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Issue 1 2014 Freight Business Journal


Making sense of global logistics


Leading logistics expert, John Manners-Bell, has written a new guide to what is going on in the world supply chain - Global Logistics Strategies: Delivering the Goods.


It’s a sobering thought that of the six companies that pioneered contract logistics in the UK and indeed the world – Exel, Tibbett & Britten, Christian


Salvesen, Hays, TDG,


Wincanton – only the last named still exists as an independent entity. Such is the unforgiving nature of the fast-paced world of international freight, whose development has just been charted by John Manners-Bell, CEO of industry research firm Transport Intelligence, the market leading supplier of research and analysis to the global logistics industry. The author has an unenviable task in trying to recount the ups and downs of what is still a very fragmented and diverse industry that operates in all corners of the world. In fact, despite the book’s title, it is a very good and concise account of what has been going on in the world freight – as opposed to logistics - industry and it properly recognises the increasing importance of the freight forwarder during


the present


century and the profession’s elevation from a necessary evil to a critical element in global supply chains. Twenty years ago, nobody


would have considered that the German Post Office would be a market leader in the international express, contract logistics, road and freight-forwarding sectors or that China would be so important to the world’s logistics industry. It is likely that in another 20 years the market environment will be just as unrecognisable. The driver of the growth in the


forwarding market is world trade and John Manners-Bell


rightly


acknowledges the oſten unsung efforts of bodies like the World Trade Organisation and the oſt- maligned European Union in expanding global free trade. But world trade is evolving,


too. While we in Europe, and the North Americans, may think of our trade lanes with Asia as the major flow, the Chinese Ministry of Commerce believes that Africa will be its biggest trade partner in a


few years’ time. And a modern ‘Silk Road’ is fast developing between Asia and the Middle East. All this is making international


trade more complex. The freight industry has also


been at the sharp end of the switch to just-in-time delivery techniques, pioneered by the Dell computer company. (Remember them?) The author also tracks the emergence of the outsourced logistics industry and what the author terms the ‘unbundling’ of worldwide manufacturing. Manners-Bell states, though,


that the number of logistics companies that have been able to grow successfully through acquisition is limited. In fact, over- ambitious expansion into Europe was one of the problems that many of the once big names of British logistics ran into. Strangely, two of the entities


you would least associate with dynamic entrepreneurialism have been the most active in the active in acquisition – the European post offices and railways. (Though it could be argued that the German model of state-sponsored capitalism is a lot cannier than the UK’s ‘sell it off at any price’ approach – and some of the world’s most acquisitive logistics organisations have emerged despite – or maybe because of – that country’s until recently highly regulated transport market.) There’s a useful table of the


major acquisitions of the past decade and a half; let’s face it, most of us have forgotten more than we’ll ever know. The book also addresses the bewilderingly diverse


///INSURANCE/BOOK REVIEW The new production powerhouse


Andrew Kemp, regional director, EMEA for insurance provider TT Club looks at the growing economy of Turkey and the ramifications for freight transport operators trading with and operating within the country. He assesses recent regulatory developments and how the conflict in Syria is affecting the country’s burgeoning export drive.


With an average annual export growth rate of 11.8% between 2005 and 2010, Turkey has growing influence in European trade, comparing favourably with export growth in the BRIC nations where the rate was 14.8% over the same period. In common with the rest of the world, Turkish development was arrested, and exports went into decline, during the recession but it is once more showing signs of an export-driven recovery. The first half of 2013 saw a year-on-year increase in exports of 2.5%, and imports are also on the rise with year-to-date figures to the end of September up by nearly 6%. Container throughput at Turkish


ports rose significantly from 2011 to 2012. Istanbul increased by nearly half a million teu to over 3 million and Mersin increased volumes by 11% over the same period. A significant amount of Turkish trade also moves over land to and from Western Europe and the Middle East. Naturally, such volume increases


will expose transport operators to greater risk, but TT Club is also finding that the type and range of services that operators, particularly freight forwarders, logistics service providers and warehouse operators, are now offering, is also expanding their liability. In many cases the changes have been so


a fine line between success and disaster. The book delves into the various definitions of forwarders and their activities such as customs brokerage, NVOCC or air freight wholesalers. The


author notes range


of logistics and freight markets throughout the world. Clearly, a work of this length cannot include a huge amount of detail on any specific country, mode or industry, but there is enough to provoke thought and whet the appetite. Global firms spend millions on


restructuring their logistics systems to meet customer expectations while minimising their inventory and transport costs. But there’s


