Service Logistics Market In Sea
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SE Asia Service Parts Logistics Market Solidiance evaluates the key trends in service parts logistics industry in S. E. Asia July 2009
Service Parts Logistics Market Outlook Solidiance evaluates the key trends in service parts logistics industry in S. E. Asia The Service Logistics business (a.k.a aftermarkets business) in Asia is on a high growth trajectory, fuelled by ongoing shift of OEM’s manufacturing towards low cost destinations in Asia. While outsourcing service logistics to 3PLs has been going on for several years in key industries such as automotive, an evolution in terms of service offerings such as integrated or customized solutions for different industries is gaining traction. Industry players have understood that service logistics can complement revenue realization rather than being a cost factor - thereby many firms are now trying to transition their after sales from a cost center to a P&L. Solidiance examined 6 key industries and interviewed over 125 executives - logistics managers and executives in each vertical to understand how they are currently working with 3PLs, what are the bottlenecks and issues they face in their related Service Logistics activity and what would be the best improvements they would like to see. Targeted industries were Aerospace, Electronics, Telecom, Industrial equipment, Medical equipment and Semiconductor equipment across 6 countries in South East Asia: Singapore, Malaysia, Thailand, Indonesia, Philippines and Vietnam.
“
The results of this study affirm the demand for outsourcing service logistics solutions, complete with interesting insights across key customers and countries in S.E Asia (SEA). Logistics companies are looking at this trend with a growing interest and are developing new offers to fit their clients’ needs and help them reduce their costs.
”
Damien Duhamel – Managing Director, Solidiance
2
Service Parts Logistics Market Outlook Solidiance evaluates the key trends in service parts logistics industry in S.E.Asia
Service Logistics Market in S.E.Asia Outsourced Service Logistics (warehousing only)
Findings show that eighty three percent (83%) of the Service Logistics activity in the SEA occurs in Singapore and Malaysia (Penang). Singapore has a 60% share of the SEA market primarily due to its regional hub status. Further, the estimated total service logistics market in SEA is circa Eur. 410 M (FY 2008) (in-source & outsource). Semiconductor, Telecom and namely the Electronics industries are the fastest growing and most outsourced industries, the latter being the most attractive industry in terms of growth and size. Further, the split in terms of percentage between in sourced and outsourced market revenue is similar among all the sectors in Singapore and the rest of the countries in South East Asia. A notable exception is the aerospace industry where all the companies interviewed in Malaysia in-source the warehousing, mainly for IP purposes, which is still a important issue in this sector. Total Service Logistics by Countries in 2008
• Percentage of companies outsourcing warehousing in Singapore • Percentage of companies outsourcing warehousing in Malaysia and Thailand Source: Solidiance research and team analysis, 2008 The chart above shows the percentage of warehousing outsourced for each of the 6 industries examined in this study. Industrial equipment industry is the sector where the proportion for outsourcing is clearly the lowest compared to the other industries
Source: Solidiance research and team analysis, 2008 The chart above represents the value of Service Logistics market in 2008 in 6 main countries in South East Asia. In this region the total service logistics market is circa EUR 410 M. (insource and outsource)
3
Service Parts Logistics Market Outlook Solidiance evaluates the key trends in service parts logistics industry in S.E.Asia
Outsourcing is favoured by majority of the industries The Aerospace industry is characterized by large warehouse requirements and regulations (FAA). In this sector, the majority of companies in Singapore are outsourcing their warehousing to 3PLs. The needs of industry players are highly specialized, and 3PLs need strong industry knowledge in order to serve them.
The Medical sector is characterized by high value parts and a relatively small size in the after sales business in South East Asia. •In this industry, players rely on 3PLs for warehousing and customized solutions to optimize their supply chains. Building efficient local networks is a key point, but the reactivity of the supply chain is another.
• For example, 3PLs must be able to appropriately handle large and unconventionally shaped parts, and be able to appropriately store carbon fibre parts which are temperature sensitive.
•In some cases, special parts available in warehouses on other continents (US, Europe) must be supplied within 24h to the medical equipment manufacturer in Asia because its clients (e.g. hospitals) sometimes require interventions within 2 to 4 hours. Repairs are in-sourced by a vast majority because of the level of technical knowledge required to handle the repair of specialized equipment.
• Most of the companies in this sector to rely on 3PLs expertise for warehousing and transportation so that they can concentrate on repairs. However, the key concerns – challenges for outsourcing will include - confidentiality and IP related issues. The Electronics and Telecom sectors outsource their warehousing to 3PLs in a larger proportion than the other industries.
In the Semiconductor equipment industry, companies also believe outsourcing is advantageous because 3PLs are better equipped with the latest technologies and know how to handle logistics efficiently.
