Current and Potential Opportunities for Road Freight in Southeast Asia

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Air freight might offer convenience and speed for transportation in logistics, but road freight is continuously gaining prominence in Southeast Asia due its relatively low cost. With improved features and functionality, more companies are relying on road freight as a more convenient and cheaper method. The anticipated digitalization in the trucking industry also gives a promising opportunity for the road freight industry in the upcoming future. 

Here is an overview of the ongoing and upcoming opportunities for the road freight industry in Southeast Asia.

Current Opportunity for Road Freight

The expansion of e-commerce in the region has raised demand for cross-border shipping. The anticipated surge is being prompted by the recovery of economic growth in several of Southeast Asia’s top economies, as manufacturing recovers and corporations regionalize and broaden their supply chains. 

One of the most important innovations in the Southeast Asia Customs Transit System (ACTS) announced in 2020 is the ability for operators to transit cargo smoothly across various Southeast Asian borders with a comprehensive guarantee that covers duties and taxes for the whole route. Primarily, the Southeast Asia road freight industry anticipates a Compound Annual Growth Rate (CAGR) of more than 8% between 2020 and 2025. The expansion in the consumption of online shopping and e-commerce B2B, which is projected to grow by 70% by 2027, is also generating demands for door-to-door services. 

Challenging Competitors

One drawback that is often said about road freight is its longer shipping period, compared to air freight. However, this is arguable as it can actually reach more customers and is significantly cheaper than air freight. Additionally, road freight releases less emissions than air freight while providing higher reliability and faster delivery than ocean freight. Drone services are not a competition for road freight, since trucks can carry considerably more load than drones. Road freight is driving toward a cleaner, more efficient, safe and sustainable future for carbon-efficient fuels through technology. These dynamics are revolutionizing the road freight industry, resulting in increasingly appealing and long-term logistics solutions.

E-commerce and Road Freight

More e-commerce companies have also begun to develop their own road logistics services to ensure faster delivery. Two major e-commerce players, Lazada and Shopee, provide options for their customers choosing which delivery company they want, including Laz Express and Shopee Express. With this, the current opportunity for the road freight industry is up and going. 

Road freight is increasingly playing a growing part in international long-haul solutions throughout Southeast Asia since it is a cost-effective and sustainable alternative. Thomas Tieber, CEO of DHL Global Forwarding Southeast Asia, suggested that in Southeast Asia, road freight has provided more consistent pricing, capacity, and simpler border access. This was truly beneficial during the early COVID19 pandemic, where air and ocean freight rates were volatile.

How Digitalization Enhances Road Freight

As a key component of many supply and distribution systems, the trucking industry is one of the last to have undergone major digital change. The trucking industry will soon expect a wave of first-of-their-kind advancements enabled by digital technologies such as cloud, artificial intelligence (AI), the Internet of Things (IoT), advanced data analytics, and machine learning. 

This finding is explained by Daniel Knoedler, the Director of Global Sales, Automotive, Aerospace, and Defense Industries at IBM, and Ben Stanley, the automotive research lead at the IBM Institute for Business Value in IBM Executive Survey. According to the survey, the innovations take the form of capacity-as-a-service, crowdsourced delivery, optimized predictive maintenance, driver/truck/road-specific routing, smart cargo, automated driver assist, and many more. 

By 2030, trucking companies will be able to package data-driven capabilities with their delivery services, allowing a much more extensive array of services. Predictive maintenance will also be much more efficient, so companies may schedule their trucks regularly on the basis of insights into data. This is also expected to significantly prevent accidents and other unforeseen events, which can disturb the shipment period, as what usually happens currently. 

It is almost certain that the road freight industry has only begun to develop even more. With the available opportunities, such as the rise of e-commerce, road freight is able to penetrate the market and compete with air freight and ocean freight. Moreover, the innovation in the trucking industry can be one that further increases its prominence in the future.

 

Read Also: Opportunities for Supply Chain Industry in Southeast Asia

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