PWC Logistics Global PDF
PWC Logistics Global PDF
PWC Logistics Global PDF
We would like to thank the panellists who took part in the Delphi survey that underpins this report.
For confidentiality reasons their names will not be mentioned.
We would like to express our appreciation for the expertise provided by the below listed
individuals: Cem Araci, Umit Baskirt, Martha Elena Gonzalez, Leonid Kostroma, Arun Joshi, Tony
Lam, Henrique Luz, Chirantan Mandal, Akhter Moosa, Alan Ng, Bharti Gupta Ramola, Luciano
Sampaio, Chris Siewierski, Alexander Sinyavsky, Cenk Ulu, Elizabeth Wong.
For more information on the T&L 2030 series or a download of our three T&L 2030 publications,
please visit www.tl2030.com.
Welcome
Is it even still possible to speak about ‘emerging’ markets in the logistics sector? Many large
logistics service providers report that they already operate in more than 100 countries; the largest
express companies list as many as 200 countries or more. And such wide-reaching networks
are not a new development – on the contrary, global logistics are as old as global trade itself.
Yesterday’s Silk Road has left traces in countless transport connections in the air and by sea,
road or rail – and these too are long established. The first express company to operate as a
joint venture within China was set up 25 years ago. Today, the world famous refreshing soft
drink is available throughout the world, without anyone seriously considering the possibility that
insufficient logistics could throw a spanner in the works.
It might almost be possible to believe that state of the art logistics services are uniformly available
in all corners of the globe. Take a closer look, though, and significant differences soon become
apparent, together with the challenges that global logistics companies will need to face in coming
years and decades. Emerging markets will clearly play a central role. But what will the T&L industry
in these countries look like in twenty years? Will logistics’ centers of gravity shift eastward? Or
southward? What new hubs and spokes will develop in global transportation networks? Who will
be the leaders in the logistics industry in emerging markets – the state as owner of railroads and
postal companies, ports and airports, airlines and shipping companies? Existing local private
companies or new players? Or large multinational corporations from industrialised countries? Will
the future belong exclusively to high-tech service offerings, or will simple, reliable services also
play a role?
Our third volume of Transportation & Logistics 2030 (T&L 2030) is dedicated to answering these
and other questions. Nearly a hundred experts from all over the world took part in our Delphi
Survey. We’ve analysed their views, together with professionals from our global PwC network.
We’ve also taken a closer look at seven specific emerging markets: Brazil, China, India, Mexico,
Russia, South Africa and Turkey. The report will certainly be of interest for readers from other
regions of the world though. Who wouldn’t want to learn whether logistics companies from China
and its peers will take over the logistics markets of North America and Europe in the foreseeable
future?
We hope you will consider T&L 2030 Vol. 3 food for thought and welcome your feedback.
 
Preparation is everything. The better the strategic market and corporate foresight, the safer and
greater the subsequent success of logistics service providers and emerging countries. This study
operates along these lines of strategic foresight. It gives an overview of the status of emerging
markets, as far as what regulation and liberalisation concerns. It describes the new trade
corridors, the new flows of goods, the predicted market development for individual logistics
products and services and the progress of the competition.
This study focuses on reporting from and out of emerging markets, rather than just about them.
Half of the 90 study experts from 28 countries were born in emerging markets and provide their
invaluable insider knowledge on the following pages. This knowledge is refined and illustrates
country-specific examples in different country sections.
The logistics explosion in the emerging markets will be immense, will elevate the international
flows of goods to an unknown level, herald the globalisation programme 2.0 and unite the world
under one roof, as seldom before in history. Gigantic quantities of goods will flow between
Africa, Asia and South America with the support of North American and Western European
means of transportation and logistics services. The world will grow together in a common team
effort in a way which sociologists and utopians have only dreamed about. And logistics will be
right in the middle of it all – but only if you begin to prepare for this wonderful team effort today.
 
1 Brazil 32
2 China 34
3 India 36
4 Mexico 38
5 Russia 40
6 South Africa 42
7 Turkey 44
Opportunities 47
Methodology 53
References 58
Contacts 61
PricewaterhouseCoopers 5
Executive Summary
As the importance of emerging markets continues to sizeable quantities of raw materials to China, which has
increase, what new hubs and spokes will develop in global started trading with some of Africa’s least developed
logistics networks? Where are we likely to see the emergence countries. While these countries are still economically poor,
of new industry leaders, and what strengths will they need to some are rich in natural resources. The establishment of the
compete in a crowded global marketplace? relevant trade corridors is already well underway in some
cases; in other cases initial investments in infrastructure are
Some of the answers can be found by looking at the just beginning.
globe – regions which are able to serve as an economical
transit point have an inherent advantage in establishing As a result of these developments, new trade corridors
logistics hubs. In our discussions of the T&L markets in between Asia and Africa, Asia and South America and
Turkey, Russia and South Africa we look in detail at how each within Asia will re-chart global supply chains. Trade
of these countries plans to capitalise on their geographical volumes will shift towards emerging markets and least
position, serving as a link between Asia and Europe or as an developed countries will take their first steps into the global
entry point to Africa. marketplace.
PricewaterhouseCoopers 7
Turkey has also launched an all-embracing privatisation Turkey provides a good example. Changing consumer
programme. While the results of the country‘s first wave behaviours such as lower levels of reliance on the national
of privatisation (1985-1998) were somewhat lackluster, the post, growing e-commerce, urbanisation and a young
government has renewed its focus and established a number population should drive significant growth levels in CEP. The
of goals for privatisation, including the provision of a legal Turkish textile and clothing industry already relies heavily
and structural environment for free enterprise to operate and on international CEP services. As a result of these services,
the transfer of privatisation revenues to major infrastructure samples of ready-to-wear items and new designs can be
projects. The T&L industry is receiving particular attention, delivered quickly to potential customers in Europe, avoiding
with a number of projects already underway or in planning. delays in the race against competitors.
This example shows some of the promise the CEP can hold
for both domestic and foreign logistics service providers.
Privatisation has already helped fire up However, to be successful in the long term, logistics service
China's economic growth and other providers will need to observe changing customer needs
carefully and provide the required products and services.
countries like Turkey are also looking
to benefit from increased efficiency and Many paths lead to the emerging markets and
better access to capital. M&A opportunities will abound
Emerging countries have long been target markets of leading
multinational logistics operators. Our research suggests
Privatisation will continue to be critical in these and other that additional multinational logistics companies will have
emerging markets. In some of these the government‘s role successfully entered the domestic logistics markets in
will undergo a major shift, from active market player to emerging markets by 2030. This means that multinationals
watchdog. This oversight functionality will remain vital to will not only operate in emerging markets for advantages in
ensure fair and sustainable competition, though. Emerging international trade, they will also engage and operate in the
markets are evolving towards more transparency, so there domestic logistics markets.
will still be a strong need for governments to regulate and
provide process assurance. The number of logistics service providers in BRIC countries
already exceeds the tens of thousands mark. The spread
The government may play an important role in a number of ranges from one-man businesses to large companies with
other ways as well. For many emerging markets, free trade several thousand employees, with the resulting differences
zones will help spur economic growth and logistics services in competitiveness, financial resources and offered
providers will need to adjust their service offerings to serve services. The larger and financially-better equipped logistics
these trade hot spots. companies will target growth by looking for suitable mergers
and acquisitions (M&A). Consolidation of the logistics
Changing CEP market offers bright spots markets in emerging countries will be the consequence and
is also a natural part of the process of industry maturation.
