The Association of Southeast Asian Nations (ASEAN) is a major global hub of manufacturing and trade, as well as one of the fastest-growing markets in the world with a consumer base of more than 600 million, an expanding labor force and a soaring E-commerce industry. Transportation systems in ASEAN countries have drastically developed during the past decades along with their economic growth and rising population. However, most of ASEAN countries still have their distinct route planning problems. Will ASEAN’s logistics industry rise to challenges?
Why does ASEAN matter?
ASEAN’s business sphere is not mature. It is dominated by small and medium-sized enterprises. Yet multinational companies are increasingly turning their gaze to the ASEAN - ten dynamic economies at vastly different stages of development but all are sharing immense growth potential. According to SpirE-Journal 2016 Q4 - Spire’s Asia Market Research, ASEAN trade volume is expected to increase by 130% and will be valued at $5,653 billion by 2023. The expansion in trade volumes will mainly be driven by an increase in demand for goods and services, deriving from the huge contribution of surging middle-class. ASEAN’s middle income bracket is expected to grow at an average of 10.9% per annum from 2012 to 2023.
ASEAN is witnessing a growing middle class with increased spending power, which results in a thriving demand for logistics as consumers require better, more varied products and services delivered to their doorstep. The rising growth and integration rate of logistics service providers presents a huge market opportunity in ASEAN’s complex and ever-changing logistics context. However, alongside opportunities of the economic boom are pitfalls. Poor transportation system due to disruptions, deficiencies in technical know-how and low-tech supply chain has triggered difficulties in route planning in ASEAN.
What are challenges of route planning in ASEAN?
1. Poor transportation system
ASEAN, especially states residing geographically in the ‘Pacific ring of fire’, is prone to frequent disruptions resulting from natural disasters. Events routinely occur in the region lead to loss of life, loss of productive assets, infrastructure and protracted economic disruption. For example, flood may submerge and destroy transportation infrastructure, causing traffic anarchy and delivery failure. From 2010-2015, it triggered substantial damage to ASEAN countries, about $8 trillion economic loss and 200 million people affected (EM-DAT, 2016).
Poor infrastructure is also one of the main causes of congestion and transportation failure in ASEAN. ASEAN countries have not fully upgraded their transporting systems, whereas their infrastructure network remains largely inadequate for the region, spanning a total land area of 4,488,839 km2. Limited facilities worsen the congestion, while poor infrastructure and road block, especially in rural areas, increase transport time. Apart from the 2 leading nations – Singapore and Malaysia, other nations like Indonesia, Thailand and Vietnam are also rapidly upgrading their road, rail, maritime and air cargo infrastructure in line with ASEAN Economic Community (AEC) frameworks. Conversely, the much smaller economies of ASEAN – Cambodia, Laos, and Myanmar – are still substantially lagging behind.
2. Various business constraints
Unique technical specifications is also a bottleneck for ASEAN. When it comes to route planning, there are many parameters to take into account, for example:
Vehicle capacities, load maximization: In order for a delivery plan to be considered optimized, vehicle capacities must be fully utilized.
Multiple time windows: Each customer may choose a different expected delivery time, making it more difficult to optimize route plan.
Truck and bike delivery: Some customers may located in remote area or small alleys, making delivery by trucks impossible. In that case, bike can be used for delivery, but how about optimization for truck and bike combined?
Different delivery models also require different route planning strategy: cold-chain delivery, models with cross-docking, sun warehousing,...
In route planning, the more warehouses, delivery points, drivers and vehicles, the more problems. Vehicle routing problem is a challenging combinatorial optimization problem. It is difficult because logistics managers have to consider time and distance constraints, pickup and load capacity of vehicles, the number of available vehicles, quantity of labor and service and many other constraints such as the number of depots, road conditions, type/size of goods… Furthermore, route planning has many uncertainties such as changing demands, traffic accidents, or unexpected weather conditions, etc. All of these uncertainties can lead to higher costs in logistics management if not taken into consideration properly. Powerful, modern software helps the flow of information become more transparent and agile in the logistics department.
3. Lack of Technology
In terms of software system, many small and medium logistics enterprises in ASEAN still lack technological tools to manage their data system. Specifically, SMEs have hardly integrated their supply chain management system with ERP (Enterprise Resource Planning). They proceed their data in Excel, some even manage their data system using paperwork. This makes the task of route planning very challenging, not to mention route optimization. A dominating number of logistics coordinators still analyzes miscellaneous factors to plan route manually. In the new world, just by some clicks, all those components are taken into account and the route is automatically optimized within seconds. By relying on innovative solutions, companies can reduce costs and efforts. Moreover, the level of technology development in ASEAN is uneven and varied. In some rural areas of Indonesia and Malaysia, telecom infrastructure is underdeveloped, making delivery tracking burdensome. Less organized regional players are unable to adopt advance technologies like TMS (Transportation Management Systems) and GPS (Global Positioning Systems) due to high cost of implementation.
What is the solution for enterprises to plan delivery routes in ASEAN?
ASEAN countries have been devoting enormous efforts and costs to the improvement of transportation systems to provide safer and more comfortable movements, but as single approach cannot address route planning problems, multi-pronged approach is required. The settlement takes political, financial and social efforts of public sectors, which are in particular, beyond the control of private sector, let alone uncertain and uncontrollable weather conditions. It can be elaborated by mentioning domestic and foreign investment, policies of the government, jurisdiction and education. Due to the limited time and scope, this article will only focus on technology advancement that can assist firms to gain competitive advantages themselves.
In this era of Industry 4.0, it is vital to keep businesses updated with trends and application of the scientific and technical progress to enable competitiveness upswings among countries in the region and regions in the world. Thanks to innovative technology, businesses gain more opportunities to lower costs as well as increase velocity of goods movement. By incorporating revolutionized achievements, companies generate more productive processes. In particular, the alternative can be the software combining features: Transportation Management System and Route Optimization.
Abivin vRoute is a leading example of supply chain management software that every logistics manager might need. With Machine Learning and AI application, the real time tracking feature can enhance the supply chain visibility and risk management. What makes Abivin vRoute different is the algorithm at the heart of the software. Abivin vRoute uses flexible algorithm considers 20+ constraints like multimodal deliveries, load capacities, time windows, cross-docking... to create the most optimal routes dynamically. Derived from a member of ASEAN, Abivin vRoute is built suitably for the ASEAN region, considering unique characteristics like motorbike delivery, small road, fluctuate time windows, etc to resolve problems. Abivin vRoute is the only Transportation Management Sytem equipped with Route Optimization capability, solving multiple difficult problem in last mile logistics, helping customers reduce logistics cost by 30%.