Small businesses must continue to adapt by providing services in a high-demand, constrained-capacity supply chain world impacted by rising logistics costs. Using logistics parks as ideal locations for small businesses doing light assembly, processing, and packaging is the perfect solution for saving money, enhancing operations, and simplifying storage and shipping.

Saving money with logistics parks

The pandemic reshaped how consumers make purchases, boosting e-commerce by over 30 percent, according to CSMP’s 2020 State of Logistics Report. This demand for goods affects logistics costs by leading to high transportation fees, delayed arrivals at ports, delayed deliveries to consumers, and increased warehousing expenses. With their all-in-one method of streamlining small business needs, logistics parks offer solutions that reduce such expenses and enhance customer service.

The reason logistics parks naturally help businesses save money

One main advantage of logistics parks is their strategic location. They directly connect to multiple modes of supply chain transportation, including seaports, international airports, freeways, and railways. This allows businesses to connect easily to local, regional and international networks of suppliers and customers,  which can significantly reduce logistics costs.

Direct connectivity to transportation along with extensive trucking space also means small businesses can eliminate or marginalize costs of using transportation middlemen. The result is that assembly, processing, and packaging sectors can focus on and better control output and distribution.

Ready-built warehouse design is another advantage of logistics parks and makes them ideal for saving money while still meeting a variety of storage needs. The large, well-managed, on-site warehouses promote optimized use of resources and eliminate the expense of building or renting external warehouse space. Furthermore, with optimal layouts, ideal methods for picking and moving goods, and superior inventory management, they significantly improve warehousing efficiency and processing.

The fiscal relationship between logistics parks and small businesses

With ample storage unit space, direct transportation connectivity, increased employment opportunities, and increased efficiency, logistics parks come with a multitude of financial benefits. Located in the centers of industrial areas, near capital cities and growing companies, logistics parks attract business and promote economic development. The convenience of managing processing, packaging, storage, and distribution all in one space boosts productivity while minimizing costs. Small businesses can assemble, sort, store, and manage their product fulfillment process from a single hub, allowing them to efficiently serve local, regional, and international markets.

Logistics parks also offer small businesses the capability of organizing and managing operations from a central location, which lowers costs and improves communication among suppliers, consumers, and staff. What’s more, logistics parks create employment opportunities by providing light assembly jobs, retailer and convenience store space, office space, and data centers with specialized software.

Additional financial benefits of logistics parks via sustainability practices

With an over 70 percent increase in consumer interest in sustainability, according to BRINK News, consumers challenge industrial businesses around the world to minimize their carbon footprints. Sustainable logistics parks meet this consumer demand by operating with low emissions and incorporating eco-friendly features such as LED lighting and solar panels. They also reduce toxic odors, sounds, and vibrations. By following sustainability practices, logistics parks also lower costs for water and energy and fulfill international environmental standards, helping to minimize compliance fees and reduce CO₂ emission taxes.

The convenience of storage and shipping at logistics parks

The efficient flow and storage of goods is paramount for any business. Logistics parks reduce the need for overhead in setting up a storage facility and provide efficient transportation connectivity. With simplified storage and shipping, logistics parks reduce delivery times, optimize costs for storage and transport, and improve quality of operations.

How logistics parks simplify storage

What better way to simplify storage and inventory management than by having on-site warehousing with open layouts, flexible sizing, and the option to expand? From a centralized hub, small businesses in the light manufacturing industry can plan out inventory, operate and move equipment efficiently and safely, and easily adjust storage space.

A company in light industry can use the convenient on-site park warehouses not only for storage but also for processing, assembly, maintenance, and distribution. For businesses requiring outdoor space, logistics parks provide open storage, truck parks, and repair yards adjacent to wide roads for practical distribution.

How logistics parks simplify shipping

Multimodal access to shipping ports and direct connections with distribution centers make logistics parks ideal for simplifying shipping. According to a comprehensive analysis of port economics by Theo Notteboom and Jean-Paul Rodrigue, one key element of supply chains is their relationship with seaports. With a seaport-centric logistics park, a business owner can streamline supply chain management and operations by centralizing their activities near seaport terminals.

Traditional seaport-based parks accommodate pre-container material input and are within free trade zones exclusive of strict customs regulations. Container-oriented parks are adjacent to storage warehouses and feature container freight stations for consolidating and separating cargo for export and distribution. The central, all-in-one nature of park hubs enhances dock management and the movement of cargo. Such attributes of logistics parks promote accessibility and speed and minimize receiving and shipping cost.

Logistics parks that are close to airports, and national hubs that are located near freeways, are also prime real estate, simplifying shipping by air and land. Because they are concentrated in urban locations near capital cities, logistics parks facilitate the transfer of goods between local industrial businesses.

Enhancing operations management at a logistics park

Another reason experts see logistics parks as ideal locations for small businesses doing light assembly, processing, and packaging is the primary function of streamlining and enhancing operations. The comprehensive and all-inclusive nature of logistics parks expedites and smooths functions across all areas, including processing, assembly, packaging, and distribution.

Operations management inside and outside of a logistics park

Designed for integration and cooperation among all areas of management, operations, production, and distribution, logistics parks boost internal productivity and enhance organization. Rather than dealing with external service providers and middlemen, small businesses in light industry can focus on planning, the management of daily activities, and order fulfillment. They can also control inventory management, warehouse management, and self-storage.

Businesses in light industry must also keep sanitation, security, and safety in mind. Working with reliable and proven outside companies, logistics parks come ready-built with waste collection services, camera monitoring, fire sprinklers, and controlled entry.

How operations management is conducted for small businesses in logistics parks

With Agility’s logistics park 2PL services, small businesses focus on their operations and leave security, waste management, maintenance and overall facilities management to Agility.

Any successful business pays attention to value—the value of the goods or the service they provide to consumers and the value of their place in the industry. Because each logistics park is its own regional distribution network, value-added logistics services become vital contributors to effective operations management. Notteboom and Rodrigue note that these services provide connectivity between production and transport, are a prime source for revenue generation, and facilitate strategy planning for locational value and market impact. Combined, such factors enhance operations through consolidating a supply chain’s production and distribution divisions.

Locating logistics parks for the needs of small businesses in the light assembly, processing, and packaging industries

When choosing a park location, businesses in light manufacturing industries must understand the nature of their business and recognize their main sources of spending. Does the business require offices, IT infrastructure, retailer space, a showroom area, employee amenities, data centers, special software, assembly equipment, open floor space, or outdoor yards? Where is the majority of logistics spending going? The answer to such questions determines the size and characteristics needed for the facility and its operations.

Finding the best possible location and recognizing what to look for in a logistics park

The fluctuating nature of e-commerce and the economy requires businesses to remain flexible; accordingly, businesses must consider facilities that give them the opportunity to quickly adapt. Ideally functioning logistics parks offer flexible sizing and ready-built, move-in-ready space as well as  custom built-to-suit facilities. They provide flexible leasing and include open layouts with ample space for Class A warehousing. Layouts, office spaces, and warehouses have an expandable design, allowing the facilities to adjust or grow with shifting supply and demand.

Businesses in the light assembly, processing, and packaging industries must also ensure the logistics park is connected to the modes of transportation that best suit their needs. The most successful parks offerconnections to freeways, railways, airports, and seaports. Additionally, they must have sufficient space for docking and loading.

Light industrial businesses have other special considerations, such as natural lighting, secure workspaces, and safety features for assembly, processing, and packaging work. Finding a logistics park that meets these needs is essential.

Negotiating with logistics parks when interested in relocating

When considering a move to a logistics park, businesses and park developers must clearly define their expectations and negotiate for each party’s needs. Both need to define transport procedures and determine the shipment volume the park can handle. Does the business need sea, air, or ground transport, and how will the park accommodate this?

