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Ramping up cross-border freight along South-east Asian roads
MONDAY, OCTOBER 03, 2022
The globalisation of trade is one of the driving forces of the world economy and has created an interconnected global trading system. Endless opportunities have been created as decision-makers can now reach new customers and secure a diverse selection of new staff, materials, and products regardless of time zones.
However, with supply chain volatility across costs and shipment times, alongside inflation concerns, many logistics players are now rethinking their strategy to mitigate the impact that the pandemic has on their networks.
The solution is no longer as simple as increasing the capacity of container ships or booking planes ahead of time, as there are obstacles that are out of one’s control. The undeniable truth is that disruptions will remain as challenges such as increased extreme weather events or closures due to COVID-19 outbreaks continue to push up logistics costs, and manufacturing prices and extend supplier delivery times.
Today, international transportation is done mainly via the ocean with 90% of trade goods carried over the water. However, cross-border freight is essential when approaching ports or for home deliveries. By having a mix of cross-border, air, and ocean freight, companies can unlock endless business opportunities and potential in Southeast Asia.
The end of the “one size fits all” era
Ocean and air freight are the go-to transport modes for international freight, with the latter often seen as the favoured mode for industries such as fast-moving consumer goods, or e-commerce sellers. However, business leaders may miscalculate the actual time needed for goods to complete their journey which could lead to higher costs in their supply chain. Similarly, relying only on ocean freight can lead to delays should there be unexpected inclement weather or a lack of vessel back-ups.
Multimodal transport provides the ability to customise routes based on the nature of the goods being shipped. For example, the transportation of car tires is not as urgent or timely as pharmaceutical products. In other words, industry leaders can look at more affordable alternatives, such as shipping the cargo via air from city to city, before leveraging land transport from city to smaller towns or districts.
By implementing cross-border freight as part of their logistics strategy, chief supply chain officers can have better control and understanding of how goods move throughout the network. Within Asia, cross-border shipping that leverages both truck and railway can become a strong viable alternative as opposed to solely relying on air or ocean shipping for international transport, mitigating the effects of global supply chain disruptions.
Those who lack the resources can rely on third-party logistics providers who are able to support end-to-end shipment management and customised route solution design and help them gain a competitive edge to stay ahead of disruptions. As logistics networks in the region evolve, new rail+truck services will provide more transport options that can help foster greater connectivity for businesses and facilitate trade across borders.
Customising logistics journey for seamless and efficient transportation
Cross-border freight faces fewer restrictions on the types of items delivered compared to shipping the freight via air or ocean. Goods transported via air are subjected to aviation safety standards, so certain items such as liquids and flammables require more paperwork, which can exacerbate any ongoing delays in the network.
Organisations should see cross-border freight as a complimentary transport mode within their intra-Asia logistics strategy, in tandem with air and ocean freight. For example, the transnational China-Laos railway continues to strengthen China’s connectivity with members of Asean and signatories of the Regional Comprehensive Economic Partnership (Rcep). With multiple weekly departures, logistics players can easily make bookings to transport goods via land if there are any blockages at ports. For customers, cross-border freight is also more affordable in terms of cost per volume, without sacrificing too much speed for the Southeast Asian lanes it is available for. Instead of dealing with containers stuck at ports or airports, goods can be redirected via land to the next nearest destination.
Achieving sustainability goals in an unpredictable industry
To meet customer demand, businesses are often offering consumers the choice to opt for faster and more convenient shipping alternatives, but this can promote unsustainable consumption. As more people seek faster delivery, the delivery lead time for logistics companies shortens, resulting in more frequent and carbon-intensive delivery trips. In fact, air cargo contributes to 2 percent of global carbon emissions and 4 percent for ocean freight.
With governments implementing tighter sustainability regulations such as the Regional Action Programme for Sustainable Transport Development in Asia and the Pacific, companies are keen to go green and logistics departments are not spared from this go-green plan.
Cross-border freight can help businesses achieve their sustainability goals. For example, railway services can reduce CO2 emissions by 25 per cent as compared to ocean shipping and emit 12 times less CO2 than air freight. Moreover, more third-party logistics providers are tapping on the China-Laos railway service to provide access to more sustainable services and wider coverage. Policy measures, like maintaining essential services at the borders, promoting multimodal transport, efficiently regulating cross-border freight, and promoting digitalisation, have allowed goods to flow across borders despite domestic lockdowns and other restrictive measures.
Cross-border freight: The key to multimodal logistics
It is too risky to keep supply chain eggs in just one basket, such as only relying on air or ocean freight. By ramping up on cross-border freight, you can implement a multimodal strategy that addresses your business goals and challenges.
Moving forward, efficient and resilient transport and logistics networks are key for economic growth, and by relying on multimodal logistics, business leaders can engage in more affordable and environmentally sustainable logistics services.
Shawn Chen, Vice President Southeast Asia, C.H. Robinson
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