The Challenges of Freight Forwarding in South East Asia

Recently, Alien Logistics was invited to respond to an interview looking at the challenges which we felt were plaguing the industry. Our response was given a lot of notice because of the difference of the angle from which we evaluated the matters of contention within the world of freight forwarding.  Here is an excerpt of our response:

“Intra-Asia trade is bustling and many opportunities have arisen with more countries improving their infrastructure for cargo accessibility, namely Myanmar and the Indochinese region. As with all growing economies, corruption and extremely keen competition would no doubt be the plague of freight forwarders in South East Asia, but let’s take a look at 2 challenges which have a tremendous impact in the region:-

1.  Sustainable growth of the industry
   
2.  Maturity of service levels

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Environmentally and financially sustainable logistics is a challenge for operators in South East Asia (SEA) as the majority of cargo exported is agricultural or raw commodities and there is a high sensitivity to the cost of logistics and transportation. These types of cargo require large storage spaces, and lowest cost of transport which presses down the margins on vehicle operators who may thin out vehicle maintenance, buy older and less efficient trucks or hire lower skilled workers to save on costs. These actions in turn increase OSHA incidences, unlicensed warehousing and land clearing as well as vehicle pollution. The excessive competition also contributes to this downward spiral whereby instead of coming together to combine assets and efforts, newer logistics companies are mushrooming up to take a bite out of a seemingly infinite cake. But in reality, service providers are bidding against each other for the same customers and reducing profit margins in the hopes of winning over a new client while the end customers benefit with an ever diminishing cost to market. And the vicious cycle continues until the market collapses and operators with higher overhead costs are forced to sell off assets or merge on uneasy terms with another company to survive the low season. 

In the worse cases, warehouses fall into abandon as the owners are unable to sustain the financing and the property cannot be sold off as it is tied up with the bank; trucks and lorries lie rotting due to the same reasons and people get laid off. Hence, sustainable growth for the future of logistics in South East Asia needs to be planned carefully around the leveraging on assets available in the industry and a development of service quality which would – over time – switch over shippers’ mentality from going for the lowest price irrespective of service levels, to working with partners who manage their logistics like true partners.

" The excessive competition also contributes to this downward spiral whereby instead of coming together to combine assets and efforts, newer logistics companies are mushrooming up to take a bite out of a seemingly infinite cake. "

This brings us to the issue of the maturity of service levels in the industry. The logistics industry in South East Asia seems to have taken a different growth path from other regions in the world, seemingly to revolve around speedy response times and low pricing rather than accurate and professional service.  This has created a market which thrives on low pricing, and an amazing resilience to poor service quality. So, a majority of customers make do with frustrations and poor planning to maintain low transportation costs whereas, with proper professional advice and working together with the customer (as opposed to merely fulfilling orders) to plan for better & more efficient logistics would have created more savings through a smoother, more streamlined workflow.

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Alien Logistics (www.alienlogistics.com) which is an international freight forwarder based in Malaysia seeks to address these issues in the way we do business. 

• By focusing on our core strengths of logistics consultation, planning and project management, we aim to improve our own customers’ experience in planning their production flow and time to market; 
• By leveraging on existing resources which are well-run and vetted prior to establishing a working relationship, we aim to reduce our carbon footprint while achieving operational efficiencies via an interactive relationship with our asset-based partners. 

To date, this strategy has seen a great deal of success whereby our customers have grown accustomed to a different level of service quality and deem our team as an integral part of their operations."