New Transport Intelligence report finds that Asia’s outsourcing needs accelerated contract logistics

According to “Global Logistics 2017,” a recent report released by the London think-tank Transport Intelligence (Ti), the overall contract logistics market is estimated to have grown by 3.9% in real terms in 2016.

Despite stronger global growth during this period, many developed markets struggled to match even the modest growth rates seen in their contract logistics markets in 2015. This reflects trends in the global economy, where growth rates in advanced economies slowed overall.

According to Ti analysts, it would be “too easy” to match these struggles to the impacts of political events such as the U.S. presidential election and the Brexit vote. In 2016, Barack Obama was still U.S. president and the European Union had 28 members. Instead, weak real wage, productivity and consumption growth dampened global economic growth.

“Manufacturing production and retail sales volume growth remain fundamental drivers of contract logistics,” says Ti Economist, David Buckby. “Manufacturing expansion in advanced economies remains weak while Asia Pacific, including China, is seeing the lion’s share of growth.”

According to Buckby, retail is a different story. “To an extent, e-commerce has bailed out contract logistics in advanced economies,” he said. “And I expect these trends to continue to shape the background of the contract logistics sector for the next few years at least.”

Despite stronger global growth in 2016, many developed markets struggled to match even the modest growth rates seen in their contract logistics markets in 2015. This reflects trends in the global economy, where growth rates in advanced economies slowed overall.

Meanwhile, multinational manufacturers increasingly consider options outside China (especially nearby ASEAN) as production locations, primarily thanks to cheaper labor costs, all the while ingraining Factory Asia more deeply, a spur for the region’s manufacturing contract logistics.

That being said, even with rising wages, manufacturing in China is still undeniably strong, add Ti analysts. As low cost manufacturing has departed, this has been offset by China moving up the chain to more value-added production.

“While Europe and North America suffer from both stagnating retail sales and manufacturing production growth, Asia is taking advantage, driving growth for the global market as a whole,” adds Buckby.