Of course, parties need to discuss operational costs, be explicit with the terms of the lease, and agree to the responsibilities of each side. They must also review procedures regarding damaged freight, customs brokerage, and operational reviews. If business managers believe they might need to expand, they need to negotiate time frames and the terms of expansion costs. Ensuring both parties understand each other’s expectations and needs increases the chance for a successful move and acclimation to a logistics park.

Logistics parks: Supporting worldwide small business growth and productivity

By nature and design, logistics parks come with a variety of benefits. While reducing risk, they help businesses save money, enhance operations, and simplify storage and shipping.

Small manufacturers reach consumers around the world and often provide specialized products that larger manufacturers are unable to produce profitably. Logistics parks, as ideal locations for small businesses doing light assembly, processing, and packaging, support such businesses and promote their growth.

See all the logistics park solutions Agility has to offer small businesses worldwide, and chat with a representative today.

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• Access to a greater number of consumers
• Access to a larger labor market and lower labor costs
• Potentially less corporate regulation
• Potentially lower corporate taxes

Furthering investments in emerging markets can create additional growth; however, investments in emerging markets also come with additional risks that must be evaluated and addressed. The use of logistics parks as ideal for de-risking emerging markets for multinational corporations is one innovative solution to mitigate risk in emerging markets and gain rewards from investment.

Risks for multinational corporations in  emerging markets

Investing in emerging markets offers further opportunities for growth but has increased risks.

Advantages of investing in emerging markets

In recent years,  economies in the Middle East, Africa, and Asia have been growing  much faster than those of the United States, European and other Western nations. According to Ameriprise Financial, from 1969 to 2019 the US GDP increased by a factor of only 3.8 in comparison to India’s 14.1.

• Emerging markets often emerging affluent and middle classes with additional buying power and an interest in luxury goods. This provides an opportunity to introduce new products into the market. Being one of the first to offer a product allows a company to acquire a significant market share.
• Emerging markets are likely to have a growing infrastructure system. As infrastructure is built in these communities, businesses enter the market to provide services. Being one of the early businesses fosters the creation of lasting relationships with customers.

Investing in emerging markets also offers access to less costly labor and raw materials and helps diversify a company’s portfolio to balance economic downturns in one region with growth in another.

Political, economic, and currency risk

Emerging markets offer unique opportunities for growth. However, there are a number of risks associated with emerging markets. These risks pose potential problems for a multinational corporation’s global expansion strategy and may deter a company from investing.

Though investors in emerging markets have seen evidence of a favorable risk-to-reward ratio in their investments, it is imperative to consider potential risks when making investments in these markets.

Political risk

Political risks of emerging markets are major contributors to hesitancy toward investing in emerging markets. According to a 2006 Economist report, 65 percent of respondents have had to cancel plans to invest in emerging markets due to political risks.

These risks are created by unstable governments or political unrest and have consequences for the economy. Two of the most highly noted risks are corruption and instability of the political regime. An unstable government is at risk of being replaced, which can lead to significant policy changes affecting the economy. A regime change in an emerging market could be hostile to foreign interference, making multinational business particularly difficult.

According to an article by S&P Dow Jones Indices, political instability in Brazil in 2014 caused a drop in Brazilian equities. The underlying causes of this were uncertainty of the incumbent administraton’s stability and shortcomings of an economic policy called the New Economic Matrix. Another example cited by the same article is a drop in equities in Russia in 2014 caused by several risk factors. These are examples of political risks that must be taken into account when investing in emerging markets.

Economic and currency risks

Economic risks also play a significant role in deciding whether to invest in emerging markets. These risks come in the form of insufficient labor and materials, high inflation or deflation, and unregulated markets. The instability creates challenges for investors.

Currency risk relates to valuation of currency. Emerging markets’ currencies can be much more volatile than those of established markets. Investment gains can drop if the local currency drops significantly in value.

Despite this, multinational companies venturing into these markets have been able to see growth. They continue to invest in these markets, proving that it is possible to mitigate these risks.

Finding innovative approaches to alleviate risks can contribute to increased growth when making investments in emerging markets.

Innovations in emerging markets that attract multinational corporations

A logistics park is a defined industrial area that is home to warehousing and other logistics and distribution activities. Logistics parks offer real estate and services to help streamline supply chain management for multinational companies venturing into global markets. These parks help reduce the risk associated with entering an emerging market.

Research and development

One area of promising activity in in emerging markets is research and development (R & D). Performing R & D work in emerging markets with pools of talented, skilled workers is beneficial because of the reduced costs associated with labor and laboratories, and the innovations that come out those laboratories.

Emerging markets allow companies to have state-of-the-art facilities that are not as easily or affordably built in established markets. This reduces cost in real estate and labor while improving the quality of the laboratories.

R & D facilities in emerging markets also give companies access to the best talent from top universities around the globe, some of which are in emerging markets. In 2021 Brazil and China alone were home to over fifty of the top 500 universities in the world, as ranked by U.S. News.

These well-educated graduates are recruited to work in R & D to develop innovative solutions and technologies. According to Reuters, in 2019 and 2020, China surpassed the United States in the number of patent applications. China’s rate of increase was also higher from 2019 to 2020, at 16.1 percent versus the United States’ 3 percent.

Innovation, as displayed by the growth in patents throughout the COVID-19 pandemic, remains resilient and crucial during times of crisis. This resiliency is another reason investing in R & D in emerging markets can be beneficial to multinational corporations.

Direct investment

Emerging markets, investors, and multinational corporations alike can benefit from direct investment. Foreign direct investment (FDI) occurs when a company domiciled in one country establishes lasting interest, through investment, in an entity that resides another country. This normally involves an ownership threshold of 10 percent or higher. FDI stimulates economic growth by building stable links between economies and promoting international trade.

• Increased employment: Investments in the economies of emerging markets create jobs and increase employment.
• Human resource development: FDI often promotes a stronger workforce, providing training and development to increase the skills and knowledge of employees. This creates a ripple effect in the economy.
• Industrial development: Creation of industrial centers in underdeveloped parts of a country can boost the social economy by providing jobs, building infrastructure, and bringing formerly unavailable resources to the area.
• Provision of finance and technology: FDI often allows emerging markets to gain access to financial and technological innovations that were formerly unavailable.
• Increased exports: Many goods produced through FDI are intended for international consumption.

How logistics parks can assist multinational corporations with distribution and compliance in emerging markets

The benefits of investing internationally are abundantly clear, and those of investing in an emerging market can be exponentially greater. However, the risks of those markets need to be addressed. Logistics parks offer a solution for multinational corporations so that risk in the supply chain is minimized. They:

• Lower the cost of market entry for multinationals
• Preserve working capital for multinationals’ expansion and operations
• Allow multinationals to enter markets quickly — without the hassle of buying and securing title to property
• Let multinationals scale and flex operations without having to undertake construction themselves
• Help multinationals concentrate on their core strengths while leaving security, maintenance, waste management, utilities and other functions to a logistics park operator

This is why logistics parks are ideal for de-risking emerging markets for multinational corporations.

Supporting distribution through location

Logistics parks are located in transportation hubs of major cities in emerging markets. They are near urban centers, road networks, seaports, international airports, rail lines, and other national hubs. This provides quick access to domestic and international transportation and export facilities.

Logistics parks are dedicated to supply chain support. They are designed specifically for warehousing and light industrial activities so that companies can handle warehousing and distribution from a centralized location. This facilitates clustering equipment and services for shipping and allows consolidation of trucks or shipments required.

There are many direct benefits of the strategic locations of logistics parks:

• The requirements of demand and supply are met on time.
• Large amounts of space are available, with state-of-the-art storage facilities for goods and products.
• Wide roads enable free-flowing traffic at all hours of the day and night.
• The sites are highly secure.
• Site management and maintenance, including services like landscaping and waste removal, are provided.
• Ample truck and office parking space is available.
• Space for amenities like banking, insurance, office space, catering, and other services is available.

