The logistics sector is a dynamic sector in Malaysia and changing continuously. Malaysia has strong industrial and logistics clusters, which has seen good growth figures over the past 10 years. The ASEAN Economic Community (AEC), which just came into existence about a year ago on 31 December 2015, allowed the industry to expand transportation networks throughout Asia.
In this fast changing environment logistics companies need first of all be agile through innovation and growth.
Size matters in the logistics industry! The bigger the company the more containers and trucks you have, the better regional or global covering network you have, the more customers you will bring in. So growth for logistics companies is purely a matter of survival. This is true for pure transporters and warehouse operators, third party logistics service providers (3PL), logistics specialists (like cool chain operators), as well as fourth party logistics service providers (4PL).
Bigger logistics companies can also invest more money in research & development (R&D). R&D results in the development of new logistics products & services, new technologies in transportation and warehousing operations, lower operational costs and better anticipation on new market opportunities through solid market intelligence.
On the other hand you need to be stable and flexible, otherwise your customers will leave you. This requires excellence in data management and IT infrastructure.
A systemic underinvestment in IT by the logistics industry makes it a major challenge to meld different companies together. IT infrastructure should facilitated digitalisation and sharing of 100% intact data throughout the supply chain. The need for a solid supply chain data management from a single source is an emerging requirement for manufacturers, which would like to transfer this task to the logistic service provider. Different sources of data and re-entering of data in different systems has a high risk of making mistakes, and cost a lot of time and money.
Larger logistics companies therefore need to clean up their legacy systems and invest in life-cycle management to avoid new legacy problems in future. Secondly, standardisation is important in order to create flexibility of the IT landscape and making changes in here. Finally, moving IT processes to the cloud. Cloud based systems allow you to easier charge your customer for IT services offered (pay per use) and upscale with acquisitions of a new company. Through hybrid cloud designs, primary processes could be put on a private cloud, whereas supporting IT processes can be facilitated through a public cloud.
I am convinced that Malaysia is set for more mergers and acquisitions in the logistics sector over the coming 3 years. As mergers and acquisitions offer a fast-track growth as compared to relying on organic growth, it is an attractive strategy in expanding your business. However, finding the right business partner is not easy as company cultures might be very different. Furthermore, IT integration between the companies in order to fully meld the companies together into one larger company is critical. Otherwise you are just consolidating assets and profits together initially, without achieving any synergy advantages of a larger company due to operational problems caused by poor IT integration and clashing company cultures.
This article was published in the New Straits Times (Malaysia) of 18 January 2017. For more information on logistics strategy and M&A, please contact marco@lbbinternational.com.
No comments:
Post a Comment