The courier, express and parcel (CEP) market is one of the Perhaps more importantly, it is a necessary step towards
strongest growing sectors of the T&L industry in a number achieving economies of scale in an industry which is as
of emerging markets. It‘s also an area where changes in strongly fragmented as the logistics industry in emerging
demographics and consumer behaviours could have the countries.
most significant impact. Logistics providers with a service
portfolio characterised by low-cost and low-service will In recent years a number of the pioneering joint ventures and
have to improve the scope of services in order to maintain other arrangements have led to acquisitions by major players.
competitiveness. Our quarterly PwC M&A analyses suggest that consolidation
activities have already been taking place during the past two
PricewaterhouseCoopers 9
Findings of Delphi Survey
Section 1
PricewaterhouseCoopers 11
zones has fostered strong economic growth in emerging outside of BRIC are increasingly making investments within
markets.” They further attribute a high probability to this other emerging markets. In contrast Brazil, India and recently
development. The Delphi experts argue that free trade also Russia have shown a preference towards investing in
zones will facilitate opening markets for international trading developed countries, in particular in the US and Western
partners, providing benefits especially for those economies Europe.
that are strong in export. In addition, free trade zones can
support further globalisation if strategically located inventory The Delphi panel also evaluated whether the T&L industry
buffers are established, allowing exporters to respond with would become a focus area for (foreign direct) investment in
quicker lead times to demand from the destinations which the emerging markets in 2030, a trend they see as very likely.
they serve. They point out that as logistics costs, as a proportion of total
costs, continue to rise, investments in improving efficiency
Developed countries are the main suppliers of foreign direct will continue to gain momentum. Some also stress that
investment to emerging countries, accounting for 84% of increasing global focus on the environmental impact of T&L
global outflows.6 The share of developing and transition services will trigger investments in ‘greener’ technologies and
economies as recipients to foreign direct investment inflows solutions. Such investments may not reach their full potential,
rose from 26% in 2007 to 31% in 2009. Additionally, this though. Some experts note that foreign direct investments to
grouping attracted more than 50% of greenfield projects in the T&L industry would be even higher, if the sector was not
2009. Double-digit growth trends helped emerging markets constrained by unclear and opaque regulations.
increase their attractiveness for investors. A closer look
at the amount of foreign direct investment flowing into Emerging markets continue to face challenges
emerging markets suggests that the establishment of free
around law enforcement; social networks and
trade zones may also have been a factor contributing to the
recent upswing. Selected emerging markets which have personal contacts play an important role to
been successful in the establishment of free trade zones are cope with this situation.
also receiving large shares of foreign direct investment. The
seven largest exporters among the emerging markets are According to the Logistics Performance Index (LPI), an
also among the top ten recipients of foreign direct investment index capturing the most important aspects of the current
flows.7 logistics environment compiled by the World Bank, the BRIC
countries and other more advanced emerging markets like
Emerging nations are also reaching outwards. In recent years, Mexico still lack efficient means of law enforcement, such as
foreign direct investment outflows from emerging market effective customs offices and procedures, compared to their
multinational enterprises (firms investing in both industrialised industrialised counterparts.9
and emerging economies) have shown dynamic growth rates
of roughly 82% on average since 2003.8 The largest share In some cases, customs clearance times account for a
of outward foreign direct investments (40%) came from the notable time period in cross-border transport, exemplarily,
BRIC countries. China and some other emerging countries customs clearance in Brazil takes twice as long as it does in
the United States.10
PricewaterhouseCoopers 13
As markets evolve from emerging to developed, law privatisation.14 Many emerging markets’ governments have
enforcement generally increases. In China the logistics sector launched specific programmes in order to trigger the process
is being promoted as an important growth area. Policymakers of privatisation.
are correspondingly motivated to strengthen law enforcement
mechanisms. The impact on the logistics industry should be China’s emergence as a global economic player has been
considerable, as border clearances become quicker, more accompanied by a major internal transformation. The
timely and more efficient and administrative collaboration economy has shifted from complete reliance on state-
improves. owned and collective enterprises to a mixed economy
where private enterprises play an important role. This
The meaning of social networks and personal contacts is also remarkable transformation has been accomplished through
evolving. In the future, market access will be determined by the dynamic growth of the private sector and more recently
strict regulations and business relations are likely to be based through privatisation. The Chinese term ‘Gaizhi’, which
more firmly on contracts, e.g. service-level agreements, means ‘transforming the system’, led in many cases to a full
rather than dependent upon person to person contacts. privatisation. Between 1996 and 2003 the number of state-
Corporate players are also likely to institute programmes owned enterprises in the industrial sector of China declined
to prevent and detect corrupt practices, as legislative, to 34,000 or around a third of the number present in 1996.
regulatory and law enforcement bodies demand greater Half of the decline is credited to privatisation.15
accountability.
Turkey has also launched an all-embracing privatisation
The degree and pace of privatisation of programme. In the initial stages of a large privatisation
programme between 1985 and 1998, only a small fraction
state-owned transportation and logistics
(8.3%) of large state-owned enterprises was privatised.
organisations will strongly differ among The generated net cash flow was deemed to be less than
emerging countries; while governments in satisfactory and the impact on the stock market and the
some cases become watchdogs, they are still economy was not very impressive. In recent years, Turkey
the game makers in others. has emphasised the acceleration of its programme, especially
in the logistics industry, in order to realise the full effects. The
One important step towards developed market structures government‘s goals for the programme include the provision
can be seen in the move from state-owned enterprises of a legal and structural environment for free enterprise to
(SOE) to private companies. This trend is encouraged by the operate, a decrease in the financial burden on the state
requirements of the International Monetary Fund and the represented by SOEs and the transfer of privatisation
World Bank. Both organisations require emerging markets revenues to major infrastructure projects.16 Turkey is also
to undergo structural adjustment as a condition of receiving looking to expand and deepen the existing capital market by
new loans. Structural adjustment consists of policy changes promoting wider share ownership.17 Plans for 2010 include 8
to ensure that emerging markets become more market- highways and 2 Bosporus bridges.18
oriented, including internal changes such as deregulation and
PricewaterhouseCoopers 15
Section 2
2000
Figure 1
Exports of
manufactures
of regions by
destination
in US$ bn
2008
in 2000 and
2008
Transport flows characterised by a growth rate larger than 20% between 2000
and 2008 are displayed, not by largest dollar volumes. The thickness of the
arrows represents the value of exports of manufactures. Analysed regions
include: Africa, Asia, Commonwealth of Independent States (CIS), Europe, Middle
Source: WTO, International Trade Statistics 2009, PwC Analysis21 East, North America and South and Central America.
PricewaterhouseCoopers 17
In 2009, China became Brazil‘s largest export destination.22 In Our Delphi experts are well aware of such trends. They
2010 Turkey and Russia also signed a number of agreements evaluated the thesis “2030: Global trade flows have shifted
to deepen their economic relations. One important point such that new transportation corridors between emerging
involves the use of domestic currencies between Turkey and countries and least developed countries have been
Russia, bypassing the US dollar’s dominance.23 In doing so, established”, as highly probable. As a consequence, many
both countries reflect their trust in the stability of their own of the new trade flows will bypass developed countries. The
currency and their willingness to maximise bilateral trade. experts see the impact of this shift as significant and positive
Such new trading relations will result in higher transport – the thesis received the highest ranking for both impact and
volumes on new routes and diminished volume on traditional desirability. Panellists noted that this type of shift will affect
routes. talent development, planning and capacity cycles, as well
as infrastructure development. The main trade corridors will
Emerging market economies are also beginning to take a relocate the growth regions for transportation and logistics
significant role in investing in the world‘s least developed operators from Asia to Africa, from South America to Asia
countries (LDC). China is investing significant amounts in and on the Asian continent. Indeed, other sources estimate
Africa, home to the largest number of LDCs. According to that trade centred around Asia will contribute almost 40%
the World Bank, China provided US$7 bn in 2006 to sub- of global trade by 2028.29 Asia and the emerging markets
Saharan Africa and a further US$4.5 bn in 2007 towards represent evolving economic powerhouses which will drive
infrastructure projects.24 During the economic crisis, many and shape the direction and future of global transport
foreign investors withdrew capital investment from the corridors.
continent, however China’s resource investments and further
commitments related to the extractive industries sector have Many logistics companies are looking to respond to the
been ongoing.25 Africa’s low level of transport infrastructure development of new transport corridors, however the sheer
imposes logistical challenges and constrains the ability geographic size of emerging markets and the multitude
to transport goods and resources between neighbouring of cultures, attitudes and languages require a significant
countries, not to mention the difficulty of establishing investment. Further, companies must be willing to adapt
reliable transport routes to coastal regions for international to the local markets where they wish to expand. Logistics
trade. Noteworthy recipients of Chinese loans and grants service providers will need to take a targeted approach,
for commercially driven projects include Angola, Ethiopia, which will require taking an active part in the design process
Nigeria and Sudan among 35 other African countries.26 of new transport corridors, developing adequate structures
and pricing systems and initiating and building logistics
Logistics companies are responding to new trading clusters.
and investment patterns and adjusting their schedules
accordingly. APL has reduced capacity within its Asia- It‘s all about money — the importance of
Europe routes by approximately 25%. The CKYH Alliance
barter trade diminishes
among the Asian shipping companies Cosco, K-Line, Yang
Ming and Hanjin Shipping reduced their capacity between
Barter trade is not a new kind of trading system, on the
the US and Europe by 18%.27 Shifts in movement of freight
contrary; it’s been used since the beginning of humankind.
