For those unfamiliar with the geographical placement of Japan's industries, a logistics survey from Aichi Prefecture might seem of little consequence. However, Aichi is home to Japan's manufacturing sector, most famously the automotive manufacturing sector. More specifically, this area contains Toyota City (see map), the home of--you guessed it--Toyota. Of course, Toyota brings with it a dense network of suppliers that start at 1st Tier with companies like Denso and Aishin Seiki. As can be inferred, the logistics necessary to support this concentration of business must be equally robust. As a result, a logistics survey from Aichi provides a window on how logistics firms are faring in Japan.
The survey I will touch on is from the September 18th issue of Logistics Japan. It is a survey that I had noticed right away, but haven't gotten to blogging due to other distractions. Conducted by the Aichi Prefecture Trucking Association, it focuses on responses from members in reflection of July business results. Of the 740 companies surveyed, 323 companies replied providing a sample of 43.6 percent the total.
Comparing with data from July of last year, 22.5% of companies said freight movement increased, 35.6% said it stayed the same, and 41.8% said it decreased. Looking ahead three months (from the survey date, which would be October and November), 55.0% of companies foresee flat movement, 24.6% foresee a decreasing trend and 20.3% foresee an increasing trend.
Other interesting data is in regards to pricing power towards clients. Of the companies surveyed, 44.3% said they hadn't negotiated rate increases; 32.7% said they had negotiated, and 22.9% said they had plans for negotiations. Of those that have seen a shift upwards in rates, only 1.5% answered affirmatively. Another 17.8% had seen a partial shift. However, an astounding 80.5% have not been able to affect an upwards shift in rates.
These poor results in negotiations could be caused by such things as the quality of negotiating ability, pressure from long-term traditions in pricing, small relative size as compared with clients, an increase in industry competition/fragmentation that dilutes pricing power, amonst other reasons. Looking ahead, some firms will not be able to survive and the question is whether the transportation industry can restructure itself through consolidation efficiently enough to reorganize and concentrate pricing power to the degree that clients must begin to accept higher rates for logistics services, while at the same time easing margin pressures for transportation providers. A long, drawn-out restructuring is bound to have negative effects on the Japanese logistics industry.