Government and private sector should work even more closely together to bring down logistics costs, as the Philippines continues to register one of the highest logistics costs in the region amid the COVID-19 pandemic, according to a supply chain expert.
Samuel Bautista, President and Chief Learning Officer of the Academy of Developmental Logistics, emphasized in a recent e-forum that public-private coordination and dialogue will help improve trade logistics, lower costs, and boost the country’s global competitiveness.
Bautista said studies conducted a few years ago showed that logistics cost comprised 27.16% of sales in the Philippines. This was higher than 21.40% in Indonesia, 16.30% in Vietnam and 11.11% in Thailand. He stressed the need to update data in view of recent developments.
Addressing logistics issues is particularly urgent now as the COVID-19 crisis and related community quarantines are resulting in supply chain disruptions.
Bautista noted there are traditional causes of logistics delays and high costs, including documentation and information requirements, border procedures and controls, lack of transparency and predictability, manual and paper-based processing, and administrative fees and charges.
On top of these, new challenges have emerged as the pandemic and the ensuing lockdowns implemented have led to disruptions in the supply chain sector, said Bautista.
These challenges include ensuring the health and safety of workers, dealing with capacity and space constraints, and managing human resources including providing in-facility lodging and additional incentives and equipment for remote working.
Other new developments impacting logistics performance include observing health protocols, providing testing, and managing compliance issues particularly in getting permits and licenses in view of social distancing.
In sea freight transport in particular, carriers have responded to the effects of the pandemic by tightening capacity and managing freight rates through blank sailings and vessel rerouting.
While these measures have led to strong profitability for shipping lines, they have brought difficulties to shippers in terms of service delays and disruptions, space and equipment shortage, and soaring rates.
Shippers have also had to pay extra to avail of premium freight service and secure priority in equipment release, space, discharge, and provision of chassis at destination, noted Bautista.
He warned shippers to brace for more challenges in the new year such as continued disruptions in international supply chains due to the second wave of COVID-19 outbreaks, as well as volatile rates on all major international sea trades.
Volumes are also expected to remain brisk through the Chinese New Year, which will not improve the container shortage.
“Carriers’ capacity management strategies are here to stay and shippers will need to find ways to work within the adjusted networks,” Bautista said. “In some cases, the higher pricing trends may be the new normal.”
He added that contract and spot rates will come down but not to pre-COVID levels.
Bautista underlined the need for strong partnerships among stakeholders in industries and the government through communication and sharing of information as the most effective response to the COVID-19 pandemic and logistics issues.
He also pointed to the importance of capacity building through trainings and webinars to educate service providers and customers alike on supply chain challenges.
“Challenges were addressed although not in a swift manner but partnership and communication play an important part especially in public-private dialogue,” he concluded.