After browsing the website of Korea Logistics News, I found a short article summarizing a seminar it held on February 10 in Seoul titled "2005/2006 Logistics Market Retrospective and Outlook Seminar." The site is all in Korean, so I have translated the bulk of the article below for my readers. The portion on Japan by Mr. Cho is included even though I have covered Japan logistics extensively elsewhere on this blog. The reason for this is not only to highlight the fact this seminar considers Japan important, but also to show the angle of the Korean perspective.
This seminar hosted a few prominent speakers to discuss specific topics:
- Hyong-ho Kim, President of UPS-SCS
“2006 International Logistics Market Trends and Key Words”
- Cheol-hwi Cho, President of K&G Global Consulting
“Japan’s 2005/2006 Logistics Market Retrospective and Outlook”
- Jeong-ho Kang, President of Sagawa Express
“e-Market Growth Concerns and 2006 Outlook”
- Gyeong-ho Goh, Manager at EXE Consulting
“Domestic/Foreign 3PL Market Direction and Plan for Capacity Strengthening”
- Jeong-wu Son, Writer for Logistics News
“Domestic Door-to-Door Market: 2005 Retrospective and 2006 Outlook”
- Wi-shik Yoon, Board Member of Buy-Yes Korea
“Logistics Companies’ Facility and IT Investment Outlook and Trends”
- Mu-ik Park, Logistics Policy Team Leader at Ministry of Construction and Transportation
“Main Logistics Policy Issues for 2006”
Dilemma for Foreign 3PLs in Korea's Domestic Market
Mr. Kim from UPS-SCS pointed out that although the domestic 3PL market is quickly expanding, there are many bottlenecks in the way of foreign firms making advancements. As a result, from the perspective foreign firms, many are focusing on advancing the forwarding market centered on the air cargo segment.
Privatization Era & Attention to Friendship Repairing Process
Mr. Cho, while introducing the recent Japanese logistics market centering on "key words," explained that it is necessary to pay attention to Japan’s “Comprehensive Logistics Policy” which was newly established in 2005. He foresees the principle issue being the nexus where such things as environmental logistics and the repairing of friendship with Japan crosses logistics industry reforms and the privatization "era," where the securing of logistics-expert personnel and the thrusting M&A activity are the biggest influences.
Domestic e-Market Expected to Grow by 20%
Mr. Kang of Sagawa Express expressed his expectation that the domestic e-Market will maintain approximately 20% growth owing to the emphasis on internet shopping and fast-pace growth of the open market. He said that if one looks at the product distribution conditions for each year of the e-Market, while the usage rate of home-delivery from internet shopping mall firms, etc. has risen more than 10% compared with 2002, his own firm’s delivery rate has dropped more than 10% from 29% to 18.2%. For this year as well, he anticipates that the usage of home delivery will quickly expand.
Small to Medium Firms: Possible for “*Nut-Cracker” High
Mr. Goh foresees that, compared to the previous year, the entire domestic logistics industry will grow by 1.6% this year with contract logistics sub-industry growing 14.2%. The total logistics industry base value is approximately $92 billion with the contract logistics sub-industry at approximately $37 billion. While saying that the set-up for selection of a customer’s 3PL contract-logistics firm is expected to be revised again towards centering on a comprehensive logistics certification, he analyzed that depending on both enforcement of certification in the initial period and also any excesses in certification there is a high possibility that larger firms will benefit most due to such things as price drops and confusion in providing services. If there is no segregated capacity planning in the case of small to medium firms, then there also exists the possibility for a “*Nut-Cracker”-type situation.
(Nut-Cracker refers to the conditions where components of the Korean economy are under extreme pressures due to gaps in technology, competition, and pricing versus more advanced or advantaged countries. This term began to be used during the time of the 1997 IMF crisis when the American consulting firm, Booz-Allen, described Korea being in a "nut-cracker" where it was being pressed by Japan's advanced technology and China's low prices. If not remedied, it was said that the only thing left is to "crack" under this pressure. In the above situation, Mr. Goh illustrates that small to medium-sized logistics firms could be squeezed in this way if the systems in place to certify 3PLs advantage larger firms with more scale and better resources).
Competition will be Fierce from Second Half
With this year’s domestic home-delivery market logistics volume estimated to climb to approximately 644 million items, Mr. Son foresees that sales will exceed $2.2 billion. He anticipates that with large based investment picking up at each firm into the second-half of the year, the stage will be set for fierce competition.
System Integration Capabilities in Demand
Mr. Yoon described that, in relation to the IT investment outlook for logistics firms, while the key issue of being able to get new corporate investment has not existed for a long time, it is necessary to pay attention to the appearance of new issues driving recent investment, such as BPM and RFID. In this regard, he expressed the necessity for constructive marketing policies. He also stated that with an expansion of differences in the IT requirements between small/medium firms and large firms, between export businesses and domestic-targeted business, and between manufacturing and service businesses, his firm sought to investigate ways to balance IT for the customer. What stood out was the demand for a system integration capability that could pursue a wide range of customer requirements—a sort of dynamic scalability. (my own words in italics)
Strong Promotion of Northeast Asia Logistics Centralization Issues
Speaking last, Mr. Park explained this year’s main logistics policy issues. Within the objective of creating a “Northeast Asia logistics hub where goods, information and people gather,” he stated that issues are divided into both a hardware strategy for such things as the Northeast Asia hub transformation at Incheon International Airport and also a software side related to the activation of third-party logistics. In this way, he clarified this is the policy in place to kick-start the realization of the Ministry’s vision.
On the hardware issues, Mr. Park described the focus on specifically the Incheon International Airport hub transformation and the rail line that will serve as a regularly running logistics artery. In addition, such things as expansion of the road system and configuration of a national logistics center network are being promoted. On the software side, he stated that such things as establishing a comprehensive logistics firm certification system, activating a logistics information network, and advancing the goods transport market are being promoted.
COMMENTARY: Korea has one of the better websites in Asia for logistics news in its Korea Logistics News site. But because it is entirely in Korean, and my Korean is only at an intermediate level, it takes a bit longer to digest all the great articles. For the articles with topics I am interested in, I use Yahoo Japan to translate the Korean into Japanese, then translate the Japanese to English while proofing the Japanese against the Korean original. But it is all good, because the information can't be found anywhere else publicly accessible (as far as I know). I also improve my Korean and thus the process should only get easier. Fortunately, information on China is readily abundant in English.
There is a section on Korea that I am pursuing for which I have both English and Korean resources. That will probably come along starting later this week in the form of a short series of posts. In the meantime, I hope this brief is helpful.