Emerging Logistics Trends in ASEAN

Ruth Banomyong (PhD)Dept. of International Business Logistics & Transport

ruth@tbs.tu.ac.th

Agenda

• Current Logistics Issues• Logistics in ASEAN: An institutional perspective• Emerging Trends in ASEAN• Logistics Disruption: Ecommerce• Summary

Current Logistics issues

Logistics issues

Components of ASEAN Logistics System

Infrastructure

LogisticsSystem

ServiceProviders

InstitutionalFramework

Shippers/Consignees

Logistics in ASEAN (June 2018)INSTRUMENT

DATES OF

SIGNING

DATES OF RATIFICATION BY MEMBER STATESDATE OF

ENTRY INTO FORCEBNR CAM INA LAO MAL MYM PHI SIN THA VNM

ASEAN Framework Agreement on the Facilitation of Goods in Transit (AFAFGIT)

16/12/98 15/08/00 30/04/99 17/01/00 21/12/99 02/03/99 16/12/98 20/05/99 02/10/00 17/02/99 24/06/99 02/10/00

Protocol 1 Designation ofTransit Transport Routes and Facilities

08/02/07 26/10/09 27/10/09 29/11/11 20/06/11 11/01/18 11/07/14 13/11/07 5/02/18 22/06/11 10/10/07

EIF among those countries

who have ratified

21/08/11

Protocol 2 Designation of Frontier Posts 04/05/18

Protocol 3 Types and Quantity of Road Vehicles

15/09/99 08/09/04 09/05/07 23/06/00 19/01/00 24/07/09 21/08/00 25/11/99 02/05/06 19/04/10 15/11/99 19/04/10

Protocol 4 Technical Requirements of Vehicles

15/09/99 08/09/04 09/05/07 23/06/00 19/01/00 24/07/09 21/08/00 26/11/99 04/05/06 19/04/10 15/11/99 19/04/10

Protocol 5 ASEAN Scheme of Compulsory Motor Vehicle Insurance

08/04/01 08/04/02 30/01/02 30/07/02 06/11/02 29/04/02 16/10/03 22/09/03 29/08/02 08/01/03 02/07/01 16/10/03

Protocol 6 Railways Border and Interchange Stations

16/12/11 17/10/13 25/01/17 22/08/17 25/2/14 28/02/17 19/02/16 3/9/12 12/12/12

Protocol 7 Customs Transit System 24/2/15 6/11/17 13/01/17 23/02/18 15/09/17 20/09/16 13/01/16 03/04/17 31/03/17 22/12/17

Protocol 8 Sanitary and PhytosanitaryMeasures

27/10/00 07/08/10 23/05/03 31/12/02 09/05/01 13/01/11 25/09/02 29/01/10 30/03/06 23/8/03 29/3/01 13/01/11

Protocol 9 Dangerous Goods 20/09/02 16/04/04 14/06/07 29/08/03 19/05/03 13/09/17 25/04/03 10/06/03 13/09/07 22/01/16 15/11/02 13/09/17

Logistics in ASEAN (June 2018)INSTRUMENT

DATES OF

SIGNING

DATES OF RATIFICATION BY MEMBER STATES DATE OF ENTRY INTO

FORCEBNR CAM INA LAO MAL MYM PHI SIN THA VNM

ASEAN Framework on Multimodal Transport (AFAMT)

17/11/05 27/10/09 07/04/16 04/11/15 01/10/15 30/06/08 01/09/08 01/11/11

EIF among those

ratified (30th

day after deposit of

IoR)

01/10/08

ASEAN Framework Agreement on the Facilitation of Inter-

State Transport (AFAFIST)

10/12/09 22/11/13 27/09/11 27/01/17 17/12/12 30/11/11 25/04/12

EIF among those

ratified

(30th day after

deposit of IoR)

30/12/11

Agreement on the Commercial Vehicle Inspection Certificates for Goods Vehicles and Public Service Vehicles Issued by ASEAN Member Countries

10/09/98Ratified

25/1/2001

Ratified

30/4/99

Ratified

28/06/99

Ratified

27/11/06

Ratified

27/11/06

Ratified

21/09/99

Ratified

28/06/99

Ratified

18/03/2000

Ratified

05/02/04

Ratified

28/10/98

27 November

2006

ASEAN Framework Agreement on the Facilitation of Cross Border Transport of Passengers by Road Vehicles (CBTP)

13/10/17

Logistics in ASEAN

• The ASEAN Customs Transit System (ACTS) has been developed and installed in ASEAN on a pilot basis

• The system was piloted along the north-south corridor of ASEAN, involving transit movements between Malaysia, Singapore and Thailand (MST)

• Utilising the agreed simplified procedural environment for Customs and transport

• Procedural manuals for Customs, Government transport officials and the private sector are in the website:

• https://acts.asean.org• Member-only access for Government manuals

Logistics in ASEAN

• ACTS is to be implemented and piloted along the east-west corridor of ASEAN

• including Cambodia, Lao PDR, Myanmar and Viet Nam, with Thailand as a participant

