Comparing the Logistics Hubs of Worldwide Markets - Research Paper Example

Comparing the logistics hubs of worldwide markets (Singapore, Dubai, HK, Amsterdam, NY etc.) Contents Abstract 2 Keywords 2 Introduction 3 Background 4 Literature review and industry scan 5 Research problem/issue/objectives 10 Research methodologies 10 Analysis 11 Managerial implications 15 Conclusion 16 References  18 Abstract Singapore, Hong Kong, Dubai, New York and Amsterdam are the leading logistic hubs which are the key players in the logistics industry throughout the world. The research report is aimed at analyzing the various dynamics of the global logistics industry and the major logistic hubs functioning in this sector. The impact of globalization and new technological innovations are considered for the study. The macro and micro level factors influencing the performance of the industry are also studied in depth. The potential for logistic hubs are studied, gaps in the logistic system are identified and recommended measures are suggested. The various trend and innovations in the logistic industry are considered in this report and suitable recommendation is given as to the strategies that the logistic hubs should take up to maintain their position in the fast evolving logistics industry. Keywords The following keywords are used: logistics management, globalization, logistic hubs, logistics technologies, outsourcing. Introduction The advent of globalization, innovations in technology, mergers and acquisitions, consolidations and the boom of outsourcing have led to a huge growth in the logistics industry throughout the world. The logistics service providers are designing and implementing new services and capabilities to meet the new demands and expectations of the customers. With the evolution of a sophisticated logistics framework, the major logistics hubs in countries like Singapore, Hong Kong and New York are focusing on strategic approaches based on information rather than on the goods oriented commoditized approach. The customers are looking for all the services integrated in one point so as to avoid the complexities of involving a number of parties across the supply chain process. A single point of contact is preferred in today’s logistics market. The logistics market all around the globe has started adopting new models and new technologies to address the changing requirements of the market. The models are based on the levels of assets, collaborations, Information technology capabilities, and the scope of the services offered across the supply chain. The logistics model has evolved to a specialized function to fourth party logistics and Fifth party logistics. The third party logistics model has added capabilities and integration of the different operations in their model. The first party logistics and the second party logistics handle the storage of the assets. Thus, they have higher asset intensity levels and lower barriers of entry. The fourth party logistics is an integrating model that puts together all the capabilities, resources and technologies to design and implement an enhanced supply chain service. The factors that create highest opportunity for the logistics service providers are as follows: management of complex supply chains, comparatively high value products, increased spending on logistics processes, decentralized logistics management, time sensitivity of the supply chain process and logistics management across multiple modes. The status of the logistics industry has considerably improved over the last few years. This improvement has been done due to the proper recognition of the following factors impacting the industry: High level of competition for both the users and the service providers which drives the continuous improvement in the operations. Increase in logistics opportunities and costs driving huge savings. Innovation in operational processes such as total quality management (TQM), just in time (JIT), time compression, flexible processes etc. (Carlson, 1989, p. 315). Growing need for adopting new technologies in order to identify and track goods. Background The logistics industry has evolved from simple distribution management in the 1970s to integrated logistics management in the 1980s and to supply chain management in 1990s. As the changes took place worldwide, the focus of logistics shifted from attaining share in the market to a more customer centric approach. Logistics comprising of air, land and sea transport is a potential growing market throughout the world. The logistics cost of the world can be estimated at around $3.5 trillion per year. The global logistics industry is growing at a rate of 4-10% every year and is valued at more than $320 billion per year. The global logistics market has evolved using sophisticated technologies and strategies over the years. The range of services offered varies from individual transportation solutions to integrated and customized logistics and supply chain management solutions (Chen, 2004, p.150). With the process of outsourcing accelerating at a high growth rate, the global logistics industry has tremendous potential for continuous growth. The global logistics market grew to $1040.6 billion in 2012 from a value of $804.76 in 2007. The dominant part of the global logistics industry is the retail logistics services which accounts for almost 64% of the markets value. The United States of America is the greatest player in the global logistic market forming almost 35% of the global logistics industry value (The