2009_3PL_ASEANFinal

8/9/2019 2009_3PL_ASEANFinal

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14th Annual Third-Party Logistics Study

ASEAN Region Logistics

and SCM Insights and

Perspectives


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The 14th Annual Third-Party Logistics Study examined the

state of the global market for 3PL services and explored

key issues affecting the industry: economic volatility, thechallenges of supply chain orchestration and the IT

capability gap. The research included a global survey of

3PL shippers and 3PL providers; focus interviews with key

executives and authorities who have expertise relating to

the 3PL industry; and facilitated sessions for 3PL shippers

at Capgemini Accelerated Solutions Environment (ASE)

facilities in Chicago, USA and Utrecht, the Netherlands, in

addition to a 3PL study workshop held in Singapore. Full

details of the study are available in the 2009 study report

that is available for download at www.3plstudy.com.

The 2009 report research process placed special emphasison understanding 3PL issues and trends specific to theASEAN region.1 This included an analysis of 3PL surveyresponses from ASEAN 3PL shipper respondents and 3PLproviders as well as discussions from a 3PL workshop inSingapore that addressed ASEAN perspectives on the samegeneral and special topics issues that were covered in the2009 global study. The workshop, held in Singapore inMay, 2009, was part of the THINK! Logistics Series that isconducted by The Logistics Institute Asia-Pacific. The 20093PL study team compliments the TLI-AP and members ofthe TLI-AP staff for planning, conducting and documenting

2

Thailand

2

Indonesia

1Malaysia

5Philippines

1

Singapore

37

North America(248)32%

Latin America(103)13%

Europe

(250)33%

O t h e r

( 1 6 )

2 %

Asia Pacific

(155)20%

N u m b e r o f A S E A N R e s p o n d e n t s

N u m b e r o f G l o b a l S h i p p e r R e s p o n d e n t s

+ 2 7 9 s u r v e y r e s p o n d e n t s f r o m 3 P L

p r o v i d e r f i r m s

Figure 1: Survey Respondents Represented Range of Geographies and Industries

the results of an excellent 3PL workshop, and for thesignificant contributions and co-authorship of this report.

Figure 1 indicates the number of 3PL shipper responsesfrom the major geographies included in the overall globalsurvey, and also identifies the number of respondents from

ASEAN countries. (The ASEAN region responses are alsoincluded in the Asia-Pacific region totals.)

The content of this report is divided into three sections. Thefirst provides a high-level perspective on ASEAN 3PL issuesby taking a look at survey responses from 3PL shippers inthe ASEAN region. When appropriate, these findings arecompared with the All Regions responses from the overall

study, and also to findings from specific geographiesincluded in the overall study (North America, Europe, Asia-Pacific, and Latin America). For comparison purposes,survey responses from 3PL provider firms were alsoincluded as appropriate.

Section two discusses the ASEAN perspectives on the threespecial topics selected for this years 3PL research study:economic volatility; supply chain orchestration; and ITcapability gap. The final section covers relevant 3PL shipperrespondent and provider perspectives on the ASEAN 3PLmarketplace.

1 The Association of Southeast Asian Nations, commonly abbreviated ASEAN, is a geo-political and economic organization of 10 countries located in Southeast Asia, which was formed on

8 August 1967 by Indonesia, Malaysia, the Philippines, Singapore and Thailand. Since then, membership has expanded to include Brunei, Myanmar, Cambodia, Laos, and Vietnam. Its

aims include the acceleration of economic growth, social progress, cultural development among its members, the protection of the peace and stability of the region, and to provide

opportunities for member countries to discuss differences peacefully.

Dien dan Hang Hai-Logistics http://vietmarine.org


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Consistent with these findings, as shown in Figure 3ASEAN shipper respondents report spending a largerpercentage of their total logistics expenditures onoutsourcing (67%) than respondents for All Regions (57%)and for Asia-Pacific (62%).

Respondents project spending even larger percentages of

their logistics budgets on outsourcing in the 2010-2011 and2012-2014 timeframes (i.e., 1-2 and 3-5 years ahead).Although the projected growth rates are somewhat higherfor All Regions and for Asia-Pacific, the results for ASEANalso suggest growing percentage increases for several yearsinto the future.

Success of 3PL User-Provider Relationships

One of the key features of the annual 3PL study is theinsight provided into the success of 3PL-customerrelationships. Looking at the data in Figure 4, it is clear thatthese relationships are viewed as extremely or somewhatsuccessful by most 3PL users (89%), 3PL providers (96%),and ASEAN region respondents (96%). Upon closerinspection, it is interesting to note that: 1) 3PL providerstend to assign a much higher percentage rating forextremely successful (45%), than do All Regions shipperrespondents and ASEAN respondents; and, 2) ASEANrespondents are less likely to report extremely successfulrelationships (16%) and more likely to rate 3PLrelationships as somewhat successful (80%) than the otherrespondents.

Outsourced Services and Budget Share

For both the ASEAN region and the overall results, the mostfrequently outsourced logistics activities tend to be thosethat are more transactional, operational, and repetitive.However, as seen in Figure 2, ASEAN responses aregenerally higher than those for the All Regions respondentsand in particular are much higher for the most frequently

outsourced services such as domestic and internationaltransportation, customs brokerage, warehousing,forwarding, and cross-docking. One possible explanation isthat countries comprising the ASEAN region are moreengaged in global commerce than other countries ingeneral, and thus are more likely to use the services ofoutsourced logistics providers.

