'They want to get into this business in order to diversify because logistics is hot,' says Vincent Wong Wai-shing, executive director of Kerry Logistics Networks. 'The more value-added services you provide, the higher the margin business will be. And it's also more difficult for the customer to change companies once he's locked into your system.'

Who's going to be left standing after the brawl? Analysts say it is too early to call, but they believe the market will be big enough to sustain medium- and large-sized companies, with many of the smaller firms likely to be swallowed up.

One reason for the consolidation is the need to develop a portfolio of complex services. To provide door-to-door logistics you need to maintain a transportation network and the information technology systems necessary to track and confirm proof of delivery.

'I think the market is big enough for a few sizeable companies but the small ones will be very concerned because they don't have the money to expand,' Mr Wong says. 'To survive these days, you need two things: number one is size and coverage, just to be operational in one country is not enough. For example, Asia is one big market on its own, if you tell your customer you can only service them in Hong Kong, it's of limited usage to them because many customers buy and sell throughout the region.'

Kerry Logistics Networks has the advantages of substantial property holdings and operational experience in distribution and warehousing. Mr Wong believes these assets will play to the group's strengths, allowing the medium-sized company to hold its ground against larger competitors.

'We are transforming ourselves from a warehouse operator to a logistics player,' Mr Wong says. 'It's easier for a warehouse operator to get into the freight forwarding business, but it is very difficult for the forwarder to get into the warehousing side. Because to access warehouse capabilities is expensive. So it's a chicken and egg thing, whether you lease a warehouse first and then go looking for business. For small players it's tough, but for Kerry Logistics, we have hardware everywhere.'

He says the list of companies making the transformation includes traditional old-economy entities such as Deutsch Post and several large shipping lines.

David Cunningham, president, Asia-Pacific Division of FedEx, anticipates an acceleration of the current trends in the coming years. One effect will be increasing specialisation of logistics providers, combining both the equipment (trucks and warehouses), as well as the intangible assets such as (technological expertise). 'The integrators combine the physical assets with the non-asset to offer our customers a total solution to their supply chain needs,' Mr Cunningham says. 'I think we are going to see more specialisation in those fields in coming years.'

Describing FedEx as a 'substantial logistics player', Mr Cunningham says the key to success is to effectively link the various parts of the physical transport chain around an information technology backbone. When everything aligns properly, the result is a 'substantial value-added solution', he says.

FedEx operates comprehensive ground and air services, which reduce the chances of damage and loss. This is a key advantage over other providers who outsource all functions, he says.

Asked why FedEx has moved into the logistics business, Mr Cunningham says it is part of a wider strategy to expand the freight forwarding services beyond the express cargo market. Express cargo comprises 3 to 5 per cent of the total cargo market.

'Our customers are asking us to expand into this business. Many of them have a need to move products in a more time definite manner.'

Of the main obstacles to business growth, Mr Cunningham cites regulatory hurdles among the 211 countries served by FedEx. He is calling on the Hong Kong government to deregulate air cargo traffic restrictions. Global air freight is growing at 6.5 per cent per annum, more than three times the average GDP growth of developed countries.

Kelly Yu Sik-cheong, general manager of the Hong Kong area for DHL International, says in the coming years business will demand more flexibility and faster delivery times.

The changes are driven by four key factors: a shorter product development cycle, a shorter material procurement and delivery cycle, the need to fulfil custom-built orders, and a shorter finished goods delivery cycle.

He describes DHL as an express logistics provider, but points out the industry may be entering a new era, requiring greater strategic management.

Already the signs are there, he says, with DHL currently performing a variety of peripheral services and intelligent warehouse management. These changes have been under way for roughly five years and include strategic inventory management, parts warehouse management, and the management of return and repair centres.

He adds that more peripheral services are in the pipeline, with companies looking to DHL to provide mail room sorting and delivery.