converge paving the way for the future of southeast asian ... · 03 onere ain the a for the uture...

ConvergePaving the Way for the Future of Southeast Asian Logistics

May 2019

02

Converge - Paving the Way for the Future of Southeast Asian Logistics

03


AboutConvergeConverge is a series of reports by Deloitte Southeast Asia Innovation that provides insights into the technology trends and startup ecosystem in Southeast Asia1.

Each report provides a snapshot of the upcoming technology trends in a particular sector and introduces promising startups that are driving new ideas and taking on challenges that are unique to Southeast Asia.

Join us in discovering interesting and potentially disruptive startups and initiatives across a myriad of industries and feel the pulse of Southeast Asia’s thriving digital revolution!

Who the report is for:• Corporations exploring innovation capabilities and startup engagement• Individuals who are keen to understand technology and innovation trends driven

by the startup ecosystem in Southeast Asia

About Deloitte Southeast Asia InnovationDeloitte Southeast Asia (SEA) Innovation is a cross-function, cross-country innovation unit dedicated to driving the innovation agenda as a culture and value creator across the region.

Have feedback on Converge? Drop us a note at [email protected]!

1 This report draws from startup databases such as Tracxn, Crunchbase, Tech in Asia, and e27, as well as reports from local, regional and global news sources, and respective company websites. Some startups choose not to fully disclose their funding rounds and/ or funding amounts. As such, the exact funding situation of such startups may not be reflected in this report.


04

Southeast Asia – Advancing Logistics and the Economy

About 90% of world trade is a seaborne affair, according the International Chamber of Shipping2. Without the complementary land or airborne transfers of these raw materials and goods, however, businesses will struggle with the manufacturing of their products and the eventual sale of their goods.

The backbone of supply chain management across many industries, logistics is a multi-modal journey and a multi-faceted transaction. Moving more than just tangible material, logistics requires smart planning, financing and proper documentation, especially across borders. Establishing trust and accountability in the logistics and supply chain remains a cornerstone for global trade and commerce to run smoothly.

Southeast Asia is poised to enjoy a logistics boom as the region continues to attract world interest as an important part of global supply chains and trade flows3. From the region’s involvement in China’s Belt and Road initiative, to being the beneficiary of manufacturing activity moving out of China, Southeast Asian countries have much to be bullish about in the near future.

2 http://www.ics-shipping.org/shipping-facts/shipping-and-world-trade3 https://theaseanpost.com/article/supply-chain-shift-asean4 https://www.cento.vc/wp-content/uploads/2019/01/Cento-Ventures-SE-Asia-tech-investment-FY2018.pdf5 https://www.techinasia.com/top-funded-startups-tech-companies-southeast-asia6 https://www.thinkwithgoogle.com/intl/en-apac/tools-resources/research-studies/e-conomy-sea-2018-southeast-asias-internet-economy-hits-inflection-point/

On a domestic front, Southeast Asian consumers are becoming more affluent, internet-savvy and demanding, giving the retail sector a major boost and makeover in recent years. The consumer retail industry has been at the forefront of venture capital investment and interest within the past decade4 and the fruits of these investments are for all to see. Online marketplaces like Lazada, Tokopedia, Zilingo, and Sendo.vn have not only become some of the best-funded and most prominent startups in Southeast Asia5, they have expanded shopping and transaction practices in the region from offline to online, opening the way for new business models and supply chain considerations to take root in this region. Increasingly, mobile-first online commerce will have to be considered6, and this will transform the norms of payments and inventory management, as customers expect more instantaneous and direct access to goods and services.

In this report, we will be looking at some technology trends that have moved the needle for the logistics sector in Southeast Asia, against a backdrop of geopolitical changes and growing affluence in the region.


05

Is there still a Need for the Middleman?

