global and regional transport & logistics challenges and ...the logistics industry entered a...

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Global and Regional Transport & Logistics –Challenges and Opportunities

Dr. Ulrich Koegler, Vice President

Doha, October 19th, 2011 Conference Presentation

111019 Booz - GCC Rail Conference - Global and Regional T+L vf.ppt Prepared for GCC Transport and Rail ConferenceBooz & Company

19 October 2011

Global and Regional Transport + Logistics Markets – Trends

Logistics Platforms – Four Paradigms for Success

Customer’s Supply Chain Needs

In Summary

1

Prepared for GCC Transport and Rail Conference111019 Booz - GCC Rail Conference - Global and Regional T+L vf.ppt

Until 2020, strong growth of economic activity is expected on a global scale - most strongest in Asia-Pacific

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19 October 2011

GDP DevelopmentIn billion real 2005 US$

Considerations

Asia-Pacific remains the engine of

global GDP growth throughout this

decade and by 2015 the region will

become the largest economic zone in

terms of GDP slightly ahead of Europe

Middle East is also expected to

continue its strong growth path only

slightly below the Asia-Pacific growth

rates clearly maintaining its share of

about 2% of global GDP throughout

the decade

CAGR

2010-2020

5.1%

4.5%

4.6%

2.2%

4.4%

2.8%

Note: Does not take into account recent developments such as Eurozone-Crisis and assumes stable economic development

Source: Global Insight, Booz & Company analysis

Asia-Pacific

+3.0%

North America

Latin America

Europe

Africa

Middle East

2020

70,639

2015

59,726

2010

50,060

2000 2005

44,814

39,145

Market and Demand Structure

2


Specifically, Asia-Pacific is expected to expand its role as a leading manufacturing region throughout this decade

Value Added by Industry and Region 2010Billion Current US$

100%

North America

2,587782

Latin America

1,117

Europe

3,120

Asia-Pacific

10,605

Africa

239

Middle East

100%

North America

3,916

Middle East

1,718

Latin America

2,594

Europe

5,613

Asia-Pacific

31,489

Africa

463

Value Added by Industry and Region 2020Billion Current US$

Coal Mining

Oil & Gas Mining

Mining of Metals & Quarry

Food and Beverages

Tobacco Products

Textiles & Apparel

Wood Products

Paper and Pulp

Printing and Publishing

Refined Petroleum, Coke & Nuclear

Chemicals

Pharma

Rubber & Plastics Products

Mineral-based Products

Basic Metals & Fabricated Metals

Machinery, Equipment, Appliances

Electrical Industries

Motor Vehicles, Trailers & Parts

Transport Equipment (excluding Motor Vehicles)

Furniture, Jewelry, Toys, Musical, Other Goods

Recycling



Source: Global Insight, Booz & Company analysis

Booz & Company

19 October 20113

18,450 45,793


After the crisis, the global transport industry is expected to grow at a CAGR of 5% with maritime transport showing the strongest uptake

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19 October 2011


Source: Global Insight, OECD, ITF, ftwonline, Commodities Now, Booz & Company analysis

Comments

Overall recovery of the global

economy drives growth in the

transport sector across all segments

and at the historic rates of approx

GDP+2%

While the 2008 crisis led to a major

disruption of global trade flows, global

trade will surpass pre-crisis volumes in

2011 and is expected to return quickly

to growth at pre-crisis levels

Global shipping demand exceeded

expectations in 2010, growing an

estimated 12.3% and is expected to

continue this growth in 2011,

amounting to a further y-o-y growth of

+9.7%

Transport Sector Sales DevelopmentIn real US$bn, 2005 – 2015


+5,0%

+2,1%

Land

+3.9%

Air

+3.6%

Maritime

+5.9%

2015

3.834

2014

3.669

2013

3.506

2012

3.344

2011

3.178

2010

3.026

2009

2.867

2008

2.946

2007

2.912

2006

2.760

2005

2.636

4

Prepared for GCC Transport and Rail Conference111019 Booz - GCC Rail Conference - Global and Regional T+L vf.pptBooz & Company

