eCommerce Boom Calls for More Sustainable Supply Chains in Southeast Asia

By James Christopher, President – Asia, TMX

The COVID-19 pandemic has triggered a dramatic eCommerce boom, altering the way companies do business. It has also changed consumer buying experiences, shifting the retail landscape.

As retailers benefit from the significant increase in eCommerce orders – Southeast Asia saw more than 60% increase in gross merchandise value (GMV) to US$62 billion in just one year in 2020[1] – more needs to be done to ensure the sustainability of supply chains.

In today’s world where consumers are becoming increasingly environmentally and socially conscious, the transport and logistics sector needs to focus on operating sustainably. This is not just for corporate governance and operational savings, but to establish their social license to operate and become more environmentally conscious.

As an example, the spike in door-to-door deliveries amidst social distancing measures has been taxing on last-mile delivery vehicles. This is evident in the rise of emissions from last-mile services, which are projected to further increase by more than 30 percent in 100 cities globally[2]. Unfortunately, as companies focus on getting goods to consumers quickly, this means delivery trucks prioritise speed over efficiency, often running below full capacity.

Concerns from consumers

Consumer focus on the environmental and social impact of the companies and businesses they buy from has been around for some time, but more people are becoming aware. Today, almost half of Southeast Asia consumers expect retailers to eliminate plastic bags and plastic wrapping for perishable items, while slightly over half expect businesses to be accountable for their environmental impact.[3]

Meanwhile, research has found that companies that successfully match customers’ sustainability expectations are rewarded with customer loyalty and an increase in revenue growth[4]. This means that businesses must have visibility in their supply chains to trace raw material inputs to last-mile delivery, further underscoring the need for sustainable supply chains.  

Road to resilience

Those who have adapted their business and operating models and created more agile supply chains to meet the boom in eCommerce, have found themselves ahead of the race in a changing market.

The adoption of technology in transport and logistics has evolved over the past decade, but COVID-19 was the catalyst that pushed for dramatic and rapid change in a short window of time.

Many operators have taken up route-optimisation to improve customer experience and reduce carbon footprint. Others have considered the type of fuel they use.

eCommerce has put immense pressure on last-mile logistics with customers placed as top priority. But what happens when customers don’t quite understand the impact of cheap and fast deliveries on the sustainability of supply chains?

As operators have raced to deliver huge order volumes over various online shopping festivals, the question remains whether cost to serve is being covered. Those who can optimise their costs are more likely to reduce their carbon footprint, as well as increasing margins.

But if you’re overservicing and running deliveries on half empty trucks, then a levy such as road user charge or carbon charge, might be necessary to change business processes and consumer behaviours.

The big challenge

Senior supply chain executives face sustainability issues daily as they look to ensure the organisation’s activities are aligned to the expectation of shareholders, including internal and external stakeholders.

Having the capability and metrics in place to identify and communicate social, environmental, and economic achievements is paramount to embedding sustainability thinking within an organisation.

Supply chain strategies should enable businesses to exceed sustainability ambitions across logistics functions. At TMX, we have designed solutions that are practical and adaptable for different companies across Asia Pacific to meet environmental goals and targets in line with customer, shareholder and community values and expectations. Some organisations have also the added importance of complying with legislative requirements. Setting the right targets is crucial, including making emissions a critical key performance indicator for companies.

The new normal

The pandemic has forced businesses to throw out their old manual in order to survive – and ultimately thrive – in these uncertain times. As companies are forced to relook at the way they operate, the opportunity is ripe for factoring in sustainability in all that they do.

eCommerce is here to stay. As such, leading companies need to crack the code around supply chain efficiencies, which will simultaneously reap environmental gains. This could include understanding the cost to serve or exploring the feasibility of multiple smaller warehouses or fulfilment centres in lieu of one large one, to ensure orders arrive on time.

Industrial occupiers across Southeast Asia have been incorporating sustainable practices in their facilities for a while now. Many have also been investing in solar panels and water recycling plants among other environmental-friendly initiatives in industrial property, which is ultimately reducing carbon emissions.

Tenants are also now seeking sites that are as a minimum a Leadership in Energy and Environmental Design (LEED) Gold or Platinum standard certified or Green Mark Platinum rated, along with a requirement for LED lighting and efficient ventilation system. This demand is set to continue driving green initiatives in the industrial property market.

COVID-19 has propelled the industry forward by five years, having turbocharged online retail and forced businesses to pivot in order to stay relevant. Now more than ever, is the time to take charge of sustainable supply chains.

TMX is Asia-Pacific’s leading business transformation consultancy specialising in digital and supply chain solutions. Please visit: https://tmx.global/

[1] https://storage.googleapis.com/gweb-economy-sea.appspot.com/assets/pdf/e-Conomy_SEA_2020_Report.pdf

[2] http://www3.weforum.org/docs/WEF_Future_of_the_last_mile_ecosystem.pdf

[3] https://www.pwc.com/sg/en/publications/assets/page/the-consumer-transformed.pdf

[4] https://www.bain.com/insights/three-ways-traceability-can-fulfill-the-sustainability-promise-wef/