Supporting local economies

In addition to the direct benefits, there are economic and environmental benefits that contribute to the future success of the emerging markets logistics parks are located in. In the long term, this will pay off for the multinational companies investing in these markets and doing business out of these logistics parks.

Having a consolidated location where multinational corporations are storing and distributing goods as well as using the space for other business needs draws local companies to the area. The convenience of logistics parks allows local construction and transportation companies to operate at lower costs. Jobs are created in the logistics park itself, both with multinational companies and with local companies that have been drawn to provide services for the park and its businesses.

All of this generates economic growth in the market and benefits the surrounding community. In some cases this even creates social benefits by improving infrastructure and education.

Supporting distribution and compliance through innovation

Containing the storage and distribution of goods within a logistics park can be considered an innovation in itself. However, the dedication of logistics parks to improving distribution has also allowed the introduction of technologies that support the goal of streamlining the supply chain.

Many automated technologies have been designed and implemented to improve logistics in the supply chain. Advanced robotics and artificial intelligence technologies have allowed for the creation of reliable and efficient solutions for warehouses, factories, and supply chain management. Technology companies are continuing to improve these solutions.

Logistics parks are in a unique position to take advantage of these automation solutions for all parties involved in the logistics process. This further increases the efficiencies embedded into the functions of the logistics park.

Supporting compliance

Logistics parks can also offer support with compliance. When entering the global market, multinational companies must be compliant with the laws and regulations of the foreign countries in which they are doing business. Not only does operating out of a single facility make it easier to manage these regulations, but many logistics parks also offer services to assist with these compliance issues.

Strategies that fit logistics parks in emerging markets

Globalization has made international trade increasingly more streamlined. Supply chain consolidation in the form of logistics parks and technological advances in logistics management are two innovations that have already been touched on. However, innovations in e-commerce have further propelled globalization and can make investing in emerging markets increasingly rewarding.

E-commerce

The innovations of technology and e-commerce have made it possible to handle logistics virtually and for consumers to purchase products online from around the world. The COVID-19 pandemic accelerated the shift to online purchasing, with global retail e-commerce sales increasing 27.6 percent, according to Oracle NetSuite. The same report estimates that by 2023, e-commerce will account for 22 percent of all global retail sales.

Logistics parks can help with this rapid transition to online sales with the built-in efficiencies and ability to take advantage of innovative automation and virtual logistics technologies.

De-risk with logistics parks

Experts see logistics parks as ideal for de-risking emerging markets for multinational corporations because they reduce costs, increase efficiencies, and contribute to global infrastructure.
Contact Agility to learn how Agility Logistics Parks in Africa, South Asia, and the Middle East can help your company with a logistics infrastructure that meets or bests international standards.

Contact Agility to learn how Agility Logistics Parks in Africa, South Asia, and the Middle East can help your company with a logistics infrastructure that meets or bests international standards. 

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1. China decelerates

China’s e-commerce sector is experiencing a slowdown in growth as the market matures and policymakers shift their focus to the rural economy. Over the next five years, e-commerce is expected to grow 23.6% from 2020 levels. That’s still healthy, but nowhere near the 70.6% growth rate for the previous five years.

Slowing growth rates are already apparent. Alibaba sales for 2021 Singles Day, the mammoth annual shopping event, were $84.5 billion – a record and up 8.5% from 2020 – but the smallest increase in growth since the start of the festival in 2009.

2. 10 Years of Growth in 3 Months in the U.S., but …

At the outset of the pandemic, the United States witnessed a decade’s worth of growth in e-commerce penetration in just three months’ time, according to McKinsey. Consumers continue trying new stores, websites, brands and types of shopping experiences.

Globally, though, the 2021 e-commerce growth rate is unlikely to match the pace set in 2020. Oberlo forecasts a 17% increase in global e-commerce sales for 2021 vs. nearly 26% in 2020.

3. Emerging markets outpace others

“India, Brazil, Russia, and Argentina are all projected to post at least 26% growth in retail ecommerce sales this year,” says eMarketer.

The Brookings Institution says the “latent demand for e-commerce in emerging markets remains large.”

Changes in the Warehouse

4. Smarter robots

Gartner predicts that warehouse automation and digital transformation will reduce inventory carrying costs by 30% in North America and Europe by 2024. Driving much of that reduction will be the arrival of upskilled, multi-skilled or dual-purpose robots to replace robots that specialize in a single task. The next generation of machines will be able to perform more than one job. Imagine a smart machine that could conduct warehouse inventory, replenish the shelves — and clean the floors.

5. AI-led warehouse configuration

Amazon’s new fulfillment center in Sydney, Australia will use artificial intelligence to store 50% more per square meter, accelerating shipping times and allowing for greater product selection.

6. More micro-fulfillment

Retailers everywhere are experimenting more with micro-fulfillment centers – small, on-premise spaces devoted to processing online orders intended for pickup by customers or third-party delivery specialists. Walmart is among the many companies expanding the use of micro-fulfillment, which typically allows shoppers to drive up and scan codes to receive their orders.

Investment in businesses such as Fabric, a U.S.-based company that provides automated micro-fulfillment technology for grocers and general merchandise retailers, is surging along with growth in the same-day delivery market.

Look for more retail lockers – known in the business as Forward Deployment Fulfillment Centers (FDFCs) — in supermarkets, malls, office buildings, and other public places.

Changes in Delivery

7. Low-emissions and no-emissions delivery

B-Line Urban Delivery in Portland, Oregon, has two revenue streams. One is its last-mile logistics delivery business, which delivers using large custom cargo bikes mounted with boxy containers that carry parcels. The other stream comes from selling advertising on the visually striking containers. B-Line and others are meeting the desire of cities and businesses to find ways to cut emissions and vehicle congestion.

8. Creative sell-deliverer partnerships

Bed, Bath & Beyond is going to Uber Eats to launch a baby and kids vertical that will sell and perform same-day delivery of diapers, wipes, baby food and other items to new parents. Products from 750 Bed Bath & Beyond stores are available for on-demand delivery through the Uber and Uber Eats apps.

Changes in Customer Experience

9. Increased use of voice search

E-commerce sellers need to optimize their sites for mobile voice search, which has grown in use as voice assistants on mobile phones and smart devices have improved. The number of voice shoppers is expected to grow 55% in 2022, according to Entrepreneur.

So sellers need to make sure that voice search makes commonly requested information – web address, physical address, contact number and business hours – easily accessible via voice. Entrepreneur recommends online sellers adopt strategies that identify and rank keywords and phrases most likely to be used in voice searches.

10. Augmented reality (AR) to “see” what you’re buying

Up until now, AR has been of greatest interest to apparel brands because it allows consumers to virtually try on garments they are considering for purchase. But Oracle Netsuite urges companies with other types of businesses to take note of the rapid advance of AR technology.

Consumers doing home remodeling, for instance, will want to use AR to “see” what that new room will look like before they agree to remodel. AR can show them the flooring, wall colors, furniture, artwork and more.

11. Personalization on steroids

Online sellers are relying more on artificial intelligence and machine learning to predict individual shopping habits based on their customers’ browsing and shopping histories. At the same time, Deloitte says, consumers are increasingly willing to share their personal data in return for the prospect of customized or personalized products and services. “Mass personalization” is how Deloitte describes it.

One example: Enfamil, which asks expectant mothers for their babies’ due dates and sends them personalized information throughout their pregnancies.

In one study, retailers that were able to scale personalization boosted revenue by 25%, according to Big Commerce.

On the Back End

12. Open source e-commerce

Open source software systems have been popular with smaller e-commerce players, but larger companies have tended to favor proprietary solutions. That’s changing, particularly when it comes to user interface features (marketing, product catalogs, cart & checkout, order status, chat and support, account management) and a smaller set of APIs.

