Thailand's logistics services may need to revise their procedures in terms of precise warning systems and physical development to reduce the possibility of supply-chain disruptions during a crisis such as last year's flood disaster.
Meanwhile, a number of manufacturers are looking for alternative suppliers outside Thailand in order to diversify their risks, as they face the additional factor of needing to prepare for the coming single market under the Asean Economic Community (AEC).
Many distribution centres and roads were inundated last quarter, crippling the delivery of goods and services to retailers, resulting in temporary shortages of food and consumer products in Bangkok and surrounding areas. Some retailers had to use other logistics firms’ distribution centres temporarily established in dry areas.
“What we need for any given crisis is precise information and alternative transport networks such as by water, without leaving road transport as [the only] choice,” said Assistant Professor Dr Ruth Banomyong, director of the Centre for Logistics Research, Thammasat Business School, Thammasat University.
He added that the state would have to prepare disaster-warning systems so that the private sector could assess risks and contingency plans. The government should also think about using seaports such as Laem Chabang or Bangkok Port in Klong Toei for alternative transport.
Thailand’s transport logistics rely heavily on roads, representing almost 90 per cent of total shipments by value, while the remaining stake is shared by air, marine and rail transport.
Ruth said that because of the flood, many companies would diversify their risks by using higher numbers of suppliers, each handling smaller volumes. Some may consider adding suppliers in such neighbouring countries as Vietnam and Malaysia instead of thinking only of Thailand, to diversify their supply-chain risks.
In addition, he said, many multinational firms were no longer concentrating on any single country but were looking at Asia as a single market, especially when the AEC plays a bigger role.
“We will have to take into the account not only floods, but also other potential disasters as risk factors,” Ruth said.
To prepare for possible disasters this year, many retailers agree that the country should go back to its previous business model for distributing goods and products, said Viraj Nobnomtham, managing director of shipping firm Ecu Line (Thailand).
A few years ago, the distribution-centre model changed from one of decentralisation like the hub and spokes of the aviation industry to a more centralised system, which was viewed as more cost-effective. Having only one large cross-docking centre in each key area, such as the Central, North, Northeast and South regions, was viewed as sufficient; all products after being delivered by suppliers were immediately distributed and redelivered in smaller trucks to retail stores in nearby communities. Previously, goods and products were delivered to the centre first, then distributed to warehouses in several key areas before delivery to retailers.
“This year, I think the logistics model must be changed. Each key area will be an additional distribution centre. If one is inundated, the other one can be used instead,” Viraj said.