Report: Non-BRICS drive emerging market logistics growth
Dynamism in ASEAN, GCC countries, Sub-Saharan Africa and the large, next-tier economies of Indonesia, Nigeria, Bangladesh, Mexico and Pakistan is offsetting mixed performance in the BRICS countries that powered emerging markets growth in recent years.
The more balanced picture for growth is reflected in the 2015 Agility Emerging Markets Logistics Index, an annual data-driven ranking of 45 emerging economies accompanied by a separate survey of nearly 1,000 global logistics and supply chain executives.
The Index, now in its sixth year, ranks emerging markets based on their size, business conditions, infrastructure and other factors that make them attractive for investment by logistics companies, air cargo carriers, shipping lines, freight forwarders and distribution companies.
Large BRICS nations Brazil, Russia, India, China and South Africa have accounted for much of the growth and investment in emerging markets and have dominated the Index. But Saudi Arabia climbed to No. 2 in the 2015 Index, ranking behind only China, which has 47 times the population and 12.5 times the economic output.
Next-tier economies Indonesia (No. 4 in the Index), Nigeria (27), Bangladesh (28) and Pakistan (25) – all with populations topping 100 million – climbed in the Index rankings. The other large non-BRICS market – Mexico -- held steady at No. 9.
Other Index findings:
- Gulf states UAE, Qatar and Oman, ranked as having the best “market compatibility” – the most ideal business conditions – among the 45 countries in the Index. They were followed by Uruguay, Saudi Arabia and Morocco.
- UAE, Malaysia, China, Oman, Saudi Arabia and Chile led in “connectivity,” indicating they have the best infrastructure and transport links.
- The Philippines climbed three spots (to No. 16) in the data portion of the Index – after jumping nine spots in the 2014 Index. The country also improved its standing among supply chain executives surveyed. They pushed the Philippines up five spots (to No. 15) among countries they said will emerge as a major logistics market.
- Russia’s growing economic isolation has damaged its appeal to logistics and supply chain professionals. More than 75 percent of survey respondents said they were pessimistic about Russia’s prospects.
- India continues to divide logistics and supply chain executives. They ranked India as the No. 2 choice to emerge as a major logistics market and ranked it relatively high -- No. 17 -- among countries least likely to become a major logistics market. In the data portion of the Index, India was leapfrogged in 2014 by Brazil and Saudi Arabia, and it slipped again in the 2015 Index, falling past Indonesia to No. 5. India’s ‘market compatibility’ – a gauge of business conditions – deteriorated, despite optimism about reform under new Prime Minister Narendra Modi.
- The fastest-growing trade lanes linking emerging and developed markets were US-Vietnam (up 42.7 percent by volume) and Cambodia-EU (up 41.9 percent) for air cargo; and Ukraine-EU (up 35.8 percent) and EU-Egypt (up 23.2 percent) for ocean shipments. But for 2015, trade flows between Asia’s emerging markets and other emerging markets are the ones that had logistics professionals most upbeat in the survey. Survey respondents also identified risks to growth by region and provided views on near-sourcing, e-commerce and other trends affecting emerging markets.
“A year ago, there was talk of an emerging markets meltdown and of a new ‘fragile five’ based on concerns about weakness in South Africa, Brazil, India, Turkey and Indonesia,” said Essa Al-Saleh, President and CEO of Agility Global Integrated Logistics. “Emerging markets as a group turned out to be far more resilient – even vibrant – than expected despite continued sluggishness in the global economy.”
For 2015, the International Monetary Fund forecasts average growth for the 45 countries featured in the Index at 4.57 percent.
“The factors driving growth are increases in population, size of the middle class, spending power and urbanization rates, along with steady progress in health, education and poverty reduction,” Al-Saleh said. “That’s why we remain optimistic about emerging markets and continue to see them on an upward trajectory.”
Transport Intelligence (Ti), a leading analysis and research firm for the logistics industry, compiled the Index.
John Manners-Bell, Chief Executive Ti, said: “Five years after the global recession, prospects for all economies, developed and emerging, are still unclear. Economic fragility, a falling oil price and increasing security concerns in Africa and the Middle East have created uncertainty. Despite the challenges, interest remains high in these volatile markets as indicated by increased infrastructure investment, expanding international trade and increased domestic demand. Global manufacturers, retailers and their logistics service providers need to remain conscious of the shifting dynamics if they are to exploit the significant opportunities which exist.”