With the ability to browse, transact and arrange for delivery at the fingertips, the increasing prevalence of eCommerce and on-demand services has nurtured a new base of Southeast Asian customers who demand convenience. Businesses looking to ride on these trends stand are finding it beneficial to remove the traditional middlemen distribution layers and to adopt a direct-to-consumer (DTC) model.

The benefits of this model are beyond the cost savings from removing middlemen commissions. Technology today is equipping businesses with the ability to track customer interactions and give rewards and offers to the right person, at the right time, in the right place. The DTC model allows brands to develop relationships with customers and build brand loyalty, which promises to boost

revenue as well. The downside to the DTC model for brands, however, means that they have to manage their inventory movement vis-a-vis the plethora of distribution channels, which can be a complex coordination exercise.

Against this backdrop of changes in technology and consumer expectations, new-age middlemen have emerged in the form of startups helping brands and businesses to handle fulfilment for online and multi-channel distribution. MyCloudFulfillment from Thailand, for instance, provides a complete warehousing, packing and shipping service for brands, catering for niche requirements as well by providing cold storage options and special packaging services. Capturing precious data on movements in the supply chain down to the individual customer-level, the platform also provides feeds back information that brands can use to plan marketing or sales activities.

Direct-to-Consumer: Rising Expectations

Table 1: Fulfilment and Logistics Solutions for E-commerce and Omnichannel Sales

Startup Description Country Founding Year Funding

MyCloudFulfillmenthttps://www.mycloudfulfillment.com/

Fulfilment solution for e-commerce and omnichannel businesses.

Thailand 2014 Seed- US$144K

Irunahttps://iruna.id/

Iruna is an eLogistics & delivery company focusing on serving Commerce players & local brands.

Indonesia 2016Seed- Undisclosed

Anchantohttps://www.anchanto.com/

Anchanto provides a SaaS platform for e-commerce logistics and multi-channel selling.

Singapore 2011Series C- US$11.1M

Source: Crunchbase, Tracxn, respective company websites.


06

Table 2 – Last Mile Delivery Startups


Ninja Vanhttps://www.ninjavan.co/

Ninja Van is a last mile delivery service that provides tracking and real time updates.

Singapore 2014Series C – US$117.5M

Box24https://www.box24corp.com/

Box24 is a locker service provider catering to multiple businesses like laundry, courier companies & e-commerce.

Thailand 2015Seed- Undisclosed

PopBoxhttps://www.popbox.asia/

PopBox allows people to send, collect and return a parcel anytime, anywhere. People can register on the website to become a host for Popbox lockers.

Indonesia 2015Seed- Undisclosed

Reinventing Last Mile Delivery

Not surprisingly, the rise of the DTC model has prompted an influx of startups that are trying to solve the last mile conundrum in this region. With thousands of islands making up some of the Southeast Asian countries, poor infrastructure and urban congestion across most of Southeast Asia, the last mile tends to be the most expensive part of the physical journey of goods7.

Southeast Asia has seen many last mile delivery startups sprout up in the past few years, from dedicated courier and moving services by the likes of Ninja Van, GOGOVAN, and Lalamove, to parcel delivery services as an offshoot of ride-hailing players Grab and Go-Jek. With the improvements to drone technology and increasing sensitivity to urban planning, last mile delivery is also moving beyond wheels and into other paradigms as well.

Smart lockers, for instance, present a last mile solution that promises less failed deliveries and more flexibility for customers, which in turn assures better sales. In Bangkok, Thailand, locker service Box24 is present at residential and commercial facilities. Under their flagship WashBox24 service, customers drop off their dirty laundry at the closest locker, then get notified to collect it at their convenience when the laundry is cleaned and delivered back to the locker. Since then, Box24 has expanded to other targeted segments, including a payment solution. The concept of having conveniently-located, 24/7 accessible smart lockers, where transactions and goods can be tracked through an app, remains to be explored by a greater variety of consumer verticals.

