The Party is Over for China’s Logistics Firms

Thursday, May 14, 2009 7:20
Posted in category Uncategorized
Comments Off on The Party is Over for China’s Logistics Firms

One of the industries that has been hardest hit by the economic downturn has been the logistics industry, and whether it is ships parked in HK Harbor or trucks parked on the side of the road, there is not doubting the fact that this industry is fully tied to how quickly the global economy can rebound.

For China, this slowdown has been particularly hard on its logistics industry as 3PLs, Ports, ship builders, and container manufacturers have all been hit.  It was an industry that only a few years ago was beginning to see a lot of investment and large emerging players (see my Logistics report here), but with a high number of low value providers still in the market, the industry is finding it difficult to adjust to the current conditions.

To understand, and explain, the challenges that the logistics industry is facing AT Kearney has released The Party is Over: How Logistics Companies in China Should Respond to the Global Economic Meltdown.

As you can see from the above figure, at the current point, there are three vastly different projections depending on a few different models.  Critical to the model that proves correct is going to be how quickly the economies take to rebound, should they “rebound”.

For China’s firms, three options are on the table:

  1. Defensive – cope by employing quick-win solutions
  2. Rebuild – Establish market presence by strengthening capabilities
  3. Attack – Expand business to prepare for next stage of growth by employing structural improvement

It is an interesting analysis of the situation, one that encompases a number of the various players, however I believe a few other options are more likely:

  • Hug for warmth – This is a strategy we have seen in other industries where medium sized players develop informal/ formal ties that enable them to weather the storm
  • Park and Wait it out – Growing up in the Midwest, we always looked for the nearest bridge to protect us from a hail storm, and many smaller firms will likely do the same by parking their truck and picking up a new line of work until the storm clears
  • Roll over and die – It is an unfortunate reality, but a lot of groups – especially those who were reliant upon an industry that has been heavily hit – are going to find times too difficult
Both comments and pings are currently closed.