McKinsey says open source software typically provides more speed and flexibility, and that large e-tailers have overcome most of their doubts about scalability, security, and support requirements.

“Open source for e-commerce is an increasingly viable option for large companies, especially for those that have the requisite engineering talent and regard e-commerce as an important strategic consideration,” McKinsey says.

Read the original article by Hassan Mikail, Head of Shipa Ecommerce, at https://www.globalbankingandfinance.com/12-top-trends-in-2022-e-commerce/

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How logistics parks work as regional distribution hubs

Logistics parks are ideal for all distribution companies throughout the supply chain. Your logistics park should provide a strategic location close to multiple transportation methods and the workforce population to satisfy your customers. When your logistics park is designed to meet the supply chain demand and accommodate your employees’ needs, the park can work perfectly as a regional distribution hub.

What is a logistics park?

A logistics park is a distribution center designed to store, manage, and transport your products. Since every company and product is unique, the park can be customized to meet the specifications that your company requires. For instance, if your product requires refrigeration or speciality assembly and packaging prior to shipping, the park will be designed to optimize these operations.

Successful logistics parks are built in strategic geographical locations to increase your freight distribution and lower your costs. Your park might be built near expressways for road transport, close to railways for railroad transit, or near a large airport to make air cargo logistics fast, easy, and affordable.

Additionally, your logistics park can include amenities for your employees so that you can attract a skilled workforce population. These amenities might include banks, convenience stores, or even transportation methods to help your staff commute to work.

What is an industrial logistics park?

Many companies across the supply chain require industrial areas to manufacture their products. An industrial logistics park can accommodate large warehousing and production spaces as well as office space and employee amenities to keep your operations running smoothly.

Industrial logistics parks are engineered as manufacturing and logistics centers. Here are a few elements that your park can include:

• Specialty manufacturing equipment
• Hazmat disposal areas
• Freight docks
• Office space
• Common areas, such as a cafeteria or athletic center

How do logistics parks work as regional distribution hubs?

Logistics parks make regional distribution easy. They are built in a central location with fast and easy access to various modes of transportation. This helps your company identify the best logistics zones across the region to distribute and transport your product.

The whole purpose of a logistics park is to increase the effectiveness of your operations and freight distribution. Your park can help your business run like a well-oiled machine because it is built to accommodate your product needs and attract the best employees. The park should also include state-of-the-art technology so that you’re set up for the future. When you put these pieces together, your logistics park will function as a successful regional distribution hub.

How logistics parks assist with sustainable supply chain efforts

In past decades the industrial supply chain has sometimes been thought to contribute to pollution and produce greenhouse gases. Fortunately, a recent push for sustainable supply chain planning across the globe is trying to change that notion. And thanks to these efforts, logistics parks are now being rethought and reengineered to help supply chain industries protect the environment while still producing high-quality goods.

What is sustainable supply chain management?

Sustainable supply chain management incorporates environmentally friendly practices into supply chain operations. Due to climate change concerns in recent years, many industries have developed sustainability initiatives to reduce CO₂ emissions and their overall carbon footprint.

The push toward a greener supply chain has led to a lot of changes for the logistics industry. Companies have added services like reverse logistics and recycling programs. They are moving toward lower-emission transportation methods. And in some cases, they are converting every square foot of their distribution space and warehouse facility to be more eco-friendly.

If sustainability is part of your logistics enterprise, a logistics park can support your green efforts.

How do logistics parks assist with sustainable supply chain efforts?

Nowadays, the most innovative logistics park designers are focusing on building a sustainable supply chain to get greener. Here are a few elements that logistics parks can include to help your sustainability efforts:

• Solar energy to power building HVAC systems
• Wind energy to support electrical systems
• Energy-recapture technology for vehicles
• Safety standards to keep employees safe and healthy

Some companies fear that a sustainable supply chain might lessen their product’s quality or even result in financial loss. However, the most effective supply chain efforts prioritize not only a smaller carbon footprint but high-quality production and financial profitability as well.

What are effective supply chain efforts?

Effective supply chain efforts must achieve three main goals:

• Lower your company’s carbon footprint. State-of-the-art technology uses renewable energy resources to reduce your emissions and support the international sustainability initiative.
• Increase customer satisfaction. Going green doesn’t mean sacrificing product quality. You can still manufacture and distribute high-quality goods to your customers. And since, according to a 2021 Strategy+Business article, roughly half of consumers around the world are trying to be eco-friendly, your sustainability efforts can help grow your brand awareness and customer loyalty.
• Provide financial stability throughout each sustainability effort. Technological innovations help companies save money while being eco-friendly. Motion-sensor lights can save up to 90 percent of electrical costs, according to the Sustainable Buildings Initiative, while newly engineered equipment reduces maintenance fees and lower-emission vehicles mean lower fuel expenses. There are even tax incentives for eco-friendly upgrades, so be sure to see if your company qualifies.

Supply chain sustainability is here to stay—so it’s wise to incorporate sustainable initiatives into your corporate strategy.

Strategies for routing your company’s supply chain processes through logistics parks for distribution

You’ve already developed a strategy that outlines your company’s goals and how to achieve them. And as you work to lower your distribution costs and optimize your supply chain, it’s equally important to create a strategy for routing your processes through logistics parks.

How does supply chain management affect manufacturing distribution costs?

Strong and effective supply chain management affects all aspects of your business—including manufacturing distribution costs. Without strong supply chain planning and management, your supply chain can fail in phases like material delivery and labor allocation that increase your distribution costs. When your supply chain is well managed, your operations will run smoothly and cost-effectively.

Logistics parks help you manage your supply chain and therefore keep your distribution costs low. The best logistics parks include warehousing, office space, eco-friendly amenities, and proximity and access to various methods of transportation. If your logistics company delivers raw materials late, you can still expedite your products once they’re produced if you have easy access to road, railway, and air cargo transport.

What is supply chain optimization?

Supply chain optimization means that you have the most current and effective resources throughout every phase of the supply chain. Technology is constantly changing, and many of these advances help businesses reduce their operating costs, engage in eco-friendly practices, and satisfy their customers’ needs.

Here are a few areas in which optimizing your supply chain with the best and most modern resources can help your business run smoothly:

• Raw material ordering and tracking
• Warehouse management, including machinery efficiency, labor allocation, and inventory loss prevention
• Quality control software
• Outbound logistics operations management

Optimizing your supply chain helps you control the entire life of a product from the moment you order the raw materials through the delivery to your client’s door. This optimization is a key strategy that all companies should incorporate into their daily operations.

What are strategies for routing your company’s supply chain processes through logistics parks for distribution?

Because logistics parks are engineered to increase your distribution operations, they make it easy to design a strategy to route your company’s supply chain processes. An effective park helps you manage each logistic to ensure maximum efficiency throughout your operations.

Here are a few additional components that you can include in your strategy:

• Optimize your warehouse space for efficient operations
• Use speciality software to manage your inventory, control your costs, and forecast your sales
• Determine the best distribution methods across your region, including road, railway, ocean freight, and air cargo

Your strategy is unique to your company. So it’s important to consider your needs as you develop the strategy. And once you’ve laid out your plan, you can begin searching for the optimal location for your regional distribution hub.

How to locate logistics parks for regional distribution hubs for your company

You’re already aware that geographical location plays in important role in the effectiveness of your logistics park. The location must give you easy access to your entire region and a variety of transportation methods. And since the availability of commercial real estate varies across the world, it’s important to understand how to locate the best logistics parks.

One question to keep in mind during your search is whether your location will be affected by the coronavirus. Although supply chain companies faced challenges before the pandemic, companies have had to deal with labor and material shortages over the last two years. Thanks to creative problem-solving and the innovation of multimodal hubs, you can still find a logistics park to suit your needs.

