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Digitalization of PH logistics industry long overdue, report finds

  • The Philippine logistics sector needs to digitize if it is to keep up with the rapidly growing e-commerce industry and address changing customer expectations
  • Digitalization can ensure transparency of order status, minimize port congestion, and allow adaptation to customer expectations
  • Digitalization can come by way of procuring the required competencies and technologies, partnering with or acquiring more technologically advanced organizations, and participating in platforms offering digitalized services

Image by Gerd Altmann from Pixabay

Technological advancements such as digitalization and digital transformation are long overdue in the Philippine logistics sector, according to a new whitepaper from consulting firm YCP Solidiance and the Supply Chain Management Association of the Philippines.

As logistics enables companies to move around to obtain what they need or deliver items, so the industry should grow along with the other sectors that continue to adopt technology, such as construction, manufacturing, trade, agriculture, and others, according to the white paper titled “Digitalization in the Philippine Logistics Industry.”

Also making it necessary for the logistics industry to digitalize is the need of businesses for greater order transparency and shorter lead times, especially as e-commerce grows and customer expectations change, the paper noted.

Another push factor to digitalize is the important role the sector plays in the clearance of imported goods.

Largely traditional and analog

The paper noted that in the Philippines, the logistics industry “has generally not departed far from how traditional logistics has operated.” In contrast, neighboring countries such as Singapore, Thailand, and Indonesia have been gearing up to use a global trading platform powered by blockchain technology.

The paper said the Philippines’ logistics industry is generally not digitalized, although warehouse management is relatively more digitalized compared to other logistics processes such as fleet management.

Also less digitalized are customer-related processes such as customer service and order management, which leads to inefficiencies in dealing with customer demands, considering that manufacturers and retailers are becoming more digitalized.

“Manual processes continue to inhibit the transparency of order status and prevent the efficient flow of goods, among other inefficiencies,” the paper pointed out.

Martin Cu, Philippine country manager of courier services company Ninja Van, said transparency is now an imperative customer expectation, with businesses and individuals alike wanting full visibility of the status of their orders.

The paper noted, however, that making the order status transparent is difficult because the industry is still highly analog and manual in its processes.

Database management systems have been put in place by majority of logistics companies, but others still rely on analog processes such as having designated encoders input and update the data on the system using the documents filled out by truck drivers and warehouse managers.

The process of clearing and releasing goods is also “laden with all sorts of documentation that requires coordination across various stakeholders.”

“The direct, human, and analog involvement of different stakeholders opens up various avenues for inefficiencies such as misplaced paperwork, incorrectly filled out forms, and incorrect forms used—among a myriad of issues,” the paper noted.

Additionally, coordinating with government agencies that are involved with certain goods adds another layer to the process.

Through all this, there is also the added pressure for the logistics industry to shorten lead times and increase transparency as e-commerce and online shopping become more prevalent, and value-added services such as same-day delivery and guaranteed product returns are becoming key differentiators for businesses.

Based on an internal survey conducted by Ninja Van, delivery speed is the main challenge pinpointed by 70% of Philippine-based retailers.

“These developments in customer expectations will steadily become harder to meet using traditional logistics,” the paper noted.

Pressures to digitalize

“Digitalization presents opportunities for organizations to resolve bottlenecks and to improve efficiency,” it pointed out.

Digitalization can enable the logistics industry to ensure the transparency of order status, minimize port congestion, and adapt to changing customer expectations.

To enable transparency of order status requires employing customer-focused and fleet-enabling technological solutions, the paper said.

In turn, this transparency leads to two benefits: inventory managers and fleet managers can more easily identify issues and decide on solutions, and customers are given transparency regarding their orders, lessening the need for constant coordination.

Eliminating redundancies and digitalizing the documentation and approval systems can also significantly improve import clearance processing times and increase efficiency.

The paper estimates that digitalization can cut down the duration of clearing and releasing an imported good by around 80%, from 10 to 25 business days to 3 to 5 business days.

Lead times can be improved if the various documentation and approval processes are digitalized, the paper said.

What can be done?

Logistics companies and organizations, meanwhile, can take three non-mutually exclusive courses of action to digitalize their operations.

The first option is to build up their own digitalization capabilities by hiring experts, availing of software services, and buying hardware and software.

The second is acquiring or partnering with logistics companies that are already digitalized so their proprietary digitalized processes can be acquired.

Lastly, logistics firms can participate in digital platforms that develop and integrate technological solutions into an organization’s operations.

For government agencies, building their own capabilities is possible “should they be able to secure funding for it, and should there be enough political will to execute the digitalization initiative.”

“An inability to respond to society’s evolving demands hinders the development of organizations. Standing still as the world leans deeper into technology would leave traditional organizations—government agencies and logistics companies alike—biting the dust of faster, more efficient, and more digitalized players that can continuously adapt to the constantly changing environment,” the paper concluded. – Roumina Pablo

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