around the globe are not restricted to ocean travel; air freight
In recent years it has been used by private companies as
connections have also shifted towards emerging markets
well as national government authorities. Barter describes the
such as CIS and Asia.28
direct exchange of goods and services, or both, between
PricewaterhouseCoopers 19
Section 3
The number of logistics service providers in BRIC countries Our Delphi panel assessed the projection that by 2030 “The
currently exceeds the tens of thousands mark.41 The spread logistics industry in emerging countries has undergone a
ranges from one-man businesses to large companies with strong process of consolidation” and assigned a probability
several thousand employees. Consequently, differences in of more than 66% to this scenario. They argue that
competitiveness, financial resources and offered services consolidation is a natural part of the maturation of an industry
can be observed. Small logistics companies with limited sector. Furthermore, the experts assert that consolidation
capital resources will aim to grow organically, while larger is a necessary step towards achieving economies of
and financially-better equipped logistics companies scale in an industry which is as strongly fragmented as
will target growth by looking for suitable mergers and the logistics industry in emerging countries. Nevertheless,
acquisitions (M&A).42 Consolidation of the logistics markets they also observe forces which could deter consolidation:
in emerging countries will be the consequence.43 The number socio-political instabilities in some emerging countries
of cooperation agreements or joint ventures is also likely to may complicate consolidation activities and state-owned
increase, some of which may eventually lead to further M&A. companies have powerful positions in a number of emerging
As we already noted, after China’s entrance in the WTO and countries and may leverage their powerful position to
subsequent liberalisation, the market was completely open decelerate consolidation waves.
PricewaterhouseCoopers 21
Irrespective of the legal form used in emerging markets, transport in the past, suppliers of such a constricted service
logistics service providers entering new markets should portfolio may find it increasingly difficult to satisfy future
adapt company structures and their operations to local customer demands. Manufacturing companies in emerging
peculiarities. A strong local presence and the development markets will seek new opportunities to increase margins,
of customised logistics business models, rather than simply become more efficient and to focus on core competencies.
transferring established standard procedures, are a necessity As a result, the demand for value-added logistics and third
for success in upcoming markets. party logistics (3PL) services is expected to increase.
The logistics service industry in emerging In China, transport operators still struggle to provide shippers
with integrated contract logistics. Offering value-added
markets will increase its level of
services within the country remains a challenge, even for
professionalism, partly driven by strong those with the most sophisticated networks and resources.47
commitment, technology and know-how At the same time, though, the market for 3PL services
transfer of multinationals in their markets. exhibited the highest growth rates in the logistics industry in
recent years and is likely to continue booming – so the payoff
Logistics processes in developed countries have is significant for those companies that are able to overcome
been optimised and improved constantly in the past. the hurdles.48 Likewise, the supply of higher value-added
Consequently, many transportation, handling and services is considered to represent one of the strongest
warehousing processes have become highly automated. In growth opportunities in the Indian logistics market.49
contrast, emerging countries are frequently characterised by
very low labour costs and low levels of automation. Especially Our expert panel sees logistics companies as up to the
in the field of logistics, a large portion of logistics processes challenges posed by offering value-added services. They
in emerging markets are conducted manually. evaluated the projection that by 2030 “Logistics service
providers in emerging markets have strongly increased their
In order to analyse the extent to which the automation depth of value-added services, e.g. offering value-added
levels in logistics processes will increase, we asked services as packaging, labelling and mounting” as highly
our expert panel to assess the projection that by 2030 probable. Such a shift is seen to have a strong impact on the
“Domestic logistics service providers in emerging markets industry, as the increase in the depth of added-value service
have significantly increased the level of automation in offerings signifies an improvement of service level, quality
their logistics processes.” The participants rate significant and talent management. Further, it offers sustainable growth
improvements in the use of automation in logistics processes opportunities, higher profit margins and the opportunity to
as highly probable. Nevertheless, they argue that there are become internationally competitive. Notwithstanding, not
some factors which may put the brakes on the process every logistics service provider in emerging countries will be
of enhancing automation logistics processes in emerging able to increase its range of value-added service offerings,
countries. As long as labour costs are quite low, investments due to financial restrictions or lack of capabilities.
in technologies which allow increased automation do not pay
off fast enough. One expert also notes that some shippers Multinationals entering the domestic logistics markets
may not try to push automation too far in order to preserve in emerging countries will accelerate the increase
employment levels. in professionalism of the logistics industry. Through
cooperation, joint ventures or by following the lead of
As economic prosperity increases, customers will become competitors who have established such practices, logistics
more demanding in terms of quality and price. While logistics service providers in emerging markets will increase their level
service providers in emerging markets frequently have limited of automation and implement a broader range of value-added
their range of products to basic services like conventional services.
Fierce competition at
home and abroad
Logistics service providers from emerging developed countries”. The panel experts do not believe that
the logistics industry in developed countries will be target for
markets will not gain significant market
logistics service providers from emerging markets. Given that
share in developed countries, even low-tech the emerging countries’ own local logistics markets exhibit
logistics solutions are not perceived as a much higher growth rates than those in developed countries,
viable route to win market share. logistics service providers from these strong growing markets
may have little incentive to enter mature, competitive and
Within the last five years, the number of Fortune Global saturated logistics markets. To give an example, growth rates
500 companies based in BRIC countries has more than of the European logistics market are considered to range
doubled, going up from 27 in 2005 to 67 in 2010. All the BRIC around 5% while most of the emerging markets included in
countries as well as Turkey, Mexico and other emerging this study promise double-digit growth rates.52 Nevertheless,
markets are currently represented in the Fortune Global some experts point out that logistics companies from
500 list. According to a PwC analysis, the largest number emerging countries will become more flexible concerning
of MNCs headquartered in emerging markets has come the scope and location of their operations. As pointed out in
from China in the past, while India is expected to produce chapter 3, logistics companies from emerging and developed
the most new multinational companies in the coming years. countries will increasingly work in collaborative partnerships
By 2024, India is expected to produce over 20% more new such as joint ventures. In such cases both parties might
multinationals than China. These new MNCs will not limit their also extend their activities into the domestic markets of their
scope of activities to other emerging countries. Instead, many business partners.
will penetrate developed markets directly, offering not only
tangible products but also business services.50
“As emerging market economies grow, new
In the logistics industry, the development of multinationals trade lanes emerge – many of them Intra-Asian
from emerging markets seems less promising. China is ones or between Asia and Middle East. If you
positioned number three in Fortune’s ranking of countries, want to share in this dynamic and grow with it,
but contributes just one transportation company, China
Railways, a state-owned transport organisation operating in
you need to complement global reach with
the domestic market and representing a share of 0.25% of local business expertise – be it your own or
the total revenues of all Fortune Global 500 companies. For that of local partners.”
comparison, Germany has a smaller number of companies
in the ranking, but 3 of them are T&L companies: Deutsche
Post DHL, Deutsche Lufthansa and Deutsche Bahn, who all
operate in international transportation and logistics markets
and represent a revenue share of 0.7%. Another analysis
Dr. Frank Appel
reveals that among the top twenty multinational 3PLs, only
Chief Executive Officer
one emerging market player is ranked, the Chinese state-
Deutsche Post DHL
owned enterprise Sinotrans (13rd).51
PricewaterhouseCoopers 23
Multinational logistics service providers from emerging hundred thousand home-cooked meals to workplaces around
markets will not enter developed markets on a grand scale. Mumbai each day. Using the system of reverse logistics, they
Only a few ‘shining stars’ are likely to develop the potential to also collect the empty tins after lunch and return them home.
do so. No databases, software or barcode scanners are used, yet
the error rates of delivery are extremely low.56
Notwithstanding, will we see particularly successful or
innovative logistics services from emerging markets entering We asked the Delphi panelists to evaluate the thesis “2030:
developed markets? – In 2008, Tata Motors launched the new Low-tech logistics solutions from emerging markets have
Tata Nano, a revolutionary low-tech automobile costing only flooded the markets in developed countries.” According to
100,000 Indian rupees, approximately US$ 2,180. In 2009, the the experts, this projection is improbable, since emerging
Tata Nano won the Frost & Sullivan Innovation Award for its countries will increasingly aim to benefit from advancements
outstanding innovation and ability “to think of better product in technology and IT and thus move from low-tech to high-
designs and increase the performance boundaries of their tech services. Instead of searching for low-tech and low-
products while working within an unforgiving budgetary cost logistics services, customers in developed markets
constraint.”53 Tata’s success with the Nano is prompting have a strong preference for ‘high-tech’ logistics services
other OEMs to think about enlarging their product portfolio by and they seek for more advanced and innovative products.
developing their own low tech, low cost car.54 In addition, the experts point out that low-tech logistics
are tightly connected to labour-intensive service. Providing
Emerging markets have also developed some innovative similar low-tech services in a profitable way would be much
solutions in the logistics industry. For example, the low- more difficult in developed countries with higher salary levels.
tech logistics network of dabbawallas in India shows a Some experts even argue that only those logistics service
better performance than some sophisticated Western providers who offer high-tech logistics services will survive in
logistics networks.55 The dabbawallas, a workforce group the long-term.
of approximately five thousand people, deliver nearly two
Singapore
Shanghai
Hong Kong
Shenzhen
Busan
Dubai Ports
Ningbo
Guangzhou China
Rotterdam
Qingdao Asia
Figure 2
Hamburg
World Port Rest of the World
Kaohsiung
ranking in
Antwerp
container Tianjin
traffic in 2008 Port Kelang
Los Angeles
Long Beach
Bremen
Tanjung Pelepas
New York / New Jersey
0 5 10 15 20 25 30 35
in million TEU
PricewaterhouseCoopers 25
of 53%. A number of experts argue that 2030 is too early to
expect such a shift. According to the experts, this is likely to
take a much longer time, since the status of technology and
automation standards still incorporate room for improvement
in emerging markets. Also, some imagine that new centres
of gravity in emerging markets could complement existing
institutions, rather than displacing them.
