It’s Thai’s time for logistics system development

Logistics is defined according to the Council of Logistics Management as “a process involved with planning, operating, and controlling an organization, included the management of information and related money transactions in order to have them moved, gathered, collected, and distributed as products, raw materials, parts, and services having the purpose to gain most efficiency and effectiveness using customer satisfaction as the main focus.”

Developing a logistics system becomes a vital issue in Thailand as Thai private sector can not compete with other. The main cause of this problem is that the cost of Thailand’s logistics is quite high. The logistics cost is 20-30 percent of the GDP of Thailand, which is higher than in the United States and the European Union, and about 2-3 times higher than in Japan. Thus, it is time for Thailand to develop its logistics System.

Investing in logistics infrastructure. The logistics infrastructure of Thailand still lacks efficiency because it mostly depends on high cost road transportation; there are not enough distribution centres, and there is a lack of connection in the transportation network between each type of transportation. Where information technology infrastructure is insufficient, high costs are forced on the workforce for access to information technology. 

The government should be hastening investment in logistics infrastructure, especially the development of a rail transportation system, oil and gas pipe system, and information technology network; including the development of related rules, regulations, and standards.

Promoting competition in logistics industries. Logistics service providers (LSP) in Thailand are mostly foreign businesses with high service standards, while Thai LSPs are still weak due to a lack of business networking, scant knowledge in logistics management and limited funding, technology and information technology, as well as few human resources specialized in logistics, and database logistics records. Thus, it was not surprising that the International Air Transport Association (IATA) specified that the multinational LSPs have a 72 percent growth rate for the past five years. However, Thai LSPs had a growth rate of just 2.75 percent for that same period.

Though the government sector has attempted to strengthen Thai owned LSPs, the opportunity to develop the Thai owned LSPs for competition on the global stage is quite hard. With a future trend toward deregulation of the service sector, the government should promote investment and competition between LSPs, in such a way that could develop the whole industry and encourage greater logistics knowledge spillover in Thailand.

Developing logistics knowledge for Thai entrepreneurs. Most of Thai Entrepreneurs lack of knowledge and specialization for the development and management of logistics, particularly for small and medium enterprises (SMEs). These organizations need to aware the usefulness of logistics systems, as their lack of knowledge is a barrier, which could prevent them from having a logistics system within reach, and from also recognizing its usefulness. This therefore causes them not to plan for the development of their logistics system, for example, there is no investment in terms of assets, information technology, and the building of customer and supplier relationships. There is also no plan for human resources to take up the responsibility of logistics management.

The government should support the development of logistics knowledge for Thailand’s entrepreneurs by implementing logistics courses for general business and SMEs, training for the entrepreneur, and the development of universities that will specialize in logistics, implementing media that will give logistics knowledge, supporting businesses to implement business networks with large enterprises in order to penetrate logistics knowledge, for example. The entrepreneurs should also seek logistics knowledge from other businesses that have experience in using logistics systems, together with improving human resources within organization or recruiting logistics specialist in order to gain knowledge and specialize in logistics management.

Supporting access to information technology. Most SMEs lack in their use of information technology management within their organizations. They use it just for some activities, such as their accounting system, or their administrative and production systems. Information technology usage is still limited for the management of a logistics network among organizations, owing to the need for high investment and due to the entrepreneur lacking in knowledge, understanding, and the realization of strategic benefits in the use of information technology for logistics management, particularly software knowledge for use in logistics operations and supply chain activities. At the same time, software providers do not understand the need of each entrepreneur.

The government should promote using information technology in logistics systems, for example by developing a government electronics system and information standards, connecting information between government and private units, by supporting government purchasing by the use of an electronics system, by creating the open source logistics-aided software, and providing loans to investment in logistics technology.

Logistics development is supposedly identifiable as a national agenda issue, even though a past government emphasized infrastructural development for reason of convenience and cost reduction for the business sector as the whole. Nevertheless, the efficiency of reducing logistics cost in the organization will be more or less dependent on the role of each private unit. Thus, the workforce should start to learn and specify strategies for the development of their organizations’ logistics system, and with respect to gaining full benefits following government sector development.

Dr Kriengsak Chareonwongsak
Senior Fellow, Harvard Kennedy School , Harvard University
kriengsak@kriengsak.com, kriengsak.com, drdancando.com