Senior executives with leading multinational third party logistics providers (3PLs) often voice the mantra “think global, act local” when outlining their company’s approach to doing business.

Looking ahead, though, it appears they will increasingly have to change that philosophy to “think local, act local” as various manufacturing sector trends shift the focus of many Asian and other international supply chains – initially from global to regional and, in the longer term, to local.

That, at least, was the projected future scenario for 3PLs outlined at the recent Emerging Markets Logistics Conference in Singapore organized by UK-based global logistics industry research provider Transport Intelligence.

Addressing delegates on the subject The “Death” of Globalization: Where next for global supply chains?, John Manners-Bell, CEO of logistics market research company Transport Intelligence, suggested the global economy was undergoing rapid changes “which will see a transformation in flows of goods in the next 10 years.”

“Near-sourcing, re-shoring, intra-Asian manufacturing, south-south trades and even 3D printing mean that supply chains are no longer ‘business as usual,’” he stated. “New regional trade agreements and the failure of World Trade Organization negotiations are leading to the death of globalization and its replacement with regional and local supply chains.”

Expanding on the implications of those trends for 3PLs during a subsequent interview with Asia Cargo News, Manners-Bell said Asia’s manufacturing sector had in fact already seen significant change in the structure of its production supply chain operations.

“Over the last decade we have seen a regionalization of supply chains for manufacturers’ upstream operations as the cross-border movement of goods from suppliers has diversified and spread right across the region,” he stated.

“The final assembly still largely takes place in China, but a lot of the components and parts are being manufactured in countries like Thailand, Vietnam, Indonesia and Japan. So 3PLs need to service intra-Asian manufacturing operations. The ‘Factory Asia’ concept, as it has been termed, it already well in place.”

Now, continued Manners-Bell, the next phase of change was appearing – the regionalization of downstream supply chains handling the movement of finished goods from manufacturers to consumers. “According to figures from (multinational consumer goods manufacturer) Unilever, by 2020, 1.8 billion people in emerging markets will enter the ‘consuming class’ spending US$30 trillion, up from US$12 trillion today.”

However, he suggested, for many multinational manufacturers, sales growth in emerging markets would not result in higher global flows of goods. Rather, they would invest in more regional/local production facilities. “Unilever, for example, has been successful at creating efficient regional supply chains and logistics networks whilst developing products for specific local markets.”

In Asia, he said, that development was resulting in goods manufactured in the region increasingly also being sold there. “One of the consequences of that shift will be the increasing development of warehousing and logistics hubs in China, for example in Shanghai, to serve regional markets.”

Expanding on that point, he said one of the main challenges for manufacturers and 3PLs looking to supply newer markets in Asia was the often still poor transport infrastructure. It was not going to be possible for manufacturers to supply customers on a regional basis in many of those markets with the efficiency they were used to in more developed parts of the world. Consequently, far more local or regional warehouses would be established to serve particular parts of the market, for example individual regions of China rather than the whole country.

“That is quite important for the logistics industry because although those trends will have quite an impact and there is going to be a big tick up in logistics activity, it is not necessarily the big global 3PLs which are going to benefit,” stated Manners-Bell. “In fact, it is likely to be the much smaller national or local players which have a presence in those markets and know how to deal with the competitive nature of that business which gain.”

Another specific factor set to drive the localization of supply chain operations over the next decade and therefore have an impact on the services required from 3PLs, Manners-Bell told the Emerging Markets Logistics Conference, was the continuing rise of mega-cities in Asia and other developing regions of the world.

“Mega-cities will create their own economies of scale, supplied by local/regional production facilities. Transport demands will be specific to each city’s needs and capabilities. Fulfilment, packaging, miniaturization and reverse logistics will require increased intensity of logistics provision,” he stated.

Expanding on that point to Asia Cargo News, Manners-Bell suggested manufacturers and 3PLs would be faced with the challenge of how to deal with the varying characteristics of different cities. “Logistics will become far more city-based than countrywide-based.”

Such developments, he argued, would require global 3PLs to “crack” domestic emerging markets if they wanted to take advantage of the resulting opportunities – and that, he suggested, might be difficult for many to achieve.


By Phil Hastings

Correspondent | London