GreeN Growth - Asia-Pacific Business and Technology Report

usinesswww.biztechreport.comImportance of Logistics Industryfor Growing Economiesby Shamila JanakiramanLogistics involves thedelivery of products orservices for the clientwith assured quality andquantity.The logistics industry also depends onthe timeliness in which products are deliveredto a destination. Promptness is of utmostimportance, as delayed delivery canresult in significant losses to the recipientof the consignment in most cases. ‘Betterlate than never’ does not work well for thelogistics provider.The logistics industry depended previouslyon transportation more than anything.Nowadays, however, good infrastructureand record-keeping have beenimproved by advancements in technology,integration, globalization, legislation, andconfederations.The immense growth witnessed by theretail and manufacturing industries hasbrought warehousing and logistics facilitiescloser to towns and cities. Previouslysituated in remote areas near waterfrontsand rail tracks, these facilities are now increasinglybeing located within rural areasand city borders.Logistics forms an important part of thesupply chain and involves the planning,implementation, and effective forward andreverse flow of goods, services, and relatedinformation from origin to recipient. A logisticiancontrols the smooth functioningat every stage within legal boundaries enablinglogistics management.Logistics management is comprised ofmaterials management, channel management,physical distribution, and supplychain management. It also includes thewarehouse management system whichtakes control of stocks, and streamlines themovement of goods in the storage units.Logistics Industry TrendsCertain logistics activities can be outsourcedto third-party logistics (3PL) providers,which include transporters whoferry goods from company warehouses toa port or vice versa. Fourth-party logistics(4PL) providers use resources, capabilities,and technology to manage the entire logisticsprocess for a customer, unlike a 3PLChristos Georghiou | Dreamstime.comThe immensegrowth witnessedbythe retail andmanufacturingindustrieshas broughtwarehousingand logisticsfacilities closerto townsand cities.provider who takes care of only one function.A 4PL provider manages other 3PLs,including truckers, forwarders, and customhouse agents comprising the entiresupply chain.The immense growth in the logistics industry,especially in the emerging economiesover the past decade, ensures a brightfuture with 3PLs. Shipping logistics companieshave gained a lot in these regions,with a large contribution coming from3PLs such as transporters, warehouse facilityowners, and brokers in freight-relatedjobs.Non-asset-based logistics providers donot include transporters or couriers. Theterm refers to providers who undertakeconsultation services on packaging andtransportation, freight quoting, financialsettlement, auditing, tracking, customerservice, and issue resolution. These expertsdo not own any physical assets, but ratherpossess freight industry knowledge, informationtechnology know-how, and associatedassets.On-demand transportation is an evolvingfield within the 3PL industry. The ondemandmodel includes services like fulltruck load (FTL), hotshot (direct, exclusivecourier), next flight out, or commercialairline shipping, and international expedited.As this field caters to the specialneeds of clients, it comes at a premiumprice and hence is profitable for 3PL providers.Asian Logistics IndustryThe robust trade, economic growth, andliberalization policies followed by manyAsian countries have resulted in increasedtrade volumes. The ensuing increase intransportation, handling, and warehousingneeds has led to a demand for integratedlogistics solutions in the region.Increased globalization in manufacturingand other technological advancements hasmade companies focus more on core activities,and thus logistics activities have beenoutsourced as a cost-effective solution.In the case of India, the growing economynow requires a boost in its logisticsservices to keep the goods flowing at anincreasing rate. The logistics field is nowestimated at a value of more than $US14billion, with further growth envisioned.Logistics-related services in India encompasstransportation of goods by air, land,waterway, and railway.Air freight ensures rapid, safe, and evensame-day delivery of goods and is hencemuch preferred. India, which boasts anextensive network of roads, prefers touse them to transport household goods,machinery, and vehicles. Another costeffectiveand older mode of logistics is viathe railway transport system, which carriesvehicles, oil, and coal from one end ofthe country to the other in huge volumes.Shipment of goods on waterways is especiallyuseful in international shipments ofhuge quantities of goods like grains, oil, orsensitive articles like uranium.The logistics industry in India has grownfast, overriding major sectors like metalsand mining. Strategically located cities likeMumbai were earmarked for setting up logisticsparks with investments to the tuneof US$200 million. Export processing zoneshousing several companies ranging fromgarment to electronics have necessitatedthe need for a good logistics backbone tosupport the domestic market as well as internationaltrade.The Indian logistics industry is poised togrow annually at the rate of 15-20 percent,reaching a revenue outcome of US$385 billionby 2015. The market share of the organizedsector in logistics will also grow to 12percent by 2015, opine market analysts.Data reveals that nearly 110 logisticsparks covering 3,500 acres, set up at a costof US$1 billion, will become operational by2012. This will include huge warehousingfacilities developed by logistics companiesat an expense of US$500 million.China and Taiwan have been cooperatingin efforts to improve logistics techniques.Since the advent of online shoppingin China, the importance of deliveryfirms has grown manyfold. Taiwan’s logisticscenters are assisting Chinese logisticsservice providers nowadays. The hugepotential of China’s logistics scenariocan be proved by the overall turnover inFactoids• Logistics forms an important partof the supply chain and involves theplanning, implementation and effectiveforward and reverse flow ofgoods, services and related information.