By Stephen Ly, vice president, Southeast Asia, C.H. Robinson.
The logistics industry in Asia has experienced notable transformations in the aftermath of the disruptions caused by the Covid-19 pandemic and escalating geopolitical tensions. More businesses today are embracing omni-sourcing strategies, aiming to reduce reliance on any particular country within their supply chains. In fact, by 2026, 65 percent of companies will be buying most key items from regional suppliers, compared to just 38 percent today.
Southeast Asia, in particular, has emerged as a preferred destination for shippers and manufacturers aiming to strengthen and diversify their supply chain networks. With its strategic positioning, combined with the expanding infrastructure and favorable business conditions, Southeast Asia has become an appealing choice for facilitating smooth trade connections between the eastern and western hemispheres, connecting Europe, the Americas, Africa, and Oceania.
As we step into 2024, the logistics industry finds itself at the intersection of change, sustainability, and resilience. Here are some of the nuanced shifts in demand and supply dynamics that lie ahead in 2024, and how shippers can strategically position themselves to thrive in this evolving landscape.
Stephen Ly, vice president, Southeast Asia, C.H. Robinson.
Nearshoring will shift freight flow
The freight flow landscape is also shifting across 2024 with impact from reshoring and nearshoring trends in Southeast Asia, India, and Mexico.
While most nearshoring activities have been led by automotive companies and suppliers, the new year will see businesses in other industries shifting operations closer to their markets. To this end, companies hoping to drive nearshoring success must factor for considerations like supplier vetting, infrastructure, and punitive trade measures in tandem with their relocation. These changes can cause shifts in the supply chain that companies not nearshoring must also prepare for.
Businesses in Asia that rely on shipping between the United States and Mexico, for example, can expect the nearshoring boom in Mexico to bring a significant volume increase at the border. They will need to map out new strategies and contingencies early to mitigate the effects of border delays.
Improving supply chain resiliency
Heading into 2024, shippers from the region will spearhead enhancement of supply chain strategies to enable better contingency planning, both to future-proof their operations and to pivot more flexibly against unexpected disruptions globally.
Air freight is a measure that will gain prominence, as shippers come round to the fact that should the other modes be congested, air shipping provides the greatest flexibility to pivot deployment. This is already being adopted by the automotive industry and will see increasing uptake across other industries.
Manufacturers with near shoring priorities will be recalibrating their supply chain to support their relocation, which allows them to introduce air shipping to their transportation strategy as a buffer for freight disrupts and close sourcing gaps.
For companies with more complex transportation needs, they will need to boost supply chain resiliency by working with global forwarding partners with optimal transportation management tools. This is expected to grow demand for outsourcing of more sophisticated logistics capabilities like transportation management systems (TMS), so as to complement contingency planning with integrated 3rd party TMS software and a host of managed services.
Sustainability to take the European Union cue
Sustainability is top of mind for many shippers and carriers in the region, so they are keeping track of new regulations from the European Union (EU) and growing corporate sustainability goals as regulatory ambiguities get progressively addressed.
The addition of ocean emissions to the EU’s Emissions Trading System (ETS) from January 2024, for example, will blanket all CO2 emissions from ships entering or leaving EU ports.
Even though ocean carriers still have a year to become fully compliant, many are already progressing towards more sustainable shipping, including using slow steaming to meet emissions standards like International Maritime Organization (IMO) 2023 and introducing fuel alternatives like green methanol.
In turn, these requirements from the EU could result in carriers adjusting schedules or implementing surcharges to meet their sustainability goals – inevitably impacting shippers.
On the air side, we have seen progress on sustainable aviation fuel (SAF) and in testing power to liquid technology (PTO). That said, the supply of these options is limited, and not yet widely available to meet the current demand.
Staying agile in the face of industry developments
In 2024, shippers in the region must keep pace with new developments in their trade lanes to effectively improve their supply chain strategies for better resiliency and continuity. Those that are prioritizing sustainable global transportation should also try to establish a baseline for their carbon footprint early, to quickly determine emissions reduction for their supply chain.
Shippers can also consider partnering with logistics experts to supplement their growth strategies with the right tools and expertise to keep their supply chain running smoothly and cost-effectively. Such experts also provide shippers with customized logistics strategies, as well as access specialized tools for specifics like sustainable shipping planning, book and claim systems and alternative fuel programs.
Despite the volatility in the logistics industry in recent years, industry players have shown remarkable adaptability and agility. Indeed, it is by leveraging challenges and staying ahead of trends that logistics players can rise above uncertainties and position themselves for sustained success.
Photo credit: iStock/Lyndon Stratford