Elsewhere in the region, the locker system is also taking a hold. Over the years, Ninja Van has expanded their services offerings from wheel-based last mile services to include self-collection and locker options (Ninja Box). Even traditional postal service Singapore Post has introduced their version of lockers called POPStation, which are usually placed in malls and other busy intersections in Singapore.

7 https://ecommerceiq.asia/insights-last-mile-smart-lockers/



07

Micro Delivery – Biking into Southeast Asia’s Last Mile Game

While most people think of cargo trucks and planes when they see DHL, the logistics giant is adapting itself to suit the Southeast Asian e-dommerce market. In the last few years, they have entered the micro-delivery game in Thailand by employing motorcycle couriers to provide same-day deliveries, real-time tracking and other urban consumer requirements .

Trust continues to be an important part of the consumer experience, even in the modern DTC model. Long-established logistics players have a strong headstart over unknown startups in this game – if they can transform their delivery models quickly and suitably for the different markets.

Drone Delivery on the Horizon?

For some time now, drone delivery has been touted as the next game-changer for last mile services . In urban Southeast Asia, challenges to drone deployment in urban centres can get complicated, with a range of infrastructure and building height restrictions in place, and public security regulations evolving as authorities grapple with the implications of having easily-deployed flight drones.

Startups like Fling Asia based out of Thailand are providing their expertise on hardware and software integrations, risk assessments, sensors and more, effectively playing the role of advocates to accelerate the adoption of drone-based delivery and other use cases in Southeast Asia.


08

Bringing Traditional Trade Stores into a New Frontier

While there is a lot of interest in moving Southeast Asia to modern best practices, it is worth noting that traditional modes of doing business are still prevalent and important for many people to get the goods and services that they require.

According to the Deloitte Consumer Insights survey from 2018, while consumer preferences for buying through traditional channels have fallen from 2017, it is still a significant 40% in Indonesia, for a variety of important reasons like location of shop and price of goods (see Figure 1).

Even in the realm of the traditional, startups have been seizing on the opportunities of technology advancements to reimagine the possibilities. Making waves recently is Warung Pintar, a startup on a social mission to digitalise and improve the state of warung (roadside mom-and-pop shop) operations in Indonesia by offering warung owners digital payment and store and inventory management solutions, as well as pre-fabricated micro-storefronts with amenities like Wi-Fi and CCTVs8.

8 https://www.techinasia.com/warung-pintar-raised-35m-year-transform-asias-momandpop-stores9 https://www.thejakartapost.com/life/2019/03/02/warung-pintar-acquires-farmer-empowerment-platform-limakilo.html

By customising its technology solutions to suit the needs of warung operators, Warung Pintar not only better ensures the user adoption of technology, it also becomes a more effective consolidation platform of otherwise poorly-collected data on sales and distribution of consumer goods.

In fact, their latest acquisition in 2019 of farmer-market connection platform, Limakilo, is an exciting extension beyond the consumer packaged goods category into fresh produce, bringing the agriculture supply chain into the fold9.

Warung Pintar, Limakilo, and other startups like them are showing the way for the digitalisation of traditional distribution channels. By forming beneficial networks amongst the various actors and allowing data to be collected on the myriad of micro-operations out there, all stakeholders involved have better visibility of the state of rural and traditional distribution. Data collection and consolidation would also be very beneficial for the micro-entrepreneurs (and the farmers), as they can improve their earnings and livelihoods from having better visibility of market pricing, access to supplier bases and marketplaces, and knowledge of untapped opportunities in product-mix optimisation and other areas for potential efficiency.

Figure 1: Consumer preference for Modern vs Traditional Trade

2017 2018

40%

60%

43%

57%

Source: Deloitte Consumer Insights Survey (2018)

Traditional Trade

Modern Trade


09

Table 3: Startups Digitising Traditional Trade Stores


Warung Pintarhttps://warungpintar.co.id/

Warung Pintar is a micro retail technology company.

