The Impact of the Express
Delivery Industry on the Global
Economy
Oxford Economics
September 2009
Oxford Economics
121, St Aldates, Oxford, OX1 1HB
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: 01865 268900,
: 01865 268906
ß
: www.oxfordeconomics.com
Contents
EXECUTIVE SUMMARY 1
1. THE SIZE AND REACH OF THE EXPRESS INDUSTRY 3
2. THE ROLE OF THE EXPRESS INDUSTRY IN FACILITATING TRADE AND
COMPETITIVENESS 10
3. THE ROLE OF THE EXPRESS INDUSTRY IN FACILITATING PRODUCTIVITY AND
INVESTMENT 25
4. PROSPECTS FOR THE EXPRESS INDUSTRY AND ITS IMPACT ON GLOBAL
ECONOMIC GROWTH 34
5. THE IMPACT OF RESTRICTIONS ON EXPRESS DELIVERY SERVICES 40
ANNEX: RESEARCH SOURCES AND ACKNOWLEDGEMENTS 46
Executive Summary
The express industry – a fast growing sector…
Express operators provide guaranteed, fast, reliable, on-demand, world-wide, integrated, door-to-door
movement of shipments which are tracked and controlled throughout the journey. They are the “Business
Class” of cargo services.
The express industry simplifies and speeds the process of transporting goods. It organises collection, usually
at the end of the business day, allows the sender access to information on the progress of shipments from
pick-up to delivery, and provides proof of delivery. Where shipments cross international borders, the express
industry handles customs clearance as well as the payment of duties and taxes as required.
…supporting 2.75 million jobs in total today…
The express industry makes a significant direct contribution to the global economy:
Its direct contribution to world GDP was US$80 billion in 2008 – similar to that of the shipbuilding industry
It directly supports 1.3 million jobs, around a third more than the petroleum refinery industry.
The express industry helps to support around 2.75 million jobs in total, allowing for those people
employed in companies supplying the express operators (e.g. in the automotive industry building delivery
vehicles, in companies supplying IT support services etc) and for the jobs dependent on the spending of
express industry workers.
…and almost 4.5 million by 2018
The express industry is a fast-growing sector – since 2003 its growth has been ahead of that of the global
economy as a whole. It is expanding particularly rapidly in the transition and emerging market economies,
particularly Latin America and China.
We expect the express industry to continue to increase its share of the air cargo market, growing by an
average of 3% a year in real terms between 2008 and 2013, before accelerating to grow by an average of
7% in real terms between 2013 and 2018. This is in line with growth we expect in world trade (exports and
imports) as the recovery to the global economy takes shape. And it is over fifty percent faster than expected
GDP growth for the world economy over the next decade.
With demand for rapid, guaranteed delivery services growing strongly, direct employment in the express
industry globally is expected to increase from 1.3 million now to 1.8 million by 2018, if it is unconstrained by
regulatory impediments and restrictions. The express industry is expected to support almost 4.5 million jobs
globally by 2018.
The express industry plays a critical role in international trade…
The most important role of the express industry is in facilitating the success of other parts of the global
economy.
Express services will continue to support the transport of world trade, as companies increasingly demand
rapid, guaranteed delivery.
The Impact of the Express Delivery Industry on the Global Economy
September 2009
2
Express delivery services are increasingly important to ensuring the continued competitiveness of
companies, and so to winning export markets and encouraging investment. They are likely to become even
more important in future as the world economy becomes increasingly integrated.
Express services help to improve the competitiveness of almost all aspects of companies’ operations,
including sales, logistics and storage, production and customer support functions.
Good access to markets is the most important factor influencing international location decisions: express
services are an important element in ensuring that companies wherever they are based have the best
possible access to markets.
…and in facilitating productivity and investment
Express services enable companies to maximise the efficiency of their operations – reducing production
shutdowns and allowing the implementation of best international techniques such as build-to-order.
Express services also allow companies to minimise their inventory costs.
The express industry enables small companies to utilise high quality, rapid delivery services that they could
not provide themselves. This is particularly important in facilitating their participation in export markets.
Express services contribute to regional development by linking geographically peripheral areas to the world’s
major centres.
One area where express services are likely to be particularly critical to economic success is the knowledge-
based sectors, such as pharmaceuticals/biotechnology, financial and business services, and research &
development. These sectors are more-than-usually dependent on express services, reflecting the time-
sensitive, high-value products and services they provide.
Liberalising express services can generate substantial economic benefits
International express services, like any other aspect of international trade, can be impeded by government
polices and restrictions that undermine the ability of express delivery companies to operate efficiently and
hence their ability to facilitate increased trade, investment, and productivity across the wider economy. The
restrictions imposed by some countries include: anti-competitive practices of government-owned or
authorized monopolies; complex licensing requirements and inefficient customs procedures; restrictions on
access to aviation markets and ground transportation systems; and restrictions on foreign investment.
Such restrictions on express delivery services not only adversely affect the efficiency of express delivery
companies but also undermine the competitiveness of companies across the whole economy.
Steps to remove restrictions on the express industry would encourage increased trade, investment and
productivity, boosting GDP, employment, and government finances.
The benefits from liberalising express services would be substantial. For example, it is estimated that China’s
output would increase by almost US$180 billion over five years, generating an additional 700,000 jobs.
The Impact of the Express Delivery Industry on the Global Economy
September 2009
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1. The size and reach of the express industry
Introduction
This report sets out the impact of the express delivery industry on the global economy. The most important
contribution that the express industry makes is that it improves the capabilities and competitiveness of other
sectors of the economy. We describe in detail in this report how the express industry facilitates increased
output, trade, investment and employment around the world.
First we begin by explaining what the express industry is, how it initially developed, and how it has grown
globally over the last 30 years.
We then illustrate the size of the express industry within the global economy, in terms of its contribution to
GDP and employment.
Key Findings:
The express industry is a fast growing sector in the global economy.
It has made a significant contribution to the global economy in the past and we expect it to do so in the
future but it will suffer in the short-term as world trade is adversely affected by the current economic
climate.
The industry now employs around 1.3 million people directly - around a third more than the petroleum
refining industry - and supports 2.75 million jobs in total.
It made a direct contribution to world GDP of US$80 billion in 2008.
A broad range of industries use express delivery services. But the largest users are typically ‘high tech’
parts of manufacturing, IT & telecommunications, pharmaceuticals and financial & business services.
The greatest contribution made by the express industry is in enabling companies in all regions of the
world to compete effectively in an increasingly global market.
What is the express industry?
The core business of the express industry is the provision of value-added, door-to-door transport and
deliveries of next-day or time-definite shipments, including documents, parcels and merchandise goods.
(Time-definite shipments normally incur a transit time of between 2 and 3 days.)
Four companies – DHL, FedEx, TNT and UPS, also referred to as ‘integrators’ – are the leaders of the global
express industry, but there are many others in this highly competitive sector. The term ‘integrator’ refers to
the ability of these companies to offer door-to-door, time-definite integrated services, where the company
maintains control over all aspects of the transportation process – for instance, by offering the possibility of
The Impact of the Express Delivery Industry on the Global Economy
September 2009
4
changing the destination and addressee in transit – and with each item being tracked at every step
throughout its journey.
Figure 1-1: The key stages of a typical express delivery
Characteristics of the express industry
The express industry simplifies and speeds the process of transporting goods. It organises collection, usually
at the end of the business day, allows the sender access to information on the progress of shipments from
pick-up to delivery, and provides proof of delivery. Where shipments cross international borders, the express
industry handles customs clearance as well as the payment of duties and taxes as required. Figure 1.1
illustrates the key stages involved in a typical express delivery.
Other transport operators on their own cannot respond to the needs of business as effectively as the express
industry. In particular, they are not able to offer the same level of rapid, guaranteed delivery to as wide a
range of destinations.
To meet the requirements of business, the express industry relies on overnight transport to use the ‘dead
time’ from when a company hands over its shipment late in the working day to delivery to the recipient early
the following day. Express transportation is achieved by using a variety of different transport modes; lorries,
vans, trains, and passenger aircraft and freight aircraft as well as on-foot delivery. Where possible, though,
the express industry uses surface transport modes. Air express services are only used where there are no
other options available to meet same day and next-day delivery requirements.
For some companies, members of the express industry organise all aspects of their distribution process and
so provide a complete supply chain management system.
The Impact of the Express Delivery Industry on the Global Economy
September 2009
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Development of express services
The express industry originated in the US in the late 1960s and flourished following the deregulation of air
cargo in the US in the late 1970s. The express delivery companies met the increasing need of companies for
time-definite, guaranteed delivery that could not be met by either postal services or freight forwarders. As a
result, the industry has grown quickly and in the 1980s moved beyond the US domestic market to become a
global business.
The express industry has developed from the delivery of documents and parcels to specialist items such as
high-tech products, semiconductors, and general airfreight commodities. Typically, the types of goods
transported by express services are high-value / low-weight items such as electronic components, designer
fashions, and pharmaceutical products; however, express delivery is frequently called on to delivery urgent
shipments of large, urgently-needed articles such as parts for aircraft and equipment for mining, construction,
and manufacturing operations. The Air Transport Action Group (ATAG) estimate that the value of goods
transported by air represents about 35% of all international trade. However, by weight, the share is estimated
to be is much lower, at around 1%, reflecting the high unit value of goods transported by air. Express
services represent a substantial proportion of this international trade: it constitutes almost half of the intra-
European air cargo market.
1
Express delivery a US$175 billion a year global business…
The express industry globally is estimated to have generated sales revenue (i.e. turnover) of US$175 billion
in 2008. Stripping out the effects of inflation, the express industry’s sales revenue is estimated to have risen
by just over 20% in real terms since 2003 – i.e. at an average annualised rate of 4% a year, slightly ahead of
the rate of growth of the world economy as a whole.
Chart 1-1: Sales revenue of the global express industry versus GDP
1
http://www.euroexpress.org/about_the_eea.php?section_id=1
90
95
100
105
110
115
120
125
2003 2004 2005 2006 2007 2008
90
95
100
105
110
115
120
125
Real sales revenue index
Global real GDP index
2003=100
Source : Oxford Economics based on information from Global Express
A
ssociation (GEA) Members
2003=100
The Impact of the Express Delivery Industry on the Global Economy
September 2009
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The express industry has made a significant contribution to the global economy in the past and we expect it
to do so in the future but it will suffer in the short-term (2009 and 2010) as world trade is adversely affected
by the current economic climate. Chapter 4 sets out in greater detail the prospects for the express industry
over the next decade.
North America forms the largest express market in the world, with estimated revenues of US$76 billion in
2008 (Table 1.1). Latin America contributes around US$3 billion, 2 per cent of the global market. With
revenues of US$49 billon and US$42 billion respectively, the European and Asia-Pacific domestic and
international markets for express services have significant scope for further expansion as companies
increasingly adopt best international business practice with regard to time-definite, guaranteed delivery. The
fastest regional growth in recent years has been in emerging economies, particularly the Middle East and
Latin America, albeit from a relatively small base.