International Transport Forum, 2009). The customers have become more sensitive towards the value derived from the services. This has increased the level of competition among the logistics service providers which continuously strive to achieve operational excellence and provide maximum value to the customers. The process of evolution of the logistics industry is critically driven by the aim at reducing the costs incurred in the logistics process (Christopher, 2010, p. 15). The companies are trying to bring about a decrease in the costs by improving the logistics infrastructure and ensuring the quick and easy movement of goods as well as information. Also, the need for improved management practices and new technologies is essential for the companies to survive in the changing market conditions (Christopher, 1992, p.62). Literature review and industry scan Singapore, Hong Kong, Dubai, New York and Amsterdam are considered as the major and leading logistic hubs around the globe. Several leading organizations around the globe are trying to capitalize on the potential opportunities that have been developed due to globalization and advanced technology. The leading global organizations are trying to expand their business operations and practices in international market in order to achieve several potential competitive advantages. It is highly important for an organization to respond effectively to the market demand that is developed around the globe in order to attain significant market share growth rate. However, the governments of several developed and developing countries are trying to adopt and introduce different policies for the logistics and supply chain management agencies and organizations in order to maintain competitive advantages. Logistic activities in Hong Kong increased significantly in recent years. This city is known for its high export activities. Significant and favorable strategic location of Hong Kong made the city heart of Entire Asia. China is known as one of the fastest growing consumer market. Now-a-days, several leading multinational organizations are trying to enter in potential Chinese market as the government of the country is supporting and encouraging these organizations to enter and start business practices in China. Recently, the number of manufacturing and retail chain business units is significantly increasing in China. It is important for the organizations to maintain effective logistics and supply chain networks in order to bring efficiency in the supply chain process. Large and appropriate number of logistic hubs is required in a developing country in order to maintain effective economic growth rate. It is true that service industry is achieving significant growth rate due to growing market demand of the global business clients and customers for differentiated products or services. Effective and quick logistics supply chain network ensures significant business performances of several countries. Several leading organizations, such as Dell, Avaya, Panasonic and Siemens highly focus on strong supply chain network rather than other business activities. Asian countries are achieving significant economic growth rate in recent years. It is impressive to know that the recent financial crisis and economic recession has limited impact on the economic environment of several developing countries, such as Singapore and China. Government of these countries is trying to increase the networks of logistic hubs due to growing market demand. In addition to this, several leading countries are focusing on entering these emerging Asian markets due to significant availability of effective business operation resources. On the other hand, the logistics and supply chain operation in western countries are getting affected due to several external environmental issues and challenges. United States of America is known as the most economically developed country. It is true that several leading organizations in US are trying to enter in the potential Asian market. New York and Amsterdam have the most leading and largest logistic hubs. According to Steffi (2012), the industrial revolution during the First and Second World War motivated the governments of Switzerland and United States of America to increase the numbers and network of logistic hubs in order to attain economic sustainability (Steffi, 2012, p.92). Change Airport is considered as one of the leading logistics hubs in Singapore. The government of Singapore ensured world class infrastructure and effective logistics and supply chain capabilities that can influence the organization to enter into the country. Singapore is known as one state and one country (Manners-Bell, 2013, p.143). The organizations generally focus on those international markets in which they can have access to the technologically advanced countries. Mainly there are two types of logistics hubs, such as airport logistics hubs and port logistics hubs. Leading retail chains in this world focus on ship or port logistics as the organization can make a large shipment in low operating cost comparing to other modes. The current scale of operation in Dubai is also increasing. Dubai is known as the capital and one of the largest business hubs of United Arab Emirates. Dubai market is also known as one of the emerging business markets among the global organizations. Dubai is focusing on International Airport Logistics and cargo services. The country is also trying to make Dubai International Airport as Asia’s largest logistic hubs in order to foster