In the Electronics industry, the existence of multiple subsectors results in large volumes of finished goods and spare part movement. Outsourcing is therefore the best way to improve efficiency of Service Logistics in this industry.
•Relying on local 3PLs is the most preferred option for several companies in this industry, a major reason being that it allows them to handle customs issues faster and with a stronger “last mile” reach than the global logistics companies.
• As a result, most of the companies prefer to outsource their warehousing component to optimize cost, especially in Singapore.
The Industrial equipment industry differentiates itself from the other sectors by leaning more towards in-sourcing •This trend is especially true in Malaysia and Thailand where an average of 6% of companies are outsourcing this part of their service logistics.
Telecom players in Singapore mainly prefer outsourcing their warehousing to 3PLs in order to be more efficient in ensuring tight control in safety & security measures for telecom equipment. • Moreover, 3PLs are able to customize and adapt solutions in pace with the fast changes in the telecom industry. Hence companies vie for long term partnerships/service agreements with 3PLs to optimize their long term contracts.
•Most of those companies are manufacturing heavy industrial products. However, in the sub-segment of control automation companies are keen on using 3PLs for managing their warehousing. 4
Service Parts Logistics Market Outlook Solidiance evaluates the key trends in service parts logistics industry in S.E.Asia
Key trends to watch out in 2009 The Service Logistics business is increasingly shifting towards outsourcing not only transportation, but also warehousing. Key customer discussions confirm this trend of growth grow despite the current crisis, primarily driven by businesses from emerging countries such as China, India and Indonesia. The current financial turmoil should have a “positive” effect on after sales services, especially Service Part Logistics since customers will tend to extend the life cycle of their equipment rather than buying new products.
“
The biggest growth opportunity is here in Asia for us and for many other companies. It's growing faster than the business as a whole, and we believe it will continue to grow substantially faster than the overall business which we expect to grow in high single digits annually especially growth in terms of demand for logistical services from the healthcare and aviation industries – across both mainstream and service logistics. Global CEO, Global Supply Chain & Logistics Major
5
”
Service Parts Logistics Market Outlook Solidiance evaluates the key trends in service parts logistics industry in S.E.Asia Solidiance is a marketing and innovation strategy consulting firm with focus on growth in Asia Pacific. We are devoted to working side-by-side with our clients to outpace the competition, close gaps in growth and deliver breakthroughs in performance and profitability. Our Asia focus provides our clients with a better understanding of intrinsic regional issues. To subscribe to further white papers and to learn more about Solidiance please visit: www.solidiance.com
Mark Lee - Principal
Mickael Feige – Consultant
Mark is a Principal based in the Singapore office with more than eight years of consulting experience. Mark has a strong focus on quantitative based projects. Previous roles include being regional manager for Synovate Business Consulting in Singapore, handling projects for MNCs across Asia, focused predominantly on the logistics and supply chain space across industries. Mark managed most survey-based projects for MNCs where he advised international companies on market entry, customer segmentation prioritization and growth strategies. He also has ample experience in qualitative research, having managed various multi-country projects that required a combination multiple approaches in order to customize results to meet the clients’ needs. Having worked for five years in the M&A team of a Korean Conglomerate in Spain, Mark also has vast experience with mergers and acquisitions in Europe, Asia and Africa. Mark is fluent in Korean, English and Spanish. He holds a BS in mechanical engineering, from the Worcester Polytechnic Institute (United States) and a MBA from the University of Rochester.
China Suite 801 Hong Kong Plaza 283 Huaihai Road Central Shanghai 200021 Tel: +86 21 5168 8905
Mickael Feige is a Consultant based in the Thailand office with more than five years of consulting experience. He has led over 50 national and multi-regional engagements for Fortune 500 clients across Europe, Japan and south-east Asia. Prior to joining Solidiance, Mickael was managing investments projects in Europe for large Japanese MNCs. With strong experience in combining numerical and qualitative analytics, Mickael specializes in customizing advanced market segmentation and size forecasting models to help clients identify and prioritize market opportunities to develop growth strategies. Mickael has rich experience across supply chain and logistics industry throughout Europe and Asia Pacific, including key industries such as medical equipment, manufacturing and automotive. He combines sector and cross-industry best practice, leveraging this knowledge to help clients develop successful market strategies. He holds a Bachelor in marketing (with Honors) from the London Metropolitan University and a MBA from the Institute of Political Science of Lyon.