Table 1-2: Regional trends in the express industry over the past 5 years
The vast majority of express deliveries are intra-regional – i.e. between countries and states within either the
Americas, Europe, or Asia-Pacific. Express deliveries between these three regions account for 12% of
express industry revenues. Nevertheless, inter-regional express deliveries generated revenues of US$21
billion in 2008. The market for express services in the rest of the world is estimated to just over US$11
billion.
Per annum growth Global share
2003 2008 2003-2008 2008
North America 58 76 6% 43%
Latin America and Caribbean 2 3 12% 2%
Europe 35 49 7% 28%
Asia Pacific 28 42 9% 24%
Middle East and Africa 4 6 10% 4%
Total 125 175 7% 100%
Express Revenue US$ billion
Source: Oxford Economics estimates based on information from Global Express Association (GEA) members and
CECSS
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September 2009
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Figure 1-2: Global express market in 2008
…contributing US$80 billion directly to GDP…
The direct contribution of the express industry to world GDP is measured by its ‘value-added’, defined as the
value of sales less the value of intermediate purchases bought from suppliers (e.g. fuel, packaging materials,
airlines etc). However, estimates of value added are not separately identified for the express industry in the
National Accounts produced by national statistical offices. As a result, the scale of the industry and its direct
contribution to GDP and employment are not well understood.
Building on previous Oxford Economics research on the economic contribution of the express industry to the
Global economy and incorporating information from the accounts of the integrators, we estimate that the
direct contribution of the express industry to global GDP was around US$80 billion in 2008. This means that
the express delivery industry makes a direct contribution to Global GDP that is similar to the shipbuilding
industry.
…directly creating 1.3 million jobs…
The express industry employs around 1.3 million staff worldwide. It provides work for people with a wide
range of skills, including sorting and delivery, administration and sales, as well as engineers/technicians and
managers.
…and supporting 2.75 million jobs in total
The express industry helps to support other jobs in the global economy, including:
employment in companies supplying goods and services to the express industry – so-called ‘indirect
employment’ – including those working in: commercial and cargo airlines employed by express
operators; the aerospace industry building aircraft operated by express companies; the automotive
Europe-Asia,
6.3
MEA-ROW,
11.2
Americas-Asia,
8.0
Americas-
Europe, 6.7
Intra-Asia, 32.9
Intra-Europe,
38.2
Intra Americas,
72.0
Source : Oxford Economics based on information from Global Express
A
ssociation (GEA) members
Global express market = US$175bn in 2008
The Impact of the Express Delivery Industry on the Global Economy
September 2009
8
industry building delivery vehicles; in companies supplying IT equipment and support services; in oil
companies; accountants and lawyers; etc.
On the basis of previous studies of the economic impact of the express industry that use both
information from the integrators on the value their purchases from suppliers and the input-output
tables prepared by national statistical offices, we estimate that the 1.3 million direct jobs in the
express industry generate an additional 910,000 indirect jobs globally through the supply-chain.
Employees in the express industry (whether directly or indirectly) use their income to purchase goods
and services for their own consumption, and this spending then helps to support jobs in other sectors,
so called ‘induced employment’. Estimates based on simulations conducted on the Oxford
Economic Forecasting Global Macroeconomic Model suggest that this so-called ‘induced
employment’ may be around 550,000 (i.e. about 25% of direct and indirect employment in the
express industry). This does not mean that these additional jobs would not exist without the express
sector, but they are likely to do so only at somewhat lower real wages and living standards for those
workers.
Putting these different elements together implies that the express industry now helps to support around 3
million jobs around the world. In addition, the express industry also helps to generate employment elsewhere
in the economy by, for example, facilitating trade and investment, and improving the efficiency of its client
companies. These wider effects reflect the so-called ‘catalytic’ impact of the express industry and are
discussed in detail in the rest of this report.
Express particularly important to high-tech and knowledge-based sectors
The services provided by the express industry are used by companies across the business spectrum. The
most important client sectors include high-tech and other leading ‘growth’ sectors, such as IT,
telecommunications, pharmaceuticals, electronics and financial & business services. But the express
industry is also used extensively by firms in other sectors, including automotives and engineering and retail.
Figure 1-3: The express industry’s main client sectors
Other
Manufacturing
1%
Automotive &
Transport
Equipment
10%
High-Tech
29%
Other services
21%
Finance &
Banking
14%
Pharmaceuticals
8%
Engineering
2%
Postal &
Transportation
3%
Retail
4%
Telecoms
8%
Source:Oxford Economics estimates based on information from Global Express
Industry (GEA) members
The Impact of the Express Delivery Industry on the Global Economy
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Conclusion
The express industry is a significant global industry supporting 2.75 million jobs worldwide. In its own right
the industry has made a significant contribution in the past and we expect it to do so in the future but it will
suffer in the short-term as its client base is hurt by the current economic climate. But the most important role
of the express industry is in facilitating the success of other parts of the economy, which is the subject of the
remainder of this report.
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September 2009
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2. The role of the express industry in facilitating trade and
competitiveness
Introduction
In this Chapter, we begin our analysis of the contribution that the express industry makes to the long-term
growth potential of the global economy by considering its role in international trade and the delivery of time-
sensitive goods.
Key Findings:
Express delivery services are increasingly important to the competitiveness of companies throughout the
world, and their ability to win markets and support jobs and investment.
Express services help to improve the competitiveness of almost all aspects of companies’ operations,
including sales, logistics and storage, production and customer support functions.
Express services will continue to help to support the transport of world trade, even during the current
economic climate, as companies continue to demand rapid, guaranteed delivery.
Express services are likely to become even more important in future as the world economy becomes
increasingly integrated.
Express delivery services providers are facilitating this trade by investing in new delivery routes and
services.
Express services are particularly important for companies geographically distant from their markets or
where the national service providers are poor. Most notably, this includes many developing countries.
Express industry plays a critical role in international trade…
Trade performance is a key determinant of economic growth and prosperity. Over the last 45 years, the
countries that have grown fastest have typically been those that have also seen the fastest growth in
international trade (Chart 2.1).
Moreover, most economies have become increasingly dependent on trade in recent years. As Chart 2.2
shows, the leading growth economies are typically very dependent on international trade. Many of the
emerging market economies, in particular, are heavily export oriented. (The low share of exports in GDP for
the United States and Japan is largely a reflection of the size of those economies.)
Rapid growth in international trade is by no means a phenomenon only of recent years. For example, world
trade in manufactured goods increased eight-fold between 1950 and 1973. But the absolute volume increase
in world trade since the mid 1970s has been over four times that over the previous 25 years, driven by:
The Impact of the Express Delivery Industry on the Global Economy
September 2009
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The gradual removal of barriers to international trade - including the creation of free trade blocs, such
as the European Single Market, NAFTA and Mercosur, and the widening influence of the World Trade
Organisation.
Globalisation – as new markets have opened up and more companies have established international
operations and foreign subsidiaries.
Increased specialisation – encouraging countries to focus on the activities in which they have a
comparative advantage, and trade with other countries that have an advantage in the production of other
goods and services.
Global communications – enabling companies to market their products around the world, and
communicate with customers and suppliers in other countries.
More favourable political background – allowing increased trade with former communist countries – a
number of whom are now members of the EU – and China.
Chart 2-1: Economic growth and trade
Source: WDI, Oxford Economics calculations
Malaysia
Indonesia
Nicaragua
Peru
Cote d'Ivoire
South Africa
Argentina
Uruguay
Philippines
Paraguay
Egypt, Arab Rep.
Australia
Costa Rica
Sweden
Brazil
UK
Germany
Chile
USA
Mexico
Finland
France
Italy
Greece
Japan
Spain
Thailand
Hong Kong, China
-1
0
1
2
3
4
5
6
7
8
0 5 10 15 20 25 30 35 40 45
Growth in total trade per capita per year (1963-2008)
Growth in GDP per capita (1963-2008)
% per annum
% p.a.
The Impact of the Express Delivery Industry on the Global Economy
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Case Study: Chinese electronic goods manufacturer
This US-owned multinational company has had a presence in Shanghai since 1927. Its main offerings are traditional and
digital cameras. The production of digital cameras is relatively new, having only started at this Shanghai factory in 2001.
Production is growing rapidly; today 90% of the factory’s camera production is digital. These are high-value items, worth
at least $200 per unit.
However, the commercial life span of digital cameras is short: new models come onto the market every 4-5 months.
Therefore, the company must rely on international air express to deliver its products to the US, Europe, Australia, and
elsewhere on an expedited basis. The express company is able to repack and re-label products, ship them to Chicago
and then break bulk the shipment and the cameras on to a multitude of retail outlets, making it an integral part of the
distribution chain.
The Chinese operation also sends its digital cameras to Rochester, NY, once a month for testing to make sure it
maintains Six-Sigma quality certification (meaning that the probability of poor products will be below 3.4/1,000,000).
Case Study: Denmark - producer of gas measurement instruments
This Danish company was formed 25 years ago and has around 125 employees globally, 75 of whom are based in
Denmark. The company is a global leader for gas measurement instruments used in the food, medical and electronics
This company operates in worldwide niche markets, with about 95% of all products are exported from Denmark to places
as far a field as China, Mexico, and Ukraine.
Express delivery services are integral to this company’s operations. It uses express services to reach far destinations
around the globe in just one or two days. This often happens, for instance, when customers need a spare part to
continue the production of their goods. According to the company’s shipping manager “it is absolutely imperative for us
that the distribution of our products runs smoothly. It has to be easy, fast and without complications. With our express
delivery partner we can cover the entire world, focus on our main competences and let our express partners do what
they know how to do best”.
Case Study: Argentinean wine producer
This company, located in the province of Mendoza, is the Argentine unit of one of the world’s leading producers of
sparkling wines. It produces both sparkling and still wines, 15% of which is exported, primarily to the US.
Although almost all of the company’s exports are shipped by ocean transport, the company relies on air express services
for its most important function – generating sales. It uses an express delivery company to deliver the samples it provides
to potential distributors of its wines in foreign markets as well as to wine competitions held throughout the world. In
addition, the company entrusts to the express delivery company the delivery of all documentation related to its exports,
such as invoices and special agricultural certificates, which are critical to getting shipments released from customs. The
company relies on the express industry because it provides speedy and reliable service that ensures that the wine
samples arrive at their destination in premium condition to be tasted. Special packaging and temperature controls are
used when shipping the wine.
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Chart 2-2: Export shares in GDP, 2008
Case Study: Danish manufacturer
This company, based in Denmark, manufactures aluminium logo nameplates for television sets, hi-fi products,
computers, and cellular telephones amongst other small electronic devices.
Having analysed the demands of their widely-dispersed customer base, they came to the conclusion that deliveries, no
matter where in the world, had to be done within one to three days, in order for the company to remain competitive.
Maintaining a leading market position depends on this company being faster with their production and shipping without
being more expensive. With that in mind, they had to ensure that their finished goods could be shipped from
Copenhagen to Beijing just as fast as if the company was located in South China.
