SE Asia

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

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

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 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
Mark is a Principal based in the Singapore office with more
than eight years of consulting experience. Mark has a strong
focus on quantitative based projects. Previous roles include
being regional manager for Synovate Business Consulting in
Singapore, handling projects for MNCs across Asia, focused
predominantly on the logistics and supply chain space across
industries. Mark managed most survey-based projects for
MNCs where he advised international companies on market
entry, customer segmentation prioritization and growth
strategies. He also has ample experience in qualitative
research, having managed various multi-country projects that
required a combination multiple approaches in order to
customize results to meet the clients’ needs. Having worked
for five years in the M&A team of a Korean Conglomerate in
Spain, Mark also has vast experience with mergers and
acquisitions in Europe, Asia and Africa. Mark is fluent in
Korean, English and Spanish. He holds a BS in mechanical
engineering, from the Worcester Polytechnic Institute (United
States) and a MBA from the University of Rochester.
China Singapore
Suite 801 Suite 17-01
Hong Kong Plaza High Street Center
283 Huaihai Road Central 1 North Bridge Road
Shanghai 200021 Singapore 179094
Tel: +86 21 5168 8905 Tel: +65 6408 8208
info@solidiance.com
6
Mickael Feige – Consultant
Mickael Feige is a Consultant based in the Thailand office
with more than five years of consulting experience. He has
led over 50 national and multi-regional engagements for
Fortune 500 clients across Europe, Japan and south-east
Asia. Prior to joining Solidiance, Mickael was managing
investments projects in Europe for large Japanese MNCs.
With strong experience in combining numerical and
qualitative analytics, Mickael specializes in customizing
advanced market segmentation and size forecasting models
to help clients identify and prioritize market opportunities to
develop growth strategies. Mickael has rich experience
across supply chain and logistics industry throughout Europe
and Asia Pacific, including key industries such as medical
equipment, manufacturing and automotive. He combines
sector and cross-industry best practice, leveraging this
knowledge to help clients develop successful market
strategies. He holds a Bachelor in marketing (with Honors)
from the London Metropolitan University and a MBA from
the Institute of Political Science of Lyon.
Thailand
Suite 32-05
Interchange 21
399 Sukhumvit Road
Bangkok 10110
Tel: +66 (0)2 660 3638