Singapore
Thailand
Suite 17-01 High Street Center 1 North Bridge Road Singapore 179094 Tel: +65 6408 8208
[email protected] 6
Suite 32-05 Interchange 21 399 Sukhumvit Road Bangkok 10110 Tel: +66 (0)2 660 3638
Service Parts Logistics Market Outlook Solidiance evaluates the key trends in service parts logistics industry in S. E. Asia The Service Logistics business (a.k.a aftermarkets business) in Asia is on a high growth trajectory, fuelled by ongoing shift of OEM’s manufacturing towards low cost destinations in Asia. While outsourcing service logistics to 3PLs has been going on for several years in key industries such as automotive, an evolution in terms of service offerings such as integrated or customized solutions for different industries is gaining traction. Industry players have understood that service logistics can complement revenue realization rather than being a cost factor - thereby many firms are now trying to transition their after sales from a cost center to a P&L. Solidiance examined 6 key industries and interviewed over 125 executives - logistics managers and executives in each vertical to understand how they are currently working with 3PLs, what are the bottlenecks and issues they face in their related Service Logistics activity and what would be the best improvements they would like to see. Targeted industries were Aerospace, Electronics, Telecom, Industrial equipment, Medical equipment and Semiconductor equipment across 6 countries in South East Asia: Singapore, Malaysia, Thailand, Indonesia, Philippines and Vietnam.
“
The results of this study affirm the demand for outsourcing service logistics solutions, complete with interesting insights across key customers and countries in S.E Asia (SEA). Logistics companies are looking at this trend with a growing interest and are developing new offers to fit their clients’ needs and help them reduce their costs.
”
Damien Duhamel – Managing Director, Solidiance
2
Service Parts Logistics Market Outlook Solidiance evaluates the key trends in service parts logistics industry in S.E.Asia
Service Logistics Market in S.E.Asia Outsourced Service Logistics (warehousing only)
Findings show that eighty three percent (83%) of the Service Logistics activity in the SEA occurs in Singapore and Malaysia (Penang). Singapore has a 60% share of the SEA market primarily due to its regional hub status. Further, the estimated total service logistics market in SEA is circa Eur. 410 M (FY 2008) (in-source & outsource). Semiconductor, Telecom and namely the Electronics industries are the fastest growing and most outsourced industries, the latter being the most attractive industry in terms of growth and size. Further, the split in terms of percentage between in sourced and outsourced market revenue is similar among all the sectors in Singapore and the rest of the countries in South East Asia. A notable exception is the aerospace industry where all the companies interviewed in Malaysia in-source the warehousing, mainly for IP purposes, which is still a important issue in this sector. Total Service Logistics by Countries in 2008
• Percentage of companies outsourcing warehousing in Singapore • Percentage of companies outsourcing warehousing in Malaysia and Thailand Source: Solidiance research and team analysis, 2008 The chart above shows the percentage of warehousing outsourced for each of the 6 industries examined in this study. Industrial equipment industry is the sector where the proportion for outsourcing is clearly the lowest compared to the other industries
Source: Solidiance research and team analysis, 2008 The chart above represents the value of Service Logistics market in 2008 in 6 main countries in South East Asia. In this region the total service logistics market is circa EUR 410 M. (insource and outsource)
3
Service Parts Logistics Market Outlook Solidiance evaluates the key trends in service parts logistics industry in S.E.Asia
Outsourcing is favoured by majority of the industries The Aerospace industry is characterized by large warehouse requirements and regulations (FAA). In this sector, the majority of companies in Singapore are outsourcing their warehousing to 3PLs. The needs of industry players are highly specialized, and 3PLs need strong industry knowledge in order to serve them.
The Medical sector is characterized by high value parts and a relatively small size in the after sales business in South East Asia. •In this industry, players rely on 3PLs for warehousing and customized solutions to optimize their supply chains. Building efficient local networks is a key point, but the reactivity of the supply chain is another.
• For example, 3PLs must be able to appropriately handle large and unconventionally shaped parts, and be able to appropriately store carbon fibre parts which are temperature sensitive.
•In some cases, special parts available in warehouses on other continents (US, Europe) must be supplied within 24h to the medical equipment manufacturer in Asia because its clients (e.g. hospitals) sometimes require interventions within 2 to 4 hours. Repairs are in-sourced by a vast majority because of the level of technical knowledge required to handle the repair of specialized equipment.
• Most of the companies in this sector to rely on 3PLs expertise for warehousing and transportation so that they can concentrate on repairs. However, the key concerns – challenges for outsourcing will include - confidentiality and IP related issues. The Electronics and Telecom sectors outsource their warehousing to 3PLs in a larger proportion than the other industries.
In the Semiconductor equipment industry, companies also believe outsourcing is advantageous because 3PLs are better equipped with the latest technologies and know how to handle logistics efficiently.