19 October 2011

Global Freight Forwarding Markets by RegionUS$ billion

36

4043 43

32

43

55

13

3

3

3

3

88

4

2007 2008

166

49

56

8

171

7

50

150

2006

58

37

7

2005

45

6

74

132

50

44

64

13

94

5

2010

174

57

54

98

4

2009

131

41

42

66

8.9%

-23%

Asia Pacific

Europe

North America

South America

Middle East

Africa

2014

245

After the sharp drop in 2009, global freight forwarding markets are on a path to recovery with a ~9% CAGR forecasted until 2014

Comments

The logistics industry entered

a post-downturn phase in

2010

The industry was buoyed by

economic expansion in China

and South East Asia

Biggest concern remains the

ailing economies of the

eurozone (in particular

Portugal, Italy, Spain and

Greece) and the massive

deficits of other Western

powerhouses, such as the

USA and UK

CAGR

2010-2014

10.4%

12.2%

9.2%

6.3%

4.7%

13.6%


Source: Transport Intelligence, Booz & Company analysis

5


19 October 2011

Global Contract Logistics Markets by RegionUS$ billion

4954

5859

5457

84

4

32

22

2

2

55

73

2009

191 5

300

99

North America

South America

Asia Pacific

Europe

Middle East

Africa

2014

9.7%

81

4 3

2007

198

55

77

4 3

2006

182

49

71

3 2

2005

166

44

3

67

3 2102

7

62

207

5

2010

78

59

208

3

2008

4

Global contract logistics markets saw strong recovery and future prospects remain positive due to maturing emerging economies

Comments

Contract logistics market saw

reasonably strong recovery in

2010 in line with general

economic growth

Industry consolidation turned

away from mega-deals of the

past to more smaller deals

Future growth is likely to

continue in line with historic

growth as emerging

economies mature and

supply chain become more

sophisticated

12.6%

11.4%

9.8%

10.0%

6.9%

12.5%


Source: Transport Intelligence, Booz & Company analysis

6

CAGR

2010-2014


19 October 2011

Also, customers perceive a strong growth of their own logistics needs

How do you envisage the total demand for logistics

services to develop over the next five years?

How do you envisage the demand for the following

logistics segments to develop over the next years?

GCC Customer’s Perspective on Transport and Logistics Market Growth

Source: Survey 2008/9, Booz & Company

7

8%

Remain

stable

31%Increase

59%Increase

significantly

2%

Decrease 35%Warehousing

6%64% 30%

24%

11%54%

14%

34%

Value

Added Services37% 35% 13%

Air Freight 45% 28% 4%

Sea Freight 51% 14%

1%

Road

Transportation

DecreaseIncrease significantly Remain stableIncrease


19 October 2011




In Summary

8


19 October 2011

Four Paradigms for Logistics Platforms: Location, Infrastructure, Transport and Logistics

Location

Infrastructure

Transport

LogisticsShipper

Customer

Va

loriz

atio

n

Dem

an

d P

ull

Functional

Spatial

Paradigms for Gateways

Source: Rodrigue, J-P and T. Notteboom (2007) "Re-assessing Port-Hinterland Relationships in the Context of Global Supply Chains", in J. Wang et al. (eds) Inserting Port-Cities in Global Supply Chains,

London: Ashgate.

9


19 October 2011

Situated at the mid-point between Europe, Africa and Asia, the Middle East’s location is ideal to serve as a local, regional and global logistics hub

Opportunities

Global Opportunities Half-way on Europe-Asia Trade Lane with

unprecedented Trade Growth Easily accessible by Air and Sea and

Excellent Infrastructure Natural Refueling Stopover for Air FreightRegional Opportunities Strong Economic Growth in Broader Region Home to MENA Headquarters of Global

Players Preferred Location Centrally in broader

Region Easily accessible by Air, Land and Sea and

Excellent Infrastructure

Regional Opportunities Strong Economic Growth and Local Re-

Investments Increasing Local Production Platforms

The Middle East as a Logistics Hub

Source: Booz & Company

10

1. Location


19 October 2011

Location and key elements of the logistics platform architecture: Ports, Hubs and Distribution Centers

Shipping Network

Road Rail Coastal / Fluvial

Distribution (Centers)