• The north-south and east-west corridors (MST-CLMV) will then be linked electronically

• This will mean that by the end of 2020 all seven land-based countries of ASEAN will have access to ACTS

Politics

Economics

SocialTechnological

Environment

Competitiveness

Logistics Market

Outsourcing

Technical Condition of Transport Infrastructure

Throughput Capacity of Transport Infrastructure

Economic Corridors

Volume and Modal Split

Safety and Security

Labour IssuesTechnology

Diffusion

Fuel Efficiency

Operational Efficiency

The Future of logistics & transport in ASEAN in 2025. Some preliminary findings from the seminar on “Facilitating trade and improving supply chain connectivity in ASEAN

economies via good regulatory practices affecting port & terminals”,

2025 Emerging Trends

4.08

2.42

3.91

2.58

1 2 3 4 5

TAXES, USER FEES AND OTHER OFFICIAL CHARGES

BORDER CROSSING CONTROL OF CARGO, DOCUMENTS, VEHICLE AND DRIVER in road freight transport between ASEAN and non-ASEAN

BORDER CROSSING CONTROL OF CARGO, DOCUMENTS, VEHICLE AND DRIVER in road freight transport within ASEAN countries

MAXIMUM ALLOWED WEIGHTS AND MEASUREMENTS in international road freight transport within ASEAN

DECREASE

STRICTER

SMALLER

SMALLER

INCREASE

LOOSER

LARGER

LARGER

Politics

4.21

1 2 3 4 5

Economic Corridors have become significant routes for trade between within ASEAN DEFINITELY NOT DEFINITELY

Economic Corridors

4.23

4.17

4.08

3.85

1 2 3 4 5

Concentration in INTERNATIONAL ROAD FREIGHT TRANSPORT MARKET in ASEAN

Concentration in LINER AND RO-RO SHIPPING MARKET in ASEAN

Concentration in the market FOR PROVISION OF ADVANCED LOGISTICS SERVICES (3PL, 4PL, etc.) in the ASEAN

Share of intra-ASEAN freight in ASEAN transported by ASEAN LOGISTICS SERVICE PROVIDERS

DECREASE INCREASE

DECREASE INCREASE

DECREASE INCREASE

DECREASE INCREASE

Logistics Markets

4.23

4.15

4.23

1 2 3 4 5

Level of outsourcing by users of LOGISTICS SERVICES within ASEAN

Level of outsourcing of LOGISTICS INFORMATION PROCESSING (e.g. order handling, invoicing, information systems) among logistics users operating in ASEAN

Level of outsourcing of MATERIALS MANAGEMENT AND VALUE-ADDED SERVICES (e.g. warehousing, inventory management, product customization) among logistics users operating in ASEAN

DECREASE INCREASE

DECREASE INCREASE

DECREASE INCREASE

Outsourcing

4.08

4.31

1 2 3 4 5

Operational efficiency of ROAD FREIGHT TRANSPORT (due to e.g. route planning, empty running, load factor)

Operational efficiency of RAIL FREIGHT TRANSPORT (due to e.g. scheduling, train composition, load factor)

DECREASE INCREASE

DECREASE INCREASE

Operational Efficiency

3.92

3.75

3.86

3.93

3.93

4.08

1 2 3 4 5

ROAD TRANSPORT INFRASTRUCTURE in ASEAN

RAIL TRANSPORT INFRASTRUCTURE in ASEAN

Maritime and PORT INFRASTRUCTURE in ASEAN

AIRPORT and AIR TRANSPORT INFRASTRUCTURE in ASEAN

UNDER CAPACITY OVER CAPACITY

UNDER CAPACITY OVER CAPACITY

UNDER CAPACITY OVER CAPACITY

UNDER CAPACITY OVER CAPACITY

UNDER CAPACITY OVER CAPACITY

UNDER CAPACITY OVER CAPACITYASEAN PORTS in ASEAN

TELECOMMUNICATIONS INFRASTRUCTURE in ASEAN

Capacity of Transport Infrastructure

4.57

4.57

4.36

4.50

1 2 3 4 5

ROAD TRANSPORT INFRASTRUCTURE in ASEAN

RAIL TRANSPORT INFRASTRUCTURE in ASEAN

PORT and MARITIME TRANSPORT INFRASTRUCTURE in ASEAN

AIRPORT and AIR TRANSPORT INFRASTRUCTURE in ASEAN

DETERIORATE IMPROVE

DETERIORATE IMPROVE

DETERIORATE IMPROVE

DETERIORATE IMPROVE

Infrastructure Condition

2.17

3.83

1 2 3 4 5

PROBABILITY OF EXTERNAL SUPPLY CHAIN DISRUPTIONS due to ASEAN-based causes (e.g. political, natural, infrastructural, social)

PREVALENCE OF CARGO THEFTS AND VEHICLE-RELATED CRIMES in international freight transport in ASEAN

DECREASE INCREASE

DECREASE INCREASE

Safety & Security

4.23

4.17

4.25

1 2 3 4 5

The use of TRACKING AND TRACING TECHNOLOGIES in logistics in ASEAN

Significant NEW TECHNOLOGIES not readily available today will already be IN OPERATIONAL USE in logistics in ASEAN