In the Electronics industry, the existence of multiple subsectors results in large volumes of finished goods and spare part movement. Outsourcing is therefore the best way to improve efficiency of Service Logistics in this industry.
•Relying on local 3PLs is the most preferred option for several companies in this industry, a major reason being that it allows them to handle customs issues faster and with a stronger “last mile” reach than the global logistics companies.
• As a result, most of the companies prefer to outsource their warehousing component to optimize cost, especially in Singapore.
The Industrial equipment industry differentiates itself from the other sectors by leaning more towards in-sourcing •This trend is especially true in Malaysia and Thailand where an average of 6% of companies are outsourcing this part of their service logistics.
Telecom players in Singapore mainly prefer outsourcing their warehousing to 3PLs in order to be more efficient in ensuring tight control in safety & security measures for telecom equipment. • Moreover, 3PLs are able to customize and adapt solutions in pace with the fast changes in the telecom industry. Hence companies vie for long term partnerships/service agreements with 3PLs to optimize their long term contracts.
•Most of those companies are manufacturing heavy industrial products. However, in the sub-segment of control automation companies are keen on using 3PLs for managing their warehousing. 4
Service Parts Logistics Market Outlook Solidiance evaluates the key trends in service parts logistics industry in S.E.Asia
Key trends to watch out in 2009 The Service Logistics business is increasingly shifting towards outsourcing not only transportation, but also warehousing. Key customer discussions confirm this trend of growth grow despite the current crisis, primarily driven by businesses from emerging countries such as China, India and Indonesia. The current financial turmoil should have a “positive” effect on after sales services, especially Service Part Logistics since customers will tend to extend the life cycle of their equipment rather than buying new products.
“
The biggest growth opportunity is here in Asia for us and for many other companies. It's growing faster than the business as a whole, and we believe it will continue to grow substantially faster than the overall business which we expect to grow in high single digits annually especially growth in terms of demand for logistical services from the healthcare and aviation industries – across both mainstream and service logistics. Global CEO, Global Supply Chain & Logistics Major
5
”
Service Parts Logistics Market Outlook Solidiance evaluates the key trends in service parts logistics industry in S.E.Asia Solidiance is a marketing and innovation strategy consulting firm with focus on growth in Asia Pacific. We are devoted to working side-by-side with our clients to outpace the competition, close gaps in growth and deliver breakthroughs in performance and profitability. Our Asia focus provides our clients with a better understanding of intrinsic regional issues. To subscribe to further white papers and to learn more about Solidiance please visit: www.solidiance.com
Mark Lee - Principal
Mickael Feige – Consultant
Mark is a Principal based in the Singapore office with more than eight years of consulting experience. Mark has a strong focus on quantitative based projects. Previous roles include being regional manager for Synovate Business Consulting in Singapore, handling projects for MNCs across Asia, focused predominantly on the logistics and supply chain space across industries. Mark managed most survey-based projects for MNCs where he advised international companies on market entry, customer segmentation prioritization and growth strategies. He also has ample experience in qualitative research, having managed various multi-country projects that required a combination multiple approaches in order to customize results to meet the clients’ needs. Having worked for five years in the M&A team of a Korean Conglomerate in Spain, Mark also has vast experience with mergers and acquisitions in Europe, Asia and Africa. Mark is fluent in Korean, English and Spanish. He holds a BS in mechanical engineering, from the Worcester Polytechnic Institute (United States) and a MBA from the University of Rochester.
China Suite 801 Hong Kong Plaza 283 Huaihai Road Central Shanghai 200021 Tel: +86 21 5168 8905
Mickael Feige is a Consultant based in the Thailand office with more than five years of consulting experience. He has led over 50 national and multi-regional engagements for Fortune 500 clients across Europe, Japan and south-east Asia. Prior to joining Solidiance, Mickael was managing investments projects in Europe for large Japanese MNCs. With strong experience in combining numerical and qualitative analytics, Mickael specializes in customizing advanced market segmentation and size forecasting models to help clients identify and prioritize market opportunities to develop growth strategies. Mickael has rich experience across supply chain and logistics industry throughout Europe and Asia Pacific, including key industries such as medical equipment, manufacturing and automotive. He combines sector and cross-industry best practice, leveraging this knowledge to help clients develop successful market strategies. He holds a Bachelor in marketing (with Honors) from the London Metropolitan University and a MBA from the Institute of Political Science of Lyon.
Singapore
Thailand
Suite 17-01 High Street Center 1 North Bridge Road Singapore 179094 Tel: +65 6408 8208
[email protected] 6
Suite 32-05 Interchange 21 399 Sukhumvit Road Bangkok 10110 Tel: +66 (0)2 660 3638
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