This company exports close to 99% of its production globally which necessitates not just fast but also reliable delivery
across the world. Timely deliveries are also essential for this company during their customers' development and approval
of new logos. Most of the company’s customers have strong brands and decisions regarding a new logo design are
always taken at the top management level. Logo prototypes in hand, delivered by an express services provider, aid these
companies in the decision making process. Around 90% of their shipments are sent using Express delivery services
which provides next morning delivery within Europe and within two days to their key destinations across the rest of the
world.
0% 20% 40% 60% 80% 100% 120% 140% 160% 180% 200% 220% 240% 260%
United States
Argentina
Brazil
Japan
Venezuela
Iran
Australia
India
Colombia
Greece
Turkey
South Africa
United Kingdom
Italy
Spain
Serbia
France
New Zealand
Mexico
Morocco
Russia
Portugal
Canada
Egypt
Saudi Arabia
Poland
Iceland
Chile
Bosnia & Herzegovina
China
Latvia
Algeria
Tunisia
Croatia
Israel
Norway
Macedonia
Philippines
Ukraine
Indonesia
Finland
Germany
Romania
Denmark
Sweden
Switzerland
Lithuania
Austria
Korea
Taiwan
Thailand
Slovenia
Ireland
Bulgeria
Netherlands
Estonia
Belgium
UAE
Slovakia
Vietnam
Czech Republic
Malaysia
Hungary
Luxembourg
Hong Kong
Singapore
Source: IMF, World Bank and Oxford Economics calculations
The Impact of the Express Delivery Industry on the Global Economy
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14
Figures 2.1 - 2.5 show the pattern of international trade in goods for North America, Europe, Latin America,
Asia (including China). Trade movements between these regions account for the bulk of world trade. They
also trade extensively with the Middle East and Africa.
But it should be emphasised that there is considerable trade within each of the regions – both between
different countries (e.g. within the EU or Asian blocs) and between different parts of individual countries (e.g.
between US states or between different areas of China).
Figure 2-1: The pattern of North American trade with the rest of the world, 2007
Figure 2-2: The pattern of European trade with the rest of the world, 2007
North America – Asia
US$352 billion
Asia – North America
US$756 billion
Europe – North America
US
$
482 billion
North America – Europe
US$341 billion
North America – Mid East
US$50 billion
Mid East – North America
US
$
84 billion
North America – Africa
US$27 billion
Africa – North America
US
$
92 billion
North America – Latin America
US$131 billion
Latin America – North America
US
$
151 billion
A
frica
–
Europe
US$168 billion
Europe
–
Africa
US$155 billion
Europe
–
Latin America
US$87 billion
Latin America
–
Europe
US$112 billion
Europe
–
North America
US$482 billion
North America
–
Europe
US$341 billion
Europe
–
Asia
US$493 billion
A
sia
–
Europe
US$794 billion
Europe
–
Mid East
US$169 billion
Mid East
–
Europe
US$113 billion
The Impact of the Express Delivery Industry on the Global Economy
September 2009
15
Figure 2-3: The pattern of Latin American trade with the rest of the world, 2007
Figure 2-4: The pattern of Asian trade with the rest of the world, 2007
Source for Figures 2-1-2.4: WTO, exports and imports of goods, 2007
Latin America
–
North America
US$151 billion
North America
–
Latin America
US$131 billion
Latin America
–
Asia
US$80 billion
Asia
–
Latin America
US$92 billion
A
frica
–
Latin America
US$15 billion
Latin America
–
Africa
US$13 billion
Latin America
–
Mid East
US$9 billion
Mid East
–
Latin America
US$4 billion
Latin America
–
Europe
US$112 billion
Europe
–
Latin America
US$87 billion
A
sia
–
North America
US$756 billion
North America - Asia
US
$
352 billion
A
sia
–
Latin America
US$92 billion
Latin America - Asia
US
$
80 billion
Asia
–
Africa
US$91 billion
Africa - Asia
US
$
81 billion
Asia
–
Mid East
US$150 billion
Mid East - Asia
US
$
397 billion
Asia
–
Europe
US$794 billion
Europe - Asia
US
$
493 billion
The Impact of the Express Delivery Industry on the Global Economy
September 2009
16
Oxford Economics global forecast suggest that the global economy will become even more dependent on
trade over the next decade, with world merchandise trade forecast to increase by over 60 per cent between
2008 and 2018, double the increase in global GDP. But in the short-term prospects for both world trade and
world GDP are bleak. World merchandise trade is forecast to contract by around 10% in 2009 and GDP
nearer 2%. The slowdown will be most abrupt in the industrialised countries. Emerging markets will also slow
significantly over the next two years, as world trade growth drops and capital inflows dwindle. But, over the
medium term global growth rates will pick-up (see Chart 2-3), helped in part by strong emerging market
growth rates.
Chart 2-3: GDP and World Trade in Goods, 1950-2020
…with rapid, guaranteed delivery increasingly key to competitiveness…
And even in times when world trade is falling, countries remain dependent on efficient and competitive
means of both delivering exports to their destination and bringing imports from other countries. During such
times, the express industry will continue to play an important role, helping to support global trade in a number
of ways, including:
Destinations served: The global nature of express delivery services means that companies can adapt
to a changing client base and ship products to and from different destinations quickly and cost-effectively
(i.e. ‘connectivity’ is important)
Reliability: Companies’ reputations can be undermined if their deliveries fail to arrive with customers on
time or are lost in transit.
Time-sensitive/time-specific delivery: For some organisations speed to market is even more important
than cost in determining their competitiveness. This is obviously vital for perishable goods, such as fresh
food, but also those working to newer business models such as “fast fashion” clothing chains. But it is
also important, for example, for firms meeting orders to strict delivery dates or having to respond
0
1000
2000
3000
4000
5000
6000
1960 1970 1980 1990 2000 2010 2020
0
1000
2000
3000
4000
5000
6000
Source: WTO / Oxford Economics
World
merchandise
trade
World GDP
1960=100 1960=100
Forecast
The Impact of the Express Delivery Industry on the Global Economy
September 2009
17
immediately to customer demand (i.e. the so-called ‘Day+1 economy’).
Case Study: Italian garment producer
This company, based in northern Italy, is a family run business which has been producing exclusive knitwear for more
than 35 years. All raw materials and fabrics are produced in Italy by highly-skilled craftsmen using the latest in knitwear
technology. This guarantees excellent quality garments, carrying the ‘Made in Italy’ label and makes them highly
appreciated in international markets. The company distributes quality and fashionable knitwear to high-end stores in
Europe and North America.
This company realised that in order to be competitive in these mature markets it needed a supply chain solution that
could synchronise various fulfilment milestones - customs clearance included - and reduce delivery times, whilst keeping
costs down. Accordingly, the company turned to an express delivery services provider to handle their entire fulfilment
supply chain, from collection at their production facility in Italy to the delivery of knitted garments to high-end stores
located in Las Vegas or Calgary.
With the support of express delivery services order fulfilment time was reduced from 15 days to just 48/72 hours which
meant that this company exceeded its new business targets and expanded rapidly in the United States and Canada.
Supported by express delivery services, in less than two years this company has been able to double its order volume in
North America. The company now has a presence in leading multibrand stores in 31 large cities and further international
growth is anticipated.
…and the express industry investing in new routes to fast-growing markets
Companies use a variety of means to transport goods to and from abroad, including road/rail and ferry, sea-
freight and airfreight. But express delivery services – which represent the ‘business class’ of the freight
transport market, focused on providing fast, highly reliable delivery – are becoming increasingly important.
The express delivery companies are able to connect 90% of world GDP within 24-48 hours.
The express industry is responding to the growth in international trade by investing in new delivery routes
and services to ensure that they can meet the growing demand for rapid, guaranteed international delivery.
Moreover, they are increasingly working with their clients to provide support with distribution and logistics
services.
Case study: Lebanese goods distributor
This Lebanon-based company provides its worldwide clientele with Lebanese food and products, directly
from Lebanon. Their main delivery challenge is to handle perishable goods and have their packages
delivered as fast as possible in a perfect condition. To meet these needs, it relies on express services to
deliver the full logistics supply-chain, from collecting the goods from the various supplies, packaging them,
and delivering them to their respective destinations in more than 100 countries worldwide. With the support
of express delivery services, the business has achieved significant growth in their internet-based operations.
The Impact of the Express Delivery Industry on the Global Economy
September 2009
18
Express services are typically used for delivering relatively high-value/low-weight products. For example, in
Italy air transport is used to carry just 0.4% of exports by weight but 11% of exports by value, with the
express industry accounting for more than half of these exports by value.
The benefits that express delivery offers have resulted in the revenues of the express operators rising by
around 40% cent since 2003 (or 20% when stripping out the effects of inflation). But that revenue growth has
not kept pace with the sharp acceleration in the value of world trade (Chart 2.4). This is likely due to a
combination of factors, including:
The increasing share of developing countries in world merchandise trade that reached 34 per
cent in 2007, an all-time record level. Express delivery services are relatively underdeveloped in
developing economies, particularly those within Asia and Latin America, but those economies will
offer considerable opportunity for expansion over the coming years.
Impact of restrictions – Restrictions placed on the operations of the express industry in fast
growing trade areas such as Latin America, the Middle East and Africa, and Asia Pacific mean that
companies in some of these countries cannot take full advantage of express services and this
undermines their ability to operate efficiently in an increasingly global market and hence their ability
to benefit from increased trade. This undermines both their performance and the performance of
their economies as a whole. We return to the impact of restrictions on express delivery services in
Chapter 5 of this report.
Chart 2-4: Express industry revenues and the value of world merchandise trade
Over the longer-term, a combination of petroleum and metal prices moving back from 2008 highs and the
express industry continuing to invest in new delivery routes to help support an increasingly integrated world
economy, will mean the express delivery services will maintain its share of world trade (see Chapter 4 for
more details).
0
25
50
75
100
125
150
175
200
225
2003 2003 2008 2008
2003=100
Source : Oxford Economics based on infomration from GEA members
Express
revenue:
$125 bn
Express
revenue:
$175 bn
World
trade:
$7,404 bn
World
trade:
$15,478 bn
The Impact of the Express Delivery Industry on the Global Economy
September 2009
19
Business surveys confirm importance of express services to companies…
The importance of the express industry in facilitating trade and competitiveness is highlighted by the results
of business surveys and case study evidence from a number of countries. As explained in the Annex to this
report, the surveys, conducted by independent researchers, asked a range of companies across all sectors
of the economy in the US, China, Chile, and six EU countries (UK, France, Germany, Italy, Belgium,
Portugal, and the Czech Republic) about their use of express delivery services. The surveys are
supplemented by a new business survey covering companies in Germany, Brazil, and India. In addition, the
report draws from case study interviews undertaken with senior executives in the US, Asia, Latin America,
and the Middle East.
The US survey results show that express delivery services are very important to a third of US companies in
order for them to meet delivery commitments to clients. In European survey around a third of companies
frequently use express delivery for sending products to customers, while over half do so at least
occasionally. And around a third of firms either frequently or occasionally use express delivery for sending
sub-components to other production facilities. In addition, many companies use express services for sending
legal documents and distributing reports within the company
In Brazil and India, almost half of companies frequently use express delivery for sending products to
customers. A similar proportion reported that express delivery services are very important part of their
company’s ability to compete in both domestic and international markets.