Mexico
• GDP 2009 US$ 866.3bn
• GDP per capita 2009 US$ 8,040
• Merchandise export 2008 US$ 291.7bn
• Merchandise import 2008 US$ 323.2bn
• Urbanisation 2009 77.5 %
• Size of logistics market ('03) US$ 50bn
• Logistics Performance Index 3.05 (#50)
Brazil
• GDP 2009 US$ 1,481.5bn
• GDP per capita 2009 US$ 7,737
• Merchandise export 2008 US$ 197.9bn
• Merchandise import 2008 US$ 182.4bn
• Urbanisation 2009 85.4 %
• Size of logistics market ('10) US$ 150bn
• Logistics Performance Index 3.20 (#41)
Turkey
• GDP 2009 US$ 593.5bn
• GDP per capita 2009 US$ 8,427
China
• Merchandise export 2008 US$ 132.0bn
• GDP 2009 US$ 4,757.7bn
• Merchandise import 2008 US$ 202.0bn
• GDP per capita 2009 US$ 3,566
• Urbanisation 2009 72.9 %
• Merchandise export 2008 US$ 1,428.3bn
• Size of logistics market ('08) US$ 59bn
• Merchandise import 2008 US$ 1,132.4bn
• Logistics Performance Index 3.22 (#39)
• Urbanisation 2009 46.6 %
• Size of logistics market ('08) US$ 506bn
• Logistics Performance Index 3.49 (#27)
India
• GDP 2009 US$ 1,242.6bn
• GDP per capita 2009 US$ 1,033
• Merchandise export 2008 US$ 177.5bn
• Merchandise import 2008 US$ 293.4bn
• Urbanisation 2009 29.8 %
• Size of logistics market ('10) US$ 125bn
• Logistics Performance Index 3.12 (#47)
South Africa
• GDP 2009 US$ 277.4bn
• GDP per capita 2009 US$ 5,635
• Merchandise export 2008 US$ 80.8bn
• Merchandise import 2008 US$ 99.5bn
• Urbanisation 2009 61.2 %
• Size of logistics market ('09) US$ 46bn
• Logistics Performance Index 3.46 (#28)
PricewaterhouseCoopers 29
Brazil, China, India, Mexico, South Africa, leading industrialised economies over the coming decades.
Their importance for the global logistics industry today and in
Turkey - all ‘emerging’, but with unique
future is beyond question. Mexico, Turkey and South Africa
fundamentals for growth in logistics. likewise are among the group of well-advanced emerging
countries. In terms of international trade and exchange of
A multitude of groupings of countries that are regarded as
goods, each of them represents an important link between
‘emerging markets’ exists, prepared by institutions like Dow
different regions of the world: Mexico links North and South
Jones, Financial Times Stock Exchange Group or Morgan
America, Turkey bridges Europe and the Middle East and
Stanley Capital International.69,70 According to these, the
South Africa is a key point of entry to the African continent,
number of emerging markets varies between 21 and 35;
especially from Asia and the Americas.
other reports analyse more than 50 separate markets. There
is no one definition or set of criteria for ‘emerging’ markets, On the previous page, we have provided an overview of some
however there are some commonalities. Generally, these key indicators for these 7 countries which vividly illustrates
are countries where business activities or populations are how diverse they are with regard to their economies and
in the process of rapid growth and where industrialisation is logistics industries. The Chinese economy, measured by its
occurring. GDP, is about four times bigger than those of India or Russia
and about 17 times bigger than the South African economy;
However, ‘emerging’ doesn’t equal ‘emerging’. Emerging
the same is true for China’s import and export volume. Still,
countries differ significantly from each other with regard
these levels are fairly low when seen in relation to China’s
to the size of the economy, the political and regulatory
vast population – China’s GDP per capita is the second
framework, the geographic location, the structure of the
lowest in this peer group. Lower per capita GDP seems to
population and many other macro-economic factors. These
correlate with a lower level of urbanisation. India is the only
determinants form the basis for domestic and international
country lagging behind China in terms of GDP per capita
trade and are critical for the logistics industry.
and exhibits an even lower level of urbanisation. In contrast
to this, some of the smaller economies show significantly
In order to provide a thorough sense of how emerging
higher GDP per capita and rates of urbanisation, especially
countries are evolving, we take a closer look at individual
Brazil, Russia, Turkey and Mexico. Urbanisation levels have
economies, using the overall analysis undertaken in the
a significant impact on logistics structures, given that greater
previous chapters as a starting point. We chose seven
concentrations of population in urban centres facilitate
emerging markets: Brazil, Russia, India, China, Mexico,
centralised distribution strategies for manufacturers.
Turkey and South Africa. The first four, often referred to
as the BRIC countries, represent the largest emerging
We analysed the World Bank’s ‘Logistics Performance Index’
economies and are foreseen to overtake some of today’s
(LPI) which summarises the performance of countries in six
PricewaterhouseCoopers 31
Brazil
The establishment of free trade zones in Brazil agreements mean that transport volumes handled in the
intra-Mercosur area will benefit from streamlined customs
has fostered strong economic growth, as
procedures, as goods destined for external markets will
these have realised above national average now need to clear customs only once. Consequently, import
growth and accelerated transport flows and export lead times could be reduced. This development
in the designated regions. Still untapped should have a positive impact on logistics costs, which
potential for further growth is provided by the represent one of the biggest challenges for the T&L industry
in Brazil.
Mercosur.
A number of industries should benefit from the region’s
Our overall Delphi survey findings suggest that free trade
strong economic growth prospects. For example, some
zones lead to above-average growth in emerging markets.
automotive analysts expect Mercosur to attract some US$4
They are attractive for international trading partners and
bn a year between 2010 and 2016. That’s significantly
investors and have been implemented successfully in
more than the US$2 bn - $2.5 bn annually raised during the
different emerging markets such as China, Mexico or Russia.
previous six-year period.73 Logistics service providers serving
automotive companies stand to benefit if the investment
Brazil has already implemented several free trade zones.
results in the expected ramping-up of production.
The creation of the free trade zone in Manaus in the State of
Amazonas (Zona Franca de Manaus e Amazonia Ocidental)
is a real success story about fostering economic growth in
the Amazon region. Imported foreign goods are tax free, “One of the fierce problems Brazil’s logistics
provided they are consumed within the zone or are exported industry faces is a transport infrastructure that
abroad. These fiscal benefits also apply to certain specific
is no longer keeping up with the growth in
areas of the Western Amazon region, which cover the states
of Acre, Amazonas, Rondônia and Roraima. Mainly due to demand, especially in air traffic. The solutions
the Manaus free-trade zone, the area gradually increased certainly will have to come either through PPP,
its participation in the Brazilian GDP in recent years, now service concessions or, as a third option,
representing the 4th highest GDP in Brazil. It accounts for privatisation.”
1.4% of the economy of the country (increased from
US$1 bn per year in 1970 to US$35 bn in 2004).71 Its
international airport ‘Eduardo Gomes’ represents the second
largest in Brazil measured by freight tonnes and its port is the
most important cargo handling port in the whole Amazonas
region. Due to the free trade zone in Manaus, the State
Henrique Luz
of Amazonas has grown significantly above the Brazilian
Brazil Markets Leader
national average for the last 10 to 20 years.
