What is Logistics?
Logistics is defined as the process of planning, implementing, and controlling the efficient, cost effective flow and storage of raw materials, in-process inventory, finished goods and related information from point of origin to point of consumption for the purpose of meeting customer requirements1. As an owner of logistics properties, Mapletree Logistics Trust leases space to logistics operators and distributors to carry out their activities.
Asia – The Global Leader in Logistics
Asia is the leader in the global logistics market. The market in Asia for logistics services is a global cross-border business. Many multinational logistics players have expanded their Asian presence in order to support the growing presence of their international clients in Asia. With 12 of the world’s top 20 busiest seaports and 8 of the top 20 busiest cargo-handling airports2 located in Asia, the logistics sector is expected to continue to be a key economic contributor in the region in the years to come.
As multinational companies ("MNC") continue to outsource their non-core operations as part of their competitive strategy as well as to manage costs, there will be a strong and increasing demand for the services provided by third party logistics ("3PL") players. This translates into demand for logistics real estate. This is in line with Asia’s increasingly important role as the world’s manufacturing hub, with more MNCs relocating their production facilities in Asia.
According to the UPS Asia Business Monitor 2008, intra-Asia trade is the fastest growing trade region in the world. Intra-Asia trade volumes are expected to keep economies in Asia stable despite growing economic woes worldwide. China and India will continue to be the pillars of the region.
Compared to developed countries in the West, logistics facilities in Asian countries are generally less well developed, resulting in higher logistics costs for manufacturers. Logistics costs as a percentage of GDP in developed countries is typically around 9% - 11% of GDP. However, in the developing countries of Asia, this figure is much higher. In China, for instance, the figure is 18%, which is double that of USA’s 9%. This underscores the tremendous potential for the further development of modern logistics facilities in Asia3.
The logistics industry is poised for high growth in Asia, and is expected to grow at about double the pace of growth as compared to the rest of the world. Datamonitor Market Research expects the logistics industry in Asia to grow at a CAGR of 10.1% for the five-year period 2008-2013 compared to a CAGR of 5.6%4 over the same period for the rest of the world.
2Containerisation International, Airports Council International
3Accenture study, Cushman & Wakefield India Report
4Datamonitor, "Global Logistics", August 2009