Similarly, in China over three-quarters of companies reported that their customers are demanding faster and
more reliable delivery of products. A similar proportion therefore views integrated express services as vital to
the competitiveness of China’s exports. The express industry is widely seen as helping to overcome the two
main problems of distribution in China, which are slow and unreliable delivery – problems that are common in
developing economies.
The surveys and interviews shed light on the reasons why companies use express services rather than
alternative means of delivery. Whether it is in developed economies, such as the EU and the US, or in
developing economies, such as in Asia or Latin America, almost all companies report that:
Guaranteed delivery is important, as the reputation of a business is undermined when their deliveries
fail to arrive on time or are lost in transit.
Speed of delivery is also important, and for many companies even more important than cost in
determining their competitiveness.
And most firms also value the ability to track the location of products en-route – a particular
specialisation of express operators.
Other reasons cited by companies for using express delivery services include: the convenience afforded by
the integrated ‘door-to-door’ service; the security provided by the integrators; assistance in completing
customs clearance procedures; and the value-added services available, such as ‘import express’, where
payment is made by the consignee.
The Impact of the Express Delivery Industry on the Global Economy
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20
Case Study: US machine tool manufacturer
For over 70 years, this company has been developing innovative machinery and tools for mining, road and building
construction, the automotive, air and space industries, as well as for agriculture and forestry. With its headquarters in the
US (Pennsylvania), the company now has around 13,500 employees worldwide located in over 60 countries.
With its machinery and tools, the company is bound to a service promise to its customers. Part of this promise is to be
able to provide products quickly in case of need, in order to keep waiting time to a minimum. For this reason, the
company has a central distribution warehouse on each of the five continents. The two largest warehouses are located in
the USA and in Europe, where most of their customers are located.
Express delivery services are used to provide a fast and reliable connection between the European central warehouse
and their American customers. This means the company can deliver products to its American customers on the following
day, even if they are not available in the American warehouses but have to come from Europe
According to the Manager of European Distribution, express delivery services “have assisted us in establishing an
optimal connection between our European central warehouse and customers in the USA, Canada, and Mexico. In the
end, that benefits our customers, who can then get their products as needed just as quickly from our European
warehouse as from one in the USA”.
…with an increasing amount of trade in time-sensitive goods…
Many companies rely on express services because their company’s products are perishable/time-sensitive.
This includes companies in the food, pharmaceuticals, electrical engineering, and business services sectors.
Almost 40% of businesses surveyed use next-day delivery services to meet more general time-critical
commitments to clients (Chart 2.5). More specifically, nearly two-thirds of firms surveyed in Europe, for
example, consider next-day delivery to be very important at times because their customers are using
streamlined production processes. And almost half have customers who need next-day delivery of spare
parts for machinery and equipment.
Case Study: French food products exporter
This well-known French bakery, an SME, has just has just three shops - two in Paris and one in London, and a large
facility outside Paris that bakes 24 hours a day. The loaves are sold to about 2,000 stores, hotels, and restaurants in
France and abroad, and are shipped worldwide via express delivery services to assure maximum freshness. About 20
percent of the company's €15 million annual revenue comes from international sales delivered by express service.
The Impact of the Express Delivery Industry on the Global Economy
September 2009
21
Chart 2-5: Are next-day delivery services very important for delivery commitments to clients?
Case Study: South African fresh produce exporter
This consortium of fresh produce exporters in South Africa was formed in 1998 to create, within free-market principles
and a deregulated environment, a prosperous but disciplined fruit-export sector. The consortium has 66 members, which
represent 76% of the fresh fruit volume exported from South Africa. The membership profile includes exporters,
producer-exporters and industry related service providers.
Fresh produce is a major export industry for South Africa, earning over R8bn in foreign currency, and providing over
400,000 jobs. South African fruit is generally of a high quality and much desired by international buyers. Market
opportunities are opening up in the People's Republic of China, Russia, the Middle East, Eastern Europe, India, and in
Africa. Many markets with great potential are distant from South Africa but the consortium is committed to maintaining
the high quality that has earned South African produce its prestigious reputation.
“Fruit is a perishable commodity and the timely delivery of it into any specific market not only determines the freshness
and quality, but also the price,” says the consortium’s chief executive officer. “Consumers are increasingly demanding
higher sanitary standards for fruit and phytosanitary protocols have to be adhered to if an exporting country wants to
maintain its global position. The same would apply if the exporting country wants to open up new markets.” For many
products, the rapid transport and careful handling offered by express delivery can be critical to meeting customers’
expectations.
Detailed case study interviews from previous research highlight that a very large proportion of business
across the world is time-sensitive – not just companies making perishable products, but many who will lose
orders or fail to close important negotiations if their products or contracts arrive late. Particular examples
highlighted in this report include:
Firms in the electronics and machine tools sectors who use express delivery to send spare parts when
products need to be repaired. High quality, rapid after-sales service is essential to maintaining their
reputation with customers.
0
10
20
30
40
50
60
70
80
90
100
Brazil Chile China Czec
Rep
France Germany India UK US
%
Source : Oxford Economics, CBI
The Impact of the Express Delivery Industry on the Global Economy
September 2009
22
Companies in the manufacturing sector who must get must be able to produce and dispatch new
designs to their customer’ during the development and approval of new products to secure a new order.
A garment manufacturer who must to produce and dispatch new designs within days for order fulfilment.
The survey of companies in Brazil and India shed light on the possible impact on orders lost because of
longer delivery times. Around half of companies surveyed in Brazil would lose orders if international express
delivery services to and from the country were no longer available and those firms would lose around a
quarter of their orders. Similarly, in India, just over 40% of survey respondents reported that they would lose
around a third of their orders if international express delivery services were no longer available.
Moreover, express services allow companies to centre their operations in a particular country while still
serving a global market in perishable materials.
Case Study: Global Manufacturer of Sports and Lifestyle Goods
With annual revenue of over €10 Billion and more than 150 subsidiaries worldwide, this company is one of the world’s
largest manufacturers of sport and lifestyle goods. Its products, which include sports footwear, apparel, gear, and
accessories, are available in almost every country. The geographical scope and scale of the operation, shorter time to
market requirements, coupled with a discerning customer base have necessitated the development of multiple supply
chains and transport models, new outsourcing concepts, as well as the development and procurement of innovative
services that only the largest express and logistics providers can offer.
For example, the company ships a significant portion of its products from Hong Kong, Indonesia, Thailand, and Vietnam
into European Union countries. To improve delivery efficiency, simplify customs clearance, as well as to reduce the
overall transit time to a large number of delivery points, the company uses an innovative break bulk express delivery
solution. Shipments destined for individual retail stores and sales offices are consolidated at origin and cleared through
customs at a single gateway in the European Union, greatly reducing the cost of clearance and potential for delay. After
clearance, the consolidated shipment is broken down into individual components and delivered through the express
provider’s regional network without any further customs documentation requirements or additional charges. Throughout
the process, the customer has full visibility on the location of his or her shipments.
…but express services also enable firms to reduce their costs
Providing rapid and reliable delivery is clearly one critical way in which the express industry contributes to the
companies’ success in international trade and is therefore vital to their competitiveness. Express services are
particularly important to the competitiveness of countries geographically distant from their largest markets –
without the speed of delivery and global reach provided by the express operators, many companies based in
such areas would be limited to serving their local market. Example countries include South Africa, Australia,
and New Zealand, and many developing countries where the use of express services is growing very rapidly
as these economies increasingly export to the US, EU and other developed markets (see Chapter 1).
The Impact of the Express Delivery Industry on the Global Economy
September 2009
23
Case Study: Malaysian semiconductor manufacturer
This company’s operation in Penang, Malaysia employs over 2,100 staff manufacturing of various high-tech products. It
uses international express transportation to ship its products directly and reliably from its manufacturing centre to its
customers throughout the US, Europe and Asia. But it is also able to give their customers immediate, accurate shipment
information through its express delivery company’s track and trace system.
As well as dedicated warehousing, systems integration, security, end-to-end visibility, and control throughout the supply
chain, the express delivery company also provides door-to-door distribution of the company’s products via its global
distribution system. Express services have helped the company to remain competitive, based on lower inventory
expenses, reduced labour costs, and shorter cycle times.
But there are a number of other ways in which express services and their operators contribute to
competitiveness:
Enabling firms to reduce purchasing costs, by increasing the area from which inputs can be sourced
and facilitating sourcing from cheaper suppliers.
Facilitating cost-savings on inventories by enabling better concentration, rationalisation and location of
warehouses.
Providing extensive logistics support services to companies, enabling them to delegate responsibility
to professionals in the sector who seek the most cost-effective way of transporting goods and paperwork
on their behalf. This both relieves companies of the burden of running their own transport departments
and vehicles, and allows managers to focus on their core business.
Improving companies’ handling of returns and complaints – for example, by allowing next-day delivery
of replacement equipment to customers or quick turnaround of repairs.
Improving the effectiveness of companies’ R&D activities, by facilitating their decentralization. For
example, 80% of survey respondents in Germany reported that this helps to reduce the time-to-market of
new product developments by enabling R&D centres to be based in locations which provide maximum
participation in leading research associations.
Facilitating improved stock-management and production techniques, reducing firms’ storage costs,
losses due to stock-outages and disruption caused by failure of machinery on production lines (see
Chapter 3 for more details).
Express services are likely to be of particular benefit to companies in the developing countries, allowing them
to adopt best international practice in transport and logistics without having to make a major investment in
their own warehouses or fleet of vehicles. Moreover, express services help to facilitate foreign direct
investment in such countries; overcoming weaknesses in their transport infrastructures and allowing efficient
networking with multinationals’ operations in other parts of the world (again, see Chapter 3 for more details).
The Impact of the Express Delivery Industry on the Global Economy
September 2009
24
Conclusion
Express services are vital to for the competitiveness of companies around the world. Being able to respond
quickly to customer demand – for new products, spare parts, contracts etc – is essential to winning and
maintaining business in an increasingly competitive global economy, even during such times when world
growth is contracting.
Case Study: Indian clinical research team
This company is a global pharmaceutical major with its clinical research team based in Mumbai conducting
tests at sites across India. The company stores small batches of drugs, many of which are highly perishable,
in carefully controlled conditions in Mumbai. Drugs are distributed to other cities only after patient
appointments are arranged so pick-up notice is short and shipments must reach their destinations overnight.
Often, the company needs to ship on holidays and weekends. To meet its unusual shipping requirements
the company uses express delivery. The express delivery operator provides specially-designed gel packs to
maintain constant temperatures and provides data on temperatures during transit. A dedicated team of
express delivery drivers with special training are assigned to serve the company’s needs. The close
partnership between the company and its express delivery operator, and the high level of speed and
reliability the express delivery operator provides in delivering perishable shipments, make it practical for the
company to maintain its research and testing operation in India, and to make the latest medical advances
available to special Indian patients.