Outsourced Logistics Services % Shippers

All Regions ASEAN

Domestic Transportation 86% 96%

International Transportation 84 96

Customs Brokerage 71 76

Warehousing 68 72

Forwarding 65 85

Cross-Docking 39 50

Product Labeling, PKG, Assembly, Kitting 38 46

Reverse Logistics 38 41

Freight Bill Auditing and Payment 33 33

Transportation Planning and Management 32 37

Information Technology (IT) Services 30 37

Fleet Management 22 30

Supply Chain Consultancy Services Provided by3PLs

21 22

Customer Service 13 17

Order Entry, Processing and Fulfillment 13 24

LLP/4PL Services 12 15

3

Current State of the 3PL Market ASEAN Region

This section explores perspectives on the ASEAN 3PL marketplace.

All Regions Asia-Pacic ASEAN

0%

20%

40%

60%

80%

Projected 2010-2011 Projected 2012-2014

67% 68%72%

62%

57%

65%61%

65%70%

Current 2009

100%

Figure 3: Shipper Expenditures on Outsourcing as Percentages ofTotal Logistics Expenditures Expected to Increase

Figure 2: Shippers Currently Outsource a Wide Variety of

Logistics Services


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Logistics cost reduction = 12%Logistics fixed asset reduction = 30%

Inventory cost reduction = 14%

Order fill rate increased from 81% to 90%

Order accuracy increased from 91% to 97%

Of course, no relationship is perfect. Figure 6 indicates thetop seven continuing problems shippers report in their 3PLrelationships. Of interest here is that all of the ASEANshipper percentages are higher than the similar percentagesreported by all of the 3PLs who participated in the survey.In addition, the ASEAN shippers rankings of these

problems differ from those of the overall group.

Figure 5 provides some insight into the factors thatcontribute to successful shipper respondent experienceswith their 3PL providers. A review of these results suggeststhat ASEAN respondents attach higher importance thanother respondents to a number of factors, including:personal relationships on an operational level; the flexibilityof 3PLs to accommodate customers needs; and peer-to-peerrelationships on an executive level providing guidance andsponsorship.

ASEAN region shippers were also asked to provide somemetrics resulting from their use of 3PL services. The figuresin the next column represent the averages of results reported

by ASEAN executives who participated in the 2009 survey:

4

Factors

Percentages Reported By

Shippers 3PL

ProvidersAll Regions ASEAN

Openness, transparency, and goodcommunication

74% 73% 77%

Personal relationships on an operational

level

65 80 72

Flexibility of 3PL to accommodateour/customers needs

64 73 65

Effective partnering and collaborationbetween customer/3PL

61 64 72

Achieving target cost reductions 54 61 58

Achieving improvements in service levels 54 68 71

Peer-to-peer relationship on executivelevel providing guidance and sponsorship

44 71 51

The capability of the 3PL/customer toprovide valuable ideas for supply chainimprovement and innovation

35 43 57

Willingness of 3PL/customers to sharerisk

30 36 25

Financial arrangements customerscompensating 3PLs

15 16 19

TOP SEVEN Continuing ProblemsPercentages Reported By:

ASEAN Shippers 3PLs - Overall

Lack of continuous, ongoingimprovements and achievements inofferings

Service level commitments not realized

Unsatisfactory transition duringimplementation stage

Cost reductions not realized

Lack of global capabilities

Benefits not achieved in a timelymanner

Lack of business process integrationacross regions and supply chainservices

21%

25%

17%

34%

31%

31%

19%45%

43%

40%

38%

35%

35%

38%

Figure 6: Shippers and 3PLs Report a Number of Continuing

Problems with 3PL Services ASEAN Results

Figure 5: A Number of Factors Contribute to Successful

Shipper Experiences with 3PLs

Extremely Successful Extremely UnsuccessfulSomewhat Successful Somewhat UnsuccessfulNeither Successful NorUnsuccessful

3PL Providers ASEAN

9%3% 4% 1% 1% 0%

Shippers

0%

20%

40%

60%

80%

100%

1% 0% 0%

45%

25%

16%

80%

64%

51%

Figure 4: Shippers and 3PLs Have Similar Evaluations of Success of Their Relationships


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Getting through the Economic Crisis- What does it

take?

At the 3PL study workshop held in Singapore, participantsdiscussed several interesting measures that have beenadopted by companies operating in the ASEAN region tocombat the current economic crisis:

Shifting Inventory: Lean inventory management andeffectively managing backorders have become critical duringthe economic crisis. Many companies are trying to pushinventory to their downstream partners, which are alsoreticent to take on additional inventory.

Mode Shifting: Many companies are switching from airtransport to cheaper modes of transport. Goods with stabledemand, long lead times and large volumes are moving viaground and ocean, while those with fluctuating demand arebeing transported by air.

Renegotiating Terms: Companies have begun to negotiatecredit terms and are focusing on working capital. Cash isking, especially in this economic crisis. Rate negotiation andsimplification have become the norm, as many customersare re-negotiating their contract terms with 3PLs tosignificantly adjust prices downward, even when theprevious contract signed at a higher value has not ended.

Shorter Contracts: The economic downturn has changedsome of the ways that business is conducted; for example,24-month or 36-month contracts are giving way in someinstances to three-month contracts due to uncertain marketconditions.