Transportation & Logistics
PricewaterhouseCoopers
Another important trigger for logistics activities can be seen
in the Common Market of the South (Mercosur), which
includes Brazil, Argentina, Paraguay and Uruguay and further
associated members. At present, the member countries form
a customs union, but their aim is to become one common
market with free movement of labour and capital in the long
Brazilian logistics service providers should try to collaborate
term.
with multinational companies using Brazil as a manufacturing
base for exports and should ensure they have networks in
In August 2010, Mercosur’s member states agreed to one
place to take advantage of growing trade within Mercosur.
external tariff in relation to third parties.72 The long-awaited
PricewaterhouseCoopers 33
China
China’s T&L industry plays a crucial role in To date, 400 out of the world’s 500 biggest companies
already have investment projects in China. Foreign logistics
the country’s future economic development
enterprises use their capital, technology and management
and promises strong and stable growth advantages to enter the Chinese market and serve these
opportunities through 2030. Foreign investors large customers.
will capitalise on resulting investment
opportunities. Business structures range from joint ventures to wholly-
owned subsidiaries, from a single-integrated logistics
The participating experts in our Delphi survey confirmed business to logistics as a business unit of a broadly
emerging markets in general, and China in particular, as diversified business and from focusing on certain localities
fertile ground for foreign direct investment. Though China’s to nationwide logistics networks. The bank Credit Suisse
logistics industry had a late start, the industry is benefitting assumes that active investments into China will continue and
from the rapid development of the national economy and forecasts that foreign direct investments into China will reach
has advanced to become a supporting and driving force for a level of US$80 bn by the end of 2010.79
economic and social development.
While in the past, foreign investments in China’s logistics
In 2008, China’s T&L market was estimated at over industry were concentrated in developed coastal areas
US$506 bn.77 The industry exhibited growth rates of more such as the Yangtze Delta, Zhujiang Delta or the Bohai Rim,
than 20% in the first quarter of 2010, following consistent recently a strong trend towards extending the geographic
expansion rates of more than 25% since 2006. This strong focus can be observed. In addition, sole ownership is
growth is expected to continue.78 Indeed, China’s T&L becoming more prevalent. This shift was primarily caused by
industry represents one of the most attractive growth areas in China’s commitment to open up its roadway transportation
most Chinese provinces and has already attracted significant business after entering the WTO.80 As a result, foreign
amounts of capital. Numerous foreign transport and logistics investors were able to set up solely-owned roadway
companies have already made direct investments in the transportation and storage businesses.81
Chinese T&L market in recent years. Some are looking for
opportunities to set up own businesses, while others seek to Enhancing services in comprehensive logistics is an
create joint ventures with domestic companies active in the expanding trend and distinctions between different sub-
express market or to acquire private logistics companies in sectors of the logistics industry will be much less clear in
China in order to expand their networks and provide more the future. Merger and acquisition activity among logistics
value-added services to existing clients. companies will increase in order to enlarge the scale of
enterprises and enhance the value of services provided.
Expansion of service coverage and density of service network
is also expected.
“The Chinese logistics challenge of the future is
to sustainably develop the emerging logistics Even though China’s logistics industry has recorded
hubs in the Western upcountry and to tremendous growth rates in terms of foreign direct investment
and has strongly benefited from those investments in the
successfully connect them to foreign past, their relevance for the country may actually decrease
investments and market growth.” in the future. Since China’s domestic economy is growing
at a rapid pace, the domestic demand for logistics services
will grow strongly in the future. This growth is based on a
rising domestic consumer base rather than foreign direct
investments. Much of the domestic demand will originate
from China’s emerging markets, many of which are outside
Alan Ng of the three Chinese megacities (Beijing, Shanghai and
China Industry Leader Guangzhou) which have been the focus for most foreign
Transportation & Logistics investors.82
PricewaterhouseCoopers
PricewaterhouseCoopers 35
India
The private sector is likely to play an for shippers. The required investments to enhance India’s
sea port infrastructure are enormous and cannot be met
increasingly important role in India’s
by the government. Consequently, further privatisation of
transportation and logistics industry in the ports is being considered as a possible solution to meet
future. However, who will play which role this tremendous financing requirement and to increase
depends on a number of governmental performance levels.91
decisions.
Privatisation of T&L operations will play an important role in
Our Delphi panel recognises the important role of India in the future. While some parts of the transport network
privatisation in emerging markets to address increasing are deemed strategic assets by the Indian government and
challenges of financing in the T&L industry. Nevertheless, unlikely to be fully privatised, a wide range of opportunities
the experts are not fully convinced that the private sector for the private sector exists. Companies which are able to
will play the leading role in the T&L industry. In India, the generate financing and improve performance will have the
importance of privatisation varies significantly between potential to earn healthy profits.
transport modes.
Gradual reforms in policy should
Goods transportation by road is almost entirely in private encourage a cautious increase in foreign
hands with only a small proportion of it being corporatized. direct investments in transport services.
Bus operations on the other hand is mostly in government
hands . Forced by a strong need to reduce the country’s
Multinational logistics companies have started
fiscal deficit, the first wave of privatisation started in the keeping an eye on the market and are already
early 1990s. Thus, a segment of India’s bus operation is starting to enter it.
with private organisations. Nevertheless, privatisation of
bus transport may not have been entirely beneficial. At The Delphi panel considers the T&L industry in emerging
present, many State Road Corporations in India have had markets as one of the new focus areas for foreign direct
to take over activities from the private sector as many of investments. The situation in India differs somewhat, with a
them have faced heavy losses and are not able to operate distinct emphasis on infrastructure-related activities. In the
without governmental support such as ones operating in last decade, the focus areas for foreign direct investment in
Madhya Pradesh, the state in the center of India. In addition, India have primarily been the financial and related services
private road transport organisations are frequently the target sector with a share of total foreign direct investment of
of criticism. Levels of dissatisfaction about the reliability, around 21%, followed by the computer software and
punctuality and quality of services from these organisations hardware (9%) and the telecommunication industry (9%).92
seem to be on the rise among users. It will be interesting to While there have been significant levels of investment in
observe if the Indian government increases its control over transport infrastructure (construction of roads, highways,
the road transport sector, even though funds for road related ports etc. at approximately 7%), interest in T&L services has
investments are scarce.89 remained quite low. In the case of infrastructure investments
(for example ports, highways, airports, urban infrastructure
The private sector is also involved in rail transportation, but etc.) projects are automatically eligible for exemption from
continues to play a fairly minor role. The government has the foreign direct investment caps, which may have helped
involved private players in the operation of container trains increase interest in such investments.
and is likely to offer a small portion of passenger operations
for private tender as well. India’s Railway Minister, Mamata In contrast, in the airline industry the government still
Banerjee, reiterated in 2010 that a full fledged privatisation maintains caps on foreign direct investment although there
of Indian Railways in the near future is not planned, although have been some moves towards liberalisation. For example,
she saw PPPs as a potential means of mobilising revenues in the aviation sector the Indian government has increased
for some projects.90 the limit for foreign direct investment into scheduled air
services at 49% and non-scheduled, chartered and cargo
India’s sea port industry has not yet experienced significant air services at 74%. However, with this liberalisation, foreign
privatisation. Most of India’s sea ports have higher loading airlines are not yet permitted to operate in the domestic
and unloading times than their international competitors. sector. Press reports indicate that foreign airlines might
The average size of Indian ports is much smaller than consider investments into India, if the regulatory environment
international standards, resulting in up to 20% higher costs changes sufficiently.93
PricewaterhouseCoopers 37
Mexico
Multinationals dominate the logistics demand and regions, including the European Union, Japan, Israel and
much of Central and South America.
in Mexico and have driven its growth
significantly. Mexico’s logistics market will Changes in Mexico’s customs regulations in recent years
continue to expand in upcoming years. have greatly expanded programmes similar to free trade
zones and well beyond conventional ‘Maquila’ operations
The experts on our Delphi panel agree that by 2030, previously available to importers. Maquiladora or Maquilas
multinational companies will have a significant presence in are assembly operations in the North of Mexico which import
emerging markets. This trend has already been observed material and equipment on a duty-free and tariff free basis
in Mexico, one of the most advanced emerging countries in for assembly or manufacturing purposes. The more elaborate
hosting multinational logistics companies. Strategic Private Bonded Warehouse programme (the REFIE)
has existed since 2003 and offers benefits similar to those
Indeed, there is a strong level of interest in Mexico from of the US free trade zones and the EU Processing under
multinationals across industry sectors. According to a survey Customs Control (PCC) programme. The REFIE regime
conducted by the UN, Mexico is the 6th most attractive affords attractive tax advantages. The main benefit consists
location worldwide for multinationals. The strong flow of of exemption of VAT triggered by sales of goods subject to
foreign direct investments, and estimated US$15 bn to the regime. As it relates to income tax, REFIE locations are
US$20 bn 2010, confirms the country’s popularity as an not deemed to be a permanent establishment for foreign
investment destination.98 It is expected that the rate of parent companies and therefore, reductions or exemptions
investment will rise from current levels of around 20% to 25% for income taxes may be allowed for activities performed
of GDP by 2020.99 within the REFIE.
