Trade Resources Industry Views Supply Chains Shall Remain Different

Supply Chains Shall Remain Different

Supply Chains Shall Remain Different

According to Transport Intelligence’s (Ti) new report Global Warehousing and Logistics Networks 2016, economics’ medium- to long-term impact on supply chains can be best understood by focusing on relatively few measures. Crucially though, the most important metrics are thought to be different in developed markets and emerging markets.

This is largely because warehousing and logistics networks are very much in the process of formalising in emerging markets, some from an extremely low base, whereas they are generally already highly formalised in developed markets.

It is therefore imperative to ask the question, what is driving formalisation in emerging markets? While the report explores a number of factors, one concept that is crucial to monitor is standard of living, with the basic assertion being that higher standard of living drives logistics formalisation. A number of measures of standard of living provide a convincing argument that Asia Pacific’s warehousing and logistics networks will formalise sufficiently over the next 10 to 20 years so as to be considered ‘transformative’ for the market.

Interestingly, this line of argument can be broadly applied to sectors beyond logistics – in recent weeks, the head of Google India and Southeast Asia asserted that the likes of Flipkart and Snapdeal were a decade away from making it big because Indians simply aren’t rich enough yet.

As for other emerging markets, the future for warehousing and logistics networks is less clear than in Asia Pacific. As for developed markets, alternative metrics (as detailed in the report) are much more prescient. It is simply less important to know which economic measures drive logistics formalisation as the market is already highly formalised.

To get the highest level view of the architecture of global logistics networks though, the report argues that global value chains (GVC) must be investigated. In one sense, GVC are nothing new. They simply describe the trade and production networks that exist across the world, and firms have been producing goods with components sourced from all around the world for a long time. As a 2013 report by the WTO states, though: “What has changed is the speed, scale depth and breadth of global interactions.”

To underline the importance of GVC, the Director General of the World Trade Organisation at the time, Pascal Lamy said in 2013: “Any discussion of international trade and investment policy that fails to acknowledge the centrality of global value chains (GVC) would be considered outmoded and of questionable relevance.”

The central findings around GVC in Ti’s upcoming report are that global supply chains are in fact already highly regionalised, and they are likely to become more regional over time, primarily thanks to demand factors, technological developments and changing cost structures.

Economist at Ti David Buckby commented: “It is essential to get a good grasp of the most important high-level economic factors that will influence warehousing and logistics networks over the years to come, both in emerging and developed markets. Furthermore, the architecture of global warehousing and logistics networks should really now be viewed through the lens of global value chains. This report demists these issues and gives clear views on the main metrics to monitor and the key conclusions to be drawn.”

In summary:

Long run economic drivers in Asia Pacific will be ‘transformative’ for the formalisation of warehousing and logistics networks in the region over the next 10 to 20 years. The outlook for other emerging markets is less clear. The evolution of global value chains (GVCs) is essential to understand in order to assess how warehousing and logistics networks will develop going forward. It is useful to focus on relatively few metrics to understand economics’ impact on warehousing and logistics networks. However, these metrics are quite different in emerging and developed markets.

Source: http://www.tandlnews.com.au/2016/09/21/article/supply-chains-shall-remain-different/
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