How can companies locate logistics parks during the coronavirus pandemic?

The world changed in late 2019 and early 2020 with the onset of the coronavirus pandemic. Prior to the pandemic, logistics and distribution challenges included high fuel costs, public outcry for a greener supply chain, and the ever-increasing demand of the e-commerce industries.

During the coronavirus pandemic, supply chain companies have faced even more intense challenges. A large percentage of the working population across the world was asked to stay home in effort to prevent the virus’s spread. The reduced workforce meant that less raw material was being made and fewer products were being manufactured. To stabilize and become pandemic-resistant, companies can now look for logistics parks in areas with lower infection rates and with governments that are dedicated to keeping businesses operational.

How can companies locate logistics parks with multimodal hubs to improve supply chains during the coronavirus pandemic?

Multimodal hubs allow for seamless transportation and communication across multiple platforms. Because COVID-19 largely shut down both domestic and international travel and many employees had to work remotely, companies have had to think creatively to keep up their transportation and communication.

Fortunately, technological advancements in multimodal hubs have helped companies become pandemic-resistant. And since the best logistics parks include state-of-the-art technology, businesses throughout the supply chain have had options in choosing a logistics park with a multimodal hub that keeps them operational.

How can you locate logistics parks for regional distribution hubs for your company?

You need to locate a logistics park that will work well for your company’s manufacturing and regional distribution. Here are a few elements to keep in mind as you research commercial real estate and determine where your logistics park should be located:

• Labor cost. Where will you be able to find skilled employees that fit your labor budget?
• Freight and distribution. To optimize your logistics, should you be near an airport, a railway, or an inland port?
• Expansion and upgrade capabilities. Some geographical locations have stronger infrastructures than others. If you want room to expand and continue your sustainability initiatives, you’ll need a location that can accommodate you.

Logistics parks help you access more markets and expand your business

Your company needs high-quality, sustainable logistics services in order to compete in the regional and global markets. And Agility is the expert in developing logistics parks in the Middle East, Africa, and South Asia.

Visit our website to learn how an Agility Logistics Park is your ideal regional distribution center that can help you access regional and global markets as you expand your operations.

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One consideration that is sometimes forgotten is supply chain sustainability. Sustainability is a hot topic in all industries, logistics included. While consumers demand faster access to online goods, they’re also looking for companies that use sustainable measures.

Reducing a company’s carbon footprint is a popular topic, especially since consumers are becoming more environmentally aware. A green logistics park can help you reduce your carbon footprint in a variety of ways. For example, the supply chain solutions team at Agility helped customers reduce emissions by an average of 8 percent per year.

In modern business, sustainable options are more important than ever. When you have a suitable logistics space, such as the affordable options Agility offers, sustainable practices will help you meet your goals of lowering your costs, increasing your productivity, and reducing your carbon footprint.

Evaluation index of green logistics parks

Supply chain sustainability is one way to reduce the larger problem of our impact on the environment. The carbon footprint of individual aspects of supply chains might seem negligible, but they add up to a significant impact.

For example,  the European Commission asserts that 2.5 percent of all greenhouse gas emissions come from maritime transport. Additionally, the Environmental and Energy Study Institute reports that transport by plane drives about 5 percent of global warming.

Green logistics parks differ from their unsustainable counterparts in three ways. First, they reduce energy costs. Secondly, they reduce the environmental impact of the building, and finally, they increase productivity. With the right logistics enterprise, your business can enjoy all three benefits.

What are the elements of a green logistics park?

When it comes to a green logistics park, the main features you look for should serve multiple purposes. These elements are those that reduce carbon emission, energy consumption, and the environmental impact of the building. Ideally, logistics providers will also have a green building certification.

A common sustainable goal for logistics parks is to reduce energy consumption. Features such as LED lighting, solar panels, and skylights accomplish this at low cost. Another is to use construction techniques that make the buildings themselves greener. Green logistics parks should also strive to reduce waste and increase recycling.

As technology develops and businesses continue to understand the importance of reducing their environmental impact, new solutions will arise. Therefore, an essential consideration for a logistics park should be that it can evolve with new techniques.

What qualifies as a green logistics park?

Simply put, a green logistics park is any park that meets standards to reduce its impact on the environment. This usually includes measuring and lowering carbon emissions, reducing waste, and lowering resource consumption.

There are other efforts a logistics park can take to reduce its footprint, such as increasing natural spaces. Agility warehousing spaces use drought-resistant plants to create natural spaces that do not require lots of maintenance.

One of the most significant factors regarding what a park can offer is its location. For example, Agility’s parks are near major roads and national population hubs, meaning the distance your trucks must drive is significantly reduced. Agility’s prime locations maximize your distribution efficiency, saving you money and lowering your environmental impact.

Additionally, logistics parks qualify as green when they are EDGE certified. EDGE certification means that Agility’s buildings have reduced water and energy consumption by at least 20 percent compared to traditional buildings.

Key performance indicators in green logistics parks

When it comes to the key performance indicators (KPIs) of a green logistics park, there are two main elements to look for.

The first KPI is the financial aspect of sustainable development. While decreasing your carbon footprint is important, it’s crucial that you use a financially sound strategy to incorporate green technologies. Additionally, green solutions should be able to scale with your business.

Second, sustainable methods should increase the productivity of your entire supply chain. With the right training, you can create a team of personnel who can implement your sustainable practices in every part of your supply chain. From your warehouse floor to transport vehicles, the most successful sustainable practices will make everything run better.

How do sustainable practices reduce costs?

When the term “cut costs” comes up in conversations, people tend to think of immediate actions that result in a temporary reduction of money going out. This can involve anything from letting go of personnel, enforcing a no-idling rule for truck drivers to reduce fuel costs, or selling under-used equipment.

However, cost reductions like that often have a negative impact and are usually only temporary fixes. When a company is serious about reducing its costs, implementing green practices is a long-term option. There is a direct correlation between reducing costs and reducing your resource consumption.

For example, Agility constructs logistic spaces with the local environment in mind. Roofs and walls are built with locally sourced materials and designed to meet regional conditions. This construction method reduces your heating and cooling costs by using local knowledge of the environment. It also lowers the impact of the building by reducing the amount of shipping involved in the procurement of the construction materials.

LED lighting is another feature of Agility facilities, with both indoor and outdoor lighting using cost-effective and environmentally friendly bulbs. According to the US energy department, LEDs can reduce the amount of energy you use to light your building by up to 90 percent.

How do sustainable practices increase productivity?

New ways to increase productivity are usually towards the top of every business owner’s wish list. Increasing productivity is a great way to reduce costs and increase your selling power.

When you streamline your supply chain, you’re likely to cut methods and techniques that are wasteful. The very process of streamlining will increase your productivity. Agility parks offer optimized storage space for your needs—you can rent exactly the amount of space you need. Your warehousing space easily scales with you, with more space available whenever you need it.

Transportation is an area where many businesses see a dip in productivity, but a logistics park near national hubs means faster shipping, quicker receiving, and a smaller impact on the environment. With Agility, you gain access to the most productive means of transportation: freeways, seaports, airports, and railways.

Determining the success of sustainable practices in logistics parks

One of the most effective methods of determining the success of a logistics warehouse is to look at energy consumption. According to the US Environmental Protection Agency, 25 percent of all greenhouse gas emissions come from electricity production, 23 percent from industrial production, and 13 percent from commercial business needs for heating and waste removal.

Energy management not only reduces your overall costs, but it also lowers your carbon footprint. The easiest way to determine the efficacy of your efforts to go green can be measured in the amount of energy you consume and the money you save. While there are many ways to increase your energy efficiency, Agility logistics parks offers distribution center spaces with everything set up for you.

