Market insights

Disruptive technologies transforming the Asian logistics landscape

01 February 2017 by Andrew Stone
Frans Kok, General Manager of AEB Asia Pacific

Frans Kok, General Manager of AEB Asia Pacific, shares his insights into the fast-moving trends in Asia's supply chain and logistics sectors.

Q. It has been pointed out by AEB that the technologies that logistics companies must watch out for in 2016 include the cloud, predictive analysis, 3D printing, automation and crowdsourcing for last-mile delivery. Which of these technologies do you see making the most impact on the industry?

I think that partly depends on where you are in the region. Singapore, for example, has slightly different dynamics. Its high cost of labour and limited land availability mean that last-mile fulfilment drones are more applicable here than in Vietnam or Thailand.

Across Asia, we are seeing a lot of innovation in logistics, especially in last-mile delivery.  Even within last-mile innovation, there is a clear divide between the urbanised market – where there is lots of traffic congestion but it’s easier to scale – and non-urban, which can be very remote and where solutions are tougher to apply. Many companies, like Singapore Post for instance, are  building hub stations near high-density urban areas such as malls and residential estates, where parcels are delivered and picked up.
There has been a lot of research on last mile, and it is becoming clear that someone’s mobile data is now far more interesting and useful to the logistics business than their physical address. Companies are increasingly leveraging the capability to use your location at a particular point in time to make a delivery or collection.

The cloud has single-handedly transformed last-mile delivery, facilitating a retail-to-customer model rather than the old factory-to-distribution model. Most e-commerce companies don't keep inventory. There are fewer bulk shipments and lots of smaller, individual parcels. That’s where density in a network makes a difference, and companies start using a van or someone’s car for delivery instead of a truck. So you now see crowdsourcing, too, affecting logistics.

There’s also a lot of talk around the use of big data in logistics, but few players make full use of big data and predictive analysis to, for example, streamline reservations for truck or air cargo space. Despite the fact that there’s much more data available, the question is who is really using it?

Q. Asia is moving towards becoming the world’s largest e-commerce market. Are logistics players in Asia doing enough in terms of leveraging these technologies and innovations to thrive in an increasingly complex landscape?

Traditional logistics service providers have not adapted quickly enough, leaving the field open for new, smaller logistics service providers to join the game. This group of newcomers is also developing innovative services and solutions in emerging areas. For instance, as a result of booming e-commerce, return logistics (for defective items or those that don’t fit) is an area that is growing – logistics companies are innovating to make it more efficient.

Another case in point: One of the key challenges in mass e-commerce is the need to cater to smaller, individual shipments within short lead times. Ninja Van is an example of a startup that is arguably out-innovating multinational corporations (MNCs) in this aspect, leveraging cloud technologies to quickly identify and make use of available capacity within vehicle fleets. Ninja Van’s customers include some of the largest e-commerce businesses in Singapore.

On the other hand, many MNCs are harnessing new technologies or partnering with companies that deploy innovative technologies to resolve pain points. For example, AEB has responded to evolving requirements by developing its Visibility & Collaboration Platform, which provides supply chain visibility for employees, partners (such as logistics service providers) and customers.

The platform integrates all supply chain partners and acts as the nerve centre for supply chain management. It provides a clear, real-time view of all inventory, goods movements, and status of process steps, as well as performance analyses and reports.

Q. Since logistics startups have been much quicker to cash in on the e-commerce boom, what do traditional players need to do to quicken the pace of adoption?

Traditional players have to keep investing in technology if they don’t want to be left behind. They also need to develop new partnerships with innovative partners. A good example of an innovative Singapore-based company is  HOPE Technik, which invests in warehouse automation and robots. They must embrace the new technologies within their network – whether national or international.

In the quest for agility, customers themselves are moving away from large applications for managing the whole supply chain and now focusing on individual business processes. They are looking for specific solutions for shipping or receiving, or tracking shipments through supply chain instead of a full-blown transport management system. They increasingly look for discrete, smarter apps that are cloud based and can run on a tablet or mobile phone.

Traditional logistics players need to ask themselves: how many assets do I really want? What is the core business? Do I want warehouses, trucks, planes? To what extent do I want to make the organisation lean and take out all the things that are not directly relevant and instead use non-core physical assets on a per-use basis as the startups do? If you look at it, not many startup invests in assets. Most invest in IT.

Q. Are there innovations coming out of Singapore that other markets and regions can seek to emulate?

When it comes to last mile innovations, Singapore is one of the leading nations. The country is experimenting with picking up parcels in an increasingly automated manner – through drones or even an underground system like a tube system.  

I think Singapore also has a lot to teach the region when it comes to automation and software such as fully automated warehouses, automatic pallet storage inside of warehouses and factories, etc.

Singapore has been able to apply lessons the city has already learned from managing traffic congestion to logistics. It is using this expertise to streamline logistics and cut congestion. AEB has been participating in a series of urban logistics trials as a member of a research consortium led by The Logistics Institute. These trials aim to help logistics operators co-ordinate and streamline the way they operate. The programme includes setting up consolidation centres outside Singapore’s city centre and then having milk runs that go into the city using a bidding mechanism to manage time slots. If someone wants to deliver from 9am–10am for example, they pay more than a night delivery.

Another innovation in Singapore is an In-Mall Distribution system which is piloting at two shopping centres. The initiative will involve smarter dock delivery scheduling to avoid congestion, for example when two trucks try to deliver goods at the same time. If successful, the scheme could reduce waiting and queuing time for deliveries by 65 percent, delivering benefits to around 300 retailers and resulting in better fleet utilisation.

Singapore’s Smart Nation 2020 goal is leading it to invest in the urban environment – its people, traffic, supply chain – and this will make it a leader in the region in these areas. Other countries in the region seeking to ramp up their supply chain infrastructure need look no further than Singapore for examples of innovative supply chain and logistics initiatives.

Q. What does the roadmap look like for players in Singapore? How best can they incorporate technology and innovation into their business models to serve the region well in 2016? 

The only way to grow your business is by investing in technology. India and China are a serious threat in terms of innovation. Logistics players in Singapore will have to keep asking themselves what the key technologies will be over the next five years and invest in these now. They will have to play to Singapore’s strengths – the level of knowledge and education, the active supply chain ecosystem and availability of human capital.

This is not enough though. In terms of skills, Asia still has to catch up with the US and Europe, although Singapore is starting to do so. Unfortunately, studying logistics is still not seen as a worthwhile educational field, owing to the low career status that many perceive the logistics business to have, compared to accountancy or law for instance.

But universities in Asia are pushing the area of study as one worth pursuing. Rather than considering logistics as working in a warehouse, the youth should be made aware that they would be studying robotics in the supply chain or business process optimisation. Once that transformation in education happens, logistics companies in the region will also have world-class skills to fall back on. 

Edited by Kritika Srinivasan and Goh Wei Ting