Over 95 % of all INTERNATIONAL SHIPMENTS in ASEAN using a Waybill will be relying on an ELECTRONIC WAYBILL INSTEAD OF PAPER DOCUMENTS

DECREASE INCREASE

DEFINITELY NOT DEFINITELY

DEFINITELY NOT DEFINITELY

Technology Diffusion

4.38

4.38

1 2 3 4 5

Costs to comply with the ENVIRONMENTAL REGULATIONS in the transport sector in ASEAN

Demand for ENVIRONMENTALLY ACCOUNTABLE logistics services

DECREASE INCREASE

DECREASE INCREASE

Environment by 2025

4.50

4.42

4.62

1 2 3 4 5

Importance of the logistics and transport sector for the COMPETITIVENESS of ASEAN

Importance of the logistics and transport sector to attract FOREIGN DIRECT INVESTMENT into ASEAN

Share of the logistics and transport sector of the combined GROSS DOMESTIC PRODUCT in ASEAN

DECREASE INCREASE

DECREASE INCREASE

DECREASE INCREASE

Competitiveness

Traditional vs E-Commerce Logistics

Log. Activities Traditional EcommerceOrder Patterns Predictable VariableOrder Cycle Long/Weekly Short/DailySize of shipment Bulk/Multiple pieces Small/Single piecesReplenishment Scheduled SpontaneousBusiness Model B2B B2B/B2B2C/C2CPoint of delivery Single/Few Multiple/ManyWarehouse configuration

Static/Unchanging Dynamic/Ever changing

Distribution network Trucking/Point 2 point Express/Hub&Spoke

Challenges to international Ecommerce logistics?• Speed x Flexibility• Cultural Diversity

South Korea

Japan

Mexico

India

United Kingdom

Spain

Italy

Germany

France

South-East Asia

.de

.it

.co.uk

.es

.fr

.in

.ca

.com.au

Logistics disruption: Ecommerce

How Ecommerce disrupt logistics• The difference between manufacturing and retail is starting

to get fuzzy• More manufacturers are becoming drop-ship suppliers, and

have to support a business-to-consumer (B2C) distribution model.

• Manufacturers have to decide to better get in the game and sell their products directly to the consumer, or an Ecommerce platform is going to do it, taking revenue and margin that could have been captured

• In the past, manufacturer supply chains often included master distributors, distributors, and retailers.

• Each party earned a margin, driving up overall costs. • Ecommerce has made personal relationships less

important, and shortened the distribution channel

How Ecommerce disrupt logistics• Another change is the consumer-like behavior of many

industrial and manufacturing customers."They want their orders fulfilled quickly, at a price they

want, and delivered where and when they want!“• E-commerce has accelerated the speed with which order

volumes move both up and down the supply chain.• Another challenge facing some manufacturers is growing

pushback from retailers that are also struggling to manage changing consumer expectations,

• Meeting customers' expectations, always a challenge, has become even more demanding.

• A firm can lose customers if it fails to meet expectations, yet the complexity of fulfilling all orders, across all channels, accurately and on time, is significant.

CHALLENGESCHALLENGES LAZADA SOLUTIONSLAZADA SOLUTIONS

• Global Shipping network

• Own first mile, last mile & sorting with Lazada Express

• Fulfillment network

• Payment / remittance alliance

• Global Shipping network

• Own first mile, last mile & sorting with Lazada Express

• Fulfillment network

• Payment / remittance alliance

• Undeveloped infrastructure

• Geographic diversity

• Scattered logistics network

• Complex regulations & customs

• Local payment methods & cash on delivery

• Undeveloped infrastructure

• Geographic diversity

• Scattered logistics network

• Complex regulations & customs

• Local payment methods & cash on delivery

LAZADA LOGISTICS SEALOGISTICS SEA

75 PARTNERS+

MAIN SORTINGCENTERS

5LAZADA DELIVERY NETWORKDELIVERY NETWORK

Assigning the right partner for each parcel

LASTMILE HUBSRaising the bar: 25% faster

deliverieswith better economies

78

LAZADA LAZADA EXPRESSLAZADA EXPRESS

MedanMedan

Palembang (2016)Palembang (2016)

Balikpapan (2016)Balikpapan (2016)

SurabayaSurabayaJakartaJakarta

11FULFILLMENT CENTERS“Closer to our customers for high quality

deliveries"

LAZADA LAZADA FULFILLMENTLAZADA FULFILLMENT

LAZADA LAZADA GLOBAL SHIPPINGLAZADA GLOBAL SHIPPING

• Express Outbound Center• Global Transshipment Center• Global Reverse Logistics Center

Summary

• Logistics is a key enabler of ASEAN connectivity• There is a disconnect between ASEAN Level

Agreements and the reality on the ground• Logistics and supply chains are evolving faster than

ASEAN or even country policies• It is time to rethink the ASEAN agenda to focus on

establishing an enabling environment and not drown under to many agreements that cannot be implemented!!