential causes for supply chain disruptions such as piracy, natural disasters, port or transport shutdowns, and product tampering; and
  • Companies believe that 3PLs should provide green initiatives that are socially, financially and environmentally acceptable.

What to Expect

In general, there will be slow recovery for the logistics and cargo business for 2010. The immediate future will also be characterized by stronger relationship and collaboration within the logistics industry (expanded logistics outsourcing).

There will be more integration (mergers and acquisitions) and alliances / partnering among 3PLs, carriers, agents, other third parties. Experts are also looking at possible failures among small / medium size 3PLs across all regions.

For domestic forwarders, carriers and shippers, we have listed below factors (both positive and negative) affecting the domestic logistics industry:

  • EU and US competition laws
  • Expanded logistics outsourcing
  • New Rules on Carriage of Goods by Sea (Rotterdam Rules)
  • Customs security requirements and compliance requirements
  • Integration and collaboration of 3PLs, carriers, etc.
  • Government regulation of international shipping lines
  • IATA capitalization requirement (for air freight)
  • Transfer of PSB functions to DOTC/Marina (for sea freight)
  • Difficult times for forwarding partners/agents
  • RA 9280 amendments
  • Shorter supply chains
  • Growing complexity of trading rules / FTAs

The author is the legal director of AFPI, PISFA and PUC. He is a lecturer on logistics, indirect tax and customs, and a trainor of Ateneo and BayanTrade on International Supply Chain Management. Please contact agatonuvero@yahoo.com for your comments.

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