The country’s major players in the supply chain and logistics sector have agreed for stronger collaboration and digital transformation as the industry’s robust growth is further accelerated during this time of pandemic.
“Now is the time for more collaboration, to work with each other and with the government,” Paolo Delgado, managing director of Delgado Brothers Group, the country’s pioneer in the logistics industry, said during a recent webinar on supply chain and logistics organized by the German Chamber of Commerce of the Philippines.
Even before the coronavirus pandemic, the supply chain and logistics sector was already considered the next sunshine industry due to the high demand for e-commerce. Industry players expanded into related sectors such as warehousing and cold storage facilities mostly for B to B commerce. New investors are also building new warehousing and cold storage facilities in anticipation of strong demand.
But several firms have gone into the last mile logistics, which is the delivery of food, packages and parcels direct to consumers. Most of the last mile logistics companies are from B to C (business to customers) transactions.
Most of the startup last mile logistics firms are just concentrating on this bustling delivery segment.
Some of them have also been tapped by the B to B logistics firms which do not have last mile delivery arm. Individual retailers or micro enterprises that sell online have also tapped these last mile logistics enterprises for their deliveries.
The pandemic, which calls for lesser physical contract, has further boosted e-commerce and high demand for delivery services and attracted more startups to join the delivery service bandwagon.
Elmer Sarmiento, CEO and President of the country’s leading integrated logistics company Royal Cargo, also echoed this call for enhanced collaboration and for the industry to play its role in helping exporters and importers.
“As we have to prepare ourselves, we have to help and support also the exporters and importers,” he said.
“We have not seen the whole impact, yet we can only hope, we cannot give up,” Sarmiento said as he expressed fear on the reduction of overseas dollar remittances as OFWs are sent back home with no jobs to return to. In addition, tourism is weak and the low income will ultimately mean an economic downturn.
Delgado noted of the robust logistics industry. “We’ve had our banner year,” said Delgado as he observed the global industry players pouring in their money like Amazon, which is investing heavily in logistics. He sees a strong trend for years to come for the delivery service sector and a huge logistics market.
“We should always be looking forward,” he said.
In calling for more collaboration, Sarmiento noted that Royal Cargo was contemplating of going into the last mile logistics, but later decided not to and concentrate on what they do best B to B business
“We’re studying last mile, but profit is almost nil so let’s just give this to fellow Filipinos to earn a living and just collaborate,” he said.
He noted that most logistics firms do outsource their last mile delivery services even as he wondered if these e-commerce firms are really making lots of money. He said that their revenues may be up but he doubted a robust bottomline.
Jess Cham, president of Meat Importers and Traders Association, noted of the port congestion happening at the ports and commercial cold storage facilities during the Enhanced Community Quarantine period as markets were closed and more pigs were culled due to the outbreak of African Swine Flu.
“I think government should be more supportive and help stakeholders to adapt to the new era,” he said adding this uncertainty could be for the next few years, making it more difficult for importers.
For its part, ICTSI, the world’s largest port operator owned by Filipino businessman Enrique K. Razon Jr., is pushing for its Laguna Gateway Inland Container Terminal project. This will serve as off dock facility for containers from the port of Manila.
Justin Tolentino, ICTSI Asia Pacific commercial director, said they are working with the Philippine National Railway tracks to revive the operation of this container cargo rail. ICTSI operated the cargo trains transporting containers from the port of Manila to Laguna using the PNR tracks from 1998 until it was discontinued in 2003.
Once operational, the link will help Philippine National Railways to haul cargo containers equivalent to 500 to 700 truck trips per day further easing Manila ports’ container yard.
Dan Lachica, president of the Semiconductor and Electronics Industries in the Philippines Foundation, Inc. (SEIPI), said the pandemic experience should push for further improvement in the digitalization of both the Bureau of Customs and the Philippine Economic Zone Authority.
He urged for both agencies to have backup systems to ensure online transactions go unhampered at all times. During the ECQ period, Lachica said that regular flights and shipping schedules had disrupted supply chain. This was compounded by lack of personnel to man the BOC processes.
The largest exporter and importer’s group experienced delays in shipment and still have difficulty attaining 100 operating capacity because there is no public transport for workers. All these can be mitigated by a full digital operation of the BOC and PEZA.
The Procurement and Supply Institute of Asia also agreed that collaboration is crucial for supply chain effectiveness. However, the lack of planning and control process across functions like finished goods and materials planning, manufacturing, distribution logistics as well as external suppliers create risk in supply chain execution.
These risks lead to issues in demand fulfillment hurting revenue or inventory risk impacting working
capital and cost.
With digital transformation and collaboration, supply chain and the logistics sector can very well survive this pandemic period and beyond.