Ma

riti

me

Fre

igh

t

Dis

trib

uti

on

Inla

nd

Fre

igh

t

Dis

trib

uti

on

Port System

Corridors and Hubs

Gateways

1. Location

11

ILLUSTRATIVE – MARITIME PLATFORMS


19 October 2011

Pacific Asia Europe / North America

Availability of effective infrastructure is a key driver of geo-graphic economic development: Gateways and Hinterland effect

Efficient Inland

Freight Distribution

Inefficient Inland

Freight Distribution

SEZ

Corridor

2. Infrastructure

12


19 October 2011

Illustrative: Container Transport Costs from Inland China to US West Coast

Source: Carruthers, Robin, and Jitendra N. Bajpai. 2002. “Trends in Trade and Logistics: An East Asian Perspective.” Working Paper No. 2, Transport Sector Unit. Washington, D.C.: World Bank.

ILLUSTRATIVE

Infrastructure as Driver of Location Competitiveness

2. Infrastructure

13

Total Cost per TEU 100%

Land access to final destination (USA) 7%

Port handling (USA) 4%

Maritime transport 21%

Port handling (China) 5%

Land access to port (China) 63%


19 October 2011

Need for infrastructure development depends on Hinterland setting and structure of major economic regions

Coastal concentration

Landbridge connections

Inland concentration

Coastal gateways

Coastal concentration

Low hinterland access

Hinterland intensity Freight Corridor hierarchy Gateway hierarchy

North America Western Europe East and Southeast Asia

Source: Adapted from Lee, Song and Ducruet (2006)

2. Infrastructure

ILLUSTRATIVE

14


Infrastructure investments are currently underway – opportunity to establish intermodality early on?

Booz & Company

19 October 2011

PORT

ROAD

RAIL

Intermodal networksRail network developmentCurrent status

Potential intermodal network in GCC

2. Infrastructure

15


19 October 2011

Terminals are a critical part of intermodal networks – access and control are key factors in enabling intermodal transport

Sea Port /

Container Terminal

Inland Port /

Trimodal Terminal

Hinterland /

Gateway Terminal

Hinterland /

Local Terminal

Source: Booz & Company analysis

2. Infrastructure

16

Ideal location where

barges, rail and trucks

connect

Clear focus on sea

containers

Portal cranes at quay

Coordinated schedules for

barges and trains

Additional services (e.g.

storage, customs)

High capacity and high

productivity

All types of equipment

Large portal cranes

Coordinated train

schedules (trans-loading)


storage, customs)

Small to medium-sized and

high flexibility

All types of equipment

Portal cranes or mobile

equipment

Local delivery and pick-up

by trucks


way-bill, customs)

Characteristics

Port / terminal operators

Incumbent railways /

infrastructure managers

Inland port operators

Terminal operators with

public and private

shareholders

Intermodal operators

Railways / intra manager

Private owners

Intermodal operators

Railways / infra managers

Forwarders, shippers

Owners /

Operators

Rail Service Center,

Rotterdam (NL)

Combinant, Antwerp (B)

DeCeTe, Duisburg (D)

WienCont, Vienna (A)

Busto, Arsizio (I)

UBM, Munich (D)

Birk, Budapest (H)

Interporto Bologna (I)Examples

High capacity and high

productivity

Sea container only

Need for / trend towards

automation

Dense network of shuttle

trains / high frequency

IT integration /

customised loading plan


19 October 2011

As the sophistication/customization of production evolves, logistics needs to become an embedded part of the supply chain

Design

Parts

Assembly

Distribution

Market

Design

Parts

Assembly

Distribution

Market

PureStandardization

SegmentedStandardization

Design

Parts

Assembly

Distribution

Market

CustomizedStandardization

Design

Parts

Assembly

Distribution

Market

TailoredCustomization

Design

Parts

Assembly

Distribution

Market

PureCustomization

Processingwithout order Shipment to order Assembly to order

Manufacturingto order Design to order

Embeddedness

Push (expectation) Pull (response)

Source: Adapted from W. Delfmann (2007) “The Changing Role of Gateways in the Context of Global Value Chain Dynamics”, Canada’s Gateway and Corridors Initiative Conference, Vancouver, British Columbia

ILLUSTRATIVE

4. Logistics

17


19 October 2011

Consequently, logistics services require embedded hubs for consolidation and deconsolidation

