Amid a global recession, one bright spot for the supply chain industry is contract logistics. Some of Asia's key operators tell Associate Editor Saul Symonds how they will weather the current crisis
Cargo volumes are being choked by the global financial crisis, putting crippling pressure on the bottom lines of the world's supply chain operators. Yet a few major players are finding contract logistics to be the one bright spot in a sea of gloom. Companies such as Kuehne + Nagel, DHL, Geodis and CEVA still see a bright side to the cargo downturn.
Diversification has been the key to staying ahead, said Jean-Louis Demeulenaere, Geodis Group deputy chief executive officer. "Through our four core businesses - freight forwarding, contract logistics, groupage distribution and some secure freight activities in Europe - we've been able to compensate for the recent decrease in volumes quite quickly,'' he said.
"We are still confident that we can get through this crisis safely." The company is currently developing its capacity in various ports, as well as setting up shop near airports.
"We consider contract logistics as the key link between the inbound and outbound flows. For us, contract logistics is becoming more and more about floor management," said Demeulenaere.
Chief executive officer of DHL Exel Supply Chain Asia Pacific, Paul Graham, said navigating through the crisis had a lot to do with helping customers weed out cost inefficiencies from the supply chain, and that was never more pertinent than now.
The downturn has so far not significantly affected DHL Exel, said Graham. Moreover, he believes there are benefits to be found in the current landscape.
"We see a positive trend in the economic downturn forcing companies to outsource in order to lower head count.
"In Asia, we are less impacted than what we saw in the US or Europe. We're supplying our customers with best case-worst case scenarios, but Asia's still a growth market from a GDP basis and most of our business in the supply chain is exposed to the domestic market as opposed to the international market."
Mike Davies, operations director of contract logistics, non-automotive, for CEVA in China, agreed that companies had been affected by the drop in volumes and he called for cost controls.
Prudent cost control was a must in the current economic climate, he said. "We are always watching for signs in the market and will continue to adjust our strategy. It's a good time to offer some unique solutions that can create value and reduce overall supply chain costs. If a provider cannot find a way to add value or offer unique solutions, then the competition will be too overwhelming.
"Contract logistics should not be considered a tool to compensate for short-term demand contraction. A customer should only consider outsourcing to a 3PL if there is a long-term strategy that considers core competencies, KPIs (key performance indicators), cost savings and operational efficiencies."
Regarding China, Davies said: "The market is growing and so local demand will continue. This will drive increased demand for more innovative solutions through 2009."
Andy Weber, managing director of Kuehne + Nagel (Asia Pacific) Management believes that postponing or cancelling of orders by customers who lack financing will trigger a new wave of outsourcing as these companies look for logistics partners that are financially stable and have a comprehensive global network.
Catering to this very need, Kuehne + Nagel has increased its provision of industry-specific supply chain management solutions. "The objective is to able to support industry and trade to significantly add values to their supply chain, in order to maintain their market competitiveness," said Weber.
He said the continuous development of new products and processes was vital to remaining at the forefront of the contract logistics business. "More than ever, it is of high importance to add value to the customer's supply chains and to be able to quickly adapt to change," Weber said.
"Nobody knows how long the current financial and economic crisis will last," he said."Therefore, it is at present rather difficult to forecast how the markets will develop."
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Source: Cargonewsasia
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