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News Release

Shanghai

3PLs Need to Secure Critical Spot in the New Industrial Relocation Wave

Jones Lang LaSalle presents the "Asian 3PL of the Year" in the Supply Chain Asia Logistics Awards 2010


As one of the official sponsors for the Supply Chain Asia Logistics Awards 2010, Jones Lang LaSalle (NYSE:JLL), the leading global real estate service provider, presented “Asian 3PL of the Year” Award to YCH Group at the Gala Dinner held in Hong Kong last week.
 
The annual awards brings recognition to deserving corporations and individuals who have been part of the region's supply chain and logistics industry throughout the year. For this year, the honor was given to YCH Group out of the five companies chosen as finalists in this category. Stuart Ross, Head of Industrial for Jones Lang LaSalle China, presented the award.

As the market leader in industrial real estate consultancy, Jones Lang LaSalle works very closely with a variety of 3PL companies. After the event, Ross shared his perspective on the key trends facing 3PL firms in China.

In a recent development, manufacturing companies such as Foxconn, Flextronics, Dell, HP, and Pfizer have been moving their plants from coastal areas to inland China over the past 12 months. The rising labor cost is one of the motivators behind this new wave of relocations, and the recent surge in the CPI certainly provided little relief. Meanwhile, land supply for logistics use in Tier I cities is becoming limited, indicating an imminent paucity in warehouse spaces in markets where vacancy rates are already relatively low. Consequently, developments of warehouses are rising rapidly in Tier II cities, which would also links to the large consumer markets at inland provinces. “Such trend will impose critical changes on 3PLs’ businesses in a way that restructures their network of supply chain,” Ross noted.

After this new wave of industrial relocation, product manufacturing will be less clustered and spread in multiple geographies; meanwhile, the retail markets in comparison will be even more scattered. At the same time, retailers are looking for new ways to deliver their goods faster amid the development of e-commerce. This means 3PL companies will need to re-strategize to manage complexities – from technologies to human resources – so that they can stay ahead of the curve and maintain profitability. “Without a doubt, location is pivotal. 3PL companies will need to have locations that can serve its entire supply chain. More importantly, the location must fulfill the goal of achieving the 'visibility' of the supply chain so companies can monitor and manage the processes and efficiency of the entire network ,” he added. In such a market where the logistics system is highly fragmented, the new wave of relocation can translate to massive opportunities for consolidation among 3PL companies and different distribution centers. As such, we believe that demand for large-sized warehouse space will rise significantly going forward.

“In some of the emerging and future key locations, especially those in proximity to critical infrastructure projects such as airports and highway hubs, the 'window of opportunity' will soon close,” Ross noted. Although the current land prices in these locations may still be low, they may not be so in a span of 12 months. In other words, 3PL companies must act fast. “To ensure on-time delivery to clients, 3PL companies must always move quickly and early,” he concluded.