NESDB says local logistics firms must fight together against global giants

Local logistics service providers need to seek strategic alliances if they want to survive in face of tougher competition, according to the National Economic and Social Development Board (NESDB).

Most of the 2,000 Thai logistics service providers are small- and medium-sized enterprises (SMEs) whose budgets for overseas network expansion are limited, according to Suriyon Thunkijjanukij, director of the NESDB’s Logistics Strategy Division.

As such, it is difficult for them to provide door-to-door services in other countries like global players DHL, FedEx and UPS.

“I can’t see what business is left for Thai logistics companies when global networks have already been integrated by world-class service providers,” said Mr Suriyon.

Local logistics service providers had better form partnerships or strategic alliances in other countries to broaden their service networks, he added.

In seeking foreign partners, local logistics operators should look for SMEs whose businesses can complement their expertise in niche areas. For example, if one company already has a good reputation for reliable sea shipments from Thailand to China, its business partner could be someone who are keen on providing door-to-door service in China, instead of someone based in Europe with little knowledge about East Asia, said Mr Suriyon.

Although Thai logistics companies may find it hard to survive overseas, they could be the service providers of choice for local shipments.

While international operators may enjoy several advantages, Thai logistics companies know better how to deal with traffic conditions and authorities on highways, said Mr Suriyon.

“This could be a competitive edge for local companies,” he said.

Mr Suriyon also suggested the private sector to form a cluster of logistics service providers with the support from various ministries, like transport, industry and commerce, to enhance competitiveness.

According to an NESDB study, logistics cost per gross domestic product (GDP) in Thailand was 16% in 2006. To improve the country’s competitiveness, a policy has been set up to bring down the figure to 13% over the next five years.

“But the chance of meeting this target is slim due to the delays of some infrastructural projects such as e-logistics and the construction of Pakbara port in Satun and Songkhla port, regional distribution centres and container yards for railway transport, as well as human resources development,” said Mr Suriyon.

Although the NESDB initiated the concept of e-logistics three years ago, the project has yet to replace conventional logistics procedures even today.

NESDB estimated the market value of the logistics industry in Thailand to increase by 85% to 185 billion baht in 2010 from 100 billion baht in 2006 as a result of international trade expansion.