Postponement: Companies are working hard to reducecycle times, postpone physical manufacturing activities, andstart manufacturing only when an order has beenconfirmed.

Figure 7 indicates the strategies used in response toeconomic volatility as reported by survey respondents fromthe ASEAN region, and by the 3PLs who participated in the2009 study. This provides some understanding of how bothshippers and 3PLs are dealing with the prevailing economic

uncertainties.

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As these results indicate, it is not business as usual for mostcompanies in the ASEAN region. During the recession,companies are giving a lot of attention to cost and areasking questions including: Are businesses being runoptimally? What is the impact on infrastructure?

According to the participants in the Singapore workshop,for many ASEAN companies, the focus has changed fromgrowing and increasing revenue to managing the bottomline. There is a great deal of uncertainty, as well asconfusion, about how long this particular perspective willlast. At this crucial time, many are diverting resources andenergy to critical activities and away from those activitiesthat are not contributing sufficiently high value to thecompany.

Shippers (ASEAN)

Primary Strategies Percent Shippers

Reduce Operating Costs 82%

Improve Forecasting & Inventory Management 80%

Renegotiate Supplier Contracts 77%

Restructure Supply Chain to Improve Financials 64%

Expand to New Markets or Offer New Products 62%

Reduce Order-To-Cash Cycle Time 59%

3PLs

Strategy Percent 3PLs

Reduce Operating Costs 89%

Expand to New Markets or Offer New Products 59%

Renegotiate Supplier Contracts 58%

Reduce Order-To-Cash Cycle Time 49%

Convert Fixed Costs to Variable Costs 39%

ASEAN Perspectives Economic Volatility

This section offers the ASEAN perspectives on the special topic areas selected forinclusion in the 2009 3PL Study, as well as additional topics of interest specifically to theASEAN region

Figure 7: Strategies Used In Response to Economic Volatility


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warehousing and other non-core competencies to low costregions such as Vietnam and Southern China, are stillfavorites for shippers in the region.

Some shippers are using outsourcing as a flexible responseto economic changes, or are even reverting fromoutsourcing. For several shippers in the ASEAN region whohave suffered significant losses, partnerships have becomemuch less important. A company has to survive by itselffirst before it can care for its partner.

Many ASEAN companies are taking a closer look at the

value of outsourcing and at 3PLs to evaluate their externalpractices and share what is happening elsewhere. Before theeconomic crisis the question was whether or not tooutsource. Today, the question is not whether it should bedone, but where it should be used. It is important to exploitonly what is competitive to cut out on waste and leveragecollaboration.

Workshop participant Stefano Battan, Director,Transportation Logistics - Worldwide at ST Microelectronics,notes, Outsourcing is a given. It is one of the implementsin our tool box that is needed to get out of the crisis.

Turnover in organizations will probably decelerate, butcompanies will still experience a loss of key talent inorganizations. Therefore, the key resources may still be

While service levels have to be maintained, reducing cycleTime-To-Market (TTM), Internet buying, capturing sales,

and complete revenue management are driving supplychains. Contracts with other supply chain partners may bere-negotiated, but this does not mean beating suppliers or3PLs down. If that happens, they wont survive. Instead,workshop participants advise, companies should work withtheir 3PLs to make them more compatible.

Another valuable measure necessary to get out of a crisis,participants concluded, is to nurture leadership that canhandle change management. To drive innovation, moreleaders than managers are needed during bad times. Whatsmore, green logistics and recycling practices that were not

deemed as important during the good times have becomeimportant during the financial crisis.

As seen in Figure 8, respondents in the ASEAN regionindicate managing unpredictable demand as the mostdifficult aspect for managing supply chains in an economicdownturn.

For many ASEAN companies, surviving the crisis hasbecome a focal point. Given the choice to grow and surviveby expanding market share or by moving up the valuechain, companies would prefer to gain market share, eithergeographically or by sector.

For example, many automotive companies across the globeare struggling. But Korean companies across the board,including those in the automotive sector, are doing well andare capitalizing on the crisis and gaining market share.Factors contributing to this success include their favouredfinancing methods and the ready availability of financing,differing business models, well-honed execution capabilities,and growing capacity for innovation. These have helpedposition many Korean companies as leaders in other sectorssuch as telecom, audio, and video.

This success proves that companies can still grow duringthe bad times, workshop participants concurred.Opportunity is available, but it is important for companiesto look long term. The situation may change and now is thetime to plan to see how they want to build or rebuild.

Role Played by Outsourcing in Achieving Success

The nature of outsourcing activities has changed somewhatduring the economic crisis, workshop participants agreed.Outsourcing depends upon the capacity of the outsourcingcompany and what capabilities are available outside.Outsourcing of intellectual property (IP) or key

competencies is not as feasible in Asia since the IPlegislation is not robust. However, outsourcing of productdesign, back office processes such as accounts payable,

6

Unpredictable Demand

Fuel Price Volatility

Excessive Inventory in SC

Currency Exchange Volatility

Supplier Financial Risk

Commodity Price Volatility

Difculty Securing Capital

Loss of SC Skills Due to Downsizing

Labor Rate Volatility

Other

0% 20% 40% 60% 80% 100

All Regions ASEAN

Figure 8: Difficult Aspects for Managing Supply Chains in An

Economic Downturn


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found outside the company, for example, by outsourcing.Outsourcing can even be viewed as a temporary solution

and a more focused way to get out of the crisis.