economic growth. The country already has a positive economic growth as the country is significantly enriches with petroleum and crude oil. According to Sole (2010), this advanced logistics and supply chain hubs are influencing the leading global organizations. The country developed an advanced logistics city to provide value added services to the global organizations (Sole, 2010, p.255). According to the views of the macroeconomic groups of PWC, the emerging market logistics players cannot rule the world for all the times. The emerging market players are dubiously dominating the developed markets. According to a report of PWC on the emergence and extension of logistics hubs, it can be stated that the emerging global logistics players will try to develop market share and competencies in more attractive way in several potential emerging markets (PWC, 2010, p.9). It will help them to provide competitive advantages. Governments of several nations are trying to develop several policies for the organizations that have significant access to the global logistics and supply chain networks. It is true that the leading multinational and several domestic organizations are trying to implement aggressive strategies to reduce the business operation cost. It is highly important for an organization to maintain sustainability in the logistics and supply chain operation to avoid several types of legal and environmental challenges. In addition to this, the governments and several public agencies are trying to maintain the environmental, social and economic sustainability in the business hubs as it is important for the government of a country to influence several leading manufacturing and distributing organizations around the globe to enter in the market (Dickens, 2007, p.39). It is true that several organizations are trying to maintain effective corporate governance, business ethics and sustainability in the business operation processes in order to motivate global stakeholders and business clients. Economic and environmental sustainability become most important aspects in the global logistics and supply chain industry. Governments of several countries try to reduce the percentage of carbon emission level in the logistics hubs to maintain environmental sustainability. In addition to this, several agencies are implementing advanced technologies in several logistics hubs to give effective and value added services to the business clients. The supply chain networks of the entire world are changing. It is true that the new trade corridors are becoming visible to the organization. In addition to this, the number of emerging business markets is increasing significantly. Therefore, the organizations and agencies within this logistics hub industry can get significant opportunities to achieve sustainable growth rate. In addition to this, the global logistics agencies are trying to implement environment and society friendly business operation strategies in the logistics hubs in order to minimize the possibilities of external environmental threats. According to Bookbinder (2012), it is highly important for an organization to develop strong research and development center that can help them to identify potential opportunities in this particular industry (Bookbinder, 2012, p.382). In addition to this, government of different countries around the globe should try to support the agencies to increase the number of logistic hubs. Moreover, the global multinational organizations need to be influenced by the governments in respective countries as it will help the countries to gain significant economic growth rate. It is true that emergence of logistics hub industry can improve logistics and supply chain activities of several manufacturing and distributing organizations. Research problem/issue/objectives The primary objective of the research is to compare the logistics hubs in the worldwide markets. The other objectives for the research include an analysis of the global logistics market, the major trends in the industry, potential of the market, an analysis of the future prospects of the industry, competitive analysis and an evaluation of the macro and micro economic factors affecting the global logistics industry. A study of the different logistic hubs across the globe like Singapore, Hong Kong, New York, Dubai and Amsterdam is done. The report contains an overview of the logistics and supply chain industry operating across the globe, the effects of consolidations and alliances on the logistics industry and the various dynamics existing and emerging in the logistics sector. Research methodologies The primary research methodology used for the report is secondary research done with the aid of books, journals and government websites. Other sources used for the research are published market research reports, the internet, country information, directories and news sources. An extensive use of qualitative research methodology is done for the report. This study is based on a multifaceted analysis of the importance of emerging markets for the Transportation & Logistics industry. An extensive desk research is done to evaluate the various dynamics and trends of the industry. The research methodology starts with the identification of the research objectives. Then a comprehensive literature review and industry analysis is done followed by the interpretation of the findings and the analysis. The methodology ends with presenting a suitable conclusion and recommendation for the logistic service providers to gain