Mexico’s growth and export rates have been negatively Over the past few years, the Mexican government has
impacted by the entrance of China to the World Trade addressed the criticism raised in the Global Competitiveness
Organisation, though. The United States are Mexico’s most Report and has made good progress in reforming its
important export partner and the country has lost notable regulatory policies and institutions for the T&L sectors. These
market share to China in a range of areas, including textiles attempts have also been supported by the US government
and electronic devices such as televisions or personal and enhanced cooperation with US law enforcement
computers. Due to low production costs, some US- agencies. By means of the Merida Initiative, the US and
headquartered manufacturing companies relocated their Mexico are working together to break the power and impunity
production facilities from Mexico to China. Nonetheless, of criminal organisations, strengthen border, air and maritime
as noted, Mexico’s overall investment flows are still set to controls and improve the capacity of justice systems in the
increase over a 10-year forecast period. region to conduct investigations and prosecutions.102 Further
efforts concentrate on the strengthening of institutional and
Mexico has a number of competitive advantages which infrastructure capabilities of law enforcement and judicial
relate to logistics. The close geographic proximity to the US sectors, with a strong focus on counter-drugs and security
means that logistics costs for US-headquartered companies along the US and Mexican land border zone.
are generally quite low. Mexico also has a good functioning
network of feeder plants serving the manufacturing industry. Due to the strong dependence on the US as the main export
Its logistics service companies will need to build upon these destination, an underperforming export sector has significant
advantages and continue to drive technological advances in negative implications for Mexico’s trade balance and its
their service offerings in order to stay competitive. economy. The cancellation of the cross-border trucking
programme in March 2009 provides a huge challenge
Mexico needs to push the process of for Mexican trucking companies. The programme, which
allowed Mexican trucks to operate freely on US roads,
reforming its regulatory policies and
was introduced by the US Congress in September 2007
institutions in the logistics industry in order before being withdrawn in March 2009. Calls by Mexico’s
to move the economy closer to the leading government to reinstate the agreement have so far fallen
BRICs. on deaf ears. Consequently, rapid improvements in law
enforcement are needed and would create a double return for
Law enforcement is still a hot topic for logistics companies the country.
in emerging markets, although our Delphi experts are
optimistic that its importance as a constraining factor will Long-term competitiveness in a global context will require
have diminished by 2030. Other challenges will remain, greater public and private action to spur regulatory
though. Many emerging markets also need to reform archaic improvements in regions throughout the country. At the
regulations, automate manual systems and overcome national level, greater attention to policies for regional
political differences to achieve regional integration. development, anti-corruption and bribery and functioning law
enforcement would drive important and sustainable growth
Mexico faces a number of these hurdles. The Global for the logistics industry in Mexico.
Competitiveness Report of the World Economic Forum
PricewaterhouseCoopers 39
Russia
In the future the logistics industry in Russia of this plan.103 At the same time Russia actively takes part in
different summits devoted to international trade problems
may benefit more from its geographic
and cooperation (for example, within the bounds of G20,
location connecting East Asia and Europe. CIS summits, APEC, Black Sea Economic Agreement etc.).
Introduction of port special economic zones Efforts are also underway to enable Russia to join the World
will stimulate internal and external trade flows Trade Organisation.
between Asia, Europe and North America.
The Russian government sees the T&L industry as one of the
We asked our Delphi panelists to evaluate whether key priorities for the economy. The government is willing to
global trade flows will have shifted by 2030 so that new actively use public private partnership (PPP) tools to develop
transportation corridors develop. Our experts ranked the infrastructure projects. In order to help facilitate PPP activity,
probability of this projection as well as its impact on the the government has introduced a law on concessions
logistics industry as fairly high. and has established a special investment fund to finance
infrastructure projects. Russia is planning to build toll roads
Thinking about new transportation routes is especially by securing private investment. The government is also
important for Russia due to its geographic location. Russia aiming to attract foreign players as a means of accessing
physically connects the Chinese and European markets modern technology and expertise along with financial
and represents the shortest way from Europe to Asia. resources.
Nonetheless, Russia today is not considered as an important
transportation corridor, as the main trade between Europe Russia also plans to use special economic zones as a lever to
and Asia takes on seaways. Russia will aim to take advantage achieve its objective to create new transportation corridors.
of its beneficial position in the future. In order to realise Russia has established around 20 special economic zones;
this vision, Russia needs to develop its railways and roads major objectives are to create optimal conditions for foreign
in order to ensure rapid and cost-effective transportation and domestic investments and to develop modern industrial
options. Russian Railways is already planning to build complexes able to produce high-quality products. The
several high-speed railways. The first one will be constructed resulting production is intended to stimulate the economy
between St. Petersburg and Moscow. and the Russian export base. Four special economic zones
have been created at transport hubs with the intention of
Currently the Russian economy is rather vulnerable to oil attracting both domestic and foreign investment as well as to
market fluctuations and dependent on the world economic develop regional transportation and logistics infrastructure.
situation. The Russian government is drafting policies The zones are located at the airports of Krasnoyarsk in East
directed at changing the state’s export structure from Siberia and Ulyanovsk in the Volga area, at the Sovetskaya
exporting primary products and resources to exporting Gavan port in the Khabarovsk Territory, in the Far East and at
integrated and advanced technology products and services. the Port of Murmansk in the North.
If this policy succeeds, it will be necessary to develop new
markets and ways of selling these products and goods. Krasnoyarsk airport is aimed to develop a large multimodal
New transportation corridors will need to be developed and transport hub with expected investments to reach US$800m.
existing ones significantly improved. The Ulyanovsk special economic port zone is aimed to
develop the airport Ulyanovsk – with a major focus on the
Russia is already looking at options. One plan under production and maintenance of light airplanes and the
consideration would ‘revitalise’ the Northern Sea Route as creation of a logistics hub. About US$300 m of investments
the shortest seaway between Europe and Eastern Asia, along are planned by 2020.
with the development of land routes connecting Asia and
Europe. The Shanghai Cooperation Organisation (SCO) aims Even greater levels of investment are being made in
to facilitate the international road transportation between enhancing sea routes. Around US$3.5 bn of investments
its member states, especially between Russia and China. are planned for Sovetskaya Gavan - sea port special
Since China is interested in using the land connection to economic zone located in Khabarovsk region, including
accelerate its exports to Europe and Russia, both countries participation from private investors.104 Development of this
are interested in this new ‘Silk Road’. The continuing work port is important for Asia and Russia overall. Sovetskaya
of the SCO member states aimed to develop “international Gavan will serve as the transport outlet of Baikalo-Amurskaya
transportation and simplify border crossing procedures in Magistral (major railway, connecting Russian East and
the region” is regarded as a first step towards the realisation West), facilitating intermodal transfers. It will also develop
PricewaterhouseCoopers 43
Turkey
Turkey’s third-party logistics providers
and CEP service providers are advanced “Turkey’s young and dynamic population
compared to their counterparts in other structure will increasingly demand high-tech
emerging markets. The country’s market logistics services, representing significant
dynamics still encompass growth potential. growth potential for 3PLs and CEP providers.”