Agility makes use of the ample roofs on its buildings by setting up solar panels. You’ll also find skylights, which not only reduce your need for lighting (thus reducing your power bill), but it makes the warehouse space more enjoyable for your employees.

The critical difference between traditional methods of cutting costs and sustainable practices is your return on investment (ROI). With conventional methods, you usually don’t see a high ROI. With sustainable practices, however, you not only get a return on your capital investment, but you also get all the other benefits that come with sustainability.

Importance of sustainable practices for logistics parks

Environmental sustainability will continue to rise in importance for all industries, and companies that want to keep their competitive edge need to embrace the movement.

However, creating a green supply chain is important beyond its appeal to customers. A green logistics park optimizes your available resources, reduces costs, and reduces your overall environmental impact.

What are the tax benefits of sustainability practices at a logistics park?

It used to be that taking sustainable measures was something a company did to improve its image. Today, sustainability is helpful for much more than your reputation. Aside from the obvious benefit of helping the environment, there are numerous economic incentives to going green. One of the incentives is tax benefits.

While tax benefits vary based on the country your business is located in, efforts in sustainability usually come with valuable tax cuts and credits.

For example, the Green Business Bureau reports that the US government offers tax credits, rebates, and breaks for companies that invest in sustainability practices. These benefits include:

• Deductions for green installations that reduce power use, such as LED lighting
• Grants and credits for properties that use alternative energy, such as solar panels
• Bonuses for recycling of waste and equipment
• Credits for using fuel-efficient vehicles

Some countries have better tax breaks than others, but you can expect to see some sort of tax benefits when you use sustainable practices.

Green warehousing technologies and products available for logistics parks

Just as logistics parks have different business features, the same is true for sustainability. Ideally, a logistics park will offer the green practices you want as well as features you can grow into.

For example, Agility logistics parks offer a long list of sustainability practices that you can make use of with little to no effort:

• Recycling
• Solar panels
• Xeriscaping
• Skylights
• Construction techniques
• Low-emitting paint
• LED lighting
• Regionally-sourced construction materials

The benefit an Agility warehouse is that you don’t have to choose which green warehousing technologies you want to use—you get them all.

What are the most recent developments in green warehousing technology?

Today, the biggest developments in warehousing technology aim to reduce energy consumption and environmental impact. Current warehousing trends include a move towards automation, optimizing facilities, increasing recycling, and increasing the use of renewable energies. Optimizing facilities includes lowering resource consumption

An example of reducing resource consumption while promoting green building techniques is Agility’s use of xeriscaping. Agility uses drought-resistant plants to minimize water consumption while ensuring workers have access to natural spaces.

Recycling is of particular interest in warehousing because there is a lot of waste created in the supply chain. Agility has recycling zones set up in every logistics park. An essential part of recycling is reusing materials. Reusing materials not only saves you money, but it also lowers your carbon emission.

For example, Agility was able to help one client increase its reuse rate from 47 percent to 72 percent, which saved them over $78,000.

What factors are driving trends in green warehousing technologies?

COVID-19 has significantly impacted the way people shop, and warehousing technology has become an increasingly popular topic of conversation. According to the World Green Building Council, facilities like logistics parks have huge potential to make a massive impact on efforts to reduce global warming.

However, industrial buildings are giant consumers of energy, water, and other resources. This fact has driven the development of sustainable practices in warehouses and logistic parks.

Explore your sustainability options with Agility

Agility recognizes that sustainability practices are more than your reputation. Today’s businesses need sustainable options to meet their goals of reducing their carbon footprint, increasing productivity, and reducing costs.

If you’re ready to see how a sustainable Agility logistics park can help your business, contact us today to get started.

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Agility and Transport Intelligence discuss the 2021 global economic outlook, ongoing supply chain turmoil, and lasting change brought about by the pandemic — all reflected in the just-launched 2021 Agility Emerging Markets Logistics Index.

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The China re-think didn’t start with COVID-19

Well before the pandemic, many companies relying on Chinese producers for finished goods and parts were looking to de-risk by finding alternative suppliers in other countries. Why? Geopolitical tensions, trade disputes, and rising costs in China.

Trade tensions and national security concerns have led to a wave of legislation in the United States, where there are more than 60 bills pending in Congress aimed at changing economic relations with China. In addition, U.S. brands and manufacturers comparing China’s labor costs to those in Mexico have seen China’s labor costs rising faster. That has eroded China’s competitiveness and made Mexico more attractive.

Outward migration of production was underway before the pandemic because tariffs imposed by the U.S. and China had increased supply chain costs by up to 10% for as much as 40% of companies sourcing in China, according to Kamala Raman, a senior director analyst at Gartner.

The U.S., Germany, Japan and other countries have expressed strategic concerns about overreliance on China for critical products: 5G telecommunications gear, semiconductors, steel, cranes, electrical power equipment and more. McKinsey identified 180 different products for which one country — most often China — accounts for more than 70% of the global export market. Many of the products are chemicals and pharmaceuticals.

Intel recently divested itself of a business in politically sensitive memory chips because the business was heavily dependent on China sales. Samsung and others have cited cost considerations for production moves or asset sales.

The pandemic is turning concern to action

China’s assertive response to the pandemic included lengthy, mandatory lockdowns that froze manufacturing and stranded global cargo shipments for several weeks in the spring of 2020. That caused unprecedented disruption in supply chains and led to shortages of everything from household goods and consumer electronics to industrial components and healthcare products.

The pandemic exposed the fragility of sprawling global supply chains. In one recent survey, one-quarter of businesses sourcing from China indicated plans to transition all or some of their operations to other countries over the next three years. In a Gartner survey, an even higher percentage – 33% — said they intend to pull manufacturing or sourcing out of China in the next two to three years. Sixty-four percent of North American manufacturing and industrial professional said they were likely to bring manufacturing production and sourcing back to North America, in a Thomas Publishing survey.

Look for knock-on effects

Any exodus from China will ripple around the world so expect huge and uneven consequences in other markets. The modest movement to other production and sourcing locations has already led to overheated labor markets and infrastructure bottlenecks in other Asian manufacturing countries.

In some cases, the effort to build supply chain resilience is felt most in far off warehousing and distribution hubs, where companies are adding safety stock or shifting from just-in-time inventory to beefed up “just-in-case” models.

Sourcing diversification is altering the flow of goods into U.S. ports. West Coast ports continue to have a lock on ocean traffic from China and serve as the primary gateway for Chinese goods. But now East Coast ports are receiving higher volumes of containerized ocean goods because, in addition to vessels traversing traditional routes from Europe, the Mediterranean and the Caribbean, they receive cargo from Vietnam, Thailand, Malaysia and India, which have found it economical to ship via the Indian Ocean and Suez Canal.

In turn, the shift toward the East Coast has driven up industrial real estate prices along the eastern seaboard of the U.S. as companies scramble to set up distribution hubs and e-commerce facilities.

Japan is pushing an ‘Exit China’ strategy

At least 87 Japanese companies have shuttered production in China, moving it back home to Japan or relocating to Southeast Asian countries in response to incentives offered under the Japanese government’s $2 billion Exit China program. Nikkei Asia says Japanese companies “wary of rising labor costs in China and geopolitical factors had already begun reorganizing production prior to the pandemic.”

Japanese investment in Southeast Asian manufacturing – specifically in Vietnam, the Philippines, Malaysia, Indonesia and Thailand – was already increasing at twice the rate of investment in China.

It’s not just China

Supply chain risk has been rising for years as costly disruptions become regular occurrences.

McKinsey says weather disasters alone accounted for 40 separate incidents involving damage in excess of $1 billion in 2019. Add the risk from trade disputes, retaliatory tariffs — and a doubling of cyberattacks in a single year at a time when companies are increasing their reliance on digital systems.