a strong foothold in the evolving global scenario. The qualitative research method is used to find out the systematic investigation of the quantitative phenomenon. Analysis The logistics industry has become a critical part of the service provider market. The top players in the logistics market are UPS, FedEx, DHL, TNT Post Group, Nippon Express and Expeditors. As a result of the world trade developments, new trade opportunities are opening up which are likely to reshape the global logistic process. Trade corridors are opening between Asia, South America and Africa causing a linkage between the major logistics hubs in Hong Kong, Dubai and New York (Deloitte Touché Consulting, 2012). The trade volumes are moving towards the emerging markets as Hong Kong logistic hub proves to be a very critical and major player in the logistics industry. The creations of free trade zones in these countries have attracted foreign direct investment flows into the economies and this has fostered the economic growth of these countries. Singapore and Hong Kong have emerged as vital industrialized economies of the world. The key criteria needed for the success of an integrated hub are: efficient logistics infrastructure, strategic location, ability to deliver value added services, world class ports, being established as a major business hub, reasonable operating costs and presence of multi modal transport facilities, government support and financial resources (Clemons, 1993, p.9-35). All of these factors have been found in the logistics hubs of Singapore, Dubai, Hong Kong, Amsterdam and New York making them the major established logistic hubs in the world. Various micro and macro environmental analysis are done for different logistic hubs throughout the world to understand the key factors influencing the global logistics scenario. A SWOT analysis of the Hong Kong logistic hub industry can be done as follows: Strengths: The major strengths are the use of world class technology, strong government support, effective overseas sales contacts, simple tax system, strong technological and financial support, transparent legal system, excellent connectivity and efficient customs services. Weaknesses: The high cost of operations, pricing pressures and lack of joint ventures and partnerships are the weaknesses in this industry. Opportunities: The major opportunities are globalization, a stable political environment, increased logistic demands and collaborative ventures and alliances. Threats: The major threats for this industry are the huge competition levels, environmental issues, new labor laws, difficult labor supply and the rising values. Another threat is that the industry is still an unorganized sector. The logistics industry accounts for almost 18% of the total global carbon dioxide emission. The PESTL Analysis for the Hong Kong logistics market is done to analyze the different macro environmental factors affecting the market. Political: The government is strongly supportive of the functioning of the logistics hubs. The tariffs and excise duties for borders are changing. The government encourages the improvement of local human resources for the service sectors (Pierre, 2013). Economic: The logistics cost per year in any country varies from 9% to 20% of the GDP of the country (The World Bank, 2007).The government provides extensive financial support like investment subsidies and preferential tax rates. The exchange rates and the risk of demand also play an influential role in the logistics industry. The high growth rate of the economy is also a key driving factor for the logistic hub. Social: The logistics sector has to take particular care to adhere to the social and environmental standards. It is advised for the service providers to reduce the emission of harmful gases. Technology: Technology plays a critical role in the logistics industry. The industry is majorly driven by new technologies like Just in Time. The main themes of the use of information technology in logistics are: communications technology, integration, flexibility and Electronic Data Interchange (EDI). The logistic hub in Hong Kong implements advanced technological support where fund transfers can be done in few seconds. Legal: Legal permits are essential to transport goods across states and countries. The legal system acts as a valuable resource for the industry. The tax rate system is low and easy compared to other countries. Shenzhen is a special economic zone which enjoys the benefit of a 15% corporate tax. The logistics industry has to continuously formulate strategies, create operational excellence and use information technology to create and deliver maximum value for the customers. The advent of globalization and the continuous innovations in technology have accelerated the growth of the logistics services market and this industry is likely to evolve more in the coming years (Ballot, 2004, p.57). According to the analysis by researchers, the following interrelated factors will critically impact the functions of the major logistic hubs in the world like the Hong Kong, Dubai, New York, Singapore and Amsterdam logistic hubs over the coming few years. Mergers and acquisitions have played a critical role in the development of these logistics hubs spread across the globe. Technological advancements - New advancements and rapid innovation in the logistics management technology like RFID enabler is likely to increase the range of functionality and the performance level of the logistics service providers throughout the world (Kirsten, 2010, p.5). Globalization and consolidation- An increased number of mergers and acquisitions of firms throughout the industry is boosting the formation of service providers capable of providing a single point of contact to deliver all the services involved in a supply chain process. The globalization of logistics businesses is creating the need for addressing new concerns like international trade, market expansion and different sources of supply. Security and risk management- Maintaining security and effectively managing risk is a key concern for the logistics industry. The critical factors driving these measures are weather conditions, diseases, terrorist attacks, labor issues etc. Increased outsourcing- Logistics outsourcing is gaining popularity all across the world. Businesses are implementing outsourcing to increase the flexibility and the performance of the supply chain. Companies are focusing more on utilizing competencies to deal with the increasing complexity of the supply chain processes. The logistics challenges in the future for these major hubs under discussion are to sustain their development in the industry where there are a number of emerging logistic hubs and optimally use foreign direct investments as well as the market opportunities to maintain their strength in the industry. Though the logistics hubs in major countries like Hong Kong, New York, Singapore and Dubai are the most established logistics hubs still they are likely to face competition from the emerging hubs in the global logistics market (PricewaterhouseCoopers, 2013). Also, these hubs are facing challenges created from the major shifts evolving in the global logistics industry. Managerial implications The main focus in the evolving logistics industry is the reduction in the costs incurred in the entire logistics process (Balsa, 1965, p.99-123). The company should formulate effective strategies to reduce the costs and increase the value creation for the customers to maintain competitive advantage over the other players in the industry. The analysis of the industry indicates that the companies should move towards implementing higher value added services to enhance their growth. Also, in the current global environment, the best way to survive in the industry is to optimize the operations involved in the business processes. The management of the logistic service providing companies should also look for mergers and acquisitions as an effective strategy to strengthen their position in the market. The logistics community would be further enriched by the global partnerships and alliances between different firms in the industry. The companies should adopt and implement the latest technological innovations in their operational processes to increase the performance level and to provide maximum benefits to the customers (Clinton, 1997, p.192). Conclusion The world scenario for logistics and supply chain management is rapidly changing. The industry is identifying new trade opportunities and the logistic service providers should capitalize on these opportunities to maximize their benefits from the process of global trade evolution. With the growth of emerging markets, a number of opportunities are opened up for the logistics service providers of all capabilities. The logistic companies should implement effective strategies for managerial accounting systems, diversity management, corporate social responsibility practices and the use of key performance indicators. The use of these strategies would help the companies to capture the developed as well as the emerging markets. The logistic service providers should develop specific strategies to capture suitable target markets. The companies also need to closely monitor the government regulations like foreign direct investments, establishment and maintenance of free trade zones, customs procedures, emerging requirements for sustainability etc. which dominate the diverse markets in which the businesses operate. The logistic companies can increase their market competitiveness by decreasing the costs incurred in the whole chain. In the recent past, the logistics industry has seen a paradigm shift in the range of services offered as the major logistics service providers in the market have shifted from being single service providers to implementing the total logistic solution in their services range. This has created a new dimension in the synergy of services which has enabled the service providers to offer more benefits to the customers at comparatively lower rates. In the current scenario, the companies also aim to diversify their service range so that they can minimize the risks caused by unpredictable factors in the business like weather conditions and exchange rate fluctuations. To maintain sustainable competitive advantage, the companies should ensure streamlining their operations with the changing market conditions and demands of the customers. The companies that will be able to embrace the changes and take up the opportunities are likely to survive strongly in the transforming global logistics industry. References  Ballot, R. 2004. Business Logistics/Supply Chain Management. New Jersey: Pearson Prentice Hall. Balsa, B. 1965. Trade liberalization and revealed comparative advantage. The Manchester School of Economic and Social Studies. Vol. 33 No.2, pp.99-123. Boobkbinder, J., 2012. Global Logistics. New York: Springer. Carlson, J.G., 1989. JIT applications to warehousing operations. 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