Our Delphi panel agreed that the CEP market represents the
highest growth potential in the logistics industry in emerging
countries until 2030, although the rate of growth varies
between the various emerging markets. In Turkey, the CEP
segment is showing rapid growth. Due to changing consumer Cenk Ulu
behaviour, growing e-commerce, urbanisation and a young Turkey Industry Leader
population, CEP services seem to be a promising market Transportation & Logistics
segment. One robust segment is driven by the Turkish textile PricewaterhouseCoopers
and clothing industry, which relies heavily on international
CEP services. As a result of these services, samples of
ready-to-wear items and new designs can be delivered
quickly to potential customers in Europe, avoiding delays in
the race against competitors. Borusan, Balnak, Reysas and Ekol Logistics provide
supply chain management, insurance, customs clearance,
Logistics overall is a young sector in Turkey which has made warehousing and inventory management as full scale 3PL
progress in recent years. Turkey, being advantageously companies.
positioned between the Middle East and Europe, serves as
a transfer centre between these regions. Many authorities In the domestic market, increased efficiency, transparency
claim it will become a logistics base; some assert it already and accountability on the part of government administration
serves this role. The Turkish logistics market has experienced offices (for example, during customs clearance) could help
a 20% growth rate during the last five years and is forecast to remove current growth obstacles of the logistics market
increase to US$ 120 bn by 2015.107 Double digit growth rates in general and the CEP segment in particular.108 Probable
in the industry have attracted many international players; legislative reforms within the framework of the EU integration
indeed all major multinationals are already active in Turkey. process will tip the balance in favour of liberalisation and
While many establish joint ventures with local companies in have a profound impact on the domestic market.
order to learn the local industry dynamics, some of the large
players such as UPS, TNT and DHL have already bought out While the logistics market has expanded threefold since
their joint venture partners or acquired local companies as a 2002, the share of third party logistics service providers has
sign of their commitment to stay in Turkey and grow in the increased only marginally. Large players providing value
surrounding regions. added services are leading the market, with revenue gains of
more than US$100 m. There is still room for growth, though,
Fierce competition exists and is on the rise in the market, for 3PLs which are able to market their extended services
both between domestic and international logistics service more effectively. According to forecasts about the sector,
providers and within each group. Consequently, all logistics 3PLs will focus their efforts on structuring and public relations
companies have tried to differentiate themselves by offering activities in the near-term.109 Outsourcing is expected to
different and extended services to their customers. Quality continue.
improvements in logistics services and constantly rising
service standards were the results. The logistics industry The markets for CEP and 3PL services are not yet saturated
in Turkey has already developed significantly past the and both segments are likely to extend the range of local
point where logistics is regarded as mere transportation. service offerings significantly by 2030. Turkey has a great
The market has acknowledged that logistics management deal of potential with its young population and its dynamic
can deal with all aspects of the supply chain, including market conditions. Traditional consumer behaviours which
packaging, labelling, recycling, warehousing etc. Leading rely upon using the national post office seem to be changing
domestic logistics companies such as Omsan, Horoz, as CEP services become available countrywide.
PricewaterhouseCoopers 45
Opportunities
Emerging markets provide outstanding countries. Naturally some opportunities will also be of interest
for all logistics service providers operating in the relevant
opportunities for logistics service providers,
markets.
both in terms of overall growth rates and in
response to rapidly changing market trends. It is important to highlight that the ‘opportunity radar’ is the
subjective outcome of several future workshops, based on
This chapter looks at some promising future opportunities the scenarios described in previous chapters. The radar is
for companies operating in emerging markets. We present designed to provide a pragmatic, but creative perspective
opportunities in the areas of ‘Products & Services’, into the future. In order to provide a tool which supports
‘Positioning & Strategy’, ‘Research & Education’ and decision-making, the radar presents opportunities with
‘Organisation & Processes’. Some of the opportunities different degrees of innovativeness. While some of them are
presented may be most attractive to logistics service almost near implementation, others remain visions by current
providers from emerging countries, while others might be standards.
more relevant for logistics service providers from developed
Figure 3
Opportunity Radar
y R es ea
S tr a t e g rch
&
in g& Ed
uc
ion ati
s it on
Po Development of rural Establishment of research
areas cultures
Or
Cross-border
ga
innovators
ce
providers to shape
ni s
ati
Se
Transfer of CCOO
on
low-tech
Consolidation
s&
technologies Avatar
Strong cooperation
&P
scout processing
4PL 2.0 between logistics actors
uc t
Pictogram-based
Reverse CSR guard
logistics language
s se s
PricewaterhouseCoopers 47
Products & Services
Social network broker networks, providing small logistics service providers with
Professional social network brokers (SNB) could assist jobs which they might not have received without the 4PL’s
in ‘getting to know the right people’. Social networks support and activity in the logistics market. Companies
and personal contacts will continue to be crucial in doing benefit from 4PLs’ extensive networks and experience, which
business successfully in the future. Foreign companies which will help them select for the best logistics service solution for
aim to enter an emerging market could contact SNBs and each individual customer.
share their ideas on future business plans in the respective
Customs in country of origin (CCOO)
emerging countries. In turn, SNBs will arrange and initiate the
When quickly perishable cut-flowers have to be transported
first contact between the new market entrants and relevant
for several thousand kilometres around the globe there is no
individuals in the emerging country.
time to waste at customs desks. Thus, when cut flowers are
Barter trade specialist transported from the Netherlands to Japan, for example, a
Barter trade will probably not represent the most prevalent Japanese customs officer conducts all the required customs
financing mode for emerging and least developed countries. procedures in the Netherlands so that the flowers can be
However, there is good reason to believe that barter trade imported into Japan without any delays. In this system,
could still offer great opportunities for doing business in customs procedures are conducted in the country of origin.
emerging markets. This concept could be transferred to other industries in
emerging countries as well. In many emerging countries,
Companies which position themselves as ‘barter trade
companies report problems with customs handling and
specialists’ could help to make this form of trade more
complain about time consuming and annoying customs
effective and efficient. Barter trade specialists assist in
procedures. Efficiency improvements could be realised if
evaluating the articles of exchange and structuring the
corresponding procedures are already completed in the
exchange. Countries and companies active in barter trade
exporting country, eliminating the need to queue at the
often appreciate the additional levels of security implicit in
customs counter of the country into which products are
such transactions. While conventional, cash-based trade
to be imported. The accelerated customs clearance could
often includes some uncertainty as to whether the counter-
reduce costs of employed capital as high-value goods and
party is able to pay, exchanging parties in barter trade are
assets would be moved faster between countries. In order to
often better able to evaluate the availability of the agreed
achieve such improvements, participating countries will need
barter product.
to negotiate new agreements regarding customs procedures.
Consolidation scout
Collaboration of logistics service providers to shape new
Consolidation scouts could develop an attractive business
transport corridors
opportunity in emerging countries. They could use their
The design and shape of new trade corridors will be
experience and knowledge about the logistics markets in
strongly affected by the new players actively using them.
specific emerging countries and assist in identifying potential
Logistics service providers should work closely together in
acquisition targets for companies aiming at growth through
order to shape those new transport corridors, i.e. identify
mergers and acquisitions. Consolidation scouts would check
future transport corridors, seek ways to build up required
not only financial situations and product portfolios, but would
infrastructures, actively contribute to their establishment
also assess cultural fit, distribution networks, and strategies
and develop services which are optimised for transportation
in order to spot optimal acquisition targets. Consolidation
activities taking place in those corridors.
scouts might also serve as advocates for the deal, once they
have identified a suitable M&A partner. Development of rural areas
In the past, logistics service providers in emerging countries
4PL 2.0
have strongly focused their activities on urban areas leaving
Fourth-party logistics service providers (4PL) coordinate and
rural areas comparatively underdeveloped. Appreciable
manage delivery or supply networks to achieve efficient,
growth potential in rural areas looks likely, though. Logistics
agile networks and support other service providers. Such
service providers which extend their activities to those areas
companies could play an important role in emerging
and establish effective distribution networks within them
markets, where they could help to increase currently low
could realise first-mover advantages. By opening up these
levels of efficiency. 4PL 2.0 would provide a facilitating
new markets, logistics service providers could successfully
role in fragmented markets, as they offer a service portfolio
contribute to the design of new supply and procurement
based on the combination of logistics services provided by
markets.
sub-contracted logistics service providers. 4PL 2.0 would
incorporate even the smallest logistics service providers and
their service offerings within an emerging market into their
PricewaterhouseCoopers 49
Research & Education
Managerial accounting and performance measurement continue and could support new areas of application, such
Many logistics processes in emerging countries are rather as the use of mobile phones as simple tracking and tracing
inefficient today. In many emerging countries, logistics costs devices. For example, truck drivers could be localised via
represent a much higher proportion of overall GDP than their mobile phones which would give information about
in developed nations. Advanced managerial accounting the location of the transported goods and products. Using
and performance measurement processes could assist in established and widely-used technologies such as mobile
better understanding cost drivers in logistics processes phones would lessen the requirement to install cost-intensive
and becoming more efficient. Activity-based costing, KPI tracking and tracing systems.
reporting or the application of internal transfer prices are just
CSR guard
some examples of accounting processes which could help
Many companies are increasingly aiming to operate in a
in better analysing and managing logistics processes and
responsible way and are highlighting their CSR activities,
thereby reducing costs.
often as part of a strategy to protect and build valuable
Second hand technologies for emerging markets brands. Achieving real sustainability usually means
Instead of investing into new and cutting-edge logistics monitoring the activities of supply chain partners as well,
technologies, a market for second hand logistics however many companies report challenges around
technologies could enable logistics service providers in monitoring the extent to which supply chain partners
emerging markets to acquire technologies which represent are also complying with CSR guidelines. This difficulty is
good value for money. Today, numerous projects in emerging especially acute when suppliers are located in other regions.
countries are being put “on-hold” as necessary technologies Many LSPs already have a core competency in connecting
cannot be financed. The acquisition of expensive IT systems companies across the supply chain. They may be able to
is another major problem for logistics service providers in leverage valuable knowledge about partners’ activities and
emerging countries. Opportunities to purchase second hand develop service offerings which would monitor whether
technologies for lower prices could be a valuable lever to supply chain partners stick to CSR related agreements.
attract required investments.
