Distribution Business Articles

  During a recent interview with DHL, some interesting business growth issues were discussed.  Prime among them is the 10 - 20 percent increase in demand for pharmaceuticals.  This growth is being fueled by two things:

1. The cash rich regions of the Middle East benefiting from cash flows resulting form oil paying $100 plus per barrel
2. Trade promoting tax free zones like the Jebel Ali Free Zone, long noted as an international trade hub is now adding international pharmaceutical products to its line up.

What prompted you to enter the pharmaceutical logistics market?

(DH) We noticed that there was a great demand for healthcare products and services. Pharmaceutical manufacturers were seeing a 10 per cent to 20 per cent rise in demand for pharmaceutical products in the region. Dubai was also in the initial stages of positioning itself as a health tourism hub through the Healthcare City and we foresaw unprecedented demand for healthcare services in the UAE as more people come to the country for treatment.
The development of the Jebel Ali Free Zone as a regional and international logistics hub, as well as the announcement of Dubai World Central, helped to raise the profile of the Middle East as a major gateway for consumer products. Pharmaceutical companies were increasingly looking at the Middle East as a preferred hub to provide the linkages needed with their wider markets globally.

DHL sees huge growth in pharmaceutical logistics

The Jebel Ali Free Zone has moved a long way from heavy equipment, oil related products and consumer electronics and is now moving into everything from drugs to fight malaria and aids to promotional products.

Chiquita is selling Atlanta AG to for $85 million to reduce their debt.  They are selling the  . . .

. . .German distribution business, Atlanta AG, to Univeg Fruit and Vegetables BV for net proceeds of at least $85 million at current exchange rates.

Atlanta will also continue to serve as Chiquita's preferred supplier of banana ripening and distribution services in Germany and Austria, the company said.

The deal is expected to close near the end of the second quarter, and Chiquita will use the proceeds primarily to reduce debt.

Chiquita to sell German distribution business Atlanta AG for $85 million

Chiquita like many companies reliant on logistics and shipping is unloading loose luggage from their vertical and horizontal line ups as fuel prices continue to rise, increasing inflation in the products they offer.

This week you may have noticed that Oil prices have been pushing up towards $125 per barrel.  But did you catch the headlines that oil is predicted by Goldman Sachs to hit $150 and then $200 per barrel over the next 24 months?

$200 Per Barrel Oil Predictions fm Goldman Sachs

You think logistics and transportation costs are difficult to manage now, consider what will happen if the price of oil in American dollars doubles.  There are four very real scenarios that are driving this problem.

1. The value of the dollar and the ability to purchase oil and commodities is dropping every day.
2. Instability in the Middle East and Africa is getting worse every day from Afghanistan to Iran to Iraq to Syria to Somalia and Nigeria and Zimbabwe.
3. Demand for Oil continues to grow world wide especially as other countries continue to grow at 5% a year.  They are using more oil and energy and the products they consume from China are causing high growth there as well.
4. Speculators are continuing to push the prices up as well trading in and out of the market, which keeps the market fluid but has had the mid term effect over the last 2 years of pushing the oil price up continually.

Bringing this back to a relative level, consider that if Truckers have to park their trucks for loads paying $2 a mile or less when oil is at $100 a barrel, consider that they may not be able to move freight for less than $4 or $5 a mile if oil its $150 or $200 a barrel.

How will that impact your costs, operations, or even your logistics choices if you try and push some long haul freight to trains or even boats? 

Will JIT out the window with the value of the dollar?

Will we need to put our national logistics leaders through an oil based drug rehab program to teach them new methods of moving freight efficiently?

There is sometimes nothing uglier for a Distributor than when a producer or partner drops the distributor and take product out of the Distributors channel.  That goes double for industries such as entertainment where distributors are often the record companies or movie studios that sign top talent to multi-year contracts, promote the artists, the content and distribute that content at what is like a micro-monopoly over that artists body of work during the contract period.

These days more and more producers in entertainment as well as producers of goods in China and around the world are looking out side the box at the internet and other areas to move their goods electronically and physically.  This is happening in markets that move CDs and movies to markets that sell novelty scooters and even basement dehumidifiers.  As they break their bonds away from former traditional distribution partners, things can get very ugly for distributors.

A very good example of this is Nine Inch Nails break from Universal Records.  The break has been bad for Universal for many reasons.

1. First and foremost Nine Inch Nails has been very successful.  Selling over $1.6 million in records during their first week of record sales, when they gave CDs away for FREE.
2. Customers are following the creators and not buying from the distributors more and more.
3. The new models are demonstrating that historic distribution models may be obsolete in many circumstances.
4. Distributors often suffer the wrath of very bad press and public relations.

Singer and songwriter Trent Reznor has attacked his former record label Universal for "ripping off" fans, and once told a crowd to "steal, steal and steal some more".

The band's deal with Universal has now ended, but The Slip will still be coming out on CD, Reznor said.

"For those of you interested in physical products, fear not. We plan to make a version of this release available on CD and vinyl in July."

Nine Inch Nails offer free album

There's an interesting thing that is now happening in the microcosm of the Nine Inch Nails example.  Just a little more than a month after their last free offering that included a 4 CD set with more than 30 tracks, Nine Inch Nails is doing it again and offering another album for free.

The producer is producing more and consumers are lining up to consume that product.  As I write this the demand on the Nine Inch Nails Website is so large that the site is stalling out as consumers race to the site to get the latest free album.

More Headlines on Nine Inch Nails latest Free Album offering