Leveraging emerging opportunities in ASEAN and Asia Pacific


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Presentation given at ‘SME Expo – Logistics 2006’

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Leveraging emerging opportunities in ASEAN and Asia Pacific

  1. 1. “ Leveraging Emerging Opportunities in ASEAN and Asia Pacific “ By Rajeev K Chopra Presented at “SME Expo – Logistics 2006” Organized by FICCI at Mumbai, India.
  2. 2. <ul><li>Overview-Asia Pacific, ASEAN </li></ul><ul><li>Key features of logistics in the region </li></ul><ul><li>Market size of logistics in Asia Pacific </li></ul><ul><li>Emerging areas in Asia for Logistics players </li></ul><ul><li>Changing Logistics Trends </li></ul><ul><li>Case Study: Gati International </li></ul>Contents
  3. 3. Source: OECD, Armstrong & Associates, Mercer Management consulting, World Bank, Transport Intelligence Global Logistics Market - Industry Segments
  4. 4. Asian’s 3PL market is expected to grow faster than those of the US and Europe <ul><li>Asia </li></ul><ul><li>Europe </li></ul><ul><li>USA </li></ul><ul><li>ESTIMATE </li></ul>* Refers to contract led 3PL outsourcing Source: Deutsche Bank, Morgan Stanley, analysis <ul><li>Development of the 3PL market* Rs in billions </li></ul>935 1,320 1,760 5,445 6,875 8,690 4290 5555 7205 <ul><li>2005 </li></ul><ul><li>2005 </li></ul><ul><li>2005 </li></ul><ul><li>2002 </li></ul><ul><li>2008 </li></ul><ul><li>2002 </li></ul><ul><li>2008 </li></ul><ul><li>2002 </li></ul><ul><li>2008 </li></ul>11% 8% 9% <ul><li>Rationale for faster growth in Asia </li></ul><ul><ul><li>Relatively smaller base </li></ul></ul><ul><ul><li>Increasing competition leading to awareness of outsourcing of non-core activities and cutting supply-chain costs </li></ul></ul><ul><ul><li>Increasing MNC penetration with traditionally higher propensity for outsourcing </li></ul></ul><ul><ul><li>Evolution of a stronger supply base </li></ul></ul><ul><li>Various reports suggests that the emergence of 3PL players offering distinctive value propositions could accelerate growth since many large corporations are willing to outsource, but can’t find adequate suppliers </li></ul>
  5. 5. Source: Transport Intelligence ‘ Asia Pacific’ Logistics Market-High Growth Areas
  6. 6. China, Thailand, Malaysia and India represent the large majority of the Asian 3PL market Source: Deutsche Bank, IDC, EIU, Morgan Stanley, customer interviews, literature search <ul><li>Key drivers of future growth </li></ul><ul><li>Size of 3PL market </li></ul><ul><li>Rs in billions </li></ul><ul><li>China </li></ul><ul><ul><li>Large population </li></ul></ul><ul><ul><li>Strong GDP growth </li></ul></ul><ul><ul><li>Significant international trade volumes </li></ul></ul><ul><ul><li>Increasing MNC penetration and strong FDI inflow </li></ul></ul><ul><li>Malaysia </li></ul><ul><ul><li>Large GDP </li></ul></ul><ul><ul><li>One of largest international trade volumes </li></ul></ul><ul><li>Thailand </li></ul><ul><ul><li>Strong GDP growth </li></ul></ul><ul><ul><li>Significant international trade volumes </li></ul></ul><ul><ul><li>Strong FDI inflow </li></ul></ul><ul><ul><li>Strong government support for 3 rd party logistics </li></ul></ul><ul><li>India </li></ul><ul><ul><li>Large population </li></ul></ul><ul><ul><li>Strong GDP growth </li></ul></ul><ul><ul><li>Increasing MNC penetration and strong FDI growth </li></ul></ul>715. 545. 165. 94.0 55.0 39.0 39.0 39.0 28.0 22.0 17.0 330. 336. 