Abstract
Research Overview
Inadequate Infrastructure Poses a Multitude of Problems
The third-party logistics (3PL) market in the Association of Southeast Asian
Nation (ASEAN) is gradually gaining ground due to the growing need for
companies to cut costs and focus on core competencies. The removal of trade
barriers between ASEAN member countries is creating strong opportunities for
3PL service providers and helping them offer more comprehensive and integrated
services while encouraging multinational companies (MNCs) to increase
investment in the region. Free trade also eases the burden of procuring raw
materials and intermediate goods elsewhere, driving manufacturing companies to
be more cost-competitive and enjoy economies of scale. However, these
developments are possible only if infrastructure in ASEAN countries -- such as
roads, communications, ports, and airports -- expands at a corresponding pace.
This may not happen uniformly as the levels of development in the region
differ and countries with relatively poor infrastructure such as Indonesia,
Thailand, and the Philippines are likely to face greater difficulty in
addressing logistics-related challenges. Thus, the success of the ASEAN 3PL
market is very much dependent on the rate of infrastructure development in the
region.
Increasing Foreign Investment: Gateway to the ASEAN Trading Zone
The ASEAN region presents a highly attractive investment destination to
companies. The creation of the ASEAN Investment Area (AIA) has not only
ensured a free flow of investments into the region, but has also fully
exploited the advantages offered by these countries to maximize efficiency.
Southeast Asia is well on its way to economic recovery and there has been a
significant rise in manufacturing supply from this region to the global
market. "With foreign investment increasing in the ASEAN region, there is
likely to be a phenomenal increase in the need for 3PL in the future," says
the analyst of this research service. "The shift of many manufacturing
companies to the ASEAN region indicates that 3PL is here to stay in the
region."
There is also a growing trend among MNCs in the principal country of ASEAN to
pressurize affiliates in other Southeast Asian nations to outsource their
logistics to 3PL service providers and focus on their core business instead.
This is likely to promote market growth further and is expected to be one of
the major drivers of the 3PL industry in Southeast Asia.
Focus on Core Competencies and Higher Logistics Requirement Accounts for Increased Demand
The trend among companies in developed countries is to focus on their core
competencies and outsource all non-core activities to professionals with
expertise in these business functions. Manufacturing companies that take
advantage of the resources of such professionals with proven domain expertise
can not only enjoy higher efficiency, but also achieve cost reduction in the
long run.
The increasingly higher requirements of the supply chain such as the
availability of the just-in-time (JIT) delivery system has further encouraged
manufacturers to outsource logistics activities due to their limited expertise
in supply chain management as well as the need to maintain cost
competitiveness. "Improved logistics can considerably increase the
competitiveness of companies, especially in time-based competitive industries
such as electronics or electrical products," says the analyst. "The ability to
utilize existing resources effectively and maximize efficiency is driving
businesses to identify this key area for improvement."
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