Southeast Asia Third Party Logistics Market - www.solidiance.com
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Southeast Asia Third Party Logistics Market - www.solidiance.com

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Findings show that eighty three percent (83%) of the Service Logistics activity in Southeast Asia (SEA) occurs in Singapore and Malaysia (Penang). Singapore has a 60% share of the SEA market......

Findings show that eighty three percent (83%) of the Service Logistics activity in Southeast Asia (SEA) occurs in Singapore and Malaysia (Penang). Singapore has a 60% share of the SEA market primarily due to its regional hub status. Further, the estimated total service logistics market in SEA is circa Eur. 410 M (FY 2008). Solidiance reviews the challenges and opportunities of the service parts logistics in SEA in 2009.

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  • 1. SE Asia Service Parts Logistics Market Solidiance evaluates the key trends in service parts logistics industry in S. E. Asia July 2009
  • 2. Service Parts Logistics Market Outlook Solidiance evaluates the key trends in service parts logistics industry in S. E. Asia The Service Logistics business (a.k.a aftermarkets “ business) in Asia is on a high growth trajectory, fuelled by ongoing shift of OEM’s manufacturing towards low cost destinations in Asia. While outsourcing service The results of this study affirm the logistics to 3PLs has been going on for several years in demand for outsourcing service key industries such as automotive, an evolution in terms of service offerings such as integrated or logistics solutions, complete with customized solutions for different industries is gaining interesting insights across key traction. Industry players have understood that service customers and countries in S.E Asia logistics can complement revenue realization rather than being a cost factor - thereby many firms are now (SEA). Logistics companies are trying to transition their after sales from a cost center looking at this trend with a growing to a P&L. interest and are developing new offers Solidiance examined 6 key industries and interviewed to fit their clients’ needs and help over 125 executives - logistics managers and executives them reduce their costs. ” in each vertical to understand how they are currently working with 3PLs, what are the bottlenecks and issues they face in their related Service Logistics activity and Damien Duhamel – Managing Director, Solidiance what would be the best improvements they would like to see. Targeted industries were Aerospace, Electronics, Telecom, Industrial equipment, Medical equipment and Semiconductor equipment across 6 countries in South East Asia: Singapore, Malaysia, Thailand, Indonesia, Philippines and Vietnam. 2
  • 3. Service Parts Logistics Market Outlook Solidiance evaluates the key trends in service parts logistics industry in S.E.Asia Service Logistics Market in S.E.Asia Findings show that eighty three percent (83%) of the Outsourced Service Logistics (warehousing only) Service Logistics activity in the SEA occurs in Singapore and Malaysia (Penang). Singapore has a 60% share of the SEA market primarily due to its regional hub status. Further, the estimated total service logistics market in SEA is circa Eur. 410 M (FY 2008) (in-source & out- source). Semiconductor, Telecom and namely the Electronics industries are the fastest growing and most outsourced industries, the latter being the most attractive industry in terms of growth and size. Further, the split in terms of percentage between in sourced and outsourced market revenue is similar among all the sectors in Singapore and the rest of the countries in South East Asia. A notable exception is the aerospace industry where all the companies interviewed in Malaysia in-source the warehousing, mainly for IP purposes, which is still a important issue in this sector. Total Service Logistics by Countries in 2008 • Percentage of companies outsourcing warehousing in Singapore • Percentage of companies outsourcing warehousing in Malaysia and Thailand Source: Solidiance research and team analysis, 2008 Source: Solidiance research and team analysis, 2008 The chart above shows the percentage of warehousing outsourced for each of The chart above represents the value of Service Logistics market in 2008 in 6 the 6 industries examined in this study. Industrial equipment industry is the main countries in South East Asia. In this region the total service logistics sector where the proportion for outsourcing is clearly the lowest compared to market is circa EUR 410 M. (insource and outsource) the other industries 3
  • 4. Service Parts Logistics Market Outlook Solidiance evaluates the key trends in service parts logistics industry in S.E.Asia Outsourcing is favoured by majority of the industries The Aerospace industry is characterized by large The Medical sector is characterized by high value parts warehouse requirements and regulations (FAA). In this and a relatively small size in the after sales business in South sector, the majority of companies in Singapore are East Asia. outsourcing their warehousing to 3PLs. The needs of •In this industry, players rely on 3PLs for warehousing and industry players are highly specialized, and 3PLs need strong customized solutions to optimize their supply chains. Building industry knowledge in order to serve them. efficient local networks is a key point, but the reactivity of • For example, 3PLs must be able to appropriately handle the supply chain is another. large and unconventionally shaped parts, and be able to •In some cases, special parts available in warehouses on appropriately store carbon fibre parts which are other continents (US, Europe) must be supplied within 24h temperature sensitive. to the medical equipment manufacturer in Asia because its • Most of the companies in this sector to rely on 3PLs clients (e.g. hospitals) sometimes require interventions expertise for warehousing and transportation so that they within 2 to 4 hours. Repairs are in-sourced by a vast can concentrate on repairs. However, the key concerns – majority because of the level of technical knowledge