that forwarding is still a highly fragmented market, despite the emergence of a small number of very large players; even giants like DHL only have a very small proportion of the the market and there’s little evidence that that is changing. That said, there has been a fair


flurry of merger and acquisition activity in the past


few years


while the integrators have also attacked the market share of the big airfreight forwarders. But there is little sign that the fundamental role of the forwarder is under threat


diverse and expansion of their services so rapid that operators have not yet fully assessed the enlarged risk burden they have acquired as a result. Turkish freight companies, like


fellow operators in other regions, must take care when agreeing to contracts covering extended services. Many multi-national retailers and manufacturers trading with Turkey are insisting that logistics service suppliers take full responsibility for loss or damage to goods they are transporting, storing or handling. For the operator this oſten creates new risks; for instance, errors and omissions during labelling or sub-assembly work that might be new to their service portfolio. TT Club advises such operators to carefully check contractual clauses and take the advice of their insurance provider before agreeing or suggesting clausal alterations. But there has been an important


regulatory change in Turkey that helps clarify the legal position with regard to liability - the New Turkish Commercial Code that came into force in July 2012. The Code grants contractual parties the right to use Standard Terms for transport contracts and insurance policies as is common practice in Western markets and help transport operators limit their liability in


– there are no real moves towards the ‘disintermediation’ that has so affected travel agents. There follows a comprehensive,


and not too hard to understand analysis of the dynamics of the freight forwarding industry. One deduction, which might surprise some, is that forwarders’ profitability has been remarkably resilient. The book also acknowledges


the coming together of the contract logistics and freight forwarding activities, a trend arguably started by Exel in the late 1990s when it merged with forwarder MSAS. But


even now, logistics


providers oſten struggle to offer a consistent service across a range of geographies, despite sometimes ambitious claims, and clients are strongly advised to check carefully


accordance with inter- na ti o nal conventions. Before the Code came into effect it was difficult for transport operators to invoke their conditions in Turkish courts in cases of dispute resolution. The code has been successful


By Andrew Kemp


by road through Iraq incurs extra insurance premiums to


in its main aim to facilitate transport companies, and indeed insurers, wishing to invest in the Turkish market and operate services. The Code, which is very comprehensive, covering all forms of business law - not just transport and insurance - is also part of the Turkish State’s efforts to gain EU membership. While in this respect freight


transport, particularly to/from Europe is being made easier for those involved in the Turkish market, the civil war in Syria is making things more difficult for Turkish trade to/from the Middle East. In 2010 an estimated 22% of Turkish exports were bound for the Arabian Gulf states, the bulk of them transiting through Syria – a route that has almost ceased to function since March 2011. Two of the alternative routings involve additional costs. Transport


what their true capabilities really are. Logistics outsourcing can still be a fraught process. The book also examines the


various subsections of the transport market, including European road freight, express parcels, air cargo, rail and container shipping. In the latter, more complex trading patterns are emerging and, while Europe and North America may be preoccupied with its own trade with China, in fact intra-Asian trade is now the world’s single largest flow. At the same time, North-South America, China/Africa and China/ Latin America are becoming much more important. Next there is consideration of the


supply chain dynamics of various ‘vertical’ sectors, like automotive, pharmaceutical, consumer goods and high tech. Despite what many


cover


War Risks while the sea route via the Suez Canal can add up to two weeks to transit time, making it a poor option particularly for perishable goods. Some operators are therefore resorting to loading road trailers onto ro-ro vessels to Haifa in Israel, from where they continue by road south through Jordan and on into Saudi Arabia – another time-consuming and costly alternative. Compared with many other


Mediterranean countries, Turkey – and its trade potential – has much in its favour. However, as with any sort of economic development, such growth also has its risks. Careful assessment, risk management and providing advice and support are fundamental tenets of TT Club’s business philosophy. The Club will continue to guide and advise members since the challenges of international trade remain as dynamic as ever.


people seem to believe, car making is not really a truly globalised business, Manners-Bell contends – most material flows are localised or, at most, within single continents. A better claim could be made for the high tech sector, where devices are made in remote locations and shipped thousands of miles to end users. We are though a long way


from the heady days when Steve Jobs booked up all the air freight space ahead of the iMac’s launch to prevent Apple’s rivals from shipping their products – a lot more electronics move by sea these days. Global Logistics Strategies:


Delivering the Goods is published by6 Kogan Page (www.koganpage. com) and is available from www.transportintelligence. com/bookshop


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