Capacity

Frequency

Corridor

Customer

Segment

Global Hinterland Regional Local

Shipping

Network

Consolidation Break-down

4. Logistics

“Last Mile”

ILLUSTRATIVE

GatewayInland

TerminalDistribution

Center

18


19 October 2011




In Summary

19


19 October 2011

CategoryWould you agree or disagree with the following statements with respect

to the current logistics infrastructure and service provision? Result

Warehousing There is a shortage of warehousing/storage capacity

In the future there will be a lack of modern, high-quality warehousing facilities

Road Transport

There is a lack of high quality, reliable road transportation / trucking services

Road transportation will become a more viable alternative to sea freight once the GCC customs union is fully implemented

There is an increasing demand for a cross-regional road transportation network (LTL/FTL services)

Logistics Industry The logistics service industry is still a highly fragmented market dominated by small local

players

Infrastructure The logistics infrastructure (sea ports, airports, road network) is competitive but there is a

lack of high quality service providers

Outlook

In the future there will be an increasing need for integrated logistics solution provider(one-stop-shopping)

High-quality, global supply chain management capabilities will be more important than lowest rates

Outsourcing More and more companies will consider to outsource their logistics needs to external

providers

Customer requirements towards integrated logistics solutions and im-proved service levels are expected to grow significantly in the next years

Agree Disagree

Customers Supply Chain Requirements

Source: Booz & Company

20


19 October 2011

Yes

25%

No

75%

Outsourcing and usage of Logistics Service Providers is still very low in the GCC

Do you outsource to an external

logistics provider?

Indicate the importance of the reasons for outsourcing

logistics services to an external logistics provider

Lack of in-house

capabilities3.0

Capability and

expertise3.9

Better reliability 4.0

Shorter lead time 4.1

Cost savings 4.2

12345

Not at all Important

Not very Important

Fairly Important

Very Important

Extremely Important

Source: Market Survey

Total = 60

21


19 October 2011

How satisfied are you with your current

logistics service provider?

Outsourcing is still focused on basic logistics needs: Transportation and Warehousing

What parts of your logistics needs

are you currently outsourcing?

– Number of Mentions –

1

45

6

88

OtherTransport

Organiza-

tion /Freight

Forwarding

DistributionCustoms

Brokerage

Warehou-

sing/Value

Added

Services

Transpor-

tation

Total number of

Respondents 15

What percentage of your logistics spends is outsourced?

– Number of Respondents –

15

6

Total31-40%

3

21-30%

2

11-20%

4

<=10%

13%7%

20%

Extremely

DissatisfiedNot very

satisfied

Satisfied

Very Satisfied

40%

Extremely

Satisfied20%

Total = 15


22


19 October 2011

No

37%

Yes

63%

Yet, customers are actively looking for increased usage of logistics service providers

Would you consider outsourcing to an external

logistics service provider in the near future?

3

8

131414

24

OtherTransport

Organiza-

tion/Freight

Forwarding

DistributionCustoms

Brokerage

Warehou-

sing/Value

Added

Services

Transpor-

tation

1

333

7

9

OthersNoneMaintain

control over

supply chain

Risk of

delays

Expected

higher

logistics cost

Own logistic

company/

investments

What are the reasons for not outsourcing to an external logistics provider?


Total number of

Respondents 38

Total number of

Respondents 22


Total = 60

23

Which parts of your logistics needs would you consider outsourcing?



19 October 2011




In Summary

24


Significant growth of global and regional transport and logistics markets expected providing ample

opportunities

GCC/Middle East ideally positioned to capture on transport & logistics opportunities – globally,

regionally and, locally

Large scale transport infrastructure investments in GCC/Middle East will not only enhance

economic development domestically but also spur global/regional transport / logistics

competitiveness

Coastal geography and weak road transport governance as a key challenge for intermodal transport

– Efficiency of terminals as key ingredient to competitiveness of intermodal transport

– “Best-in-class” regulation of road transport required – low economic value added of road transport

“Software” is key – customer needs for improved logistics services still not well served

In Summary…

Booz & Company

19 October 201125

global and regional transport & logistics challenges and ...the logistics industry entered a...

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