Geopolitical risk is unavoidable. Today, 80% of trade involves countries with declining stability scores. “Companies can now expect supply chain disruptions lasting a month or longer to occur every 3.7 years, and the most severe events take a major financial toll,” McKinsey says.

Agility’s Take

Economic trauma caused by COVID-19 will initially shrink the universe of suppliers, not expand it. And new layers of protectionism will leave companies with even fewer choices of supply because they will rob efficient producers — in China and elsewhere — of their competitiveness and make them too expensive.

Uprooting from China is not as easy as it seems. Forty years after it began modernizing, China today holds advantages available nowhere else: unmatched scale; abundant skilled and unskilled labor; sophisticated automation, engineering and sciences; world-class infrastructure and logistics; closely synchronized and integrated supplier networks both in-country and across Asia.

Twenty-five years ago, leaving China meant leaving a low-cost manufacturing center. Today, for some multi-nationals, it would mean giving up on the world’s largest consumer market and an economy growing at twice the rate of the United States before the COVID-19 crisis.

Willy Shih, a Harvard Business School professor, says: “There’s a lot of impatience about this supply chain resilience and reshoring. I like to remind people that it took 20 to 25 years for China to capture the supply chain for many products. And if you want to move the supply chain, we’re not talking about something that will happen in a year, or in a couple of years.”

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Insights from Frank Clary, VP for Sustainability at Agility

In only a few months, the COVID-19 virus has been responsible for tens of thousands of deaths, with cases in 180 countries. The global pandemic has overwhelmed health systems in highly-developed markets, including Italy and Spain. Informed by the devastating impact of the COVID-19 pandemic on more developed countries with strong health systems, the humanitarian community is coming to terms with what could happen in vulnerable countries in Africa, Asia, and Latin America, already challenged with weaker institutions and networks.

Cascading, systemic risk in vulnerable countries

The combined weakness of core systems – health, telecom, education, food, transport, and others – means vulnerable countries face what are called cascading risks. Upon actualization of one risk, in this case, a health system overwhelmed by a global pandemic, more systemic risks are actualized, leading to the combined collapse of core systems, and potentially complete societal collapse.

In a country with many poor and vulnerable citizens, governments have limited levers that they can pull to help prevent or slow community spread. Many people live day-to-day and risk loss of livelihood if they self-isolate. Many live in precarious, crowded situations where self-isolation is not possible. It will not be possible to control community spread of the virus in communities where individuals must work every day to survive.

A shortage of personal protection equipment (PPE), already an issue in many countries in Europe and North America, precipitously increases the infection rate of first responders. Once infected, first responders cannot conduct tests, contact tracing, or treat patients. With first responders incapacitated, the public health system is considerably weakened, which could increase infection rates and contribute to significant death toll.

Humanitarian supply chains  

In a humanitarian emergency, logistics is critically important for saving lives, and typically accounts for 75-80 percent of total spend. This crisis will be no different. The logistics challenge is particularly acute due to the global nature of this crisis, now that more than 50 countries currently restrict the export of medical supplies, including India, where a large proportion of the Active Pharmaceutical Ingredients (APIs) used in medicines originate.

Agility is working together with other logistics companies that make up part of the Logistics Emergency Team which supports the Logistics Cluster, led by the United Nations World Food Programme. The companies are creating a dynamic database of information that will be essential to ensure that the 40+ essential items on the WHO’s COVID-19 Disease Commodity Package get to vulnerable countries. The exercise includes data collection and analysis of 4 key factors critical for fast humanitarian response.

• Geographies of risk: which populations are most at risk of systemic failures?
• Export restrictions for countries that are producing essential items
• Import restrictions in vulnerable countries that apply to these essential items
• Capacity constraints for air, ocean and road freight from production countries to vulnerable countries

The sooner test kits, PPE and other essential goods can get to people who need them, the more likely these countries can manage the crisis before it gets out of hand. Agility is also donating warehouse space for storage of humanitarian supplies in Ghana, Malaysia and Dubai.

At the same time, Agility is leveraging its global network, and particularly relationships with suppliers and local governments in emerging markets to get up-to-date information on how the situation is changing. Agility’s COVID-19 Global Shipping Updates are maintained by a network of logistics service providers all over the world, offering information in real time from their countries, as the situation evolves.

A Call to Action: we all can help vulnerable countries respond to COVID-19

For this global crisis, what you do to build resilience in your community, your company, or your supply chain affects the quantity and availability of life-saving products for vulnerable countries. We must keep life-saving cargo moving. 

For logistics companies: share information that we can share with humanitarian organizations, particularly in terms of fast-changing export and import restrictions and available capacity

For shippers: collaborate closely with your freight forwarders, carriers, and others – especially for pharmaceutical industry. Sky-high air freight rates and capacity shortages are prompting players to go it alone, just when we need to work together to bring costs down and free up capacity. Collaboration between stakeholders can improve asset utilization, which could help bring costs down and overcome capacity constraints on some critical trade lanes.

For governments: governments need to ensure that exports of humanitarian supplies to vulnerable countries continue, especially to countries unable to limit community spread and to locations where cascading system breakdowns could lead to heavy loss of life and societal collapse. Catastrophe in vulnerable countries will prolong the global crisis for everyone. Particularly for those countries that are ramping up production of PPE and life-saving equipment, it is important to work with humanitarian organizations to consider how to ensure that humanitarian cargo is able to flow freely to vulnerable populations.

For individuals: self-isolate, and reserve PPE and medicines for first-responders who really need them to do things such as contact tracing, testing and treating patients. The faster communities recover, the more expertise, PPE and other life-saving commodities will be available in the global supply chain to reach more vulnerable populations.

The global trade system has a responsibility now to keep cargo moving in order to protect vulnerable populations. #keepcargomoving

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Africa has 731 airports and 419 airlines with an aviation industry that supports around 6.9 million jobs and USD 80 billion in economic activity. According to the International Air Transport Association (IATA), Africa is set to become one of the fastest growing aviation regions in the next 20 years with an annual expansion of nearly 5%. While it is evident that aviation in Africa has the potential to fuel economic growth, several barriers exist. Weak infrastructure, high ticket prices, poor connectivity and lack of liberalisation rank amongst the many challenges.

Consider the reality: Airport infrastructure in most African countries is outdated and not built to serve the growing volume of passengers or cargo. Airlines and airports are often managed by government entities or regulatory bodies. Foreign investment is discouraged. In Malawi, for example, it’s illegal for a foreign airline or private investor to own more than 49% of a national airline. So, this prevented Ethiopian Airlines from purchasing more than a 49% stake in Malawian Airlines.

Yet, modernising infrastructure and operations requires both investment and expertise, ideally from public-private partnerships. Africa needs to open its doors for private capital investment. Countries such as Côte d’Ivoire and Rwanda are heeding this call and making strategic bets in the sector while employing best practices to drive vibrant aviation growth. Take the outstanding example of the Abidjan International Airport. In 1996, management and operation of the terminal in Côte d’Ivoire were privatised and awarded to AERIA, a French company. Ownership of AERIA is shared by private investors (65%), a technical partner (25%) and Côte d’Ivoire (10%). The company has invested in infrastructure and delivered quality service, impressing the government so much that the concession has been extended.

With private capital involved in the mix as in Côte d’Ivoire, partnerships can build greater efficiency, higher revenue and better quality service that demand financial discipline and eliminate corruption. Still, governments have an important role to play in delivering economic and social benefits by championing intercontinental aviation as well as shaping a dynamic African aviation sector.

Liberalisation will bring strong outcomes – new routes, more frequent flights, better connections and lower fares. These improvements will increase the number of passengers, which will have both direct and indirect positive effects on trade, business travel and tourism. In turn, this has impacts for the broader economy, generating more tourism revenues, jobs and productivity. They will enhance the GDP of African countries and uplift the welfare of ordinary Africans. According to an IATA survey, if just 12 key African countries opened their markets and increased connectivity, an extra 155,000 jobs and USD 1.3 billion in annual GDP would be created in those countries. A study by InterVISTAS Consulting shows that in South Africa, liberalisation could yield an estimated 15,000 new jobs and generate USD 284 million in national revenues.