Flexibility is a concern, as are costs. Shippers must reduceoverhead and fixed costs. Some have significantly reducedthe number of service providers. Others have started tonegotiate volume-based contracts. Growing with selectedpartners and conducting network studies to understandones capabilities and then consolidating them have becometop management priorities.

A 3PLs ability to maintain service levels is a crucial factor inchoosing a partner. Choosing the right 3PL is like choosing

the right girlfriend, observes Lim Kiong Wah, AssistantGeneral Manager, Logistics + Warehousing, for TimesPublishing Limited (TPL). Small things such as usingelectronic documents instead of paperwork add toefficiency.

Figure 9 reveals that shippers feel significant opportunitiesfor outsourcing of IT-based services continue to exist in the

ASEAN region despite the economic downturn.

The reduced demand many companies are experiencing inthe current economic environment provides an opportunetime for ASEAN shippers to revisit outsourcing decisions,evaluating each in-sourced and outsourced logistics activityto determine its impact on cost, value and quality of service.

Innovative Supply Chain Ideas Implemented

The key to encouraging innovations during the economiccrisis is to include them in the key performance indicators(KPI), workshop participants concluded. However, to dothis properly, shippers have to consider various KPIs forbusiness divisions, groups, and individuals and align themproperly in order to avoid conflicts. The use oflogistics/sales as a KPI is gaining acceptance.

Some innovative supply chain ideas that have beenimplemented in the ASEAN region include consolidation oftransportation (such as cross-docking to reduceorganizational costs), product design and packaging,leveraging tax models (by knowing country-specific importtaxation rules and utilizing Free Trade Agreements - FTAs)and recycling pallets (reuse of pallets is environmentallyfriendly and saves up to SS15 per EU-pallet). Some shippersare even considering the ease of handling packagedcontainers when designing packaging, especially whendelivering to Europe where the labor costs are significantlyhigher than in China.

7

The economic situation has prompted managers to lookdeeper into their distribution channels: Are having

warehouses in all countries necessary? Should distributionbe outsourced to 3PLs? How about having only two layersof distribution instead of three?

Savvy shippers are using this down period of the economyto improve basic processes such as warehousing, forecasting,storage and materials management and IT systems andimproving real time visibility and transparency. While mostcompanies dont really think that these matter very much,adaptations to business basics can significantly decreasecosts. This is, therefore, the best time to invest in revisions.

WH-DC Management

Transportation Management (Execution)

Transportation Management (planning)

Global Trade Management

Yard Management

Web Portals

Visibility

E D I

Bar Coding

ISC Network Opt

Customer Order Management

SC Event Management

RFID

SC Planning

0% 20% 40% 60%

78%

100%

Currently Use 3PL Internally Managed

Transportation Sourcing

19%

68%27%

57%

41%

46%46%

38%46%

32%

19%

30%

24%

57%

32%

73%

76%

22%62%

19% 65%

16%81%

14%

57%

8%30%

89%

80%

0%

Figure 9: There Continue to Be Significant Opportunities for

Outsourcing of IT-Based Services (ASEAN Results)


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Value from Strategic Partnerships

Whether they are 3PLs or shippers, most companies arewilling to invest in commitment-building and IT integrationonly when a long-term partnership or contract isestablished. However, a long-term relationship not onlymeans that partners will share profits in a win-win situation,but also that they will share risks during the economiccrisis, workshop participants concluded.

Figure 11 reveals that a larger percentage of ASEANrespondents (68%) than All Regions respondents (59%)believe that the current economic crisis can be viewed as anInflection Point to rethink supply chain/3PL relationships.Some respondents are unsure as to what the currentenvironment means for their business and their use of 3PLs.

Shipper-3PL Collaboration on Advanced Supply

Chain Concepts

For a 3PL to be part of a shippers business, that 3PL needsto understand the entire business, not just their logisticsneeds. For example, with spare parts delivery or medicalequipment delivery, both of which need to be delivered ontime, the 3PL needs to know the consequences of being lateand what happens if delivery is not made. In this case, itcan help for the 3PL to hire business industry expertisesuch as pharmacists. It is also important for 3PLs to be ableto share in the shippers risks and to think like the shipperabout their business.

As indicated in Figure 10, according to the ASEAN 3PLsurvey respondents, shippers in the ASEAN region havehigher expectations from their 3PLs regarding the provisionof critical capabilities such as deep business process and ITexpertise compared with shippers in all regions.

However, it can be more difficult to find 3PLs with deepexpertise in specialized industries including aerospace,biotech and pharmaceuticals, thus making it difficult forcustomer needs to be met. Also, it is often challenging todevelop such specialized knowledge among current 3PLemployees. As a result, some ASEAN companies are nowhiring experts from 3PLs to enhance available in-houseexpertise. Therefore, a good argument may be made for the

cross-breeding of 3PLs and supply chain employees.