The Impact of the Express Delivery Industry on the Global Economy
September 2009
25
3. The role of the express industry in facilitating
productivity and investment
Introduction
In this Chapter, we continue our analysis of the contribution that the express industry makes to the global
economy through the impact it has on the performance of companies in other sectors by considering its role
in determining productivity and investment. We also discuss the importance of express services to Small and
Medium-Size Enterprises, regional development, and foreign direct investment.
Key Findings:
Express services enable companies to maximise the efficiency of their production activities – reducing
production shutdowns and allowing the implementation of best international techniques such as build-to-
order.
Express services also allow companies to minimise their inventory costs.
The express industry enables small companies to utilise high quality, rapid delivery services that they
could not provide themselves. This is particularly important in facilitating their participation in export
markets.
Express services contribute to regional development by enabling businesses to locate in regions that are
not necessarily close to their market. This includes many developing countries.
Good access to markets is the most important factor influencing international location decisions. Without
international next-day delivery a significant proportion of companies would possibly have to relocate
some operations to countries that provide next-day services.
Express services enable firms to organise production efficiently…
As well as using express services to deliver products to their customers, companies are increasingly relying
on express services in order to organise their production operations as efficiently as possible. Surveys of
companies and case study interviews suggest that the majority of firms either frequently or occasionally
require their suppliers to deliver spare parts by express services. Many also use express services for delivery
of sub-components to their production facilities.
The efficiencies companies derive from using express services are demonstrated by a survey of German
companies. This found that:
Two-thirds of companies are or have been able to achieve cost-savings from working with express
delivery companies.
The Impact of the Express Delivery Industry on the Global Economy
September 2009
26
Around one-third of firms using express services are able to reduce their production costs. The main
advantage here is considered to come from cutting idle periods and production shutdowns, as express
delivery companies are able to ensure rapid delivery of materials and spare parts.
Two-thirds of respondents believe that express services facilitate the adoption of international best
practice in production, which increase companies’ flexibility and ability to adapt to changes in demand.
For example, many companies use express services to permit ‘build-to-order’, since time savings on
delivery can be used to allow customisation to match particular client requirements (e.g. for computers).
According to PA Consulting, these strategies have been found to reduce total supply chain costs by
between 3% and 5%.
…helping to avoid costly production shutdowns…
The key role express services play in helping companies avoid interruptions to the production process is also
illustrated by the survey of companies in India. For example, respondents expect that, without next-day
delivery, production would on average be interrupted on more than 10 days per year because spare parts for
equipment could not be delivered next-day when needed. Some firms believe that their production might
even be seriously affected on more than 16 days a year.
The case studies provide a number of examples illustrating how firms rely on express services to maximise
their efficiency, including:
Airlines, who demand delivery of spare parts within 24 hours to avoid costs resulting from aircraft being
grounded.
A manufacturer of semiconductors, for whom one of the leading express delivery companies has
developed a facility to handle its orders that has reduced lead times, improved customer service levels
and lowered inventory costs.
A multinational company that uses express services to speed the importation of parts for its oil facilities
and for handling customs procedures.
It is not only companies in the manufacturing sector that rely on express services; they are key to efficient
operations for many firms in the service sector too.
The Impact of the Express Delivery Industry on the Global Economy
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27
Case Study: Romanian business services support company
This company has become the first Romanian supplier capable of providing complex integrated solutions for cash
management, customer flow management, automated identification of data, and brand/documents security. As the
leading Romanian expert in the analysis and automation of cash processes, the company is able to provide any type of
store with complete front-office and back-office, store equipment, and anti-theft systems. Since its beginning, it has
provided solutions, along with service and technical assistance, to over 3000 companies in finance and banking, retail,
logistics and warehousing, distribution, transportation, telecommunications, and other industries. By investing in the
latest technologies and offering the best-in-market products and services, it assured not only its own rapid growth but the
success of its customers and partners on the local and international markets.
In order to achieve and maintain its high pace of development in a market that has recently joined the European Union,
the company needed the support of a reliable and flexible partner in transportation able to ensure its connections with
key suppliers – more than 25 international partners – and with customers in all Romanian cities. From the beginning, its
partner in transportation has been a business-to-business express delivery company. The use time-definite services
have helped to shorten distances and provide the best service on the market, and an essential contributing factor in
delivering 24/7 expert customer service.
…and reducing companies’ inventory costs
Business surveys covering nine countries across North America, Europe, Latin America, and Asia show that
around a third of firms surveyed report that there are aspects of their production process for which next-day
delivery of sub-components from their suppliers or elsewhere in their companies is very important (Chart
3.1). Of these firms, around 50% report that next-day delivery of sub-components is important because they
operate a just-in-time inventory system, while around two-third require urgent delivery of spare parts for
machinery in case of breakdown.
Survey evidence and the case studies clearly show that just-in-time inventory controls are now increasingly
important for companies around the world, and that these have created strong demand for express delivery
services. Under just-in-time, an increasing number of firms hold only very limited ‘buffer’ inventories in case
they run short of critical sub-components or spare parts. Instead, they require their suppliers (which may be
other parts of their business) to deliver to a strict timetable to fit in with the production runs. It is estimated,
for example, that this system has contributed to a reduction of over 20% in the inventory-output ratio in the
UK over the last 20 years, saving UK companies over £6 billion a year. Large savings are likely to have been
achieved in other developed economies.
The Impact of the Express Delivery Industry on the Global Economy
September 2009
28
Chart 3-1 – Use of express services for production
The value of speed and reliability
Integrated express services improve customer efficiency and help control costs in a variety of ways. Looking at how
express service can reduce costs in just one area – inventory finance charges – can help put potential savings in
perspective.
Consider two sources of inventory finance charges: time spent in transit and extra days of inventory kept on hand to
guard against disruptions in supply.
Assuming an annual inventory finance charge of 10 percent, a $100,000 dollar shipment (semiconductors or computer
components, for example) costs the shipper roughly $27 in finance charges for every day it is delayed (perhaps because
it is being shipped air freight instead of express or because it is being delayed in customs). If a typical delay is two days
and there are 200 additional inventory financing expenses of approximately $11,000 per year.
Assuming that shipment unreliability causes a manufacturer to maintain two additional weeks of inventory on hand (to
guard against stock-outs or disruptions in production, for example), over a 250-day manufacturing year a $10 million
average daily inventory would increase annual expenses by approximately $96,000.
Together, then, the combination of delayed and unreliable transportation could cost this company over $100,000 per year
in inventory finance costs alone.
Source: Delivering Business into the 21st Century: The Integrated Express Industry in the ASEAN Region, USASEAN
Business Council
In order to illustrate the role of the express industry in helping firms to minimise their inventory costs, firms in
Europe, Brazil, and India were asked how they would react if next-day delivery services to or from their
countries to foreign locations were no longer available. In Europe around a third reported that they might
0
10
20
30
40
50
60
70
80
90
100
% of respondents
Source : Oxford Economics
Is next-day delivery
important?
Why? Just in time Why? Spare
parts for repairs
% saying yes
The Impact of the Express Delivery Industry on the Global Economy
September 2009
29
have to hold increased inventory at their home production site in order to meet the requirements of their
production process, while nearly 40% reported that they might have to hold increased inventory to meet
customer demand.
The importance of express services to efficient inventory management is further illustrated by the survey of
Brazilian companies. This found that, if international next-day deliveries were withdrawn, firms would, on
average, have to increase by 10% their inventories of intermediate goods to meet the requirements of the
production process. And Brazilian companies’ inventories of finished goods would have to increase by 9% on
average to ensure that consumer demand could be promptly met.
Similarly, in India, around a third of survey respondents report that they have achieved inventory cost-
savings through the use of express services: without them, their costs would be over 2% higher.
Express services help SMEs serve global markets…
The vast majority of firms are Small and Medium-Size Enterprises (SMEs – i.e. firms with fewer than 250
employees). Express delivery services are important to SMEs because they typically do not have the same
transport delivery infrastructure that large companies have in place. While the scale of large manufacturers,
such as the motor vehicle producers, makes it economic either for them to run their own transport fleet or
buy-in dedicated services from a contractor, this would be uneconomic for most SMEs making relatively few
and irregular deliveries. SMEs therefore frequently rely on transport services where a central provider
delivers on behalf of a large number of customers.
The express industry enables SMEs to take advantage of the economies of scale its large-scale transport
operations generate, while at the same time providing the same high quality of service – time-sensitive
delivery, reliability, and tracking – provided to large companies. The express industry allows the many small
firms that are part of a network (e.g. owned by a single entrepreneur) to transport products between
operations quickly and efficiently. Moreover, express services will assist in completing customs clearance
procedures so that SMEs don’t have to concern themselves with the numerous rules and associated
paperwork.
Case Study: Cambodian handicraft producer
This SME company is a fair trade producer of a variety of Cambodian handicrafts. Exports play a small but important
part of their business success. However, exporting handicrafts from a developing country is not always straightforward.
In the past they used several creative means to facilitate exports: sometimes the handicrafts were carried onto the
aircraft by hand by friendly travellers and posted within the destination country; in other cases the company shared
shipping with other larger local businesses.
In 2004 the company decided to experiment with express delivery. The results were so entirely satisfactory that the
company now relies exclusively on express services to deliver its exports. Express services take care of the required
details for customs clearance and have helped the company achieve “100% safe delivery of our products, in good time”.
The Impact of the Express Delivery Industry on the Global Economy
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30
The business surveys and case study interviews confirm that SMEs are substantial users of express delivery
services. For example:
Companies responding to the survey in India highlighted the importance of express services to SMEs’
ability to participate in international markets.
The Brazilian survey found that over half of SMEs frequently send packages by express delivery.
Without next-day international express delivery, almost a third of Brazilian SMEs report that they would
probably lose some export orders.
Similarly, the Italian survey found that 80% of SMEs believe that, without next-day international express
delivery, they would probably lose some export orders.
Case Study: U.S. manufacturing company
This company has been producing industrial sewing machines in Newington, Connecticut in the USA since 1838. As
textile and apparel production shifted from the U.S. to other locations, the company has followed its customers overseas.
The current company president, the eighth generation to manage the family-owned business, describes the transition:
“One of our biggest challenges was to figure out how to continue to compete efficiently as a global company, as we
actively sell sewing machines and spare parts to 85 or more countries. Global agencies, what we used to call
distributors, have been weakened so much in the last 25 years that it has become necessary for us to service and
support end-users directly. Our international business is viable now largely because of our ability to use express delivery
to have proximity to our markets.”
Case Study: French SME
Founded in 1993, this SME has 30 employees located just outside of Paris. It offers a wide range of upmarket, creative
products, including cutlery, accessories and dinner sets. The company’s exports have grown quickly, thanks to its
presence at trade shows in France, other European countries and the USA. Today, this company makes 55% of its
turnover through exports, mainly to the USA (20% of global turnover), but also Germany, Italy, the United Kingdom and
Australia.
To ensure the quality of customer service and guarantee business development, the company must deliver ready-to-use
products to its customers and be able to inform them about the status of their delivery at any time. To meet demand, this
company must send numerous packages (the average weight for the USA is 8 kilos). These shipments are destined for
multiple locations and must meet short deadlines.