Agility brings efficiency to supply chains in some of the globe’s most challenging environments, offering unmatched personal service, a global footprint and customized capabilities in developed and developing economies alike. Agility is one of the world’s leading providers of integrated logistics. It is a publicly traded company with over $5 billion in revenue and more than 22,000 employees in 500 offices across 100 countries. Agility’s core commercial business, Global Integrated Logistics (GIL), provides supply chain solutions to meet traditional and complex customer needs. GIL offers air, ocean and road freight forwarding, warehousing, distribution, and specialized services in project logistics, fairs and events, and chemicals. Agility’s Infrastructure group of companies manages industrial real estate and offers logistics-related services, including e-government customs optimization and consulting, waste management and recycling, aviation and ground-handling services, support to governments and ministries of defence, remote infrastructure and life support.
For more information about Agility, visit agility.com
Driver shortages: Why the industry needs to be worried
While driver shortages are a global problem, with a recent survey from the International Road Transport Union suggesting that driver shortages are expected to increase by 25% year-on-year across its 23 member countries, the issue has very much made itself felt for UK businesses in recent weeks.
A perfect storm of factors, which many within the industry have been wary of, and warning about, for months, have led to a situation wherein businesses are suddenly facing significant difficulties around transporting goods to shelves on time, as well as inflated operating costs for doing so.
What’s more, the public may also see price rises as a result due to demand outmatching supply for certain product lines, which in turn brings with it the risk of customer dissatisfaction and a hit to brand and stakeholder reputation. Given that this price inflation has been speculated to hit in October, when the extended grace period on Brexit customs checks comes to an end, the worst may be yet to come.
"Steps must be taken to make a career in the industry a more attractive proposition for younger drivers, which will require a joint effort from government, industry bodies, and the sector as a whole"
That said, we have already been hearing reports of service interruption due to lack of driver availability, meaning that volumes aren’t being transported, or delivered, to required schedules and lead times. A real-world example of this occurred on the weekend of 4-6 June with convenience retailer Nisa, with deliveries to Nisa outlets across the UK affected by driver shortages to its logistics provider DHL.
But where has this skills shortage stemmed from?
Supply is the primary issue. Specifically, the number of available EU drivers has decreased by up to 15,000 drivers due to Brexit alone, and this has been further exacerbated by drivers returning to their home country during the COVID-19 pandemic, as well as changes to foreign exchange rates making UK a less desirable place to live and work. This, alongside the recent need to manage IR35 tax changes, has also led to significant inflation in driver and transport costs.
COVID-19 complications have also meant that there have been no HGV driver tests over the past year, meaning the expected 6,000-7,000 new drivers over the past year have not appeared. With the return of the hospitality sector we understand that this is a significant challenge with, for instance, order delivery lead times being extended.
It is little surprise, therefore, that the Road Haulage Association (RHA) earlier this month became the latest in a long line of industry spokespeople to write to the government about the driver shortage for trucks. The letter echoed the view held by much of the industry, that the cause of this issue is both multi-faceted and, at least in some aspects, long-standing.
So, many in the industry are in agreement as to the driving factors behind this crisis. But what can be done?
Simply enough, outside of businesses completely reorganising their supply chain network, external support is needed. In the short-term, the government should consider providing the industry with financial aid, and this can also be supported more widely with legislative change.
Specifically, immigration policy could be updated to place drivers on the shortage occupations list, which would go some way towards easing the burden created by foreign drivers returning to their home countries. Looking elsewhere, government should also look for ways to increase the availability of HGV driver tests after the blockage created by the coronavirus lockdowns.
Looking more long-term, steps must be taken to make a career in the industry a more attractive proposition for younger drivers, which will require a joint effort from government, industry bodies, and the sector as a whole. As it stands, multiple sources suggest that the average age of truck drivers in the UK is 48, with only one in every hundred drivers under the age of 25. We must therefore do more to increase the talent pipeline coming into the industry if we are to offset more significant skills shortages further down the line.
On the back of a turbulent year for the supply chain industry, it has become increasingly clear that the long-foretold shortage of drivers is now having a tangible and, in places, crippling effect on supply chains.
Drivers, and the wider supply chain industry, have rightly been recognised for the seismic role they played in keeping the nation moving and fed over the past year under unprecedented strain. If this level of service is to continue, we must now see Government answer calls to provide the support the sector needs, and work hand-in-hand with the industry to find a solution. If we do not see concrete action to this effect soon, we are likely to be in for a turbulent few months.
Rob Wright is executive director at SCALA, a leading provider of management services for the supply chain and logistics sector