Some quite striking supply chain trends in several key tech sectors are beginning to make significant impacts globally, and in particular on established logistics patterns in North America and Europe. In industries like pharma research and production, clinical trials management and in the wider automotive sector – especially in the space of next-gen propulsion systems, autonomy and lightweighting, there are some dramatic evolutions taking place which will have great consequences to existing logistics patterns, specifically to carriers, airports and to established cluster regions. Given this dynamic situation, we see that well-positioned transport assets have a window of opportunity to take advantage of these trends for both revenue growth and asset monetization.

We will be providing insight to sector-specific trends in this blog regularly, but here are some of the important larger influencing factors:

• The fast-changing roles that are being played by the outsourced logistic provider and contract manufacturing firms. The expanding definition of the word “manufacturer” is now having meaningful impact to facility locations and transport requirements. Essentially, things are getting more complex with contract manufacturers taking on new and more complex responsibilities in the manufacturing process. We all know about Foxconn and their role in acting as an outsourced manufacturer for Apple in Asia, but that firm and others like them are beginning to play roles in sectors where they had not been a factor in the past. On the outsourced logistics side, the third party logistics world is unquestionably advancing their capacity to play an increasing role, in many ways to become a more integral part of the (prime) manufacturers overall supply chain. In our work, we are experiencing that these players are playing important roles in location decisions and we predict that this will become a very important factor in the future. The news about Amazon and Alibaba emerging as logistics and procurement powerhouses is another extension of this phenomenon. New players are entering the fray and with then comes enormous clout in terms of “buying power” but also a wider appetite to play a disruptive role of substantial consequence.
• Evolving technology and building practice in creating specialty storage and distribution environments. We see a transition in the area of production and distribution physical asset development toward satisfying new specialty requirements. Much of this has to do with the issues of blended requirement for final stage production, customization, packaging, sorting, labelling and forward deployment.
  • In particular, the advent of high-velocity forward deployment centers at and around transport hubs is an important dynamic that had been only a boutique issue in the past. This is going to be most evident in four or five technology sectors at key airport cargo hubs and for meeting last mile delivery requirements via truck transport.
  • As well, the increasing use of multi-story ramped logistics facilities which, although already very common in parts of Asia-Pacific, are almost without precedent in Europe or North America. This is will the result of increased land cost, but also a representation of the importance of locations at key transport hubs, which as in the case of airports are typically short of horizontal land development capacity.
  • An increased use of shared-user service and consolidation centers, particularly at and around key logistics assets. This will be in part a result of the 3PL role expansion.
• Fuel price reductions following the drastic drops in the commodity price for oil. Because of the precipitous drop in oil prices, there have been a number of things that have occurred, and will these trends continue to evolve. For example, lower jet fuel requirements have caused air cargo to become somewhat more competitive to other transport modes. During the global economic downturn beginning in 2007-2008, there was a substantial shift from air cargo to ocean transit, and this has rebalanced to a fair extent. As most forecasts are for oil prices to remain relatively low as compared to their highest levels over the past five or so years, the opportunity for air cargo-driven strategy and asset development is high. Multinational manufacturing players are essentially assuming lower oil prices into a new generation of logistics planning and this is impacting various parts of their business model, which previously had bene built around higher energy costs, but also with the assumption that those costs would only increase over time.
• Fast growth at transport asset locations. We are seeing that planned multimodal business centers are becoming quite attractive to a range of shippers. This includes at airport-centric locations where there is good highway connectivity, especially to other hubs markets within a half day’s dray or so, and also for strategically-located inland centers that are located within proximity of load center seaports. This may be partly related to branding – the promise to have a corporate location with “good transport connectivity”, but it goes beyond that. Many businesses will have a diversity of transport requirements, whether on a regular basis or sporadically, say for an extraordinary important expedited customer shipment that may have a production line go down but, for a part that is being airlifted in. We are working on right now several global airport centric projects that are building an underling business strategy around these kinds of changing requirements.

In the coming weeks, we will be providing a deeper perspective about some of the specific changes impacting pharma and life sciences, automotive medical supplies and equipment and electronics. We will also be assessing the extraordinary implications of the moves that Amazon (and Alibaba and others) are making in terms of air cargo, ground transportation, outsourced B2B procurement. It’s a heady time and for those that have a strong view of the marketplace, there are a raft of opportunities.