Economy, Globe, World

Why investors are seeing the potential of the logistics sector

For the average consumer, logistics is perhaps one of the least obvious sectors in the supply chain and product manufacturing processes. But it’s undeniable that logistics is actually one of the most important fields there is: covering everything from transporting and distributing goods to the storage of raw materials, strong logistical management is essential for ensuring each part of a crucial process feeds correctly into every other. And with logistics now more important than ever in our interconnected and fast-paced economic environment, it’s no surprise that investors are starting to get increasingly interested in the returns it can bring.

What is the logistics sector?

 Put simply, the logistics sector provides services that help companies organise and move their goods from one place to the next. As the materials for a product move through the manufacturing process, they hit several crucial nodes such as transport and assembly, warehouse storage and more. By using tried and tested and systematically minded management techniques, logistics firms are able to ensure that this process goes smoothly. A good logistics firm is able to operate these processes in a highly efficient way and save their customers money in the long run by plugging any gaps in internal systems and identifying cheaper ways to run them.

The growth in logistics

Logistics has always been required, of course, but there’s now a higher demand than ever thanks to the changing nature of consumer consumption. As a result of mass-market consumer behemoths such as Amazon growing in popularity in recent decades, there’s been a consequent spike in demand for logistics. Amazon alone often sells more than two billion products per month, and getting all of these products to their respective buyers in a quick way requires highly efficient warehouse management and delivery techniques to be employed. And with the pound in Britain dipping down into periods of relatively low value recently, exporters – which are often some of the largest customers of logistics firms – have seen more activity too.

This is where the logistics sector comes in. Companies that sell high volumes of items on a regular basis will inevitably need a higher volume of logistical capacity, and so demand for large lorries and smart warehouses has soared. Investors, meanwhile, have responded to this demand by pouring their cash into promising logistics firms. In the UK, for example, the total value of deals relating to logistics firms hit almost £900 million in the last three months of 2016 alone. And it’s the same story elsewhere as well. In the major manufacturing epicentre that is modern China, for example, revenue in the logistics industry grew by almost a quarter in 2017 alone.

Where next?

Investing in the logistics sector makes good business sense, and the behaviour of investors is bearing this out. Greek shipping magnate Evangelos Marinakis has expanded his firm’s range of vessels in recent years, and other logistics investors are doing the same. Trends towards investments that help firms to make online shopping and internet-based business-to-business order fulfilment easier, meanwhile, are not going to reverse any time soon.

As well as proving the need for traditional logistics, this trend also creates an extra layer of demand. Firms like Amazon tend to make it a business priority to optimise the logistics aspects of their businesses, such as their delivery efficiency and warehouse organisation techniques, in a way unparalleled by any of the companies that came before them. Amazon is believed to have designed a futuristic warehouse that may be able to float through the skies for optimal delivery processes, for example, while Chinese firm Alibaba has introduced robots to its warehouses in order to slash job time. It’s clear that providers that can offer smart, targeted solutions to help companies achieve these sorts of ends are likely to be in higher demand than ever as the online shopping revolution marches on in the coming decades.

The logistics sector has long been an important part of many business’ processes, and demand for services that can improve everything from warehouse stock control to transportation and delivery times has always been there. But changes to the modern economy mean that there’s now a newfound demand to take this to the next level – and when it comes to investment, the figures bear this out. With millions of pounds, dollars, yuan and much more getting invested in the logistics world on a regular basis, it’s definitely an area for investors and analysts to watch closely in the coming years.

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