Findings show that eighty three percent (83%) of the Service Logistics activity in Southeast Asia (SEA) occurs in Singapore and Malaysia (Penang). Singapore has a 60% share of the SEA market primarily due to its regional hub status. Further, the estimated total service logistics market in SEA is circa Eur. 410 M (FY 2008). Solidiance reviews the challenges and opportunities of the service parts logistics in SEA in 2009.

1. SE Asia
Service Parts
Logistics
Market
Solidiance evaluates the key trends in service
parts logistics industry in S. E. Asia
July 2009

2. Service Parts Logistics Market Outlook
Solidiance evaluates the key trends in service parts logistics industry in S. E. Asia
The Service Logistics business (a.k.a aftermarkets
“
business) in Asia is on a high growth trajectory, fuelled
by ongoing shift of OEM’s manufacturing towards low
cost destinations in Asia. While outsourcing service The results of this study affirm the
logistics to 3PLs has been going on for several years in demand for outsourcing service
key industries such as automotive, an evolution in
terms of service offerings such as integrated or
logistics solutions, complete with
customized solutions for different industries is gaining interesting insights across key
traction. Industry players have understood that service customers and countries in S.E Asia
logistics can complement revenue realization rather
than being a cost factor - thereby many firms are now (SEA). Logistics companies are
trying to transition their after sales from a cost center looking at this trend with a growing
to a P&L.
interest and are developing new offers
Solidiance examined 6 key industries and interviewed to fit their clients’ needs and help
over 125 executives - logistics managers and executives
them reduce their costs.
”
in each vertical to understand how they are currently
working with 3PLs, what are the bottlenecks and issues
they face in their related Service Logistics activity and Damien Duhamel – Managing Director, Solidiance
what would be the best improvements they would like
to see. Targeted industries were Aerospace, Electronics,
Telecom, Industrial equipment, Medical equipment and
Semiconductor equipment across 6 countries in South
East Asia: Singapore, Malaysia, Thailand, Indonesia,
Philippines and Vietnam. 2

3. Service Parts Logistics Market Outlook
Solidiance evaluates the key trends in service parts logistics industry in S.E.Asia
Service Logistics Market in S.E.Asia
Findings show that eighty three percent (83%) of the Outsourced Service Logistics (warehousing only)
Service Logistics activity in the SEA occurs in Singapore
and Malaysia (Penang). Singapore has a 60% share of
the SEA market primarily due to its regional hub status.
Further, the estimated total service logistics market in
SEA is circa Eur. 410 M (FY 2008) (in-source & out-
source). Semiconductor, Telecom and namely the
Electronics industries are the fastest growing and most
outsourced industries, the latter being the most
attractive industry in terms of growth and size.
Further, the split in terms of percentage between in
sourced and outsourced market revenue is similar
among all the sectors in Singapore and the rest of the
countries in South East Asia. A notable exception is the
aerospace industry where all the companies interviewed
in Malaysia in-source the warehousing, mainly for IP
purposes, which is still a important issue in this sector.
Total Service Logistics by Countries in 2008
• Percentage of companies outsourcing warehousing in Singapore
• Percentage of companies outsourcing warehousing in Malaysia and
Thailand
Source: Solidiance research and team analysis, 2008
Source: Solidiance research and team analysis, 2008 The chart above shows the percentage of warehousing outsourced for each of
The chart above represents the value of Service Logistics market in 2008 in 6 the 6 industries examined in this study. Industrial equipment industry is the
main countries in South East Asia. In this region the total service logistics sector where the proportion for outsourcing is clearly the lowest compared to
market is circa EUR 410 M. (insource and outsource) the other industries
3

