The global economy is not a static system. There are various forces creating fundamental changes, some temporary and some very long-term. In the quest for increased efficiency, or in reaction to new trade agreement frameworks, new shipping solutions are being developed for existing and emerging supply chain requirements. This post is the first of several discussing newly emerging air logistics hubs that are being created by the continuous change in the global economy.
Change is resulting from geopolitical churn, emerging market expansion, and evolving sourcing patterns. These are the kinds of issues that are producing global economic conditions that are quite dynamic.
- The US has abandoned the Transpacific Partnership and imposed tariffs on steel, aluminum, and a wide range of Chinese goods
- The UK is in the process of leaving the world’s largest free-trade area
- Economic growth in the developing world is boosting demand for products made in the developed world
- Trade in services is increasing
- Companies are moving production closer to their customers so they can respond faster to changes in demand
- Automation has slowed the never-ending search for people willing to work for even lower wages
- The greater complexity of modern goods means that R&D and maintenance are beginning to matter as much as productionThe recent and ongoing trade dispute between the US and China likely represents a structural rearrangement of trade between Asia and North America, and this is having ripple implications in other areas of the world. Tariffs on goods disrupt and distort trade flows and lower productivity. Clearly, these issues have introduced concerns for manufacturers, some of which have already revised their manufacturing footprint in reaction.
From GLDPartners extensive client and investment project work, we are seeing that all this change is having a tremendous impact on supply chain management and in turn, on the logistics industry.
- We’re currently seeing lower volumes in ocean logistics, especially on some key trade lanes and some shift from say East Asia to South East Asia outbound to North America and Europe.
- We’re also seeing massive change in volume and shipment type in ecommerce, pharma and mobility-technology – all of these impacting air cargo lanes.
- And, we are seeing the impact of digital technology creating more efficient, agile, and customer-focused supply chains
Amazon Air’s recent announcement that it will begin daily service to/from Anchorage (ANC) is likely a big deal. ANC creates a potential starting point for Amazon to expand its presence in Asia. It also gives the company increased control over its packaging network allowing them to pick-up their US bound packages from Asia and then fly the parcels directly to their own hubs rather than using FedEx and UPS to move the goods into the lower 48.
We see Amazon’s commitment to Alaska as both an example and a precursor to the rise of a new model of airport logistics hubs. We feel that we’ll see 10 or 15 new airports emerging as strategic logistics centers and that several of these will have the potential to become multi-dimensional airport investment districts – where the development of a combined logistics hub will enable on/off airport forward deployment, assembly and production for high-velocity products.
ANC in Anchorage is a great example of an airport that could emerge as a new model of an airport logistics hub. It is already a major hub for international air trade with Asian countries and has over 500 freighters a week making operational/technical stops at the airport. ANC is attractive to shippers because 90% of the industrialized northern hemisphere can be reached within 9.5 hours, which allows the carriers to transport more cargo and consume less fuel. Anchorage’s prime global location combined with the growth of China’s tech exports has made ANC one of the top airports in the world for cargo traffic.
With its great logistics connectivity and strategic location, ANC is poised to move into the next phase of its life cycle. ANC has been a client of GLDPartners and we have seen firsthand their attributes for a range of manufacturing and production/distribution facilities that require dependable, cost-efficient high-velocity supply chains. ANC provides a forward-looking supply chain solution enhancing operational efficiency and competitiveness. With Amazon’s commitment to ANC, they can become the “first mover” that opens the door for third-party logistics firms, global manufacturing concerns with Asian – North America supply chains and specialty logistics service providers to invest in Alaska
From our work in a range of supply chains including pharma, automotive, electronics and now the new mobility-technology sector, we believe that there is a range of industry verticals that have been previously sourced and built in Asia and sold in North America where the supply chain systems are being made more complex to adapt to the new change dynamics. These dynamics could provide a window of opportunity for new settings like Alaska to provide solutions to the evolving pressures facing a spectrum of manufacturing industries.
In the end, current industry analytics clearly demonstrate that a variety of global supply chains will require new logistics solutions to support the rapidly changing market dynamics. The pattern and speed of these changes in some sectors, provide a window of opportunity for new places to capitalize on their location, unique air cargo transport service and infrastructure to attract logistic-enabled investment.
GLDPartners is an international investment and advisory firm that specializes in revenue and infrastructure development projects at and around high-opportunity airports, seaports and strategic trade and logistics hubs. The firm supports global manufacturers and companies with retail distribution operations with network design strategy and facility location analytics. GLDPartners’ clients and market perspective is global and the firm is headquartered in Scottsdale, Arizona, with offices in New York, Washington DC and in the UK.