Third-party contract logistics (3PLs) is big business. Big, global business. Until last year Europe was the leading market for global 3PLs, but it has now been overtaken by Asia Pacific. As Asia Pacific has become the hub of the world’s 3PL business, Singapore has emerged to be Asia Pacific’s leading hub, with 20 of the world’s top 25 logistics companies having either a regional or a global headquarters located there. In recent years the Singapore government has recognized this and begun to push investments into logistics, citing Singapore’s superb geographical location and ease of access, plus its ease of doing business, as good reasons for doing so.
But when it comes to logistics and shipping cargos, it can be a big cost center if not done right. Consider some of the numbers around the logistics industry. The global air freight logistics industry is expected to grow at just 2.1 percent in the five years leading up to 2018, while 80 percent of transport and logistics company CEOs say that they are engaged in implementing cost reduction initiatives at this time.
The logistics business has a big element of risk of course, so companies need comprehensive insurance policies to cover them, and these insurance premiums are increasing all the time. Similarly, unregulated driving and fluctuating fuel prices continue to impact operating margins for companies with fleets of delivery vehicles. Research shows that the average net margin for Class 1 and Class 2 truck fleet carriers is under 4 percent.
So even in the face of ongoing globalisation, declining trade barriers and western investment continuing to flow into Asia Pacific, the logistics and fleet management sector still faces challenges in terms of growing revenues. Typically fleet management companies have to overcome three key factors to be sustainably successful – the cost of fuel and fuel management, insurance, and the cost of delivering goods in their region. Traditional approaches to these factors are not really working now – so organizations must look to technology to help them drive cost reductions.
What is the landscape in Asia Pacific and what is next?
Another interesting statistic is that trade centered around Asia will comprise nearly 40 percent of total global trade by 2028, meaning that it is a good time for Asia Pacific countries to focus on making their logistics sectors as efficient as possible. I have worked in the technology space in Asia Pacific for 20 years, and one of the key developments I have observed in the past 5 years or so is that companies are looking to manage route calls a lot better. They have identified a need to maximize fuel efficiency, so route management has become super-critical.
Companies transporting goods need to know how to get the most effective route they can – how is the weather, is there piracy en route, given that fuel costs did drop noticeably recently, how can we now ensure lower insurance costs and so on. And technology can help them with all these things using fleet management solutions, machine to machine (M2M) tools, VSAT satellite connectivity and more.
So why Singapore?
As a case study for a logistics hub, Singapore simply has lots of factors in its favour. It has been ranked as the number one logistics hub in Asia by the World Bank, it is strategically placed among all of Asia’s regional shipping lanes and boasts a world class infrastructure; Changi International Airport services 6,100 flights per week to 210 cities in 60 countries and handles around 2 million tons of cargo. Factor in that Singapore is also known for being at the forefront of developing cutting edge technologies, and it is an attractive proposition.
Where can technology make immediate differences?
At present, running a fleet carries with it certain prohibitive costs that logistics organizations are always seeking to reduce. For example, in addition to the previously mentioned net margin of 4 percent for running a fleet of trucks, it also costs 28 to 30 percent of overall operational costs for insurance and 5 percent of the same for fuel. With that in mind, transport and logistics executives are looking to digital transformation to make reductions; fleet control, driver behaviour and customer experience are three areas of focus where Internet of Things (IoT) and M2M solutions such as in-depth data analytics and telematics can have a marked impact on operational efficiency. A logistics company with a smart, connected fleet can enjoy 2 to 3 percent savings quickly.
Real-world benefits to be had
We know this because we see Orange customers reaping the benefits of digitally transforming their fleet management. We help organizations utilize real-time tracking and reporting solutions for supply chain management, transport and logistics and have over 10 years’ experience in fleet management and geo-tracking solutions. One customer deployed Orange solutions to monitor over 48,000 trips made by its fleet, covering over 400,000km, and had access to precise insights of each vehicle’s location and driver behavior at all times – ensuring passenger safety, timely dispatch of vehicle support during unexpected incidents and improved productivity.
Technology is having a profound impact on the way logistics and fleet companies operate and thrive, and as the IoT and M2M technologies continue to become mainstream, it can give companies the competitive edge and efficiencies they are looking for.
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