The logistics industry in ASEAN (Association of Southeast Asian Nations) is thriving in recent years, making it a huge logistics hub for both domestic and foreign investors. The shipment of goods to their final destination, referred to as last mile delivery in the supply chain, accounts for 30% of total logistics cost. This last-mile trip not only determines a company’s competitive differentiation but also affects customer relationship. Thus, many businesses are seeking to enhance this last-mile experience in order to stay competitive.
However, with opportunities come challenges, as the last-mile procedures are now burdened with operational drag and excessive human resources involvement. Referring to Amazon, Sucharita Mulpuru of Forrester Research said, “They own the last mile, the moment that matters. That moment is when the package arrives. Once you can own the moment that matters, you build a loyal customer base.” What is about ASEAN last-mile delivery that matters? What are the challenges facing ASEAN logistics managers?
ASEAN Logistics – The Big Picture
Over the last decade, ASEAN has been emerging as a new global economic power. Constituting 10% of world population, ASEAN makes the world’s third biggest market, after China and India. ASEAN as an unified unit has been growing at a rapid economic rate of 5% per annum (World Bank Data). With its large consumer base follows remarkable potentials for growth. ASEAN is gradually replacing China to make its name as the next destination for both local and international logistics participants by 2025.
Home to more than ten nations, ASEAN presents a large disparity of prosperity, geography, demographics and infrastructure development among different countries. Due to these diversifying characteristics, the movement of goods and services around ASEAN countries requires multi-modal transportation development.
The logistics landscape also varies across ASEAN countries. While Singapore consistently remains ASEAN’s best destination for logistics investors, countries of the Greater Mekong Subregion, such as Vietnam, are boosting their logististics industry. According to SpirEresearch, Vietnam’s logistics sector grew by 12% throughout the year of 2016. SpirEresearch also indicated that this rapid growth rate resulted from rising fast-moving consumer goods, growing agricultural output and improvement in infrastructure construction. Other agile logistics markets include Indonesia, with their logistics sector expected to grow by up to 16% annually by 2020. The Philippines is also witnessing a similar growth, driven by its rapid outburst of E-logistics, 3PLs and domestic express deliveries.
Recently, ASEAN governments have constantly been providing incentives to advance last-mile delivery in the region. Efforts have been made by governments across ASEAN countries to improve infrastructure planning and road construction. While Malaysia seeks to strengthen technology and human capital and boost freight demand, Indonesia simplifies logistics regulations to encourage businesses to immerse in e-commerce. Thailand government aims to expand on rail transport and cross-border infrastructure planning. Singapore, a more developed nations, with its strong foundation of logistics management, strives to reinforce its position as a global hurdle for logistics. Yet other less developed countries, like Laos and Myanmar, are still lagging behind in the industry.
The Real Enemy of ASEAN Last-Mile Delivery
A recent edition by Retail News Asia reported that Vietnam’s logistics costs alone were equivalent to 20.9% of GDP in 2016, higher than those of China, Thailand and Japan. The reason lies behind the cost of transportation by land, which constitutes 59% of all logistics costs. Such high costs result from unorganized operations due to lack of technology. Most ASEAN countries now rely on human resources for most of their supply chain management. Specifically, businesses in these countries are still using traditional route planning that includes redundant procedures. These chains employ unnecessarily high amounts of resources that induce more costs for companies.
2. Road Construction and Infrastructure Planning
Growing urbanization and population explosion in ASEAN countries lead to increasing emigration to big cities. This results in heavy traffic congestion and downgraded infrastructure that significantly challenge last-mile logistic management. A recent edition by TaipanOracle claims that, “while countries like Philippines, Indonesia and Vietnam are rapidly upgrading their infrastructure, others like Myanmar, Cambodia and Laos continue to remain laggards.” The article also reports that, “while roads in Singapore are fully paved, Cambodia and Laos have less than 10% paved highways.” Although most of the highways in ASEAN countries have been constructed, there is still a lack of critical transportation links, not to mention questionable road quality.
Poor infrastructure planning and road construction have led to challenges facing logistics managers. Especially in ASEAN countries where technology-integrated supply chain management is just on the upswing, manually constructing a last-mile delivery route is both cost-inducing and time-consuming. Drivers in certain ASEAN regions are still struggling to deliver goods and services to pre-determined locations promptly and accurately. In most cases, they assume their familiarity with the local area, refuse to utilize the help of technology and tend to take longer routes.
3. Lack of Technology Integration
Manually planning routes for the last-mile trip is not uncommon, especially in developing countries in ASEAN. By not integrating technology into supply chain management systems, businesses increase logistics cost by up to a two-digit number. According to SpirEresearch, less organized systems in ASEAN are unable to adopt advances like Transportation Management Systems and Global Positioning Systems. High initial cost of implementation is the main deterrent to this problem. SpirEresearch also added that cargo tracking in rural areas of Indonesia and Malaysia has proven to be challenging due to underdeveloped telecom infrastructure.
Disruptive Technology Transforms ASEAN Last-Mile Landscape
As companies strive for better supply chain management, logistics managers are beginning to realize the importance of technology in advancing the last-mile experience. Many ASEAN logistics managers are becoming fully aware that last-mile delivery determines the ultimate outcome of the entire supply chain. Therefore, they persistently seek technology for a game changer to this last-mile challenge.
Many businesses count on the great potential of Artificial Intelligence (AI) to revolutionize their supply chain procedures. With its ability to forecast future scenarios by finding patterns, AI has the ability to enhance decision making and improve risk management to a business. Many leading edge companies also utilize advanced data analytics to take advantage of future opportunities. Decisions made based on analyzing historical data can greatly improve decision making. By providing a big picture and predicting possible adverse events, Big Data leaves nothing to chance, which ultimately helps to manage and optimize supply chain management systems.
There should not be a more suitable solution than Abivin vRoute!
Abivin vRoute employs route optimization that allows for every mode of transportation in the ASEAN region. Whether the driver uses motorbike or truck, Abivin vRoute will analyze local maps that produce the best delivery route tailored to the specific modes of transportation and the availability of vehicles. Abivin vRoute handles the work that traditionally take hours by providing a disruptive assistant to optimizing delivery routes. Particularly, Abivin vRoute replaces outdated planning procedures with optimal route planning, which now can be proceeded in just a couple of minutes.
With the help of Abivin vRoute, drivers no longer have to input data of every single shipment. Abivin vRoute now organizes all shipment details into reports that keep track and manage delivery performance. Traditional and manual documentation can now be replaced by a digital folder of all delivery details. Moreover, the intelligent software allows users to gain insights into past operations by self-producing reports from past records.