The Office of Industrial Economics (OIE) is a government agency with a major job on its hands. When projects are proposed to help enhance the country's industrial effort, the office's role is to screen the proposals and select those it believes justify funding support from the government. Consequently, it has a formidable workload.

"There are about 50 projects under the investment plan from 2008-12. Of these, about five are under consideration for approval this year," says director-general Atchaka Sibunruang Brimble.

Only projects seen to have clear benefits are endorsed to proceed. Most of them involve research and development, training, industrial enhancement, human resources or productivity.

However, one of the projects awaiting approval this year involves the development of logistics systems - in literal terms, the detailed coordination of a large and complex operation: supplying and running Thailand's industries and delivering to market the country's industrial output.

Government policy seeks to reduce Thailand's logistics costs to 13 per cent of gross domestic product (GDP) by 2010. Some calculations indicate the Kingdom's logistics costs are now nearly 20 per cent of GDP, while those in developed countries do not exceed 10 per cent.

A committee on logistics and supply chains chaired by the Industry Ministry's deputy permanent secretary created a road map last year that, among other things, points to a reduction in logistics costs. It provides for the implementation of action plans on increased productivity, upgraded human resources and support for networks both inside and outside the country.

Two teams from the committee have recently begun investigating cost-effective logistics and the development of electronic service support.

Atchaka says the OIE is also a unit that determines plans for the development of networks and logistics systems, including distribution centres.

She explains the importance of supply chains in any industry. These should be integrated into a fully completed logistics system that links a chain of products from their sources towards production processes in factories and then transports them from the factories to the hands of end-users.

"If we're on the right track, Thailand can reduce its logistics costs in line with the target of 13 per cent," she says.

Her office is trying to encourage the establishment of more local logistics service providers (LSPs). As well, the Board of Investment offers privileges to support new LSPs.

In terms of practical studies of logistics problems and solutions, Atchaka says the OIE has joined with the Department of Industrial Promotion to launch a new study in Ayutthaya province.

Regarded as a pilot project, the study is being hosted by industries in Ayutthaya. It will focus on relieving rush-hour traffic congestion in the province, which is a major production base for both local and international manufacturers.

In a bid to reduce overall logistics costs, manufacturers are being urged to consider three transport alternatives, including marine and rail delivery, instead of depending, as usual, on land transport.

Ayutthaya is also a centre for various traditional products made and marketed by small- and medium-sized enterprises (SMEs) that are too small to cope with logistics costs. Therefore, the study makes provision for setting up a logistics centre for SMEs, so they can export their products more efficiently and conveniently.

With support from other state agencies, the electronic system for customs procedures used at air- and seaports will be adapted to help transit goods and control production via a single electronic window. The goods and products can thus be traceable, saving time and costs, she says.

As well, the OIE is encouraging the clustering system, in which large companies help small suppliers in its supply chains.

The wisdom of this approach can be seen in the success of Toyota Motor Thailand, which now claims to be the biggest vehicle exporter in Asia. Its success could not have happened if local small- and medium-sized automobile-industry suppliers had not been strong, Atchaka says.

"I would like to see the country's overall logistics costs standing below 10 per cent of GDP," she adds.

Sasithorn Ongdee

The Nation