8

ASEAN Perspectives Supply Chain Orchestration

Total Landed Cost Rportingand Analysis

Deep Business Process andIT Expertise

Supply Chain Network Design

Deep Planning and ExecutionCapabilities in Industry Vertical

0% 20% 40% 60% 80%

All Regions ASEAN

64%

63%

60%

66%

46%

58%

34%

45%

Figure 10: Critical Capabilities Shippers Would Like to See in

3PLs

Yes No Not Sure

0%

20%

40%

60%

80%

ASEAN

22%

68%

All Regions

100%

59%

20% 19%

12%

Need to re-evaluate

relationship with 3PLs to

possibly drive the

relationship deeper

Some respondentsconfused by the current

environment as to what it

means about their

business and use of 3PLs

Need to re-evaluate

relationship with 3PLs to

possibly drive the

relationship deeper

Some respondentsconfused by the current

environment as to what it

means about their

business and use of 3PLs

Figure 11: Current Economic Crisis is Viewed as Inflection

Point to Re-Think Supply Chain/3PL Relationships


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3PLs as Preferred Business Partners

While there is nothing inferior about offering just logistics

execution, 3PLs seeking to expand their relationships withcustomers can consider new areas of supply chain offerings,such as:

Supplier selection, including landed cost analysis and riskmanagement

Distribution Requirements Planning (DRP)-process afterSOP (Sales and Operations Planning)

Planning based on a companys forecast

Order processing

Billing

Vendor Managed Inventory (VMI)Factory sequencing

Kanban

Network design

Reverse logistics

Scrap management (waste management)

System-driven 4PL services

To build these capabilities and services, 3PLs need software,management capabilities, skilled and experienced peoplewho understand specific software processes, etc., as well as

contracts that ensure the proper handling of data andresponsibilities.

9

Opportunities and Challenges with Total Landed

Costs

Workshop participants agreed that total landed cost (TLC)is a relevant concept for any shipper, and may include awide spectrum of costs and benefits. For some shippers, it isimportant to look at the entire network and determine thecomplete cost of sending the final product to the customer,including manufacturing, procurement, and shipping.Manufacturing costs and transportation costs frequentlyvary from country to country. For example, when designinga product for the Indian market, where should the companylocate its factory? Should it have a distribution center inIndia or move directly from the factory to the customer inIndia?

Some companies dont really measure the TLC. Rather, theylook at the performance of TLC. They tend to measurefreight costs and manufacturing costs, in other words,individual costs. These measurements take a snapshot of thesituation and are easily furnished by 3PLs. But it isimportant to note that there are also added costs, such astaxation, that can be very difficult to capture. So selecting a3PL based on the ability to furnish TLC remains an elusiveexercise for many shippers in the ASEAN region.

Figure 12 shows the value to shippers of more strategicrelationships with their 3PLs. Respondents in the ASEANregion attribute higher value to reducing inventory in thepipeline and reducing total landed and distributed costs ascompared to respondents in all regions. Other value-addingfeatures in a 3PL-shipper relationship, such as increasingoperational flexibility, becoming more demand driven, andreducing capital costs, head count and operational expenses,were also considered in the 3PL survey.

Reduce Total Landed andDistributed Costs

Increase Operational Flexibility andBecome More Demand Driven

Reduce Capital Costs, Head Countand Operational Expenses

Reduce Inventory in the Pipeline

0% 20% 40% 60% 80% 100%

ASEANAll Re ions

75%

83%

58%

67%

58%

67%

47%

75%

Figure 12: The Value to Shippers of More Strategic Relationships With 3PLs


10/16

Comparing costs of technology, such as use of RFID readersand tags, versus labor can be complex. Product trackingusing RFID costs approximately US$1 per RFID-chip plusthe cost of scanners, while industry studies have shown thatRFID solutions are only economically viable at around 5US-cents per RFID-chip. Unless a company is selling tobusinesses that require use of such technologies, they arenot necessarily cost-effective in low-cost countries. On theother hand, in Australia, where labor is relatively moreexpensive, a handful of warehouse staffers equipped withRF readers can do the work more cheaply than a largerlabor force using manual processes.

Figure 13 indicates that there is a measurable gap in theshippers perceptions of their 3PLs IT capabilities across thedifferent regions of the world surveyed in the 3PL study.The survey results indicate a higher level of satisfaction withthe 3PL IT services in the ASEAN region as compared withall other regions.

Underlying the IT concerns is the shippers need to obtainand share information. Integration is seen as a key enablerto these processes, but one that can be difficult to attain.Companies need integration they can rely upon. IT issuesare related to integration, not IT systems themselves, saysElectroluxs Bjorn Van Jensen. The lack of proper integrationamong some 3PLs internal IT systems has created a

backlash, with a number of ASEAN shippers reporting thedesire to bring their supply chain IT in-house.

Key Areas of IT Integration

An integrated IT platform that includes both internalintegration and external integration with 3PLs is veryimportant to shippers in the ASEAN region. The three keyareas of integration important to workshop participants are:order management (including WMS), transportationplanning and execution, and track and trace. To achievethese essential integrations, workshop participants discussedthree key measures.

First, a pre-requisite for an integrated platform is dataintegration, which allows accurate data to flow throughdifferent systems consistently and without boundaries.Second, IT processes must be in line with businessprocesses. Last but not least, shippers wish to have a kind ofalert service, so that when exceptions occur, the 3PLs systemis able to automatically send an alert which enables theshipper to prepare for the change, and re-arrange otherrelated activities.

Key IT Capabilities Shippers Look For - ASEANDifferences?

Shippers in the ASEAN region do not necessarily differ intheir expectations of 3PL IT capabilities, but IT isconsidered more important in some countries than others,workshop participants agreed. While 3PLs have multiplecapabilities, shippers are not necessarily willing to pay forthem. Especially in Asia, labor costs are quite low andtherefore IT is relatively more expensive. For example, sinceIndia has more people, it is sometimes less expensive to useadditional people than to pay for an IT capability. Further,with their high import duties, it is less expensive to do a lot

within India than to work with external parties.