Indonesia 2017Series B – US$35.5M

Geraikuhttps://geraiku.store/

Geraiku elevates underserved traditional retail stores through Mobile Tech.

Indonesia 2017 Private Equity

GrowSarihttps://www.growsari.com/

Growsari is helping to build the future of Sari Sari stores in the Philippines.

Philippines 2015 Undisclosed

StoreKinghttp://storeking.in/http://storeking.id/

Storeking is a platform enabling small town retailers to sell over 50,000 products to walk-in customers without having to invest in working capital stock.

Indonesia 2011Series B – US$18.5M


The Future of Warung

Alfamart, one of the largest modern trade retailers in Indonesia, has created a platform that allows people to plug into their branding, operations, product catalogues and supplier distribution channels to start their own little retail business at a very low cost .

Called Alfamind, it is essentially an app that would-be store owners can access and transact from, while providing customers a 3-dimensional augmented virtual reality experience of shopping. Alfamind is not only being creative with technology to provide a unique consumer experience, it is making use of consumer technology to augment their existing distribution operations to include more sales channels. Best of all, in doing so, they are offering the chance for many micro-entrepreneurs to start up and succeed.


10

Moving the Bulk – Optimisations for Logistic Players

Before entering the last mile to reach the end consumer, most goods were probably transported in bulk overland or through sea routes and held in storage at various points. While bulk movements allow for unit costs to go down, unfilled capacity within bulk shipping facilities and warehouses is likely to pose a major cost concern to facility owners.

With internet penetration increasing in Southeast Asia10, startups are emerging with online platform solutions that help to match the many providers of capacity with the many sources of demand.

The efficient use of large-scale logistics facilities is an important aspect of the development of the logistics sector in most countries in the region. In the emergent economy of Myanmar, aggregated trucking service platform Kargo (not to be confused with the startup of the same name from Indonesia) has brought some organisation and simplification to the logistics scene that is made up of many small fleets. Beyond serving Myanmar, it is also looking towards expanding their footprint into the region, where there are similar needs.

Even in a small country like Singapore, startups like Haulio have come to the fore to optimise the matching of supply and demand amongst the fleets available in the container-moving industry. Meanwhile, Indonesian startup Waresix provides an online platform linking up customers with inventory for storage to multiple third-party warehouses, helping warehouse owners soothe over seasonal fluctuations from their traditional demand sources. With real-time access to a cloud-based inventory system, customers get full visibility and control of their stored goods across these warehouses.

Having access to real-time data at each stage of the journey, right down to the unique actor and product level, presents an invaluable opportunity for supply chain analytics to become part of the new business-as-usual. Businesses are now able to keep tabs on the product supply chain lifecycle to ensure product and shipping quality, as well as mitigate the risk of product losses. With data-backed insights, logistics providers are able to look for improvements for their businesses and for their employees alike. The possibilities with IoT are endless.

10 https://medium.com/financex/southeast-asia-mobile-internet-usage-increasing-dramatically-bb63266affb5

Internet of Logistics to Improve Supply Chain Management

From trucking to warehousing to packaging, Internet of Things (IoT) enablers like sensors and trackers are becoming commonplace along the supply chain, making it possible for data to be collected over the physical journey. Smart product and packaging startup EVRYTHNG , for instance, helps companies embed digital identities onto any physical object, making the physical world trackable and manageable from a cloud-based platform. Meanwhile, fleet management telematics provided by startups like Thailand-based DRVR allows devices and sensors to send and receive information across large distances, track vehicle hardware performance, and also driver user behavior, including details like braking habits or even unscheduled stops.


11

Table 4 – Logistics Marketplace Startups


Hauliohttp://haulio.io/

Haulio is a marketplace for booking trucking services. The haulage management platform connects users with a network of carriers and other stakeholders like freight forwarders, drivers and port operators. Carriers can further collaborate with other stakeholders on the platform to offer industry level sharing.

