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Logistics market expansion dominated by manufacturing, retail


Transparency Market Research reported on December 28 that the global logistics market is expected to grow from $8.1 trillion in 2015 to $15.5 trillion by 2023, or a compound annual growth rate (CAGR) of 7.5 percent. Measured by freight volume, the CAGR from 2016 to 2024 is expected to be 6 percent.

Global logistics revenues were led by road transportation, with a 2015 market-share of 44.6 percent. In terms of freight volume, maritime transportation made up 47.9 percent of the marketplace. The Asia-Pacific region constituted the largest component of global logistics at 46.6 percent of market revenue.

In 2015, second-party logistics, which consists of transportation carriers, made up the largest revenue and volume share of the market. However, first-party logistics, which constitutes shippers, is forecasted to provide the highest rate of growth in the logistics market.

Manufacturing leads first-party logistics growth because of the sector’s long-established supply chains. Logistics operations enable manufacturers to reduce operational costs, improve delivery performance, and increase customer satisfaction.

According to FreightWaves SONAR, the national index for industrial production in manufacturing grew over 20 percent from June 2009 to November 2018.

Retail is the next-largest contributor to first-party logistics growth through the impact of e-commerce.

“The rising popularity of online shopping globally serves as one of the major factors driving the demand for logistics services,” stated the Transparency Market Research report. The increasing accessibility and applications of the internet are credited to e-commerce’s role in first-party logistics growth.

Amazon’s (AMZN: NASDAQ) emergence as an e-commerce giant is one of the driving forces behind the expansion of first-party logistics into new areas as the company develops in-house delivery services. The growth of Amazon Air, Amazon’s truck fleet, and the prospect of drone delivery gives Amazon the ability to compete with their second-party contractors such as FedEx (FDX: NYSE).

Transparency Market Research identified several challenges that interfere with the growth of the logistics market, particularly in developing countries where one might expect the fastest market growth. These challenges include poor infrastructure, a shortage of skilled manpower, low wages, sparse economic diversification, and poor adoption of technology.

As a result of these challenges, the logistics industry has become more reliant on older skilled workers, which has hampered service quality. Organizations such as the U.S. Army’s Logistical Support Activity workshop are working to train youth in logistics management. Private companies are also recruiting and training younger workers.