E Logistics Marketplace: Opportunity for Thai carriers amid intensifying competition in the digital era (Current Issue No.3051)

         Over the past five years, Thai companies offering road transport services have faced fiercer competition due to an expansion of international logistics giants in Thailand. In the past, these international logistics giants used to focus on serving export oriented  industrial manufacturers.   Recently, they have expanded to domestic freight transportation.   Moreover, these international logistics firms use digital technology to enhance their logistics management to gain a comparative advantage over Thai companies. Their presence has inevitably affected the local carriers.

         Nonetheless, the advent of digital technology also presents a new business model called “Electronic Logistics Marketplace," which is an online platform for producers and carriers to settle the prices and conditions for merchandise delivery. E Logistics Marketplace will gather all delivery orders all over the country and create a market mechanism to promote an effective collaboration in truck sharing.

             One of the main hurdles eroding the competitive edge of Thai carriers against international logistics firms is that the local companies lack the sales channels to provide freight transport service nationwide and can only find customers within their local area. This has resulted in inefficient transportation. For example, their trucks are not fully loaded on every trip or their trucks return empty. This problem can be solved by a formation of a network for carriers to share their service purchase orders.

               In fact, the concept of the network of carriers is not new. A network of trucking companies in Thailand has existed for a long time. However, the network has not been fully utilized for business collaboration because it is difficult to find appropriate and fair prices to collaborate and distribute benefits among the members. The issue becomes tricky when leaders of the network also run the trucking business.

             In fact, the issue can be solved by the creation of a network of trucking operators through an online platform. For example, in the US, E Logistics Marketplace, such as Uber Freight, has been established as a digital broker to gather orders for transportation services from all over the country and uses artificial intelligence (AI) technology and big data analytics as the tools to create a dynamic pricing model to find real time optimum price for freight transportation. Therefore, E Logistics Marketplace can reduce transportation costs and provide benefits for all partners in the network. It also serves as a key mechanism to level the playing field to enable small carriers to compete with logistics juggernauts.

​               E Logistics Marketplace has become a new business model with excellent prospects as seen by the rapid growth of Uber Freight's revenue, which surged 78 percent in the third quarter of 2019. KResearch views that E Logistics Marketplace is a potential business model for Thailand. To date, 1-2 startups have begun venturing into the business. It is expected that E Logistics Marketplace in Thailand will expand rapidly within the next five years, following the boom of B2B e-commerce, which will persuade some manufacturers to change their practices and increasingly adopt digital technology to ship their merchandise.

Therefore, Thai transport operators should get ready by building up skills and increasing their capability to use digital technology for their businesses. For example, they may install a GPS tracking system in their trucks in order to reap the benefits from E Logistics Marketplace. In the future, carriers who fail to take advantage of online platforms might miss the bandwagon and could be forced to leave the market.