Singapore 2018 Seed – US$747K

TheLorryhttps://thelorry.com/

The Lorry is an online platform to book cargo transportation services. The users can book the services from site or mobile app and mention the boxes, packing and work power needed.

Malaysia 2014Series B – US$7.35M

Kargohttps://kargo.com.mm/

Kargo offers an online platform which can be used by businesses or individuals to request a truck for pickup and delivery services.

Myanmar 2016 Seed- US$825K

Kargohttps://www.kargo.co.id/

Kargo provides its users to book transporters for medium and heavy goods transportation. It partners up with various transporters and provides them with a platform to book their empty spaces with requests from Kargo consumers.

Indonesia 2015 Seed – US$7.6M

LOGIVANhttps://www.logivan.com/

LOGIVAN develops technology solutions to help businesses find and manage trucks online.

Vietnam 2017Venture Series - US$7.9M

Waresixhttps://waresix.com/

Waresix is an online platform for on-demand warehousing. Customers can use the online platform to book available warehouses. Additionally, customers can manage inventory from multiple warehouses using the cloud based WMS on the platform.

Indonesia 2017 Seed – US$1.6M



12

Table 5 – Supply Chain Analytics Enablers


EVRYTHNGhttps://evrythng.com/

EVRYTHNG gives each item an Active Digital Identity™, giving brands an unprecedented opportunity to apply data science intelligence on an item by item basis, drive new digital applications, gain control over their supply chains, and engage with their customers.

United States

2012Series B – US$41.3M

DRVRhttp://www.drvr.co/

Covering fleet, cold chain, bike tracking and most recently vessels, DRVR connects vehicles to the Internet using smart IoT sensors, processing data and then turning it into actionable knowledge.

Thailand 2014 Seed - US$522k



13

Blockchain - The New Mediator for Trust and Transparency

With globalisation, a broader range of stakeholders and processes are involved in a widening supply chain, and business agreements have become tedious to manage and monitor effectively and efficiently. Blockchain technology, with its ability to securely record transactions between parties without the need for intermediaries to verify, record, and coordinate transactions, has captured the imagination of how much more efficient and transparent logistics management can be in the future.

Early initiatives have yielded impressive outcomes that have been widely reported, like how it takes IBM’s blockchain-based Food Trust solution11 a mere 2.2 seconds to trace a food source instead of the usual 7 days or so. In Singapore, Standard Chartered executed its first cross-border trade finance transaction on a blockchain-based platform in January 2019. The deal, which was related to an agri-business supply chain, took a mere day to complete compared to the usual 5 to 7 days needed for documents to be checked and processed12. The potential upside of widespread implementation of blockchain in logistics and supply chain is immense, improving efficiency and traceability by leaps and bounds, and promoting trust and accountability amongst all stakeholders.

Blockchain is a technology layer that can serve many use cases and aspects of logistics and supply chain. From logistics-focused blockchain-based solutions provided by startups like LogisticsX and Yojee, to supply chain financing solutions by startups like DLT.sg that provided the platform for Standard Chartered’s deal, this technology presents a game-changing frontier that will continue to inspire new ideas and arrangements for logistics and supply chain management in time to come.

11 https://techcrunch.com/2018/09/24/walmart-is-betting-on-the-blockchain-to-improve-food-safety/12 https://www.businesstimes.com.sg/banking-finance/stanchart-makes-its-first-singapore-trade-finance-deal-using-blockchain

Table 6 – Blockchain-related Logistics and Supply Chain Startups


Yojeehttps://yojee.com/

Yojee provides an artificial intelligence-based fleet management software based on blockchain. Its features include real-time tracking and communication, AI-powered routing and dispatch, and analytics dashboard.

Singapore 2015 Public - IPO

LogisticsXhttps://logisticsx.io/

LogisticsX is a decentralized platform for last mile delivery services, connecting multiple stakeholders.