challenges for outsourcing will include - confidentiality and required to handle the repair of specialized equipment. IP related issues. In the Semiconductor equipment industry, companies The Electronics and Telecom sectors outsource their also believe outsourcing is advantageous because 3PLs are warehousing to 3PLs in a larger proportion than the other better equipped with the latest technologies and know how industries. to handle logistics efficiently. In the Electronics industry, the existence of multiple sub- •Relying on local 3PLs is the most preferred option for sectors results in large volumes of finished goods and spare several companies in this industry, a major reason being that part movement. Outsourcing is therefore the best way to it allows them to handle customs issues faster and with a improve efficiency of Service Logistics in this industry. stronger “last mile” reach than the global logistics companies. • As a result, most of the companies prefer to outsource The Industrial equipment industry differentiates itself from their warehousing component to optimize cost, especially in the other sectors by leaning more towards in-sourcing Singapore. •This trend is especially true in Malaysia and Thailand where Telecom players in Singapore mainly prefer outsourcing their an average of 6% of companies are outsourcing this part of warehousing to 3PLs in order to be more efficient in ensuring their service logistics. tight control in safety & security measures for telecom •Most of those companies are manufacturing heavy industrial equipment. products. However, in the sub-segment of control • Moreover, 3PLs are able to customize and adapt solutions automation companies are keen on using 3PLs for managing in pace with the fast changes in the telecom industry. their warehousing. Hence companies vie for long term partnerships/service agreements with 3PLs to optimize their long term contracts. 4
  • 5. Service Parts Logistics Market Outlook Solidiance evaluates the key trends in service parts logistics industry in S.E.Asia Key trends to watch out in 2009 “ The Service Logistics business is increasingly shifting towards outsourcing not only transportation, but also The biggest growth opportunity is here warehousing. Key customer discussions confirm this trend in Asia for us and for many other of growth grow despite the current crisis, primarily driven companies. It's growing faster than the by businesses from emerging countries such as China, India and Indonesia. The current financial turmoil should business as a whole, and we believe it have a “positive” effect on after sales services, especially will continue to grow substantially Service Part Logistics since customers will tend to extend the life cycle of their equipment rather than buying new faster than the overall business which products. we expect to grow in high single digits annually especially growth in terms of demand for logistical services from the healthcare and aviation industries – across both mainstream and service ” logistics. Global CEO, Global Supply Chain & Logistics Major 5
  • 6. Service Parts Logistics Market Outlook Solidiance evaluates the key trends in service parts logistics industry in S.E.Asia Solidiance is a marketing and innovation strategy consulting firm with focus on growth in Asia Pacific. We are devoted to working side-by-side with our clients to outpace the competition, close gaps in growth and deliver breakthroughs in performance and profitability. Our Asia focus provides our clients with a better understanding of intrinsic regional issues. To subscribe to further white papers and to learn more about Solidiance please visit: www.solidiance.com Mark Lee - Principal Mickael Feige – Consultant Mark is a Principal based in the Singapore office with more Mickael Feige is a Consultant based in the Thailand office than eight years of consulting experience. Mark has a strong with more than five years of consulting experience. He has focus on quantitative based projects. Previous roles include led over 50 national and multi-regional engagements for being regional manager for Synovate Business Consulting in Fortune 500 clients across Europe, Japan and south-east Singapore, handling projects for MNCs across Asia, focused Asia. Prior to joining Solidiance, Mickael was managing predominantly on the logistics and supply chain space across investments projects in Europe for large Japanese MNCs. industries. Mark managed most survey-based projects for With strong experience in combining numerical and MNCs where he advised international companies on market qualitative analytics, Mickael specializes in customizing entry, customer segmentation prioritization and growth advanced market segmentation and size forecasting models strategies. He also has ample experience in qualitative to help clients identify and prioritize market opportunities to research, having managed various multi-country projects that develop growth strategies. Mickael has rich experience required a combination multiple approaches in order to across supply chain and logistics industry throughout Europe customize results to meet the clients’ needs. Having worked and Asia Pacific, including key industries such as medical for five years in the M&A team of a Korean Conglomerate in equipment, manufacturing and automotive. He combines Spain, Mark also has vast experience with mergers and sector and cross-industry best practice, leveraging this acquisitions in Europe, Asia and Africa. Mark is fluent in knowledge to help clients develop successful market Korean, English and Spanish. He holds a BS in mechanical strategies. He holds a Bachelor in marketing (with Honors) engineering, from the Worcester Polytechnic Institute (United from the London Metropolitan University and a MBA from States) and a MBA from the University of Rochester. the Institute of Political Science of Lyon. China Singapore Thailand Suite 801 Suite 17-01 Suite 32-05 Hong Kong Plaza High Street Center Interchange 21 283 Huaihai Road Central 1 North Bridge Road 399 Sukhumvit Road Shanghai 200021 Singapore 179094 Bangkok 10110 Tel: +86 21 5168 8905 Tel: +65 6408 8208 Tel: +66 (0)2 660 3638 info@solidiance.com 6