99.0 39.0 39.0 17.0 17.0 17.0 17.0 17.0 11.0 <ul><li>2008 </li></ul><ul><li>2002 </li></ul><ul><li>CAGR 03-08 </li></ul><ul><li>Percent </li></ul><ul><li>China </li></ul><ul><li>Japan </li></ul><ul><li>Korea </li></ul><ul><li>India </li></ul><ul><li>Singapore </li></ul><ul><li>Hong Kong </li></ul><ul><li>Philippines </li></ul><ul><li>Indonesia </li></ul><ul><li>Malaysia </li></ul><ul><li>Thailand </li></ul><ul><li>Taiwan </li></ul><ul><li>12.6% </li></ul><ul><li>8.5% </li></ul><ul><li>8.5% </li></ul><ul><li>16% </li></ul><ul><li>8.5% </li></ul><ul><li>8.5% </li></ul><ul><li>16% </li></ul><ul><li>16% </li></ul><ul><li>16% </li></ul><ul><li>16% </li></ul><ul><li>8.5% </li></ul>
  7. 7. <ul><li>Current Logistics services are Fragmented </li></ul><ul><li>Multiple layers of channels – CNF Agents, Stockiest, Distributors. </li></ul><ul><li>Absence of supply chain expertise & Best Practices </li></ul><ul><li>Less emphasis on quality of infrastructure, more on Cost. </li></ul><ul><li>Low automation and high usage of un-skilled labour. </li></ul><ul><li>Transportation is handled poorly </li></ul><ul><li>High fragmentation (87 % of trucks with owners having 10 trucks or less) </li></ul><ul><li>Complex value chains with many low mark-up intermediaries (Shipper - Transporter - Broker - Financier - Truck Driver / Owner) </li></ul><ul><li>Lack of focus on time-sensitivities </li></ul><ul><li>Information Management </li></ul><ul><li>Low data connectivity across plants, warehouses, transporters and supply chain partners </li></ul><ul><li>Primitive data storage & information management systems in selected locations </li></ul><ul><li>Value Added Services </li></ul><ul><li>Mostly manual & fragmented processes being practiced. Silo mentality. </li></ul><ul><li>No concept of value add as found in international markets while customers are desperate for such services </li></ul>Key Features of Logistics in Asia
  8. 8. Asian 3PL market development by target sector <ul><li>Rs in millions </li></ul><ul><li>FMCG </li></ul><ul><li>Electronics </li></ul><ul><li>Automotive </li></ul><ul><li>2002 </li></ul><ul><li>2008 </li></ul>138.0 204.0 88 .0 171.0 237 539 55 127 55 352.0 523.0 66.0 99.0 28 <ul><li>Drivers </li></ul><ul><li>Others* </li></ul><ul><li>CAGR Percent </li></ul>6.8 11.9 12.9 13.1 <ul><ul><li>-Strong growth rate in these sectors driven by increased consumer spending leading to retail boom like in India </li></ul></ul><ul><ul><li>-Significant MNC penetration with higher propensity towards outsourcing </li></ul></ul><ul><ul><li>-Increasing price competition in these sectors propelling companies to increase supply chain efficiency through outsourced “best practice” implementation </li></ul></ul><ul><ul><li>-Increasing export/import volumes, especially in automotive and electronics </li></ul></ul>* Others include other manufacturing sectors (Paper & Pulp, non-metallic minerals, industry machinery etc.), agriculture and services (excluding retail and hotels) Source: Deutsche Bank, IDC, EIU, Morgan Stanley, literature search, analysis <ul><li>ESTIMATE </li></ul><ul><li>Retail/Wholesale / Restaurant/Hotel </li></ul><ul><li>Chemicals </li></ul><ul><li>Basic Metal </li></ul>12.2 14.6 14.7 Retail /Hotels FMCG Automotive Electronics