Similarly, transport planning IT capabilities are available inVietnam, but customers there are not willing to pay forthem. 3PLs have the capabilities that companies look for inthe region, but what is the ROI for these capabilities? asksworkshop participant Bjorn Van Jensen, Vice President,Group Purchasing for Electrolux. This suggests that there isnot necessarily a gap in IT capabilities available, but a hugegap in what a customer expects to get for free and what3PLs are willing to give for free.

10

ASEAN Perspectives IT Capability Gap

0%

20%

40%

60%

80%

Customers Satised with3PL IT Capabilities

42%

3PL-Based IT CapabilitiesImportant

100%

88%

50%

86%

42%

89%

31%

89%

40%

92%

51%

93%

AllR

egions

North

America

Europe

Asia-

Pacic

Latin

America

ASEAN

Figure 13: Again This Year, There is a Measurable Gap Between

Customer Expectations and Perceptions of 3PL IT

Capabilities


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Strengths and Shortfalls of ASEAN 3PLs in IT

Capabilities

ASEAN shippers report a variety of shortfalls in the 3PLs ITcapabilities. As with All Regions respondents, the lack ofintegration among a 3PLs internal systems heads the list.

Because of the inflexibility that results, some ASEANshippers expressed the feeling that IT, which should enablebusiness processes, sometimes rules business processesinstead. Some struggle with whether to invest in directintegration of their internal IT with the 3PLs systems, orwait for industry standards to accomplish this. Thequestion is not whether there is a lack of IT capabilitiesavailable. The question is whether it is worth the investment

of infrastructure, says workshop participant Eric Cheong,Asia Logistics Leader, PerkinElmer.

Integrating with a 3PLs systems can also drive up the cost ofswitching providers one reason many 3PLs favor closeintegration with their shipper customers. In addition, manyshippers fear becoming overly dependent on their 3PLs andlosing flexibility. Large 3PLs in particular may offer more ITinfrastructure but less flexibility for alignment. Shippers arevery interested in standard integration or a commonplatform, which would reduce switching costs.

Another option is simply logging into the 3PLs system forinquiries. However, even when shippers opt to use the 3PLssystem, they must train their employees on how to operatethe new system. This becomes even more challenging forshippers who engage multiple 3PLs. This makes the cost ofswitching 3PLs relatively high in this case as well.

According to workshop participants, the capabilities ASEANCIOs would like to see from the 3PLs include: event-drivenmessaging, time-critical tracking for temperature-sensitiveproducts, automated reporting produced from 3PLsintegrated IT solutions, and evidence of clear cost

reductions resulting from integration with a 3PLs IT, such asthrough automated tendering. Another often-cited desire is

full IT functionality at a reasonable cost.

Participants also report some over-selling of IT capabilitiesby the 3PLs. ASEAN shippers are frustrated when 3PL ITcapabilities are exaggerated or the integration of the shipperand 3PL IT systems is described as fast and easy. Byclaiming their systems are already interfaced with aparticular brand of software and thereby negating how longit takes to really integrate data, these companies are doingthe industry a disservice and creating a huge perceptiongap, they say.

Instead, 3PLs should be straight forward in telling benefitsof the system and downfalls. 3PLs also need to realize thatnot all shippers want a full suite IT system, workshopparticipants report. Often they just want a basicwarehousing system and the option to choose from an a lacarte menu of IT options.

Figure 14 illustrates surveyed shippers perceptions ofvarious challenges with 3PL IT capabilities compared withthe All Regions respondents. The number one challenge forall is integration among internal 3PL systems.

In discussing 3PL IT capabilities, a distinction should bemade between the network logistics providers and non-network providers. Is the 3PL offering an integrated servicethat includes IT, or are IT capabilities added on top? Often,shippers expect IT services to be in place and to be a part oftheir service plan or agreement, even though they are notwilling to pay a premium to get them. Some companies arechoosing 3PLs based on their service offerings and rates andnot on the IT that they offer. In addition, shipperssometimes fail to enact the internal systems required to fullybenefit from the integration with a 3PLs IT.

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Inadequate Performance Reports

Lack of Integration Among Internal 3PL Systems

Lack of Sufcient Project Management Processes

Inability to Provide Sufcient Order/Shipment/Inventory Visibility

Inability to Quickly Provide Quotes for Special Services

0% 20% 40% 60%

All Regions ASEAN

55%

49%

42%

46%

38%

23%

38%

40%

26%

43%

Figure 14: Shippers Face a Number of Challenges With 3PL IT Capabilities


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Reasons for 3PL-Shipper Disconnect

Most 3PLs do not have a problem in offering basic servicessuch as warehousing services, workshop participantssuggest. Relatively speaking, however, too much attentionhas been put into the improvement of processes andsystems, while the people issues in many instances havebeen largely ignored. While recognizing the importance ofthe former, without capable people to do the job, shipperswould be less than satisfied with the services that 3PLsprovide.

Some 3PLs are seeking a more strategic role in shipperssupply chains, but shippers themselves would rather workwith consulting organizations that have expertise andexperience in this area. In ASEAN, the 3PLs are a lotyounger and this lack of maturity leads to differences inwhat they want to be and what shippers want them to be.