4. Service Parts Logistics Market Outlook
Solidiance evaluates the key trends in service parts logistics industry in S.E.Asia
Outsourcing is favoured by majority of the industries
The Aerospace industry is characterized by large The Medical sector is characterized by high value parts
warehouse requirements and regulations (FAA). In this and a relatively small size in the after sales business in South
sector, the majority of companies in Singapore are East Asia.
outsourcing their warehousing to 3PLs. The needs of
•In this industry, players rely on 3PLs for warehousing and
industry players are highly specialized, and 3PLs need strong
customized solutions to optimize their supply chains. Building
industry knowledge in order to serve them.
efficient local networks is a key point, but the reactivity of
• For example, 3PLs must be able to appropriately handle the supply chain is another.
large and unconventionally shaped parts, and be able to
•In some cases, special parts available in warehouses on
appropriately store carbon fibre parts which are
other continents (US, Europe) must be supplied within 24h
temperature sensitive.
to the medical equipment manufacturer in Asia because its
• Most of the companies in this sector to rely on 3PLs clients (e.g. hospitals) sometimes require interventions
expertise for warehousing and transportation so that they within 2 to 4 hours. Repairs are in-sourced by a vast
can concentrate on repairs. However, the key concerns – majority because of the level of technical knowledge
challenges for outsourcing will include - confidentiality and required to handle the repair of specialized equipment.
IP related issues.
In the Semiconductor equipment industry, companies
The Electronics and Telecom sectors outsource their also believe outsourcing is advantageous because 3PLs are
warehousing to 3PLs in a larger proportion than the other better equipped with the latest technologies and know how
industries. to handle logistics efficiently.
In the Electronics industry, the existence of multiple sub- •Relying on local 3PLs is the most preferred option for
sectors results in large volumes of finished goods and spare several companies in this industry, a major reason being that
part movement. Outsourcing is therefore the best way to it allows them to handle customs issues faster and with a
improve efficiency of Service Logistics in this industry. stronger “last mile” reach than the global logistics companies.
• As a result, most of the companies prefer to outsource The Industrial equipment industry differentiates itself from
their warehousing component to optimize cost, especially in the other sectors by leaning more towards in-sourcing
Singapore.
•This trend is especially true in Malaysia and Thailand where
Telecom players in Singapore mainly prefer outsourcing their an average of 6% of companies are outsourcing this part of
warehousing to 3PLs in order to be more efficient in ensuring their service logistics.
tight control in safety & security measures for telecom
•Most of those companies are manufacturing heavy industrial
equipment.
products. However, in the sub-segment of control
• Moreover, 3PLs are able to customize and adapt solutions automation companies are keen on using 3PLs for managing
in pace with the fast changes in the telecom industry. their warehousing.
Hence companies vie for long term partnerships/service
agreements with 3PLs to optimize their long term contracts.
4

5. Service Parts Logistics Market Outlook
Solidiance evaluates the key trends in service parts logistics industry in S.E.Asia
Key trends to watch out in 2009
“
The Service Logistics business is increasingly shifting
towards outsourcing not only transportation, but also
The biggest growth opportunity is here
warehousing. Key customer discussions confirm this trend in Asia for us and for many other
of growth grow despite the current crisis, primarily driven companies. It's growing faster than the
by businesses from emerging countries such as China,
India and Indonesia. The current financial turmoil should business as a whole, and we believe it
have a “positive” effect on after sales services, especially will continue to grow substantially
Service Part Logistics since customers will tend to extend
the life cycle of their equipment rather than buying new
faster than the overall business which
products. we expect to grow in high single digits
annually especially growth in terms of
demand for logistical services from the
healthcare and aviation industries –
across both mainstream and service
”
logistics.
Global CEO, Global Supply Chain & Logistics Major
5

6. Service Parts Logistics Market Outlook
Solidiance evaluates the key trends in service parts logistics industry in S.E.Asia
Solidiance is a marketing and innovation strategy consulting firm with focus on growth in Asia Pacific. We are devoted to working side-by-side with our clients to
outpace the competition, close gaps in growth and deliver breakthroughs in performance and profitability. Our Asia focus provides our clients with a better
understanding of intrinsic regional issues.
To subscribe to further white papers and to learn more about Solidiance please visit: www.solidiance.com
Mark Lee - Principal Mickael Feige – Consultant
Mark is a Principal based in the Singapore office with more Mickael Feige is a Consultant based in the Thailand office
than eight years of consulting experience. Mark has a strong with more than five years of consulting experience. He has
focus on quantitative based projects. Previous roles include led over 50 national and multi-regional engagements for
being regional manager for Synovate Business Consulting in Fortune 500 clients across Europe, Japan and south-east
Singapore, handling projects for MNCs across Asia, focused Asia. Prior to joining Solidiance, Mickael was managing
predominantly on the logistics and supply chain space across investments projects in Europe for large Japanese MNCs.
industries. Mark managed most survey-based projects for With strong experience in combining numerical and
MNCs where he advised international companies on market qualitative analytics, Mickael specializes in customizing
entry, customer segmentation prioritization and growth advanced market segmentation and size forecasting models
strategies. He also has ample experience in qualitative to help clients identify and prioritize market opportunities to
research, having managed various multi-country projects that develop growth strategies. Mickael has rich experience
required a combination multiple approaches in order to across supply chain and logistics industry throughout Europe
customize results to meet the clients’ needs. Having worked and Asia Pacific, including key industries such as medical
for five years in the M&A team of a Korean Conglomerate in equipment, manufacturing and automotive. He combines
Spain, Mark also has vast experience with mergers and sector and cross-industry best practice, leveraging this
acquisitions in Europe, Asia and Africa. Mark is fluent in knowledge to help clients develop successful market
Korean, English and Spanish. He holds a BS in mechanical strategies. He holds a Bachelor in marketing (with Honors)
engineering, from the Worcester Polytechnic Institute (United from the London Metropolitan University and a MBA from
States) and a MBA from the University of Rochester. the Institute of Political Science of Lyon.
China Singapore Thailand
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