Media Releases – 16th February 2017
1- Leschaco is known for its delivery of cutting-edge supply chain and logistics solutions. What are the pre-requisites of an efficient distribution network?
Distribution as sub-function of logistics is equally determined by the interdependent objectives of the latter, i.e. cost, quality, and performance. Therefore, the efficiency of a distribution network depends on the emphasis on either objective and needs to be considered separately for the individual use case. More general however, a good distribution network covers different means and modes of transport, as well as distribution centers in the respective area. In that way goods can be delivered in the most direct and economic way from A to B while air as wasted payload can be reduced. That may sound trivial but complexity increases exponentially with each added transport relation. That is why software applications do not only optimize routings by considering load combinations and including possible return loads, but also ease the proof of delivery, an often-underestimated effort, especially in an environment where direct, smaller, and more frequent deliveries are required. Lastly, information, e.g. by tracking and tracing, along the distribution chain is essential as logistics processes are often integrated among each other and as well with production.
2 – How is doing business in Thailand and Southeast Asia different from the rest of the world?
Next to usual cultural differences one major factor, especially in logistics, is standardization. Normally in this region there is a higher tolerance for customer specific requests than for example in Europe where the buyer, in most cases, must accept a pre-defined and therefore standardized scope of supply and service. The individualization creates a significant amount of extra handling and cost which can hardly be determined before the commencement of services. At the same time, it is expected to such an extent that questioning it will most likely result in a decrease of customer satisfaction in the short term and the loss of the customer mid to long term since competitors are equally used to and willing to provide additional services on their own cost just to gain and keep contracts. Transactions, either B2B, B2C, or B2G, are likewise not much standardized and still paper based. For someone used to e-business it appears complicated and many times overwhelming.
3 – How important is efficient warehousing and cold supply chain for the growth of the sector? How do you think the industry will perform in the near future?
With the ongoing globalization and emergence of new strong economies such as China and India the competition and cost pressure increases continuously. Hence, logistics is realized by manufacturers more and more as an unwanted additional cost outside the own core competencies. Accordingly, companies examine their supply chains whether there are saving potentials. In such an environment, no one can afford piling up products in a warehouse with a huge capital lockup. That is why I believe that traditional warehouses, as efficient as they may be, will become extinct and substituted by highly productive distribution centers with minimum throughput cost. These distribution centers are essential for the growth of the industry and are the backbone of modern integrated supply chains, both ambient and temperature controlled. But even distribution centers might become obsolete in the long term with the emergence of sophisticated 3D-printers when products are not handled or distributed anymore but rather 3D-printed whenever and wherever they are needed. Nonetheless, warehouses are currently springing up like mushrooms in Southeast Asia. With uncertain economic forecasts the overcapacity makes warehousing clearly a buyer’s market. That is why I predict tough times for traditional, especially ambient temperature, warehouse operators if they’re not able to set themselves apart from the rest of the pack.
4 – Can you throw some light on the policy changes that may be required to help in the development of the industry in Thailand?
There has been good progress in the last decade, but further steps are needed to establish Thailand as a regional logistics hub. Contradictory statues of different regulatory authorities need to be eliminated to give companies a clearer picture of the actual requirements when setting up a business. In that regard, the Thailand National Single Window is being established and goes into the right direction of e-government. At the same time the dependency on paper-based records should be further reduced by relying on electronic documents to ease administrational efforts. Also, foreign entrepreneurs who are looking at Thailand as a distribution hub are often surprised that one needs to have a locally registered company to act as importer and exporter of record, even in a Freezone. A more facilitating solution may be found to attract such companies. Further, it has just been announced that goods can only be kept for a maximum of two years in a Freezone, and not for an unlimited period as before. That procedure gives the authorities more control but at the same time do such sudden announcements make investors insecure. And speaking about control, rules and regulations need to be truly enforced to allow equal abilities to compete among companies, both local and foreign. Finally, statistics indicate that road transportation will form approximately 80 percent or more of all logistics activities in Thailand. While Thailand’s road infrastructure is good, the infrastructure development strategy must as well focus on rail to establish Thailand as a true transit and logistics hub within AEC.
5 – How do you think platforms like Asia Warehousing Show and Asia Cold Chain Show going to help industry professionals get together and understand market needs for changing times ahead?
The Asia Warehousing Show and Asia Cold Chain Show fulfill two main purposes as platforms. Firstly, in the exhibition part visitors have the chance to see the trends in the industry and therefore keep up to date with the latest developments. It is also a good chance to get in touch with potential suppliers. For example, I found a very interesting solution for proof of delivery as mobile phone application in the 2016 exhibition. The second purpose is an interesting discussion round among industry professionals. New trends and challenges can be highlighted from different points of view and help all participants to get a clearer understanding of what needs to be done to stay competitive. Two weeks after the 2016 Asia Warehousing Show and Asia Cold Chain Show I met with a business owner who attended my speech about distribution centers and we discussed the feasibility of warehouse automation in Thailand’s 3PL industry. Our opinions were pretty much the opposite, but we had nevertheless a very good discussion. That is why visitors who for example walk only through the exhibition might not know the true promise of such an event. And of course, both the exhibition and the forum part are great opportunities for networking, no one should miss that.