On the other hand, the lack of liberalisation affects connectivity and ticket costs. In Africa, no direct flight exists to travel from Abidjan, a hub in West Africa, to Dar Es Salam, a hub in East Africa. Instead, a traveler inefficiently flies to a second or third country before reaching the final destination. Across the globe, on average, low-cost carriers are about a quarter of all flights. In Africa, however, they don’t even reach 10%, which obviously makes ticket prices somewhat prohibitive.

So what’s ahead for Africa’s skies?

First, the Single African Air Transport Market introduced earlier this year aims to open up Africa’s skies and improve intra-African air connectivity. So far, 26 African countries have signed up. The movement is promising and will be more effective once all African countries come onboard.

Second, visas need rethinking. Only 14 out of 54 African countries currently offer visas upon arrival to African nationals. Difficulties in obtaining visas for intra-Africa travel affect travel and tourism. But visa openness underpins the continent’s tourism sector and can create many more skilled jobs. The AfDB’s Africa Tourism Monitoring Report  outlines that a visa liberalisation scheme could increase tourism by 5% to 25%. Increased tourism will give rise to new businesses opportunities in transport, hotels, shopping malls and restaurants. For the 60% of African youth who are currently unemployed, this means a new job market, which also prevents local brain drain in the long run.

Indeed, the advantages of increased mobility are many. Not only the Schengen Agreement and the Gulf Cooperation Council, but also African countries that have eased visa restrictions, demonstrate this reality. Rwanda, for one, is a strong supporter of Visa Free Africa. On opening a visa on arrival to all African citizens, the country saw a 24% increase in tourism arrivals and a 50% increase in intra-African trade. Trade with the Democratic Republic of the Congo alone increased by 73% since the implementation of the policy. And when Rwanda abolished work permits for East African citizens, the country’s trade with Kenya and Uganda increased by at least 50%. Seychelles too saw benefits as one of the few completely visa-free countries in Africa. After adopting the policy, Seychelles saw an average 7% increase per year in international tourism into the country between 2009 and 2014.

Ultimately, by 2035, Africa will see an extra 192 million passengers a year for a total market of 303 million passengers traveling to and from African destinations. The top ten fastest-growing markets in percentage terms are in Africa: Sierra Leone, Guinea, Central African Republic, Benin, Mali, Rwanda, Togo, Uganda, Zambia and Madagascar. Each of these markets is expected to grow by more than 8% each year on average over the next 20 years, doubling in size each decade. Thus, while challenges exist, so do the opportunities according to these forecasts. With public-private partnerships for upgrading infrastructure and operations, open skies, and visa liberalisation, aviation in Africa is sure to soar. The question now is: How soon can we make this happen?

This article was originally published by OECD Development Matters. Read the full article here.

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Indonesia, Thailand, Myanmar, the Philippines and Cambodia – countries that all followed in the footsteps of Viet Nam as first-time hosts of WEF’s annual Asian regional meeting – along with others in the ASEAN bloc, are experiencing strong growth too. The 10 member states are expected to generate GDP growth rates between 3% and 8% over 2017-2021.

While the growth of these individual countries is impressive, the real success story belongs to the region. ASEAN has long heeded the connectivity imperative, and the benefits of regional cooperation and economic integration, through initiatives such as the ASEAN Economic Community (AEC), are paying dividends. ASEAN commands a combined GDP of about $2.4 trillion, and GDP per capita has increased by 63.2% from 2007 to 2015. If it were a single country, it would be among the top 10 economic powers in the world. To further drive growth, ASEAN and its six strategic partners will come together in November for the hotly anticipated signing of the Regional Comprehensive Economic Partnership. This will create the world’s largest free-trade area, representing nearly 30% of global GDP, and demonstrates ASEAN’s commitment to removing barriers to trade and expanding market access both within the region and with its partners.

With a population of over 600 million, ASEAN is the world’s third-largest market. It also offers the third-largest labour force, behind China and India, and has some 67 million households that are part of the “consuming class”, a figure that could almost double to 125 million by 2025. Between 2007 and 2014, ASEAN trade increased by a value of nearly $1 trillion. While nearly a quarter (24%) of trade was within the region, this was followed by trade with China (14%), Europe (10%), Japan (9%) and the United States (8%). During the same period, foreign direct investment rose from $85 billion to $136 billion. As nations elsewhere redefine their approach to international trade, one thing’s for sure: ASEAN is open for global business.

Embracing the 4IR

While significant steps have been made to enhance the free flow of goods, services, investments and people, new challenges lie ahead. The technological advancements brought on by the Fourth Industrial Revolution (4IR) are placing new demands on governments and businesses across the region. However, the 4IR also presents great opportunity, if member states can respond to its challenges with speed, flexibility and agility in order to make these new technologies part of its success. Entrepreneurship could play a key role here. SMEs are the backbone of local economies across ASEAN, and often the largest source of local employment across all economic sectors. In countries such as Thailand and Viet Nam, for example, they account for nearly 99% of all registered businesses and employ more than 70% of the workforce. To unleash this potential, the region must ensure that policy reflects the interests of SMEs, affording them the best environment for growth.

E-commerce is a prime example of how 4IR technologies are disrupting traditional sectors. While e-commerce remains relatively underdeveloped in ASEAN today, accounting for less than 1% of total retail sales, this will soon change as internet penetration spreads and the region’s consumer base continues to grow. Given this potential, large local providers such as Lazada and Tokopedia are competing for market share with global players. With SMEs poised to play such a key role in the region’s success, it will be crucial for governments to ensure the internet infrastructure they require is in place, so that entrepreneurs can future-proof their businesses and actively participate in e-trade.

4IR technologies are also enabling logistics providers to take supply chains to the next level in terms of speed and accessibility. This is contributing to the rise of e-commerce, but also driving business more broadly across the region. Drones are operating in warehouses, artificial intelligence is automating processes and blockchain has the potential to transform decentralised supply-chain functions. Logistics providers are also offering online freight forwarding platforms that ease the process of doing business for SMEs, both within the region and more globally. Unsurprisingly, global logistics hub Singapore is leading the way in adoption of technologies into the supply chain, through its Smart Logistics initiative.

Taking an agile approach

However, to truly ascend the global value chain, ASEAN needs to look beyond trade facilitation and advancements in technology. In reality, the very 4IR technologies that are driving growth are at the same time disrupting the region’s traditional strengths in low-end manufacturing in the form of automation, robotics and 3D printing.

Have you read?

• These Asian cities are best equipped for the future
• How to power a bright future for ASEAN
• The ‘ASEAN way’: what it is, how it must change for the future

Governments and businesses need agile approaches to upgrade education, R&D, lifelong learning and skills development. This will create the necessary conditions for ASEAN to better close income gaps, create employment, support SMEs, expand the pool of knowledge workers and – ultimately – to rise in global value chains. Therefore, preparing the capable and young workforce for new realities must happen with close coordination between industry, governments and civil society. These will complement the tremendous efforts leaders are already making in supporting cross-border trade and enhancing mobility.

While there is much for the region to consider as it sets its sights on ascending the global value chain, what is clear is that now is the time for ASEAN to shine. The theme of this year’s World Economic Forum summit, ASEAN 4.0: Entrepreneurship and the Fourth Industrial Revolution, could not be a more timely one.

Written by Sushant Palakurthi Rao, Head of Global Partnerships, Agility

This article was originally published by The ASEAN Post in collaboration with the World Economic Forum.

Read the full article here: https://www.weforum.org/agenda/2018/09/trade-entrepreneurship-and-the-future-of-asean

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