  9. 9. Thailand GDP US $ 143,303 million Key focus areas: Gems & Jewelry, Textiles, Automotive Singapore GDP US $ 106,818 million Key focus areas: Electronics, Trading, Machinery parts Philippines GDP US $ 143,303 million Key focus areas: Gems & Jewelry, Textiles, Machinery parts Mynamar GDP US $ 9605 million Key focus areas: Agro based industries, Textiles, spare parts Malaysia GDP US $ 103,737 million Key focus areas: Machinery, Heavy equipment, palm oil, wood products Laos GDP US $ 12043 million Key focus areas: Wood products, coffee, Garments, Chemicals Cambodia GDP US $ 4215 million Key focus areas: Rubber, Textiles, Furniture, food chemicals Brunei GDP US $ 54626 million Key focus areas: Oil & gas, building material, manufactured goods Vietnam GDP US $ 39,021 million Key focus areas: Agro products, Garments, Motors, Fertilizers ASEAN: New growth areas for Logistics players Indonesia GDP US $ 208,625 million Key focus areas: Footwear, Paper, Timber,Textiles, Plywood
  10. 10. North America Asia Western Europe North America Western Europe Asia North America Western Europe Asia FMCG/Retail Industry Electronics Industry Automotive Industry 5% 11% 35% 18% 23% 8% 4% 24% 48% 4% 8% 12% 30% 17% 10% 14% 10% 17% Source: Citigroup Emergence of Asia: Shift in Global Trade Flows
  11. 11. Logistics Trends <ul><li>Warehouse: Multi-user facilities as part of the package </li></ul><ul><li>Customers avoid investment in non-core assets & activities </li></ul><ul><li>Inventory management instead of warehouse management </li></ul><ul><li>Driven by Multiple Transport based solutions </li></ul><ul><li>Supply Chain Enablers’ & Marketplace Solution Providers’ clout is growing </li></ul><ul><li>Inorganic growth within Logistics </li></ul><ul><li>Technology driven eg, Marketplace Solutions & Application Service Providers </li></ul><ul><li>Stock eradication & velocity to market are crucial </li></ul><ul><li>Acceleration of fast cycle logistics </li></ul><ul><li>Customers preference for single (complete) supply chain logistics </li></ul><ul><li>Home deliveries & after-office hours for wider, effective customer reach </li></ul>
  12. 12. <ul><li>Supply chains are increasingly influenced by impact of lower cost manufacturing regions </li></ul><ul><li>Highly fragmented, unsophisticated material flow infrastructure </li></ul><ul><li>Leanest supply chain principles include JIT being eroded due to extended and unreliable lead times and increasing inventory levels </li></ul><ul><li>Freight lane capacities(air, sea, land) are being stretched in Asia </li></ul><ul><li>Changing role of ports from consignment landing point to break bulk processing center </li></ul>Logistics Trends…cont..
  13. 13. Services Outsourced Most Frequently Outsourcing Trends Source:Caps Gemini 14 52 22 35 Order Fulfillment and Distribution 35 84 40 47 Freight Forwarding 11 8 19 53 Freight Bill Auditing/Payment 68 84 82 54 Inbound Transportation 22 40 49 55 Cross-Docking/Shipment Consolidation 68 68 48 57 Customs Clearance 57 88 34 60 Customs Brokerage 89 100 89 66 Outbound Transportation 51% 88% 70% 72% Warehousing Latin America Asia-Pacific Western Europe North America
  14. 14. <ul><li>High annual growth in logistics sector poses risk to a straining supply chain at a higher rate than it can cope up with </li></ul><ul><li>Poor infrastructure and technology support </li></ul><ul><li>Highly regulatory environment, creating localized networks </li></ul><ul><li>Ethical Issues- patronage and relationship building. </li></ul><ul><li>Poor security in IT and at warehouses, consolidation centers. </li></ul><ul><li>High level of trucking subcontracting- who is the driver? </li></ul>Asia Logistics Weaknesses
  15. 15. Thank You