• In order to maintain a competitiveadvantage, logistics companies mustleverage available knowledge moreefficiently to evolve into innovationbasedlogistics service providers.2010, which was estimated at 110 trillionChinese Yuan (US$16.6 trillion). This representsa huge business opportunity forlogistics-related companies. The expectedincrease in China’s GDP will give a furtherboost to this industry.The logistics costs in China are high,yet they can easily be lowered. One hurdleChina faces in this industry is that there isno unified business tax system. Currently,a three percent business tax is levied ontransportation, loading and unloading,along with another five percent levy onwarehousing and distribution and othertaxes.In spite of the growing economy inChina, the logistics industry can be said tobe continuing to suffer, but all city governmentsunderstand the importance of logisticscenters for rapid urban development.Taiwanese logistics companies are preferredby Chinese clients over ones fromHong Kong and foreign enterprises for upgradingChina’s logistics sector.With the Chinese logistics businessscene as potentially lucrative as it is, severalTaiwanese companies have set up logisticscenters on land provided by Chineselocal governments. A food logistics parkwas established in Chengdu by the Hai-Pa-Wang Taiwanese seafood restaurant, forexample. Another cross-strait commerceand trade cooperation zone was set up inKunshan in Suzhou.Logistics operations can also be simple,as in the case of the Philippines, where buslines are used to carry goods in provincialoperations. Although not entirely dedicatedto carrying goods, almost all bus lines acceptpackages for delivery on their routes.The sender has only to deposit the packageat the nearest bus terminal and inform therecipient about the consignment.As buses operate between routes continuously,this localized logistics systemserves a huge population and may even bethe fastest mode of delivery. Perishableslike vegetables, fruits and flowers alsofollow this mode to reach urban marketsfrom villages in all parts of the world, oftenreaching their destination in the weehours of the morning.Continued from Page 31China, 20 percent of which is generated byhydroelectric power.However, analysts believe the main reasonfor the current power shortage is largelythe lower power prices which are being controlledto feed manufacturing units, therebypreventing hydroelectric power generationfrom being optimized. Drought is incidentalto the overall lowered production of hydroelectricpower in China, presently.Technology in LogisticsA systems-driven approach using advancedsystems to integrate and simplifylarge, complex operations is required tostreamline production activities up todelivery. A fully-integrated supply chainmanagement solution will help systemsintegration and management besides enhancingdecision support and visibility ofthe company’s worldwide inventory.Information technologies in the logisticsindustry include the application of datacollection technologies and the Internet.Data collection and exchange are criticalfor logistics information management andcontrol, as they can be leveraged to delivercustomers’ goods more accurately and efficiently.The bar code system and radiofrequency identification system (RFID) aredata collection technologies that are usedwidely for this.Companies rely on information technologyto enable integration, order and transportationmanagement and warehousemanagement. RFID technology is used totrack vehicles, pallets, and even smallerunits to gain greater visibility.Electronic data interchange (EDI), electronicordering system (EOS), logistics informationsystem (LIS), enterprise informationportals (EIP), and knowledge management(KM) are information technology elementsused in the logistics industry. Electronicdata interchange involves inter-companycomputer-to-computer exchange of businessdocuments in standard formats.A good logistics company integrates allthe supply chain functions ranging fromraw material sourcing and manufacturingto the distribution of finished goods. Thecompany has to control costs of transportationand inventory while working out strategiesto serve customers optimally withinset time periods and budgets.All this makes supply chain managementcomplex, and therefore companiesneed real-time visibility to gain optimal insightsinto the flow of goods from suppliersand even suppliers’ suppliers. Better visibilityreduces wait times, and helps manageinventory and costs. Different companiesneed different solutions designed accordingto the product, volumes involved, location,and so on.Global supply chain management canbe enhanced by systems integration andmanagement to provide a tight vigil onworldwide inventory and transportationexpenditure. Supply chain management,lean logistics which emphasizes waste reduction,inventory control, standardizedwork, and mistake-proofing are other requisitesof a good logistics provider. In orderto maintain competitive advantage, logisticscompanies must leverage availableknowledge more efficiently to evolve intoinnovation-based logistics service providers,say experts. A-PThe Road Map AheadChina has a very limited pathway aheadof it. It has to improvise and implementgreener practices of production as the presentheavy pressures on the limited water resourcesavailable for both irrigation and industrialproduction is creating a widespreadnegative impact. Alternative resources forindustries have to be found, since there aresuch a large number of industries involved.Economic growth at the cost of environmentdegradation is a non-progressiveroute. Sustained development will providea positive impact and better all-around resultsfor China. A-P34 | A-P BUSINESS & TECHNOLOGY REPORT A-P BUSINESS & TECHNOLOGY REPORT | 35