SPECIAL REPORT: Digital transformation of logistics companies in SE Asia

Lee Kok Leong, our special correspondent, talks to Bob Gill, general manager, Southeast Asia at ARC Advisory Group, about the opportunities and challenges of embarking on a digital transformation journey for logistics service providers.

Bob is responsible for managing ARC’s business operations and market research activities in Southeast Asia.  ARC is a global technology research and advisory firm.

The logistics industry in Southeast Asia is still traditional and lagged behind in terms of technology adoption relative to their counterparts in other regions of Asia.  It does not help that supply chains are complex, fragmented, and there is often poor transparency.  However, the key to successful technology adoption is to justify it with a business case.

In general, logistics companies are plagued by legacy systems, underutilization of assets, inefficient labour-intensive processes, and outdated customer interfaces that serve to lengthen response times.  By embarking on a digital transformation journey, logistics companies can develop new business models and solutions, digitalize core operations, and build a robust internal digital foundation.

These will help remove supply chain inefficiencies, solve problems associated with asset underutilization, improve demand-supply matching, and increase visibility and connectivity across previously siloed systems.

For examples, companies can, among others,

  • use advanced analytics to optimize operations in pricing, routing, and load shipment consolidation
  • put in place a digital platform to provide customers with a convenient one-stop shop experience which also improves internal operational visibility
  • increase the automation of core internal business processes to help ease labour-intensive logistics operations in distribution, warehousing, and picking and packing

Corporate Fair Trade Community (CFTC):  Where are we now in terms of digital transformation?

ARC Advisory Group (ARC): Transformation is a big word; indeed, as one dictionary definition puts it: “… a process of profound and radical change that orients an organisation in a new direction and takes it to an entirely different level of effectiveness”.

I don’t see that many companies in Southeast Asia are undertaking such a root-and-branch change at the current stage.

However, the arrival of many new technologies and capabilities over the last five years, including additive manufacturing, advanced analytics, artificial intelligence, blockchain, drones, IoT, low power wide area networks, etc, means that with increasing awareness and more cost-effective adoption possibilities, supply chain logistics processes can be more easily digitalised and higher performance levels achieved across aspects such as route planning, inventory management, warehouse picking, asset tracking, and others.

CFTC: Where are we heading?  

ARC: Digital technology will continue to develop and evolve, and as more and more companies obtain and report benefits, adoption will steadily increase.

Hence, it is more important than ever that users stay informed and keep up-to-date on all the new technologies and their potential applications in logistics.  However, it is just as important that companies do not see digital technology as a silver-bullet solution that fixes all their problems and automatically brings them new-found riches.

And this is a particular danger with new, unfamiliar technologies, which are more likely to be hyped beyond any kind of reality.  Rather, the business needs, opportunities, pain points, etc., must be appropriately understood and clarified, and technology selection and implementation should then be a consequence of this thorough business analysis.

It is also critical that the organisational context is correctly considered before, during and after adoption.  This means paying attention to issues such as leadership and stakeholder buy-in, change management, and operator training.

CFTC: What is your opinion on autonomous v automation for the logistics companies?

ARC: I believe that both of these approaches can co-exist and have their place in the logistics industry.

In the warehouse, for instance, ARC predicts high growth rates for mobile autonomous robots over the next few years, as they bring large efficiencies to picking operations, especially high mix/low volume e-commerce installations.

But not all logistics processes/environments need such a high level of autonomy, and straightforward automation, such as in the warehouse, an automated storage and retrieval system (AS/RS), can be more applicable and cost-effective.

Again, it comes down to implementing the technology that meets the business need, not the highest-spec or latest, greatest technology.

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