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Logistics Industry Research Paper

Essay by   •  March 8, 2017  •  Research Paper  •  1,858 Words (8 Pages)  •  1,257 Views

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When selecting a specific industry for a company, it can be tough to limit them to a single one. Therefore in this discussion it will be focused on the logistics industry, more specifically the trucking aspect of the industry. Logistics, as defined by UPS, “is the handling of details of an operation” (UPS, 2017). The logistics industry has many competitors and has grown over the years with constant progress to fulfill the consumers demand. It is an industry in which firms have to find a way to position themselves to better facilitate the flow of goods to the end customer. The logistics industry in the U.S is very saturated and have two main competitors, United Parcel Service and FedEx (Figure 3), but when looking at a world scale there are many top competitors. These top competitors are FedEx Corporation, United Parcel Service, Ryder Supply Chain Solutions, J.B. Hunt Transport Services, Kuehne + Nagel International, also known as K & N (Figure 1).  

Industry Data

        In this industry, consumers are spread all over the world with needs that expand throughout the world. In 2015 this industry generated 140 billion U.S. dollars, Figure 4, and increase from 2014 where it generated 135 billion U.S. dollars. The industry revenue growth took a hit in 2009, but since has continued to grow upward and exceed the previous highs before 2009. This low in 2009 and the continuous growth correlated with the growth in new construction, Figure 2, therefore we can see how the expansion of the industry positively correlates with the growth of the industry revenue. The profitability of the industry can also be clearly seen in Figure 12, as it shows the decrease in profits as a whole until 2009 when the industry was finally able to turn it around.

Future Challenges

         The five major consumer segments in this industry are the food and beverage, automotive, retain and consumer products, and finally the telecom and technology industry. Being a central industry to many others, there will always be a need for transportation and logistics. The future of this industry can change due to the growing technology threats and the thought of doing it in house, as Amazon as begun to do (Kim & Insider, Par. 1). This is taking away a large portion of the market for the top competitors in the U.S. and could pose a problem if Amazon decides to go 100% in house logistics. The reason that technology could be a huge disruption in this industry is due to the use of drones and autonomous vehicles. Even though these technologies have not been executed perfectly in the past, they are in the growing stages to leave an impact on delivery processes and costs (Lamerson, 2016). These two possible disruptions that are currently in the workings could become an industry altering change in the next few years.

Conclusion

        In the end the Porter’s Five Forces, Dynamic, and SWOT analysis all show this to be a now profitable market for a company that is in it, but not attractive for a new entrant. The saturation of this industry in the U.S. is high and to compete with other countries it has a need for large capital in order to be able to buy planes, trucks, rail cars, airport privileges, and ocean fright containers. With the high supplier power or trucks and fuel, Figures 13 and 16, there is not much flexibility in the fuel prices or the cost to purchase a truck. The logistics industry, in the end, is a very crucial middleman at this point in time. They are needed to ship packages all over the world and are expected to get the package there for a decent price, yet quick. The consumers are constantly ramping up their demand for faster times and lower costs, yet the supplier cost is preventing them from lowering the prices as much as consumers want. Vertical integration could be seen from the companies, so they are no longer the middlemen but technology is more likely to take over first. In the future this will most likely change and either the leading companies will have to remove the cognitive bias blinders they have or be run out of this industry.

        


Works Cited:

BEA. (n.d.). Value added of the U.S. truck transportation industry from 2000 to 2015 (in         billion U.S. dollars)*. In Statista - The Statistics Portal. Retrieved February 24,         2017, from https://www.statista.com/statistics/255566/value-added-of-the-us-        truck-transportation-industry/.

Capgemini, & PennState Smeal, & Penske Logistics. (n.d.). Percentage of 3PLs using         innovative solutions for logistics optimization in 2016, by type. In Statista - The         Statistics Portal. Retrieved February 15, 2017, from         https://www.statista.com/statistics/672273/logistics-optimization-innovative-        solutions/.

Capgemini, & PennState Smeal, & Penske Logistics. (n.d.). Percentage of 3PLs using         innovative solutions for logistics optimization in 2016, by type. In Statista - The         Statistics Portal. Retrieved February 16, 2017, from         https://www.statista.com/statistics/672273/logistics-optimization-innovative-        solutions/.        

Kim, E., & Insider. (2015, October 24). Amazon may be secretly building a team that         will help it replace FedEx and UPS. Retrieved February 24, 2017, from Business         Insider, http://www.businessinsider.com/amazon-building-in-house-delivery-        team-2015-10

Lamerson, R. (2016, September 16). Autonomous vehicles and drones. Retrieved         February 24, 2017, from         http://www.mhisolutionsmag.com/index.php/2016/09/16/autonomous-vehicles-        and-drones/

Oliver Wyman. (n.d.). Profitability trends in logistics from 2004 to 2010. In Statista - The         Statistics Portal. Retrieved February 24, 2017, from                 https://www.statista.com/statistics/273582/profitability-trends-in-logistics/.

R Profile | Ryder System, Inc. Common Stock Stock - Yahoo Finance. (n.d.). Retrieved         February 24, 2017, from https://finance.yahoo.com/quote/R/profile?p=R

Statista. (n.d.). Worldwide revenue of selected truck manufacturers in FY 2015 (in         million U.S. dollars). In Statista - The Statistics Portal. Retrieved February 24,         2017, from https://www.statista.com/statistics/270293/worldwide-leading-truck-        manufacturers-based-on-production-figures/.

Supply Chain Digest. (n.d.). Breakdown of U.S. transportation costs in 2015, by mode of         transportation (in billion U.S. dollars). In Statista - The Statistics Portal. Retrieved         February 15, 2017, from https://www.statista.com/statistics/645322/us-logistics-        market-transportation-costs-breakdown/.

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