Risks of Supply Chain Disruption

Many 3PLs suffered losses during the economic crisis;

survival is often dependent upon their cost structure (fixedvs. variable costs). Even if there are no major disruptionsduring a downturn, inventories usually increase and 3PLsreceive deliveries at a lower frequency. If a key suppliergoes bankrupt then one has a problem, but thats why oneusually doesnt put all their eggs into one basket, notes

Andre opt Hof, Manager, Material Support, Embraer.

Consolidation within industries (e.g., mergers andacquisitions) impacts the shippers if multi-sourcingbecomes single-sourcing. Partnership is a kind of contractwhich serves as a mitigating strategy with risk-sharing and

profit/loss-sharing during supply chain disruptions, saysSteffano Battan, Director, Transportation Logistics Worldwide for ST Microelectronics.

Foreign exchange risk is a mechanical risk since only a fewcompanies trade in local currencies; most trade in USdollars and sometimes in Singapore dollars.

Overcoming Critical Logistics Barriers

Several challenges persist in intra-ASEAN trade, including:the multiple regulations in different countries, permitsrequired to cross borders, geographical limitations thatrequire use of slow ships instead of roads, barriers to theexchange of data, the need for inspection/customs clearancebetween countries, and modality issues. Several ASEANcountries have failed to provide efficient customs services.Most of the problems occur in the number and format ofvarious documentation required by the different countriescustoms departments as well as with their infrastructure andservice efficiency.

Companies in the ASEAN region deal with these logisticsbarriers because they have to in order to do business here.There are gray issues, as well as black and white issues. InEurope and North America, a certain standard is expected,but what is expected here in ASEAN?

ASEAN is not one country and is not borderless. Therefore,

a shipper needs to have warehouses and different businessmodels for every country. For example, in Malaysia andThailand, Philips Electronics is a registered company andsells within the country under their own license andregistration. But in Vietnam and Indonesia, they need aspecial model to survive, according to workshop participantPhilip Teo, Vice President, Regional Head of Logistics-Asiafor Philips Electronics. This may require an exporter withstrong local relationships, because otherwise existing tradebarriers within these countries would limit sales anddistribution.

Depending on what the demand is in certain countries,regulations can still interfere. Inspection differs based onvolume of goods moved and how customers want to buythem. Shippers may also encounter local prohibitions. Forexample, if a product has the international UL Certification,why does Asia require a CM Certification? Does a productwith an international certification still need to have a localcertification? The Free Trade Agreement in ASEAN is quiteeffective, but what about trading between China and

ASEAN? It becomes more complicated as taxes becomedifferent.

Eliminating barriers and unifying regulations, as was

accomplished in the European Union, will make doingbusiness in ASEAN seamless, but this will take time,workshop participants agreed.

Additional ASEAN Region Perspectives


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Sustainability

Sustainability is viewed as both an opportunity and aburden in the ASEAN region, since transportation modes inlogistics are a major cause of carbon emissions. Green is onthe agenda of many companies such as Motorola that spenda lot on air freight. Their business is affected by volumetricpackaging, and as a result, they try to make their volumemore dense, and in the process, save money as well.

Although some shippers in Europe consider carbonfootprint documentation to be a burden at the expense offocusing on needed improvement, Ian Thompson, Director,MDB Transportation, Motorola suggested that we end upspending effort on improving, not measuring.

Measurement takes time and money. Regulations force theshippers to perform in a certain way. Some shippers reportlooking into recycling to decrease costs and into powerconsumption of the products in standby mode. However, intheir operations (warehouses, etc.), they still do not have

the documentation of power consumption. It may requireregulations to stimulate this measurement practice acrosscompanies, but over all, this could help to decrease costs inthe supply chain.

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For both the ASEAN region and the overall results, the mostfrequently outsourced logistics activities tend to be thosethat are more transactional, operational, and repetitive.However, as heavier users of outsourcing, ASEAN responsesdiffer in key areas including the percentage of total logisticsspent on outsourcing, the somewhat lower rates of extremesuccess with outsourcing, and different continuing problemswith the 3PL services that are used.

The ASEAN responses to the economic crisis are similar tothose in All Regions, but ASEAN shippers report specificdifficulties, such as unpredictable demand, in highernumbers. The reduced demand many companies areexperiencing in the current economic environment providesan opportune time for ASEAN shippers to revisitoutsourcing decisions, evaluating each in-sourced andoutsourced logistics activity to determine its impact on cost,value, and quality of service.

The bulk of the 3PLs expertise in the ASEAN region lies in

logistics rather than 4PL services, but many 3PLs areseeking more strategic relationships with shippers. ASEANshippers are seeking 3PLs with expertise in their verticalmarkets. A larger percentage of ASEAN respondents (68%)than All Regions respondents (59%) believe that the currenteconomic crisis can be viewed as an Inflection Point torethink supply chain/3PL relationships.

An integrated IT platform which includes both internalintegration and external integration with the 3PLs is veryimportant to the shippers in the ASEAN region. Shippers inthe region do not necessarily differ in their expectations of

the 3PL IT capabilities, but IT is considered more importantin some countries than others. ASEAN shippers report avariety of shortfalls in the 3PLs IT capabilities. As with the

All Regions respondents, the lack of integration among a3PLs internal systems heads the list.

