Freight companies such as FedEx, UPS, and DHL have been expanding their service offerings along the Pacific Rim and, in particular, in China. Both FedEx and UPS have recently increased the frequency of flights in and out of Beijing and Shenzhen, and UPS and DHL have supplemented their ocean freight services to meet growing demand.
Recent research has estimated the value of the China logistics industry alone to be as high as $15.75 trillion in 2010.
This, of course, was calculated before the dramatic increase in oil prices related to unrest in the Middle East. So far, there have been no public announcements of rate hikes by freight companies, but it seems unlikely that higher fuels costs won't be passed on to customers. Either way, its unlikely shipment of goods will cease due to higher fuel costs.
Logistics and freight companies that can take advantage of economies of scale are most likely to offset higher fuel costs. Sudden spikes have happened before. According to market researchers, some of the strategies adopted by logistics providers include changing modes of transport, realigning networks to reduce mileage, and implementing route optimization software. The ever increasing requirement for outsourced logistics services and entry of new players has made the global logistics market intensely competitive.
Another measure that's being emphasized in China is “green” logistics, with the growing awareness of global environmental concerns. Green logistics — which look at the overall supply chain in terms of its impact on the environment — include measures such as shipping products in larger batches; using alternative-fuel vehicles for manufacturing and shipping; reducing overall packaging; utilizing raw products that are harvested in a sustainable way; building facilities for manufacturing and storage that are environmentally friendly; and promoting recycling and reuse programs.
There's clearly an opportunity here for international logistics companies. The international transportation management segment accounted for the maximum share of the US third-party logistics market in 2009, according to Research and Markets. However, the percentage share declined in comparison to the previous year. According to the industry estimates, the revenues of this segment are expected to grow in response to increasing freight movement worldwide. The value-added warehousing and distribution segment showed resistance to the overall decline in the market amid adverse economic conditions and suffered the least decline in terms of revenues.
Additionally, outsourcing logistics facilities is gaining importance due to the growing demand for high-tech logistics. These trends are expected to grow in the coming years. And rising investments for transportation infrastructural development are emerging as one of the major driving factors for the Chinese logistics industry.
Currently, Research and Markets lists the key players in China as CMA Logistics Co., China Logistics Group, and China Ocean Shipping Group. It's unclear if the research was limited only to China-based companies. Either way, economies of scale apply to the market. Volume shipments — whether by sea or air — are the most cost-effective way to move goods.
The economic value generated by the logistics industry in China has been witnessing phenomenal growth, driven by rapid economic expansion of the manufacturing-based economy. The current market status in the country offers huge growth opportunities for both international and domestic players.