Asia contract logistics market to overtake N. America in 5 years

Asia - Asia's contract logistics market is set to overtake North America's in the next five years, driven by increased sourcing as well as growing trade within Asia.

Contract logistics, which comprises service parts logistics and distribution, is set to skyrocket in the next few years, opening up opportunities for third-party logistics (3PL) players worldwide.

In an interview with ProcurementAsia, Craig Foster, vice president of contract logistics at UPS, said Asia is poised to overtake the North American contract logistics market in the next five years, citing market intelligence figures.

The global contract logistics market is forecast to hit US$240.1 billion in 2008 with a compounded annual growth rate (CAGR) of 8.1% through to 2011, to reach US$303.7 billion.

In comparison, the Asia Pacific contract logistics market is forecasted for 2008 at US$67.8 billion with a CAGR of 11.3 through to 2011 to reach US$93.4 billion. The region accounts for 27.4% of the global market in 2007, lagging only slightly behind North America, which accounts for 28.8%. Western Europe accounts for 39.5% of the market, the largest share to date.

While the contract logistics market is set to skyrocket with incoming trade from the west, Foster believes a global provider should have strong intra-Asia services as well.

This is important as a weakening US dollar has catalysed more trade within Asia, he said, noting that India's top import and export partners included China and Singapore, while China's top import and export partners are Japan, South Korea and Taiwan.

Foster however cautioned 3PLs looking to capitalise on opportunities in this sector should be warned that they are dealing with a highly fragmented market, and that specialised services for different markets should be favoured over a blanket service for all of Asia.

According to him, UPS has rolled out different expansion plans for different parts of Asia, according to the capabilities of that market. Some of the overriding plans for UPS contract logistics include expanding the number of existing field stocking locations (FSL) to have greater reach in the first-, second- and third-tier markets, complementing the FSL by growing the number of existing pick up and drop off locations that pan India and China, and expanding the final mile delivery network and capabilities.

The company did not disclose figures, but said investments into the region would be channelled into hiring and developing staff for last mile service, developing facilities and technology.