To manage these constraints, this company uses express delivery services to deliver its parcels within the European
Union (France, Germany, Italy and the United Kingdom) and to the USA. This service allows the company to plan
delivery times in a reliable way according to the destination and to track its shipments very closely in order to provide the
most accurate information possible to customers at any time. Moreover, by managing the constraints of an SME
specialized in upmarket products, the express delivery services provider helps the company to reinforce brand image,
meeting customers’ needs for quality, reliability and transparency.
The Impact of the Express Delivery Industry on the Global Economy
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31
Case Study: French cheese exporter
This company was launched in 1996 with the ambition of becoming a worldwide purveyor of French artisan and farmer
cheeses, products traditionally made and consumed locally. According to the founder the company faced several
difficulties of shipping cheese around the world: the product is perishable, “if delivery is delayed for six hours beyond
what I expect I will not allow it to be delivered”, and it is an agriculture product (“no two countries have the same rules”).
The company turned these problems over to an express services provider. A review of the company by Fork & Bottle, an
on-line reviewer of internet gourmet food purveyors, noted that an order placed for a New Year celebration in California,
placed on 27 December, was delivered by express services 72 hours later, less than 24 hours after being shipped.
“Everything was beautifully packed with four reusable ice packs. The cheeses were perfect – no compression from being
packed. I was nervous ordering from France – but really it was perfect transaction. No hassles.”
…and support regional development…
The employees of the express industry are widely spread around the world and in different regions within
countries. But the express industry contributes to regional development in a number of other ways as well:
It enables businesses dependent on fast delivery to customers to locate in regions that are not close to
their market. This includes many developing countries.
Companies that rely on next-day delivery to customers may locate near hubs for express services so as
to make the last pick-up time for their deliveries as late as possible, providing them with maximum
production flexibility. The box titled ‘Express hubs as a spur to regional development’ describes such
clustering around the major express hubs in the US and continental Europe.
Express hubs as a spur to regional economic development
(i) Liege:
Liege Airport has been TNT’s European operating hub since 1998. As express and air cargo traffic has grown, so a
number of distribution and logistics companies have established in the close vicinity of the airport. These companies are
located within the Liege Logistics platform: Liege Logistics now employs over 500 people. Around 845 acres have been
designated on and bordering the current airport site to enable Liege Airport’s economic growth through to 2020.
(ii) Memphis:
Memphis International Airport - Federal Express' Superhub is the world's largest cargo airport. In addition to the jobs and
direct economic benefits it provides, FedEx is a magnet for attracting distribution centre development to Memphis.
According to SRI International more than 130 foreign-owned firms from 22 countries employing 17,250 workers have
been drawn to Memphis since the early 1980s, largely due to the presence of FedEx. Examples of customers that
relocated to Memphis metro area include Williams-Sonoma (distribution & data centre); Submitorder.com (Internet
fulfilment centre); Hewlett Packard (Distribution); and Ingram Micro (Distribution / assembly / repair).
The Impact of the Express Delivery Industry on the Global Economy
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32
(iii) Leipzig:
In May 2008, DHL opened its new €300 million Central European Air Hub at the Leipzig/Halle airport. Night flight
operations, which are key to express operations, could no longer be expanded at the existing DHL hub in Brussels.
Seamless connections to road, air and rail transport, 24-hour operations and comprehensive night-flight authorization
create the ideal basis for enabling a trimodal hub to serve intra-European and intercontinental traffic. More than 2000
jobs have been created so far, their number is expected to rise to approximately 3500 in the future as the hub expands.
Nearly 90% of the newly employed workers come from the region around the airport. Two-thirds of them were previously
unemployed. Some 7000 more jobs will likely be created in the surrounding area. Furthermore DHL is training young
people in various logistics and IT professions at the airfreight hub. Experts predict that a large-scale investment in the
Leipzig/Halle site will provide strong impulses for the area’s overall economic development.
(iv) Louisville:
Louisville International Airport is home to Worldport, the all-points air hub of UPS. The location of Worldport has been
a tremendous economic engine for the city of Louisville and surrounding communities. More than 100 companies have
located in or near Louisville to tap into UPS' extensive logistics and distribution network. According to Greater Louisville
Inc., as the city's chamber of commerce is known, the estimated annual impact of UPS' Worldport expansion was nearly
14,000 new jobs (direct and indirect) and $478 million in new payroll (direct and indirect). Companies doing e-commerce
fulfillment in Greater Louisville include Nike, Zappos, and Gateway Computers. Companies doing traditional
transportation fulfillment include GE and Ford.
…and helps facilitate foreign direct investment
Foreign direct investment is critical to the development of many developing and transition economies.
Express operators offer multinational investors high quality transport links, both for bringing in materials,
components and spare parts to their production facilities and for transporting finished products to market. In
this way, express operators help investors overcome both problems of geography and weaknesses in the
transport infrastructure.
A wide range of factors influence firms’ decisions about how much and where to invest. However, surveys of
international investors suggest that ease of access to markets and international transport links are
particularly important. For example, a survey by Cushman & Wakefield shows about 60% of companies
consider easy access to markets, customers or clients, as “absolutely essential” when deciding where to
locate their business.
Express services are an important element in ensuring that companies have the best possible access to
markets. For example, almost one-third of Chinese companies surveyed indicated that, in the absence of
efficient integrated express services, they would scale back their reinvestment and/or expansion plans in
China. Similarly, business surveys in European countries show that investment would be vulnerable if next-
day delivery were no longer available:
30% of French companies and 10% of Belgian firms would seriously consider outsourcing production.
The Impact of the Express Delivery Industry on the Global Economy
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33
35% of Portuguese companies report that they would possibly have to relocate some operations from
Portugal to another country.
Over 16% of UK companies and 10% of Italian firms report they would possibly have to relocate abroad.
Conclusion
Express services are now integral to business operations around the world, reducing firms’ operating and
inventory costs, and facilitating the use of latest production techniques. Without EDS, companies’
competitiveness – and so investment - would be significantly undermined.
Case Study: Indian telecommunications company
This company is a new, fast-growing provider of telecommunications infrastructure in India. It must be certain
that it can provide a world-class service to its customers in India, where the market is highly competitive and
service “down time” must be kept to an absolute minimum in order to preserve reputation and brand loyalty.
The company needed a logistics partner that could provide support across a wide geographic area. The
logistics partner also needed to maintain supply facilities in key strategic locations to facilitate the fastest
possible response times and 24/7 distribution of critical spare parts to customers. The Indian company
chose an express delivery operator as its partner. The express delivery operator maintains two warehouse
facilities, in New Delhi and Chennai, where it manages inventory and orders, packing and dispatching, and
return of defective parts. It guarantees next-day delivery of spare parts to all major cities across India and
replenishment of parts at the two central warehouses. With the express delivery operator taking care of the
entire storage and distribution supply chain the telecommunications company is able to concentrate on
growing its core business and increasing its competitive edge.
The Impact of the Express Delivery Industry on the Global Economy
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34
4. Prospects for the express industry and its impact on
global economic growth
Introduction
In this Chapter, we consider the future prospects for the express industry and calculate its likely direct
contribution to world GDP and employment in five and ten years’ time.
But, as the previous Chapters have demonstrated, the most important contribution the express industry
makes to the global economy is through its impact on the capabilities and competitiveness of other sectors in
the economy. In this Chapter we highlight the dependence of companies’ sales on express services, while in
the next Chapter we discuss the implications that restrictions on the availability of express services would
have on economic performance.
Key Findings:
The express industry made a significant contribution to world growth in the past and we expect it to do so
in the future, but industry growth will be weaker over the next five years than in the previous five years.
Despite the short-term prospect of falling world trade and a contraction in world growth, the industry will
continue to support global trade by delivering to new destinations quickly and cost-effectively. Moreover,
the industry will enable companies to achieve significant cost saving by facilitating a more streamlined
production process.
The growth of express services is expected to average 3% a year in real terms over the next five years
then accelerate to 7% a year over the following five years, providing there are no further constraints on
its growth.
The growth prospects of the industry will outpace that of world GDP and mainly reflects the longer-term
prospect of expansion of international trade and the increasing need for rapid, guaranteed delivery,
particularly in emerging economies.
There is little sign the relatively new technologies, such as e-mail, will prevent the express industry from
growing faster then the economy generally.
As a result, employment in the express industry globally is expected to increase from 1.3 million now to
1.8 million by 2018, if growth is not constrained.
If Express services were constrained to grow in line with GDP, then employment in the express industry
would be around 300,000 lower than these forecasts by 2018.
Companies’ success in the fast-growing knowledge-based sectors will be facilitated by the express
industry.
The Impact of the Express Delivery Industry on the Global Economy
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35
Express services to continue to perform well …
Over the last five years the express industry has performed well, with turnover rising on average by around
4% a year in real terms (i.e. over-and-above inflation), slightly ahead of the rate of growth of the world
economy as a whole.
…as need for rapid, guaranteed delivery intensifies…
The express industry is likely to remain a healthy growth sector over the medium to longer-term. The
requirement for rapid delivery is likely to intensify further among existing users of the express industry and
spread to other sectors of the economy as, for example, more businesses use the internet for purchasing
and supply management, and the demand for logistics services increases.
And over the short-term, in an economic climate of falling world trade and a contraction in world growth, the
express industry will continue to support the activities of their client base in several ways including:
Lean-inventory: Express services enable companies to achieve significant cost and time savings
by facilitating more streamlined production processes (reduces firms’ storage costs) and rapid
provision of spare parts, especially for companies with overseas subsidiaries or suppliers
Global sourcing: Express services increase the area from which inputs can be sourced, facilitating
the purchase of inputs from cheaper suppliers.
Quality of service: To remain competitive many businesses have to adapt to a changing global
client base and deliver products to and from new destinations quickly and cost-effectively. The
express industry facilitates this by connecting 90% of world GDP within 24-48 hours.
…but growth will be weaker over the next five years…
International trade is expected to continue to grow rapidly over the longer-term – Oxford Economics
forecasts it to increase by almost 70% in real terms (i.e. adjusted for inflation) over the next decade
compared with a rise of 45% in world GDP. But as alluded to in Chapter 2, these long-term growth prospects
hide short-term weaknesses. Both world trade and world GDP are expected to contract in 2009, and be
generally weak in 2010, with the slowdown most abrupt among the industrialised countries.
A recent business survey supports the view that growth will be weaker over the next five years compared
with the recent past. The survey asked German companies whether they had increased their use of express
delivery services over the past five years and how they believe their use of express delivery services will
change over the next five years. Around a third of respondents reported that their use of express services
had risen by more than 10% over the last five years, while just 10% of firms expect such robust growth over
the next five years. However, 30% of firms still expect to increase their use of express delivery services by
between 5-10% over the next five years and overall, respondents reporting an increase in use of express
industries outweighs those anticipating a decline in use.
The Impact of the Express Delivery Industry on the Global Economy
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36
Chart 4-1: The use of express services in Germany
While the market for express services is relatively mature in developed economies, such as the US and EU,
there is considerable scope for expansion in emerging economies, particularly in Asia and Latin America.
