Home » SCMAP Perspective » Capacity and Capability

Over the weekend I had my car’s gas tank filled up. Upon noticing that a liter is now at roughly P57, I immediately regretted the decision. Well, partly. I needed to top up. A price rollback would be announced hours later.

 

The government has attributed last week’s record inflation rate—4.6% for May 2018, a five-year high— mostly to a hike on world crude prices, which affected the price of fuel. That, in turn, has contributed to a higher cost of transporting goods, a situation exacerbated by limited infrastructure and capacity.

 

Issues surrounding logistics capacity—transportation fleet, warehouse space, the people who will run both —have emerged as important challenges in our recent discussions with our members. With demands on logistics firms continuing to go up, thanks to a booming economy, a steady rise in consumption and the emergence of new business and retail models that accelerate all these, the ability to ensure service levels remain consistent and satisfactory becomes a concern.

 

For one, there’s congestion, which makes it difficult for trucks to make complete trips from port to warehouse, meaning stakeholders cannot fully utilize available trucks and empty containers, and deliveries from warehouses to stores become increasingly difficult, too. We’ve responded by expanding fleets to include other vehicles that aren’t bound by either truck bans or the inability to weave through traffic—hello, motorcycles making deliveries to convenience stores—but that can only go so far.

 

This has led to another, perhaps more pressing, problem: we are losing truck drivers. As it’s become more difficult to complete trips, and therefore, make money, truck drivers are leaving the logistics industry for something more appealing. Why can’t we become Grab drivers instead? We have a handle on our time and we can earn more!

 

The issue of limited personnel is also affecting our warehouses, especially those in areas that have become logistics hubs. Some of our members who operate in Laguna, for instance, mention how they compete with each other for the same people, the people who will operate forklifts and supervise operations in their facilities. We can assume not all of these people are fully trained in warehouse operations: you hire someone, teach them how to operate a forklift, and leave them to it. Perhaps, during surge periods, they just hire someone to fill capacity without much consideration towards whether they are the right persons for the job.

 

These issues contribute to the high price of transporting goods. These are inefficiencies that we know must be addressed, but we cannot fully address. You can introduce better systems inside your warehouse; you can formalize specific requirements of your contractors in your service level agreements; if you can, you can build a new warehouse entirely to up capacity. But more often than not it’s the bigger logistics companies who are capable of doing this. Investment levels are too high, and demand, while steady, remains volatile. It’s difficult, particularly for smaller companies, to invest in the future without being absolutely certain about what that future holds.

 

The best way to keep our economy moving (and make sure its growth benefits everyone) is to ensure we have enough room as it grows. Expanding and enhancing our logistics capacity and capability —whether through infrastructure, better transport regulations, and appropriate education for personnel—are efforts both the public and private sectors should get behind on, collaborate on, continuously work on. Not everybody may be able to invest now, but there are methods we can ideally implement in the short to medium term. How about co-loading, or shared services? If we can implement this, we might be able to shrink our logistics costs, which should lead to lower prices (and less shock) for all.

 

One more thing: the clock is ticking on this one. As automation slowly becomes a viable option, the possibility that we’ll see warehouses like those in Europe—massive facilities where only up to five people work, pressing buttons and operating robots—is growing. Great efficiencies there, in theory, but would we risk disenfranchising the people that work for us now?

 

We will be discussing these challenges further on our next General Membership Meeting, happening on June 21. More details are on our website, scmap.org.

 

Henrik Batallones is the marketing and communications executive of SCMAP. A former board director, he is also editor-in-chief of the organization’s official publication, Supply Chain Philippines. More information about SCMAP is available at scmap.org.

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