Singapore 2018 Unfunded

DLT.sghttps://dlt.sg/

DLT.sg provides supply chain management decentralized applications for enterprises, including smart contract-enabled cross-border transactions that be used to digitize and automate the execution of bills of lading, letters of credit, invoices and POs.

Singapore 2017 Unfunded


14


Logistics may be an indispensable operational cost of business (see Table 7) but it can certainly be optimised and improved on as domestic and cross-border business environments change.

While this report did not touch on the regulatory environment for the logistics sector, it is worth noting that governments, customs authorities and the Association of Southeast Asian Nations (ASEAN) have a major role in this ecosystem, given their overall ability to facilitate or inhibit trade through policy and regulation. It is certainly a positive outlook; against a backdrop of a booming ASEAN region, bolstered by initiatives like the ASEAN Economic Community and trade-facilitative instruments like the ASEAN Free Trade Agreements and ASEAN Single Window, country governments are cooperating and acting to improve trade efficiency.

The public sector aside, there is clearly much that can be done by the private sector, given the available technology in this era. Increasing mobile-first internet penetration in Southeast Asia has allowed producers and consumers across the supply chain to connect more directly. This has also allowed platform services to take off and improve the efficiency of matching demand and supply. The digitisation of logistics services promises not only data-backed insights for businesses and greater convenience for customers, but also the prospect of greater transparency and accountability. Blockchain technology in particular points to greater improvements in future for the retrieval and processing of provenance, financial, customs and other necessary documentation.

Disintermediation is the name of the game in the future of logistics and supply chain management in this region. In improving the flow of goods, services, information and capital in this region, businesses and livelihoods are uplifted, propelling the region ahead in its trajectory of growth and prosperity. If logistics is the bloodline of any business, the prospects that startups in Southeast Asia present and the new technology they bring are the shots we need to stay in the game.

Table 7 – Percentage of Logistics Cost as GDP

Country Percentage of Logistics Cost as GDP (2017)

Indonesia 23%

Vietnam 20%

Lao PDR 17.7%

Cambodia 16.2%

Thailand 15%

Brunei 14.9%

Malaysia 13%

The Philippines 13%

Singapore 8.5%

Source: Armstrong & Associates, Global 3PL Market Size Estimates

Technology to Bring Logistics into the Future

About Deloitte Southeast Asia Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firms, and their related entities. DTTL (also referred to as “Deloitte Global”) and each of its member firms and their affiliated entities are legally separate and independent entities. DTTL does not provide services to clients. Please see www.deloitte.com/about to learn more.

Deloitte is a leading global provider of audit and assurance, consulting, financial advisory, risk advisory, tax and related services. Our network of member firms in more than 150 countries and territories serves four out of five Fortune Global 500® companies. Learn how Deloitte’s approximately 286,000 people make an impact that matters at www.deloitte.com.

Deloitte Asia Pacific Limited is a company limited by guarantee and a member firm of DTTL. Members of Deloitte Asia Pacific Limited and their related entities provide services in Australia, Brunei Darussalam, Cambodia, East Timor, Federated States of Micronesia, Guam, Indonesia, Japan, Laos, Malaysia, Mongolia, Myanmar, New Zealand, Palau, Papua New Guinea, Singapore, Thailand, The Marshall Islands, The Northern Mariana Islands, The People’s Republic of China (incl. Hong Kong SAR and Macau SAR), The Philippines and Vietnam. In each of these, operations are conducted by separate and independent legal entities.

This communication contains general information only, and none of Deloitte Touche Tohmatsu Limited, its member firms, or their related entities (collectively, the “Deloitte Network”) is, by means of this communication, rendering professional advice or services. Before making any decision or taking any action that may affect your finances or your business, you should consult a qualified professional adviser. No entity in the Deloitte Network shall be responsible for any loss whatsoever sustained by any person who relies on this communication.

© 2019 Deloitte Southeast Asia Ltd.

converge paving the way for the future of southeast asian ... · 03 onere ain the a for the uture...

Documents