For example, over 40% of businesses surveyed in India expect their use of express delivery services to
increase by over 10% in the next 5 years, and, on balance, more companies surveyed in Brazil expect an
increase in the use of express delivery services over the next five years than expect a decrease in usage
.
Chart 4-2: The use of express services in Brazil and India
Brazil
India
Business surveys also show that companies generally do not expect that new technological developments
and distribution methods (for example, transferring information, data or contracts by secure electronic means
such as secure web-based products and broadband data transmission) will reduce their use of express
services. Indeed, in the UK e-commerce has become becoming a major driver for the economy, and the
0
5
10
15
20
25
30
35
40
45
Up > 10% Up 5-10% Up < 5% Remained
the same
Down < 5% Down 5-10% Down >10%
last five years
next five years
% of respondents
Source : Oxford Economics
0
5
10
15
20
25
30
35
40
45
Up > 10% Up 5-10% Up < 5% Remained
the same
Down < 5% Down 5-10% Down >10%
last five years
next five years
% of respondents
Source : Oxford Economics
0
5
10
15
20
25
30
35
40
45
Up > 10% Up 5-10% Up < 5% Remained
the same
Down < 5% Down 5-10% Down >10%
last five years
next five years
% of respondents
Source : Oxford Economics
The Impact of the Express Delivery Industry on the Global Economy
September 2009
37
express industry will play an increasingly important role in the supply chain ensuring business efficiency and
consumer satisfaction.
…before world growth picks-up across all regions…
Over the medium term global growth rates will pick-up helped, in part, by strong emerging market growth
rates, particularly within Asia, and a return to growth for the industrialised countries.
This upturn will be reflected in the growth rates of both world trade and world air cargo traffic. Boeing expects
world air cargo traffic to expand at an average annual rate of 5.8% over the next twenty years, with the
fastest growth in Asian markets – the domestic Chinese and intra- Asian cargo markets are forecast to
increase by 9.9% and 8.1% a year respectively.
… with output expected to rise by 5% a year over the next decade…
We expect the express industry to continue to increase its share of the air cargo market, growing by an
average of 5% a year in real terms between 2008 and 2018. This is in line with growth we expect in world
trade and well ahead of our forecast of 3% a year real growth for the world economy over the whole of the
next decade. Note, this is slightly slower growth than implied by the projections from Boeing and reflects the
current slump in air cargo traffic (IATA expect a double digit decline in air cargo traffic to in 2009) - we expect
that world air cargo traffic will expand an average annual rate of a little under 5% over the next decade.
The period 2013-2018 will see particularly strong growth for the express industry, world trade and world GDP
as the global economy rebounds sharply out of the current downturn.
Table 4-1: Prospects for the express industry over the next decade
…boosting direct employment to 1.8 million…
The direct contribution of the express industry to global GDP is set to increase by over 60% by 2018 to reach
about US$135 billion in today’s prices. This rate of growth will result in overall GDP being over US$25 billion
higher by 2018 than if the express industry grew merely in line with our GDP growth forecast of 3% per
annum. (And note that this is only the direct impact of the express industry’s growth: it does not include the
indirect or wider ‘catalytic’ impacts of strong growth in the express industry on other sectors of the economy.)
There will also be benefits to global employment from the express industry’s continued fast growth. In 2008
employment in the express industry is estimated to have been 1.3 million worldwide. We expect it to reach
1.8 million by 2018. If express services were constrained to grow in line with GDP, then employment in the
Per annum growth Per annum growth Per annum growth Per annum growth
2003-2008 2008-2013 2013-2018 2008-2018
World Trade 8 3 7 5
Express industry output 4 3 7 5
World GDP 3.5 2.5 3.5 3.0
Real terms (i.e. inflation-adjusted)
The Impact of the Express Delivery Industry on the Global Economy
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38
express industry would be around 300,000 lower than these forecasts by 2018.
…and 3.8 million jobs supported by the express industry
The expansion of the express industry will support growth in jobs both in its supply chain (indirect
employment) and as its employees purchase goods and services from other sectors (induced employment).
The total global employment supported by the express industry is forecast to increase to 3 million by 2013
and reach 3.8 million by 2018. The majority of these new jobs are expected to be in the emerging market
economies.
Chart 4-3: Employment supported by the express industry by 2013 and 2018
Case Study: Argentinean printing company
This company is a small wholesaler of pre-printed and specialty paper located in Rosario, Argentina. Its products include
paper, cards, pamphlets, posters, letterhead, presentations and labels, and it increasingly relies on e-commerce to
generate sales. Most of its customers are, like it, small and medium-size enterprises and use the firm to produce high
quality marketing and company image materials. They typically require small runs of materials that can be printed by
laser printers or photocopied. The company has 500 domestic and 25 foreign accounts. Its foreign customers are located
in the United States, Europe and Latin America, markets that are relatively distant form Argentina.
The company’s shipment characteristics are typical of many small users of air express services: irregular low-volume
shipments of goods with relatively high value to weight ratios. Because of the nature of its business, small size, and
distance from foreign markets, it needs competitive shipping prices, software to manage its deliveries, and individual
assistance in conducting foreign trade.
Through its relationship with an express delivery company, it has been able to use e-commerce to expand internationally
and better compete with foreign rivals. Typically, it takes five to six days for it to produce an order and a similar period for
final delivery. Because of the short 10 to 12-day timeframe from order to delivery, the company’s services are more
competitive. For example, it was able to secure accounts in Costa Rica and Honduras that previously were serviced by a
US firm because it could beat the competitor’s 45-day delivery timeframe.
0
500
1,000
1,500
2,000
2,500
3,000
3,500
2008 2013 2018
Direct Indirect Induced
000s
Source : Oxford Economics
The Impact of the Express Delivery Industry on the Global Economy
September 2009
39
Companies’ sales are increasingly dependent on express services…
Companies are likely to become increasingly dependent on express services, particularly over the second
half of the next decade – hence the rapid growth we expect in the industry’s output and employment. In
particular, express services are likely to become increasingly important for companies’ sales, especially in
the fastest-growing export markets.
The survey of companies in Brazil, Germany, and India demonstrates the importance of express services to
company sales. The surveys suggest that express services are key for:
17% of sales revenue in Brazil (and 30% of sales revenue of firms operating in the food industry)
11% of sales in revenue Germany (and 80% of sales revenue of German IT service suppliers)
8% of sales revenue in India
…as knowledge-based sectors expand
Express services are likely to be particularly critical to the companies’ success is the knowledge-based
sectors, such as ‘high tech’ parts of manufacturing, IT & telecommunications, financial & business services
and also those related to internet-based businesses (including those in retail industries).
The business surveys and case studies suggest that firms in the knowledge-based sectors are more-than-
usually dependent on express services, reflecting the kind of products and services they provide, such as,
High-value items, for which low stocks are essential (electronic components etc) - 82% of electronic &
electrical equipment companies surveyed in Germany would be very badly effected if international
delivery services to and from their country were no longer available
Failed items, such as personal computers, for which rapid repair and return is essential – Over half of IT
service providers surveyed in India stated that express delivery services were very important to the
overall business performance and two-thirds expect their use of express delivery services to increase by
over 10% over the next five years.
Items purchased on-line, where rapid delivery to the customer is essential. A recent report on the
express industry in China supports this view – 35% of all express deliveries where through on-line
purchases and this ‘e-business’ delivery is expected to continue to grow at a fast pace and become the
new area of growth for express delivery enterprises operating in China.
The implication is that if economies are to be successful in these key sectors – and we expect these to be
among the fastest-growing industries over the next 10 years – they will become increasingly reliant on the
services of the express industry.
Conclusion
The express industry is a fast-growing sector in its own right, outpacing world GDP as the industry serves the
increasing need for rapid, guaranteed delivery across an increasingly global market. The industry will support
around 3.8 million jobs globally by 2018.
The Impact of the Express Delivery Industry on the Global Economy
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40
5. The impact of restrictions on express delivery services
Introduction
The previous Chapters have explained the important contribution made by the express industry to the global
economy. However, restrictions placed on the operations of the express industry mean that companies in
some countries cannot take full advantage of these services. This undermines both their performance and
the performance of their economies as a whole.
In this Chapter we illustrate the restrictions placed on express delivery services in some countries and
provide example estimates of the overall economic cost of these restrictions.
Key Findings:
Restrictions on express delivery services not only adversely affect the efficiency of express delivery
companies but also undermine the competitiveness of companies across the whole economy.
Steps to remove restrictions on the express industry would encourage increased trade, investment and
productivity, boosting GDP, employment, and government finances.
Restrictions on express delivery services generate significant economic costs. For example, imposing a
restriction that led to international next-day delivery services no longer being available in the EU could
reduce GDP across the EU by more than €16 billion a year.
The benefits from liberalising express services would be substantial. For example, it is estimated that
China’s output would increase by almost US$180 billion over five years, generating an additional
700,000 jobs.
Policies and regulations affecting express delivery services…
International express services, like any other aspect of international trade, can be impeded by government
policies and restrictions that undermine the ability of express delivery companies to operate efficiently and
hence their ability to facilitate increased trade, investment, and productivity across the wider economy. These
policies and restrictions can take many forms:
Anti-competitive practices of government-owned or authorized monopolies – In some countries
delivery service providers, often government-owned, benefit from statutory or de facto monopoly status
that allows them to use their dominant market positions to limit competition in the express industry. This
can involve, for example:
o Outright exclusion of competition – reserving the right to offer express delivery services to a
government-owned or sanctioned enterprise.
The Impact of the Express Delivery Industry on the Global Economy
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41
o Cross-subsidisation – Many countries have not developed a regulatory framework such as that
developed by the European Union to avoid anti-competitive practices that could result as a
consequence of cross-subsidies from the revenues of monopoly operations. Moreover, in many
countries general tax revenues are used to support express delivery services provided by postal
operators with a monopoly.
o Special taxes – imposing extraordinary taxes or fees on private express delivery service
providers. Often the proceeds of these taxes are used to finance the development of the
government-owned or sanctioned service provider. The burden of these taxes is borne ultimately
by the national business community, thus reducing its competitiveness in global markets.
o Preferential treatment – government-owned or sanctioned delivery service providers may
receive preferential treatment for their express delivery services in, for example, the application
of customs procedures and enforcement practices; and the enforcement of traffic laws.
o Restrictions on market access – foreign express delivery companies may be restricted to
international gateways only, therefore forcing them to use a local partner. This creates a
reputation risk associated with loss of custodial control throughout the entire supply-chain.
Complex licensing requirements – While many countries require licenses for the provision of certain
delivery services, in some cases these are applied arbitrarily or in ways that are discriminatory, non-
transparent, or excessively complex. For example, some countries charge high license fees, (some
even in the form of taxes on total receipts) and do not allow automatic renewal, requiring express
delivery companies to reapply annually. Others require licensing express services for private firms but
not for publicly-owned postal bodies. For example, an international provider of express delivery services
may have to obtain 10 to 12 licences to do business; including licences for foreign investment,
international freight forwarding, customs express shipments consignee, air transportation sales agent,
road transportation, etc. And in some cases the national postal body has the right to conduct inspections
and financial audits of competing firms and to withdraw their licenses.