Other issues important to the ASEAN shippers include adisconnect between the 3PL and shipper priorities, supplychain risk, challenges to inter-ASEAN trade andsustainability.

Conclusion


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About Capgemini

Capgemini, one of the worlds foremost providers of

consulting, technology and outsourcing services, enables itsclients to transform and perform through technologies.Capgemini provides its clients with insights and capabilitiesthat boost their freedom to achieve superior results througha unique way of working, the Collaborative BusinessExperienceTM. The Group relies on its global deliverymodel called Rightshore, which aims to get the rightbalance of the best talent from multiple locations, workingas one team to create and deliver the right solution forclients. Present in more than 30 countries, Capgeminireported 2008 global revenues of EUR 8.7 billion andemploys over 92,000 people worldwide.

Capgemini Consulting is the strategy and transformationconsulting division of the Capgemini Group, with a team ofover 4,000 consultants worldwide. Leveraging its deepsector and business capabilities, Capgemini Consultingadvises and supports organizations in transforming theirbusiness, from strategy through to execution. Working sideby side with its clients, Capgemini Consulting craftsinnovative strategies and transformation roadmaps to deliversustainable performance improvement.

For more information, please visitwww.capgemini.com/consulting.

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About The Georgia Institute of Technology

The Georgia Institute of Technology, located in Atlanta, is a

leader in logistics and supply chain and logistics education.Through its School of Industrial and Systems Engineering(ISyE) and the Supply Chain and Logistics Institute (SCL),Georgia Tech is committed to serving logistics educationalneeds through its degree programs and its comprehensiveprofessional education program. Georgia Tech also conductsa fully accredited Executive Masters in InternationalLogistics (EMIL) program, a Supply Chain Executive Forumand a Leaders in Logistics Research Program. Globalinvolvement is facilitated through The Logistics Institute

Asia Pacific, a program in partnership with the NationalUniversity of Singapore.

For more information, please visit www.isye.gatech.edu andwww.scl.gatech.edu.

About Oracle

Oracle provides a complete set of capabilities that enableleading, global LSPs to streamline business processes,develop new offerings and keep customer service levelshigh.

Oracle Supply Chain Management applications arecomplete, open and integrated solutions that power theInformation-Driven Value Chain. The industrys mostcomprehensive portfolio of industry-specific supply chainapplications, Oracle SCM spans all aspects of the valuechain including planning, procurement, manufacturing,logistics and service, all with end-to-end supply chain

intelligence. With Oracle SCM, companies achieveoperational excellence, accelerate innovation and managerisk and compliance

Oracle (NASDAQ: ORCL) is the world's most complete,open, and integrated business software and hardwaresystems company.

For more information about Oracle, visit oracle.com.


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The Panalpina Group

The Panalpina Group is one of the worlds leading suppliers

of forwarding and logistics services, specializing in end-to-end supply chain management solutions andintercontinental air freight and ocean freight shipments.Thanks to its in-depth industry know-how and state-of-the-art IT systems, Panalpina provides globally integrated door-to-door forwarding services tailored to its customersindividual needs. The Panalpina Group operates a close-knitnetwork with some 500 branches in over 80 countries. In afurther 80 countries, it cooperates closely with partnercompanies. Panalpina employs about 13,500 peopleworldwide.

For more information please visit www.panalpina.com.

About The Logistic Institute Asia Pacific

Established in 1998 under the Global School House

Program, The Logistics Institute Asia Pacific (TLI AsiaPacific) is a collaboration between National University ofSingapore (NUS) and the Georgia Institute of Technology(GT). Modeled after The Logistics Institute (now known asSupply Chain and Logistics Institute) at GT, its vision is tobe Asia Pacifics premier institute nurturing logisticsexcellence through research, education and industryoutreach.

The Institute provides postgraduate and executive educationin logistics and supply chain management (SCM), notablythe Double Master Degree in Logistics and SCM and the

Executive Certificate in SCM. It also undertakes leading-edge research and development in supply chainengineering, technology and management in collaborationwith industry; and hosts a regular series of THINK Tablesthat brings thought leaders in research and industry todiscuss contemporary SCM issues, challenges and solutionsin a dynamic environment. Since 2003, TLI - Asia Pacificwas awarded the prestigious Asian Freight & Supply Chain

Award (AFSCA) for Best Education Course Provider forseven consecutive years.

For more information, please visit www.tliap.nus.edu.sg


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Dr. Robert de Souza

Executive Director

The Logistics Institute-Asia Pacific

Singapore

T: +65 6516 8984

[email protected]

Prof. Mark Goh

Director, Industry Research


Singapore

T: + 65 6516 [email protected]

Miti Garg

Research Engineer


Singapore

T: + 65 6516 4802

[email protected]

Dr. C. John Langley Jr.

Professor of Supply Chain Management

Georgia Institute of Technology

Atlanta, Georgia, USA

T: +1 404 894-6523

[email protected]

Michael Alf

Vice President

Capgemini Australia Pty Limited

Melbourne, Australia

T: +61 3 9613 3378

[email protected]

Sven Hoemmken

Corporate Head of Supply Chain Management

Panalpina Management Ltd.

Basel, Switzerland

T: +41 61 226 [email protected]

Poh Yuen Kam

Industry Business Unit - Travel and Transportation

Oracle Corporation

Singapore

T: +65 6436 1426

[email protected]

For more information please contact:

2009_3PL_ASEANFinal

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