Data from a major logistics platform shows major challenges ahead, but subtle signs also point to modest growth in the region.
Despite numerous air and ocean freight obstacles in the past months, there are signs that the South-east Asian logistics industry will experience steady recovery, albeit at a slow pace.
On the ocean shipping front, weather disruptions; the Russia-Ukraine war, and global pandemic challenges have led to port congestions due to deterioration of shipment timelines. Schedule reliability across Asia, the US and Europe will continue to be a challenge in the next few months.
However, according the logistics platform C H Robinson, the situation is improving: its data showed the first significant recovery month-over-month since March 2020 in February this year. While demand for ocean shipping is continuing an upward trend, problems such as vessel bunching, berthing delays, and reduced port capacities are also expected to worsen with demand, especially amid emerging coronavirus variants that could increase shipping lead times and higher cost pressures in Asia.
Sharply rising fuel costs are leading to higher Bunker Adjustment Factor (BAF) charges, and these adjustments may have to be made on a monthly as opposed to quarterly basis. All these factors are driving business leaders to forecast six to eight weeks ahead for any red flags, prioritizing tasks, having variability in SKUs/parts, and ensuring smooth week-to-week volumes.
Aviation-related disruptions
On the air freight front, global capacity has fallen by 10% due to continued uncertainty over sanctions against Russia, which have resulted in skyrocketing fuel costs. While prices remain high, nations have agreed to release reserves to increase oil supplies to counter the trend.
In the air travel sector, Asian countries have been seeing increased trade and travel with their relaxed border restrictions. Overall, due to the Russia/Ukraine conflict coupled with the China’s COVID-19 control measures, airfreight demand is increasing but not at a pace that the logistics market expects.
Disruptions to electronics and automotive supply chains are expected to be acute. However, C H Robinson data suggests that the Chinese market will return in the second half of the year with the recovery of manufacturing activities as the world learns to adjust to living with COVID-19.
SEA initiatives kick into action
Governments in the region have stepped in with new initiatives. Incentives such as Vietnam’s seaport master plan and Malaysia’s Industry4WRD National Policy aim to help businesses to adopt digital technologies and enhance infrastructure connectivity, reducing logistics costs in the long term. Singapore’s Advanced Digital Solutions scheme provides businesses with the opportunity to incorporate future-ready digital solutions that help streamline their supply chain network.
According to C H Robinson’s Vice President (South-east Asia), Shawn Chen: “It is possible for businesses to achieve steady growth if they have transparent conversations with stakeholders to identify red flags ahead of time. Industry players who adopt innovative solutions will see their networks moving faster than before andstrengthen their footing to secure a long-standing strategic stronghold.”
