Exploring Southeast Asia's logistics horizon

• SEA’s logistic market value expected to reach $55.7 bil by 2025
• Sector thrives on fast economic growth, positive macroeconomic factors

The ongoing problem of high logistics costs exacerbated by Covid-19, has affected Southeast Asia due to disruptions in supply and demand, geopolitical and economic uncertainties, surging inflation, and other factors. However, the region’s logistics sector is witnessing remarkable growth, propelled by the region's fast growing economies and positive macroeconomic fundamentals such as population growth and a burgeoning middle class. Projected to reach US$55.7 billion (RM260.96 billion) by 2025, the sector demonstrates a compound annual growth rate (CAGR) of 5.5% from 2018 to 2025.

To meet the demands of a growing market, the logistics industry is changing by adopting technology to solve supply chain challenges, particularly in the three layers: first mile, middle mile, and last mile. 

First-mile delivery

The premise of first-mile delivery is getting the product from its initial location (the manufacturer or the supplier) to another location, usually a central warehouse, where it can be prepared for further transportation.

Imagine you've ordered a bottle of body wash online. Once the body wash bottles are manufactured and ready for shipment, the logistics and supply chain begins when first-mile players such as Waresix step in to efficiently handle the shipping and warehousing of bulk orders of products like body wash bottles, transporting them to its warehouse.

Middle-mile delivery

After arriving at a central distribution center, products are transported to distributors, local warehouses, and stores for purchase. Middle-mile delivery optimises the flow of goods between distribution points, focusing on cost efficiency, faster transit times and overall supply chain effectiveness. Various logistics functions are involved in the middle mile to ensure items arrive at different places. They are:

• Freight and cargo logistics

Freight and cargo logistics play a crucial role in the middle-mile delivery segment. This involves the movement of large volumes of goods between distribution centers, regional hubs, and warehouses. Providers like Waresix connect shippers with trucking companies and transportation services, exemplifying a logistics technology integrator that links shippers with fleets across Indonesia through its extensive network of land and sea transport.

• Tech-enabled logistics

Tech-enabled logistics companies enhance the middle-mile process by providing real-time visibility data for monitoring the movement of goods. This spans from the shipper to the end-point of logistics, whether it's another warehouse, a store, or the end-customer. Technologies address delays, improve procurement processes, enhance overall supply-chain efficiency and planning, and mitigate on-the-ground problems and fraud. Platforms like McEasy manage first-mile, middle-mile, and last-mile delivery effectively, transforming traditional logistics through Software-as-a-Service solutions.

• Warehouse and fulfillment

Warehouse and fulfillment services are gaining momentum with the increasing volume of orders in Indonesia’s middle mile. Players like Waresix, SIRCLO, and Praktis offer warehousing and fulfillment services. Waresix goes beyond ground transportation and domestic freight by providing Warehousing & Inland Logistic Terminal services. It includes an operating system tailored for medium-sized businesses and enterprises operating within Indonesia's vast archipelago of 17,000 islands.

Sirclo is an e-commerce enabler providing fulfillment services and warehousing management tailored for Small and Medium Enterprises (SMEs) and enterprises of diverse sizes. Its platform integrates inventory across multiple sales channels, marketplaces, and chat commerce.

Meanwhile Praktis is an end-to-end supply chain enabler that acts as a single point of contact for SMEs in managing their back-end operations. Services cover raw material purchase, production, fulfillment, and logistics with technology enhancement to ensure streamlined and reliable operations for direct-to-consumer brands and suppliers.

• E-commerce logistics

Ecommerce sellers face a technology gap between shipping and warehouse providers, adding complexity to businesses. Startups like Biteship simplify shipping using a 4PL approach, connecting third-party logistics providers (3PLs)  with e-commerce sellers. The company handles pickup, location and stock management, and provides mini fulfillment for online businesses. Integration with top Indonesian delivery providers through Application Programming Interface streamlines the e-commerce logistics process.

Last mile delivery

After Waresix transports the body wash to the final transit point, whether it’s the seller's warehouse or a fulfillment center, Paxel takes charge of the last mile,  ensuring the body wash reaches your address.

The last mile is the most complex stage, dealing with a multitude of destinations, from individual customers to retail stores. Specialised services become crucial in ensuring timely and secure delivery, whether it’s body wash, temperature-sensitive goods, or other items, reaching the end customer.

Courier and express services such as Paxel, play a crucial role in ensuring timely and secure delivery of packages in the last-mile. Specialising in instant and same-day deliveries across Indonesian cities, Paxel utilises algorithm-optimized routes to enhance efficiency. The company’s relay model and smart locker system contribute to a streamlined process, covering both inter and intra-city routes for instant and same-day services.

Cold chain logistics

Cold chain logistics is the specialised supply chain process designed for products requiring a controlled and consistent temperature environment during transport. This includes items like ice cream, perishable products, dairy products, chemicals, and pharmaceuticals.

In the first mile of cold chain logistics, typically handled by large enterprise companies, temperature-sensitive goods are transported from manufacturers to designated cold storage facilities. Trucks used for this purpose are closely monitored for precise temperature control. These facilities, often large warehouses equipped with advanced cold-chain infrastructure, are strategically located in outer urban areas.

During the middle mile, goods move between different cold storage facilities, fulfillment centers, or retailers. 

Fresh Factory operates a network of hyperlocal, micro, and cold-chain fulfillment centers across 20 cities in Indonesia. The company collaborates with SMEs, medium-size, enterprises, brands, and distributors for procurement, processing, transport, and cross-border delivery.

Superkul provides both middle and last mile cold-chain transportation, using blind-vans, trucks, and motorcycles equipped with refrigerators for precise temperature control. The temperature ranges from -22°C to 10°C, depending on the specific requirements of the goods, with real-time tracking for added efficiency.

Paxel, in addition to handling dry products, offers same-day delivery for both inter and intra-city cold chain products. The company ensures special handling for cold chain shipments, using aluminum foil for packaging thermal insulation. Paxel employs the Motor Box Freezer for motorcycles equipped with freezer boxes, along with cold trucks for delivery. Cooling facilities like freezers or chillers are also utilized during transit to maintain optimal conditions.

Note: Jordy Tenka is an Investment Professional at East Ventures.