Pictogram-based logistics language
Logistics service providers which operate in both developed Pictograms are already in use for traffic planning and
as well as emerging markets could use their market regulation in some countries (e.g. Japan). These easy to
knowledge to function as a broker. They could facilitate understand ‘pictures’ can be interpreted by individuals
contacts between companies willing to sell and those willing regardless of reading and writing skills or language. A
to purchase used technologies. similar concept could be transferred to the logistics industry
and help to improve logistics processes. A standardised,
Logistics honey bee network
pictogram-based logistics language would simplify logistics
The original honey bee network is an organisation founded in
processes between regions or countries in which different
India made up of like-minded individuals, innovators, farmers,
languages are spoken, overcoming language barriers.
scholars, academicians, policy makers, entrepreneurs and
Moreover, a pictogram-based logistics language would not
non-governmental organisations (NGOs). It functions on the
only be interpretable by human beings, but also by machines
premise that members exchange knowledge and innovative
and computers. Implementing such a language could
ideas in a fair and just way. The goal thereby is to establish
help companies realise higher degrees of automation and
a sustainable knowledge sharing organisation in which each
compatibility between different systems.
member benefits from other members’ ideas and skills. In
the past, numerous innovations have been realised within Avatar processing
the network which are used by a large number of network Artificial intelligence has become an essential part of the
members today. Similar networks could be established computer science and technology industry over the last
for logistics industries in emerging markets. Within these decade. In the future, artificial intelligence could also find its
networks, logistics service providers could share innovative way into the transport and logistics industry. Thus, intelligent
ideas, best practices and knowledge in order to improve their machines could control different avatars which take over
logistics industries. various assignments related to logistics processes and
replace the necessity for human beings to make decisions.
Mobile tracking and tracing
Furthermore, these intelligent machines could potentially
The usage of mobile phones is well-established in certain
manage the planning, scheduling and controlling of logistics
emerging markets, with coverage rates in some cases
processes.
exceeding those of developed markets. This trend is likely to
PricewaterhouseCoopers 51
Methodology
RealTime Delphi Innovation interesting and comfortable for the surveyed experts. Using
this technique, much of the analysis of the data results can
Our global thought leadership programme “Transportation & also be automated.
Logistics 2030” employs a future methodology known as the
Delphi technique. A new innovation of the Delphi technique Based on extensive desk research, expert consultations
developed by the Supply Chain Management Institute (SMI) and workshop sessions, PwC and SMI developed 16 key
of the EBS Business School was applied with significant Delphi projections for the future of emerging markets (see
advantages for both surveyed experts and the monitoring overview of theses p. 57). Invited experts were asked to rate
team. the theses‘ probability of occurrence (0-100%), the impact
on T&L if occurred (5-point-Likert scale) and the desirability
The classic Delphi technique was developed at U.S. RAND (5-point-Likert scale) as well as to provide (optional)
Corporation in the 1950s in order to overcome general reasons for all answers. After the first round, answers for a
group inefficiencies, such as bandwagon, underdog and projection had been given, the statistical group opinion of all
halo effects, and to systematically develop expert opinion participants was calculated immediately and visualised in a
consensus concerning future developments and events. The second round screen (see Figure 4).
usual Delphi forecasting procedure takes place in the form
of an anonymous, written, multi-stage survey process, where The final results of the RealTime Delphi survey formed
feedback of group opinion is provided after each round. We the framework for the opportunity analysis. Further expert
designed our Delphi as an Internet-based, almost RealTime workshops drew upon the extensive qualitative survey data
survey that increases the validity of results by streamlining and desk research to develop a nuanced view of future
the classical procedure and making the whole process more trends.
Figure 4
RealTime
Delphi screen
PricewaterhouseCoopers 53
The objective of Delphi studies is not to obtain a
representative sample of a population, as with most
conventional surveys. Rather, Delphi research aims for a
high inclusion of expertise. Our panel included a significant
number of experts from business, mainly C-level executives
and decision makers from global companies. Key selection
criteria for our selection of RealTime Delphi participants were
industry and educational background and work experience,
as well as function in and outside the organisation.
2
23 7
Figure 5 5
29
Segmentation
of Delphi
56
experts Logistics
11 13 Shipping
Academics Railways
Industry Aviation
Politics and Associations Other
Represented countries: Algeria, Australia, Austria, Belgium, Brazil, Canada, China, Cyprus, Denmark, France, Germany, Jordan, India, Italy, Malaysia, Mexico,
Netherlands, New Zealand, Panama, Russia, Singapore, South Africa, South Korea, Spain, Taiwan, Turkey, Uruguay, United States of America.
PricewaterhouseCoopers 55
Figure 7
Response behaviour of Delphi panellists
80%
70%
Estimated Probability
60%
50%
Developed
40%
Countries
30%
20% Emerging
Countries
10%
0%
T1 T2 T3 T4 T5 T6 T7 T8 T9 T10 T11 T12 T13 T14 T15 T16
Theses
A group comparison of future estimations from developed showing a row of univariate numerical data (e.g. from 0 to
and emerging countries did not reveal any significant 100%) as well as several characteristics of the series of
differences (see Figure 7). This result can be considered data (e.g. median, distribution, outliers). In addition to the
a good indicator for our panel’s expertise since experts statistical group opinion, the comments and arguments –
were able to provide an objective assessment on the future already submitted by the experts for each projection – could
regardless of whether they were from emerging or developed be reviewed. After conclusion of a full survey cycle, i.e.
countries. first and second round screens of all theses, a consensus
portal was activated which gave an overview over the
The Delphi process was very dynamic. During the survey current divergences from the group. From this point on, the
process of 8 weeks each participant took part on average in respondent could access each thesis separately at any time
2.1 Delphi rounds, i.e. first and second round per thesis as until closure of the portal in order to check for updates and
well as 1.1 further logins for revision purposes. The maximum to revise own estimates. The group discussion came up with
number of rounds measured was 7. The statistical group 840 written arguments equaling 9.3 comments per expert
opinion per thesis was provided in form of a box plot, also on average. The large number of comments underlines the
known as a “box-and-whisker plot”. It represents a diagram quality of the data.
The establishment of free trade zones has fostered strong economic growth in emerging
2 66% 20 3.9 3.8
markets.
Social networks and personal contacts (e.g. Blat in Russia and Guanxi in China) have become
3 56% 20 3.4 2.5
key determinants of the supply chain structures in emerging markets.
Privatisation of state-owned transport organisations has reduced the role of government from
4 57% 20 3.9 3.8
major player to ‘watchdog’ in emerging markets.
The transport and logistics industry has become a focus area for (foreign direct) investment in
5 65% 12 4.0 4.0
the emerging markets.
Major infrastructure projects between emerging markets and least developed countries are
6 44% 30 3.2 2.8
primarily realised via barter trade (i.e. swaps of goods and services rather than cash).
Global trade flows have shifted such that new transportation corridors between emerging
7 69% 20 4.0 3.9
countries and least developed countries have been established.
Logistics service providers in emerging countries have strongly increased their depth of added
8 73% 10 4.0 4.0
value (i.e. they offer value-added services such as packaging, labelling, mounting).
Multinational logistics service providers have entered the domestic logistics markets in emerging
9 75% 10 3.9 3.7
countries.
Logistics service providers from emerging countries have gained significant market share in
10 37.6 20 3.4 3.2
developed countries.
The logistics service industry in emerging countries has undergone a strong process of
11 67% 20 3.8 3.7
consolidation.
Promising career perspectives in emerging countries have attracted large numbers of skilled
12 59% 20 3.6 3.4
logistics professionals from developed countries.
The CEP market (Courier. Express. Parcel) in emerging countries has experienced the highest
13 63% 25 3.6 3.3
growth rate in the logistics industry.
Low-tech logistics solutions from emerging countries have flooded the markets in developed
14 36% 27 3.4 2.2
countries.
Domestic logistics service providers in emerging markets have significantly increased the level of
15 67% 20 3.9 3.9
automation in their logistics processes.
The centres of gravity in transport and logistics (e.g. innovations, technology, headquarters and
16 53% 25 3.8 3.2
standards) have shifted to emerging markets.
PricewaterhouseCoopers 57
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indiatimes.com/articleshow/5308874.cms html
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