Inefficient customs procedures – While customs clearances are an integral part of the responsibility of
governments to enforce tariffs, safeguard public health, and meet international obligations to protect
against illegal trade, delays at customs can seriously undermine the operations of the express delivery
companies and reduce delivery speeds. In addition, the efficient operation of express services can be
impeded by:
o Inadequate resourcing of customs facilities – both staff shortages and inadequate use of
modern technology, such as use of electronic communication rather than paper documents, and
adoption of risk-based techniques for designating shipments for intensive physical examination.
o Restrictions on the value and weight of express shipments – Some countries classify only
low value and low weight goods as express items which may receive expedited customs
processing. Others apply different value and weight criteria for imports and exports. But, as
explained earlier in this report, express delivery is increasingly used for transporting high value
The Impact of the Express Delivery Industry on the Global Economy
September 2009
42
products. Moreover, low de minimis thresholds for taxes and duties can significantly increase the
administrative cost of customs clearance while raising relatively little revenue.
o Inconsistent and unpredictable valuation criteria and inspection procedures. Frequent
amendments to customs procedures are not always well communicated and lead to different
interpretation of existing notifications by customs personnel.
Restrictions on access to aviation markets – The major express delivery companies (i.e. the
‘integrators’) operate their own aircraft using a so-called ‘hub-and-spoke’ network system. Incoming
aircraft bring packages to a central sorting operation (‘hub’). These aircraft then convey shipments from
around the region back to the point (the end of the ‘spoke’) from which they originated. Such networks
enable the integrators to offer customers more service to more markets, and to optimise the utilisation of
their aircraft fleets. But some countries do not grant the air freedom rights that would enable the full
operation of such a network in their region or country. The optimal condition for provision of efficient and
customer-responsive delivery services is a fully liberalised air cargo market throughout the world. In
addition, some authorities, for example in Europe, have introduced restrictions on the night-time
operation of express delivery companies at airports. This again undermines the operation of the hub-
and-spoke system, and restricts the ability of the express industry to provide guaranteed next-day
international delivery.
Restrictions on access to ground transportation systems – In some countries express delivery
companies are not granted the right to offer surface transport for international air shipments. So, rather
than being able themselves to control every stage in a package’s journey, from pick-up to final delivery,
the international express delivery companies must work through agents and local partners, or establish a
subsidiary to provide ground distribution services. This may reduce the efficiency of express delivery
services. In addition, the ability of the express industry to operate efficiently is severely undermined in a
number of countries by inadequate investment in the transport infrastructure – notably, poor road
maintenance and congestion. Indeed, in some countries, cargo delivery vehicles are not permitted to
enter congested city centres during the important early morning delivery and late evening pick-up slots.
Restrictions on foreign investment – Some countries impose regulations on foreign investment in
logistics firms, forcing the separation of international and domestic operations. In addition, there may be
limits on the proportion of joint ventures that can be owned by foreign companies. These restrictions can
again affect the ability of express delivery companies to maintain door-to-door control of shipments and
affect speed of delivery.
…hinder the performance of businesses…
Survey evidence clearly highlights that if the availability of express delivery is constrained it would have an
effect on the performance of business. Overall, some 20% of business consider that their company would be
very badly affected by the various ways in which the constraints on the availability of express services would
impact on them, and around 40% of businesses surveyed considered their ability to compete would be either
very badly or quite badly affected. These effects would be most strongly felt in Latin America – over 60% of
The Impact of the Express Delivery Industry on the Global Economy
September 2009
43
companies in Brazil and Chile feel their would be a very bad or quite bad effect on their ability to compete,
with 40% of companies in Brazil reporting their international business activity would be very badly affected.
Figure 5-1: Impact on companies if international express delivery services to or from the country
were no longer available
…and generate significant economic costs…
It is important to emphasise that restrictions on express delivery services not only have an adverse impact on
the efficiency of the express delivery companies. They also damage the competitiveness of companies
across the whole economy and have a substantial overall economic cost.
The wider costs of restrictions on express services are clear from the surveys of businesses across Asia,
Europe, and Latin America. Respondents believe that their companies would be seriously affected if
government regulations were to mean that international next-day delivery services were no longer available:
40% of Indian companies expect that they would lose orders. It is estimated that orders would fall by
over a third. And production would on average be interrupted on more than 10 days per year because
spare parts for equipment could not be delivered next-day when needed. Indeed over 10% of firms
believe that their production might even be seriously affected on more than 16 days a year.
20% of Brazilian companies would have to increase their inventories of intermediate goods by over 10%
in order to meet the requirements of the production process.
Over half of German companies expect they would lose sales. It is estimated that sales would fall by
2.6% in retail & wholesale trade and by 1.7% in manufacturing. Moreover, two-thirds of German firms
expect that their costs would increase, by almost 3% on average.
0
10
20
30
40
50
60
70
80
90
100
Brazil Chile China Czech
Rep
France Germany India USA
Very badly Quite badly
% of respondents
Source : Oxford Economics
The Impact of the Express Delivery Industry on the Global Economy
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44
20% of French companies would expect their sales to fall by between 5% and 25%, while 10% would
expect their costs to increase. Moreover, 30% would consider shifting some of their operations to a
location where international next-day delivery services were available.
Over half of UK firms report that that they would be very badly affected and a further 39% would be
inconvenienced. As a result, 16% would consider relocating operations.
Italian firms expect that they would lose around 4.5% of their orders, which could prompt about 10% of
companies to consider relocating some of their operations.
The sectors reporting that they would most likely have to relocate if there were no next-day delivery include
computers & office equipment, electrical engineering, textiles & footwear, and chemicals. These sectors also
typically report a significant likely loss of orders, as do the motor vehicles and other transport equipment
sectors.
…worth €16 billion a year to EU GDP
Taking into account the impact on European companies’ sales, costs, investment plans and investment
decisions, independent researchers have estimated that restrictions that led to international next-day delivery
services no longer being available in Europe could cut GDP each year by:
• €3 billion in France
• €2 billion in the UK
• €1 billion in Italy
• €300 million in Portugal
2
If these figures are indicative of Europe as a whole, we estimate that the loss of express services would
reduce GDP across the EU by more than €16 billion a year. Over a 20-year period, the cumulative cost in
terms of foregone GDP would be over €350 billion.
Liberalising express services can generate substantial economic benefits
Similarly, eliminating restrictions on express delivery services offers substantial economic benefits. For
example, Chinese companies were asked what difference a completely free and unfettered express industry
would have on their industry:
Over 50% of respondents believe that their companies would become more competitive and able to
increase sales.
44% would expect their companies’ investment to increase.
41% would expect their companies to take on more employees.
2
These estimates assume that people working in the express industry would find jobs in other sectors, so reflect only the
‘catalytic’ impacts that express services have on the trade, productivity and investment of other sectors of the economy.
The Impact of the Express Delivery Industry on the Global Economy
September 2009
45
Figure 5-2: Impact on investment of fully developed air express industry
On this basis, we estimate that a liberalised express industry would result in an additional US$9 billion
investment in China over a five-year period. Output would be expected to increase by around US$180 billion.
And employment would rise by over 700,000 over five years.
Conclusion
The express industry makes a substantial contribution to the global economy. Countries that impose heavy
restrictions on the operations of the express industry also undermine the competitiveness of companies
across the wider economy. Removing restrictions would not only benefit the express industry but would also
encourage increased trade, investment, and productivity.
4.8%
5.0%
5.3%
3.2%
3.9%
4.4%
5.9%
5.1%
4.9%
4.3%
0% 1% 2% 3% 4% 5% 6% 7%
All sectors
Financial services
Trading/distribution
Paper & paper products
Foootwear
Toys
Transport equipment
Electronics/telecoms equipment
Electric equipment & machinery
Textiles/garments
Source : US-China Business Council Survey 2003
% increase in investment p.a.
The Impact of the Express Delivery Industry on the Global Economy
September 2009
46
Annex: Research Sources and Acknowledgements
The information in this report is drawn primarily from three sources:
• Information from the published reports and accounts of the four leading express companies that are
members of the Global Express Association (GEA) – DHL, FedEx, UPS and TNT – to identify the
turnover and value-added of their operations, and their staffing levels.
• A new series of surveys of companies in Brazil, Germany and India conducted specifically for this study
and supplemented with surveys of companies in Chile, China, Czech Republic, France, the US, the UK, Italy,
Belgium and Portugal conducted by a number of independent research groups and published in the following
reports:
Chile, China, Czech Republic, France, the US: “Measuring Airline Network Benefits”, Oxford
Economic Forecasting (published October 2006)
UK: “The economic impact of express carriers for UK plc”, by Oxford Economic Forecasting and
Mott MacDonald (published in January 2006)
China: “The integrated express industry in China: A catalyst for growth and investment”, by The
US-China Business Council (published September 2003)
Italy: “The impact of express carriers for Italy’s economy and competitiveness”, by Oxford
Economic Forecasting and Centro Studi Confindustria (published 2004).
Belgium: “Étude d’impact économique du secteur belge du courier et du transport express”, by
KPMG Business Advisory Services (published April 2003)
Portugal: “The economic impact of express industry in Portugal”, by GTE Consultores (published
in January 2004).
The business surveys conducted as part of the research for these studies asked companies about the
importance of express services to their businesses, and how their activities would be affected if there were
restrictions on international express deliveries.
• A series of in-depth case studies of companies who use express services. The case studies explore in
more depth the ways companies rely on express services and the use of express services affects the
organisation of their production and distribution operations. In addition to the case studies contained in the
above reports, we have also both conducted additional interviews for this study and drawn on the following
reports:
Global: “The impact of the express delivery industry on the global economy”, by Oxford
Economic Forecasting (published March 2005).
ASEAN region: “Integrating ASEAN to global markets” by The US-ASEAN Business Council
(published in June 2005).
The Impact of the Express Delivery Industry on the Global Economy
September 2009
47
Europe: “The economic impact of express carriers in Europe”, by Oxford Economic Forecasting
(published in 2004)
Latin America: “The air express industry in Latin America and the Caribbean: an assessment of
economic benefits and regulatory barriers”, by PA Consulting Group Inc for the Inter-American
Agency for Cooperation and Development (published in 2001)
Other reports on which we have drawn for this study are:
“The impact of the express deliveries service industry on Thai economy”, by the faculty of
Commerce and Accountancy, Chulalongkorn University (April 2008)
“Report on the Express Industry in China in 2008”, by XU Yong, Chief Express management
Consultant, CECSS)
“Cushman & Wakefield Cities Monitor, 2008”, published October 2008
“Express delivery services: Competitive conditions facing US-based firms in foreign markets” by
US International Trade Commission (published in April 2004)
We gratefully acknowledge the help that we have received from all of the organisations who assisted with the
surveys and case studies.
The design of the overall framework of analysis and drafting of this report was undertaken by Oxford
Economic Forecasting.
