Logistics in Southeast Asia have seen massive growth over the past year. Propelling the sector’s move forward is the COVID restriction inspired online shopping boom. With eCommerce and logistics needing to work in tandem to meet the increasing consumers’ needs, they continue to expand their footprints through the pandemic. 

Enterprises are seeking reliable logistics service providers to deliver and sustain their supply chain. ASEAN-based businesses in the transportation and delivery sector are also making monumental moves in the international market as Lalamove and J&T Express lockdown investment capital deals overseas. 

With international trade and infrastructure development also playing roles in this success, Southeast Asia’s total investment value more than tripled within the past year. The industry’s outlook is bright as its market is likely to achieve a value of over $55 billion USD. However, it is important that the sector optimises and prepares for the challenges weighing down their operations, even while growing to sustain a skyrocketing eCommerce industry.

The power behind the logistics boom

Southeast Asia’s burgeoning digital economy has positioned the region for extensive transformation. According to Asian Robotics Review’s data, it has a $2.5 trillion USD GDP economy, growing by 6% per year, with a literate population of more than 600 million and a smartphone penetration of 35% and more innovative information industries. Needless to say, the ASEAN digital ecosystem has established a viable space to support the eTail and delivery sectors’ fruition. 

According to the same report, about 20 to 30% of Southeast Asian Internet users purchased an item online in the last 30 days, closely matching the UK and US rates. In Indonesia alone, 58% of residents surveyed by McKinsey revealed they were using online grocery delivery services more since the outbreak, with 18% stating it was their first time using these services. As more people become accustomed to shopping online, opportunities to ease the eCommerce delivery and supply chain flow arise. 

Rapid urbanisation, infrastructure development and international trade also set the scene for logistics to thrive. As cities become more modernised, people will demand more efficient delivery and transport systems to support their growing needs. Southeast Asia’s openness to international trade and investment has made the region a hotspot for many global brands and an attractive place to do business. 

Because of the custom-free international exports and imports through the ASEAN free trade agreement, hundreds of multinational companies have established operations in the area and demand improved goods transportation services.

Companies making waves in logistics

Logistics businesses are answering the call to fulfil the growing eCommerce demand. The industry is constantly changing with new startups and established firms in stiff competition for new technology, human resources and funding. At the rate the market is moving, investment opportunities are likely to continue to escalate. 

Indonesian courier company J&T Express plans to go public in the US with an IPO that could raise more than $1 billion USD. The pandemic-charged online shopping surge and Indonesia’s need for delivery providers in a complex landscape of 7,000 islands and a 267 million population facilitated this push for investment. Similarly, Lalamove is also making plans. To compete in its intense logistics setting, the company recently accumulated $1.5 billion USD in series F funding to maintain its growth pace and lead the intra-city freight track competition. 

Challenges faced by the industry

Although the sector has experienced mass expansion over the past few years, its development is still in the infancy stage. Several factors are posing as detrimental to its progression. Southeast Asia encompasses a vast, decentralised landscape that is not fully paved out for logistics jobs as third-party services providers dominate the region. 3PLs (third-party logistics providers) in countries with many outlying islands struggle with creating efficient delivery systems that can reach customers in areas with poor signage or roadways. 

To stabilise its maturation, the logistics industry must develop solutions for creating sufficient visibility and transport control, fix the lack of warehousing and ports on smaller islands, and find a way to navigate the region’s complex terrain for faster and cheaper deliveries. The current cost may be high, but the sector is ripe for innovation. They need to refine their processes and management systems and reduce expenses by implementing tech solutions to succeed. With the support of route optimisation, predictive alerts, smart shipping, AI-based reverse and forward logistics, the industry can bypass challenges in fuel costs, speed of deliveries, last-mile fulfilment and other management issues. 

With eTailing and digital enterprises on the up and up, logistics providers intending to dominate must seize the market’s feasible opportunities. Startups and businesses in the eCommerce and logistics field have an embankment of potential developments to exploit. 

By adopting tech solutions, the market can grow significantly while tackling some of its biggest obstacles. Though there is much to develop with the heavy need for deliveries and supply chain management, the resolution to evolve, progress and succeed, will depend on logistics in Southeast Asia.