Contract logistics giant DHL Supply Chain sees “enormous” growth prospects for logistics outsourcing in the Philippines.
“The Philippines has been identified by DHL Supply Chain as a key growth country and is forecast to contribute significantly in future years,” Suzie Mitchell, country managing director of DHL Supply Chain Phils., Inc., told PortCalls in a recent interview.
She pointed to reports highlighting the country’s strengths, such as high economic growth – which, according to a recent outlook report by the Organization for Economic Cooperation and Development, would average 6.2% from 2015 to 2019 — and the large educated population as a sure case for growth. This is despite the many constraints faced by the logistics industry such as the truck ban, port congestion, poor infrastructure and industry fragmentation, all of which translate to additional costs.
As the economy develops, Mitchell expects businesses to increasingly outsource their logistics requirements, allowing them to instead focus on their core competence.
The retail sector, which comprises 40% of the DHL supply chain business, will see much growth, the DHL chief said, and this will, in turn, drive expansion of the consumer sector business, which accounts for 30%.
She also foresees growth for the technology sector, representing 20% of the business, on the back of forecasts made by the Semiconductor and Electronics Industries in the Philippines Inc (SEIPI). For 2014, SEIPI expects electronics exports to improve by 8%.
The remaining 10% of the business is accounted for by other sectors, including healthcare and automotive.
As the Philippine logistics industry “grows in competitiveness and develops to world-class standards,” DHL predicts a “potential shortage in supply chain professionals in the coming years,” Mitchell said.
In response to this, DHL recently invested in the Visayas and Mindanao “additional resource to support business growth in these regions. Half of our management trainees who graduated from Cebu are undergoing an extensive 18-month training in Manila prior to taking on permanent placements to support the growth of our Cebu operations.
“We see the industries there (southern Philippines) starting to mature more and outsource for the first time,” Mitchell said.
Globally, the company has introduced a global certified training program integrated with on-the-job training, mentoring and leadership development program.
Information systems
Taking the guesswork out of logistics is DHL’s value proposition. It leverages on transportation management and warehouse management systems to provide clients visibility over the supply chain, which allows for greater planning and ultimately cost savings.
The systems hold information that can be seen by multiple locations. Depending on their requirements, Mitchell said team members and clients can perform searches, input formation, share data, make real-time decisions about what load is coming or what needs to be bought.
With advancements in technology, she said it is “now cheaper and easier to strategically link the warehousing and distribution operation of hub warehouses rather than these being managed independently.
The technology helps DHL navigate what Mitchell describes as an “aggressive” Philippine logistics environment that can sometimes be too price-driven, focusing much on the cost per unit (cost of trucks, for instance) rather than the total cost of delivery.
“Our TMS (transportation management system) provides customers visibility. Different customers are able to see what orders have been placed and can match them to other orders. So no longer do you talk about the cost of the truck, you talk about the cost of the delivery,” she explained.
“The warehouse from the north can see what loads might be going to the central locations up to customers in the north, and then they can call on those trucks to say, ‘Don’t go back empty. Come by me because I’ve got loads that I picked up with suppliers and need to go to a customer centrally’,” Mitchell explained.
“Strategically, it sounds very simple but in reality, if you don’t have a system that has that visibility of where the trucks are, you’re going to end up with a truck in the north waiting for a backload that’s not coming, or vice versa.”
By giving customers visibility, Mitchell said, DHL has reported a threefold increase in the number of drops (delivery) per trip. “This presents real and sustained savings as opposed to just negotiating with truckers for lower rates, which could go up again after a few months,” she noted.
“You’re not really doing anything strategic to reduce the cost (if you’re just negotiating with truckers),” Mitchell said, adding that DHL differentiates its “service offering by value-adding solutions and the level of expertise we have across Asia Pacific. Leveraging on our expertise in different sectors and industries we create value for our customers.”
She said the company is always looking for something to do “to change the game. Even if they’re not big changes, if they’re just little things you can constantly do, you’re adding value.”
These little changes may include a suggestion for clients to replace suppliers, change the way a truck is loaded, or reroute trucks for optimum trip consolidation, she noted.
In order to get clients on the same page, DHL customers customarily go through workshops. “We will sit with our customers, inviting not only their logistics team but their sales team, their merchandising team, their retailer. Everybody works together and so we’re really looking at ways of adding value.”
Asked about the biggest source of frustration in the local logistics industry, Mitchell said it is when the sales or merchandising teams “don’t realize how their actions contribute to the problem and how easy it is to fix some of these things.”
She pointed out, “It’s really getting people together.”
Investment in warehousing facilities
In the next two years, the DHL Group will invest US$25 million in the Philippines, the bulk of it for warehousing facilities and associated storage or material-handling equipment.
“As the economy continues to grow and with the continual shift towards modern retailing, there will be a need for more advanced warehousing solutions in order for supply chains to cope with greater throughput volumes,” Mitchell said.
DHL currently manages for clients 19 warehouses all over the Philippines.
DHL is the world’s biggest contract logistics player based on 2013 global data. It has a global market share of 8%, way ahead of its competitors CEVA, Hitachi and Kuehne + Nagel, each of which has a 2% market share.
In the Philippines, DHL has 500 employees and an extended workforce of more than 1,700 including those of providers. – Roumina Pablo
