Shifting 3PL Landscape in Asia Pacific

When the consultancy, Armstrong & Associates, staged their “3PL Value Creation Asia Summit” last month in Hong Kong, analysts came away with some predicable observations and a few new takeaways.

Coming on the heels of Gartner's recent annual “Magic Quadrant” report, and in advance of the CSCMP's 27th Annual “State of Logistics Report” to be delivered on June 21st, Armstrong noted that merger & acquisition “multiples” peaked in August of last year, with investors now focusing on smaller priced deals.

“There is a lot of investment interest in China,” says A&A president, Evan Armstrong. “ We were also hearing questions about cross border e-commerce providers in the region.”

The fact that Amazon is building its operating infrastructure to support its fulfillment business, thereby “encroaching” on 3PLs worldwide was also not much of a surprise.

“The distribution infrastructure requirement to handle smaller parcel quantity outbound orders versus buying goods from a brick-and-mortar store is much higher,” said Armstrong.

He also noted that the markets are letting Amazon grow without generating a profit making it similar to competing with a state-run enterprise.

“Amazon's growth is raising wage and warehousing rates within local markets adding costs to 3PLs,” he observed. “Consumers have adapted a return from anywhere mentality and want to be able to return goods no matter where they were originally sourced. Furthermore, on-time fulfillment and delivery performance expectations continue to increase. Amazon PrimeNow is providing free two-hour delivery in select markets which will only continue to ratchet performance expectations up.”

Meanwhile, says Armstrong, major 3PLs are stressing targeted customer acquisitions. The focus is on targeting vertical industries and playing to a 3PL's strengths to deliver value for customers.

Not all Southeast Asia countries are the same, however.

“A tailored approach needs to be taken to achieve geographic growth,” says Armstrong. “Depending on the country, expansion may mean making specialized approaches to governmental entities, leading families, and working with locals at many levels. People are key to creating value for customers and driving 3PL growth and profitability. Having solid programs for talent acquisition and training are critical.”

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