Southeast Asia represents an economy of over 600 million people and a GDP of 2.4 trillion USD. According to the international research firm Frost & Sullivan, Indonesia’s compound annual growth rate is predicted to be 15.4% till 2020. Lower production costs, massive government spending, increasing disposable income of a growing middle class, along with an expanding e-commerce sector, are the leading cause of the region’s growth.
The rapid pace of urbanization is estimated to double the consuming class to 163 million households by 2030. This drives growth in consumer goods, retail, and consumer services sectors, and creates a need for investments in infrastructure and real estate. An estimated $7 trillion in investments into infrastructure, housing, and commercial space will be required.
With such growth of the economy predicted, it is no surprise that the businesses of the region are gearing themselves up for a massive rise in demand. In such a case the logistics sector of the country would also require to step up their game. The budding nature of the economy means that there are no footprints to follow when it comes to ramping up the supply chain. Each industry needs to figure out its own way of optimizing logistics in order to increase their productivity.
Customer Expectations from Supply Chain Businesses
Having said that, businesses need to understand that supply chain and logistics management within the region also depends on a number of factors, such as growing consumer demands and the evolving market trends.
- Rising Competition in Omnichannel Selling
With the tremendous growth of E-commerce in the region, brick-and-mortar sellers too have stepped up to embrace omnichannel and introduced online storefronts. The average customer is spoilt for choice between hundreds of online sellers under multiple categories, pushing supply chain enterprises to optimize delivery operations for maximum customer satisfaction.
- Same-Day Delivery Expectations
The customer’s expectations for express deliveries, especially same-day and two-day deliveries are sky-rocketing in the region, and it has become almost imperative for E-commerce and delivery businesses in Southeast Asia to keep this promise of same-day or express delivery. To add to it, the customers expect not only fast, but specific time-slot based deliveries that suit their schedules.
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- Free of Cost Shipping
Gone are the days when the customer would be willing to pay a shipping fee to have the convenience of doorstep deliveries. With the number of shopping and delivery options available, the customer expects free of cost shipping, as much as possible. Free shipping means hassle-free and more economic shopping for the customer, but in order to be able to offer free shipping to customers and be profitable, businesses need to find ways to reduce operating costs.
- Demand for greater transparency
As urbanization and smartphone penetration continues to rise in Southeast Asia, the majority of shoppers are becoming more and more tech-savvy. The digitally-advanced customer expects more transparency from sellers about their order status, and wants to know when a package will arrive, who will carry it, and whether it is being transported safely and on time. Visibility has become a necessity rather than comfort or luxury.
With the growing customer expectations and changing market dynamics, here are a few questions that every business is asking about its supply chain:
1. What are the challenges and opportunities of the supply chain in S.E. Asia market?
Even though the Southeast Asian market provides excellent growth potential owing to an unsaturated market, the still-developing economy brings its own set of challenges. The different maturity levels of development mean that organizations would need to utilize different supply chain strategies to adhere to the different standards prevalent in the individual markets.
Research by Google and Temasek Holdings further highlights the region’s potential, projecting that the e-commerce market could grow from US$5.5 billion in 2015 to US$88 billion in 2025, with Indonesia comprising 52 percent of the market.
Such rapid expansion would mean a tremendous market for the logistics sector, but it would also mean the pressure of consumer expectation, increase in competition and lack of customer loyalty. With logistics being the key differentiating factor between e-commerce companies, organizations need to focus on strengthening their last-mile delivery services.
With online sales skyrocketing and manufacturers migrating into the region, the logistics sector is all set to boom in this region. Indonesia’s transport and logistics sector have experienced double-digit growth for over a decade, and this trend is expected to continue. With challenges and opportunities galore, the logistics sector needs to look at automation to increase its productivity.
2. Why do I need automation in my supply chain?
With the logistics sector all set to boom in Southeast Asia, the challenges of the industry will grow many-fold as well. As the demands from customers increase, so will the pressure on businesses to serve consumers and maintain their standards.
Imagine trying to deliver 100 units of furniture. The decision-maker needs to consider — the cost contract for different vehicle types, types of furniture that can or cannot be delivered together, which service associate should be assigned for assembling these units of furniture, addresses and timings of the loading hub along with real-life constraints of traffic conditions and fuzzy delivery addresses.
With the region expecting a huge surge in the economy, and companies anticipating a spike in the orders, it becomes virtually impossible for the human mind to consider all the above-mentioned factors. Automation and the use of AI have thus become imperative for businesses. Companies can no longer afford to simply invest more in the human capital, the need of the hour is to automate operations and reduce human dependencies.
3. What are the potential impacts of automation on the supply chain?
Automation can help supply chains in every leg of the process. From optimized route planning to efficient last-mile delivery, automation has the potential to revolutionize the entire supply chain operation. 3D Packing, sales beat optimization, and real-time fleet tracking are just a few ways in which automation is changing the game.
Approximately 24% of Indonesia’s GDP is spent on logistics. Automating the supply chain can help businesses in cutting costs and increasing efficiencies. Automation also promises to minimize human dependency which can be a boon for the Southeast Asia region which is struggling with its shrinking labor force.
The real benefit of automation, however, is none of these tangible aids that it provides to businesses. AI-based decision-making engines can actually help the top management in supply chains in making better logistics choices. Using historical data for future projection, AI can unlock many secrets when it comes to optimizing resources or understanding the customers.
4. Can automation integrate with my existing system?
As discussed above, the emerging businesses of Southeast Asia don’t have standardized processes. Each business has its own system and technology solutions need to be integration-friendly for a smooth transition. New-age logistics tech platforms are Cloud-based, and easy to implement and can readily combine with the existing system, and work within restrictions provided by specific companies.
These SaaS solutions are also highly scalable, as they work on a pay-as-you-go model. These platforms even offer dedicated change management teams that work with the on-ground resources of the company to ensure a smooth transition to the new platform.
About Locus AI and Deep learning
Locus is a logistics automation and decision-making engine that uses deep learning and proprietary algorithms to automate every mile of the supply chain and minimize the human dependency in decision making.
At the heart of our products is heuristic technology that is close to real life and takes into account unpredictable on-ground factors. Locus’ AI-driven logistics optimization that accounts for real-world on ground scenarios and business constraints are modeled to continuously adapt and improve.
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This post was authored by: Sreshtha Das