After the volatility of the crash of 2009-2010, the automotive sector has remained a valuable source of stability to the contract logistics sector. The US has seen production and sales increasing solidly, ensuring the likes of CEVA, Penske and DHL with an anchor in the face of more unstable global trade. Things in Europe have been more complicated, with strongly growing demand for exports out of Germany and to a lesser extent Britain but miserable conditions in France and Italy.
Yet these headlines obscure longer-term trends. Whilst the most obvious of these is the vast expansion of China, other emerging markets are growing too. These developments present opportunities for logistics service providers but also major threats for incumbents who might find it hard to adapt.
The automotive supply chain that emerged from the 1980’s was characterised by a mix of ‘local-for local’ production combined with large volume exports out of Japan and to a lesser extent Germany and South Korea. Components were sourced locally if at all possible as the cost and risk of moving parts around the world was substantial. That world is fast disappearing. In its place vehicle manufacturers are having to wrestle with production locations spread across the globe. These aim to satisfy as much local demand as they can but usually the vehicle manufacturers find they must augment this with substantial imports from elsewhere. The existing trend towards ever more variations of vehicles has been compounded by the growth of many more markets. Vehicle manufacturers are fighting against this by creating engineering platforms that standardise components between different models. Yet this can only be done to a degree, leading to a continued need to move both parts and finished cars around the world.
This world of more movement and more complexity sounds ideal for logistics companies. Yet there is a catch. Whilst many of the largest have been positioning themselves to manage globalised supply chains the intensity and coverage required in the near future may well be more demanding. For example providing contract logistics in China is difficult due to the closed nature of much of the Chinese transport market with provision in many regions being carved-up between local firms and ‘state owned enterprises’. This is not just true in China. Many emerging markets from Russia to Brazil are difficult to do business in. Overcoming such hurdles will be key to success for any global LSP if they are not to be displaced by local companies better connected in their domestic markets.
You can find out more about the complexities of automotive logistics in Transport Intelligence’s upcoming Global Automotive Logistics 2014 report. For more information please contact Holly Francis.
