The world is trading a lot less in proportions to global GDP. Pretty much, growth continued from the mid eighties, peaked early 21st century, and then, for obvious reasons, did a division – halt.
McKinsey & Company is an American multinational management consulting firm that conducts qualitative and quantitative analysis for eighty percent of the world’s largest corporations, and considered the most prestigious management consultancy. According to McKinsey’s Quarterly, in just ten years more than half of the world’s economy will be focused in around 600 cities that comprise a huge developing economy with roughly a billion consumers making up the giant consuming class, worldwide. Developing economies have never before in history expanded so fast on such a scale. What does this mean to “international logistics” ? A lot, particularly in supply chains. The changing and shifting in trade patterns, global economy, and consumption behavior have their pros and cons.
Let’s take a look at 12 trends and 1 challenge on the ten-year horizon:
- Logistic growth: Since global trade will no longer be driven by Asia, and the patterns will become more and more unpredictable, international logistics and therefore domestics will have to be as flexible as possible. Growth is promisingly predictable for providers that take the necessary precautions and adjustments.
- Population growth with be increasingly centralized in big cities where most of the wholesaling and retailing activities take place. This, could prove problematic to providers engaged in offshoring that outsources work to remote venders with higher transportation and labor cost.
- Economic growth will become significantly dependent on transportation and infrastructure, that is, communities with the resources to invest will most likely be overwhelmed with populating consumers, where on the other hand, vise versa for those with less to work with.
- Logistics Flexibility will, also, become a success determinant factor for communities to strive or thrive. Meeting increasingly diversified needs with small shipments, more frequently as traders become more worried about overstocking than availability, and to multiple and increasingly remote destinations, logistics companies have no choice but to adjust distribution strstegies
Globalization has become the major growth strategy for the world’s largest corporations which are expected to keep up the with ever-adjusting global trade patterns, relatively easier. It is also the target mark of the next largest corporate tier, to indulge on the international stage, as well. Hence “going-global” must be a solution logistics providers have available to its customers. Whoever is trying to go global would want to see a “We Are Your Global Logistics Solution” catchphrase.
Nearshoring: Lobor and transportation costs are categorically on the rise in Asia, and hence, a higher breakeven point for manufacturers and business owners. Where Offshoring outsourced work to reduce production costs use to be the strategy of choice, Nearshoring, on the other hand, will become the better option as it is carried out for the same reasons but rather by minimizing distance between the manufacturer and end consumers, instead. A trend that takes shape subsequently to the shift in population and urban economic growth.
Multi-channel sourcing: the next wave of consumers will be extremely digitized through multiple channels, from eBay-like e-commerce to Amazon-like web retailing all the way to alibaba.com to Home Pro online, along with digital streaming and prime shipping yearly membership options – one buzzword rings the same tune tomorrow. The logistics industry not only should make sure it is keeping up with its customer centric strategy and adjust as necessary, being the first to cease the opportunity with a viable trend can yield promising fruits on the ten-year horizon.
Information Technology: IT requirements are already complex and demanding and will become even more so over the next decade to come. Resource could become scarce for the earlier AEC stages, hence, jumping on the right band wagon as early as possible could attain necessary infrastructure with smaller price tags. Not all IT resources have to be expensive, and the better news, even, is that Thailand has a good pool of innovative minds to invent it from scratch, as well.
Continuity: Outsourcing to local transporters and other alternative modes should become more and more the frequently used option as logistics providers attempt to service small shipments to remote destinations with increasingly diversified customer backgrounds, and therefore the increased risk of delayed deliveries at the cost of hard-earned reputation.
Sustainability: As global recession over the last decade has taught consumers not only about diversifying their investments and saving more for tough times, they have become more concerned about the products that they buy in unforeseen environmental ways. Conscious Consumerism, or consumers that believe the products they buy have the potential to change the world in either a positive or negative way, is expected to expand at an increasing rate over the next decade. Logistics providers that share their environmental concern with minimized environmental footprint operations can expect business from a new market share comprised of consumers of the future.
Compliance: As supplychaindigital.com has it, “Anti-bribery and corruption legislation is having an increasing impact on supply chains, since multinational companies demand that no facilitation payments are made during the export of their goods, yet still seek to source from low cost countries, which are often also at the bottom of Transparency International’s global corruption index.”
Global Partnerships will be another noticeable trend as manufacturers seek joint operations that provide better answers to their spiked breakeven points, they be vertical integrations, supply chain innovations, partnerships in key geographical locations, or code sharing-like endeavors. Logistics providers are, more likelier than not, have to embark on the same strategic lines, as well, in order to answer new geo-transporting challenges and customer demands from around the world.
Moreover, the one challenge: Global-operational accessibility and transparency is one of the most obvious systemic and the first operational requirement global logistics providers are going to have to satisfy as it effects overall operational performance and corporate creditability of both itself and its global partners. Compatibility over the entire supply chain system, IT-intensive and not, will be needed to carry out on-demand real time last minute adjustments. Information Communications Technology and Infrastructure (ICTI) therefore should render itself a top priority to continue with demand-driven operations with optimized processies and response periods with sourcing, supplying, capacity adjustments and realignments, along with other on-demand requirements. Like IT, not all ICTI measurements have to be expensive, and the better news is that not only does Thailand have a good capacity to innovate entirely new concepts and systems from zero, the return on investment should prove quite promising, too.
These developments should prove to unload significant effects on day-to-day logistics operations and corporate strategy. Companies that better prepare for “the new normal” listed but not limited to the above should be well equipped to handle further shifts in global patterns, have better chances of riding the tides as they come and go, and stay ahead of the game. Logistics, nonetheless, is one of the three core pillars that drive overall economical success, micro and macro, and will be increasingly so as societies move closer to the second half of the century and the Internet of Things (IoT) shape clearer outlines.
Compile by BLOG.SCGLogistics
Reference by supplychaindigital.com