Converge Paving the Way for the Future of Southeast Asian Logistics

May 2019 Converge - Paving the Way for the Future of Southeast Asian Logistics

02 Converge - Paving the Way for the Future of Southeast Asian Logistics

About Converge

Converge is a series of reports by Deloitte Southeast Asia Innovation that provides insights into the technology trends and startup ecosystem in Southeast Asia1.

Each report provides a snapshot of the upcoming technology trends in a particular sector and introduces promising startups that are driving new ideas and taking on challenges that are unique to Southeast Asia.

Join us in discovering interesting and potentially disruptive startups and initiatives across a myriad of industries and feel the pulse of Southeast Asia’s thriving digital revolution!

Who the report is for: • Corporations exploring innovation capabilities and startup engagement • Individuals who are keen to understand technology and innovation trends driven by the startup ecosystem in Southeast Asia

About Deloitte Southeast Asia Innovation Deloitte Southeast Asia (SEA) Innovation is a cross-function, cross-country innovation unit dedicated to driving the innovation agenda as a culture and value creator across the region.

Have feedback on Converge? Drop us a note at [email protected]!

1 This report draws from startup databases such as Tracxn, Crunchbase, Tech in Asia, and e27, as well as reports from local, regional and global news sources, and respective company websites. Some startups choose not to fully disclose their funding rounds and/ or funding amounts. As such, the exact funding situation of such startups may not be reflected in this report. 03 Converge - Paving the Way for the Future of Southeast Asian Logistics

Southeast Asia – Advancing Logistics and the Economy

About 90% of world trade is a seaborne affair, according the On a domestic front, Southeast Asian consumers are becoming International Chamber of Shipping2. Without the complementary more affluent, internet-savvy and demanding, giving the retail land or airborne transfers of these raw materials and goods, sector a major boost and makeover in recent years. The consumer however, businesses will struggle with the manufacturing of their retail industry has been at the forefront of venture capital products and the eventual sale of their goods. investment and interest within the past decade4 and the fruits of these investments are for all to see. Online marketplaces like The backbone of supply chain management across many Lazada, Tokopedia, Zilingo, and Sendo.vn have not only become industries, logistics is a multi-modal journey and a multi-faceted some of the best-funded and most prominent startups in transaction. Moving more than just tangible material, logistics Southeast Asia5, they have expanded shopping and transaction requires smart planning, financing and proper documentation, practices in the region from offline to online, opening the way for especially across borders. Establishing trust and accountability new business models and supply chain considerations to take in the logistics and supply chain remains a cornerstone for global root in this region. Increasingly, mobile-first online commerce trade and commerce to run smoothly. will have to be considered6, and this will transform the norms of payments and inventory management, as customers expect more Southeast Asia is poised to enjoy a logistics boom as the region instantaneous and direct access to goods and services. continues to attract world interest as an important part of global supply chains and trade flows3. From the region’s involvement In this report, we will be looking at some technology trends that in China’s Belt and Road initiative, to being the beneficiary of have moved the needle for the logistics sector in Southeast Asia, manufacturing activity moving out of China, Southeast Asian against a backdrop of geopolitical changes and growing affluence in countries have much to be bullish about in the near future. the region.

2 http://www.ics-shipping.org/shipping-facts/shipping-and-world-trade 3 https://theaseanpost.com/article/supply-chain-shift-asean 4 https://www.cento.vc/wp-content/uploads/2019/01/Cento-Ventures-SE-Asia-tech-investment-FY2018.pdf 5 https://www.techinasia.com/top-funded-startups-tech-companies-southeast-asia 6 https://www.thinkwithgoogle.com/intl/en-apac/tools-resources/research-studies/e-conomy-sea-2018-southeast-asias-internet-economy-hits-inflection-point/ 04 Converge - Paving the Way for the Future of Southeast Asian Logistics

Direct-to-Consumer: Rising Expectations

Is there still a Need for the Middleman? revenue as well. The downside to the DTC model for brands, however, means that they have to manage their inventory With the ability to browse, transact and arrange for delivery at movement vis-a-vis the plethora of distribution channels, which the fingertips, the increasing prevalence of eCommerce and on- can be a complex coordination exercise. demand services has nurtured a new base of Southeast Asian customers who demand convenience. Businesses looking to Against this backdrop of changes in technology and consumer ride on these trends stand are finding it beneficial to remove the expectations, new-age middlemen have emerged in the form of traditional middlemen distribution layers and to adopt a direct-to- startups helping brands and businesses to handle fulfilment for consumer (DTC) model. online and multi-channel distribution. MyCloudFulfillment from , for instance, provides a complete warehousing, packing The benefits of this model are beyond the cost savings from and shipping service for brands, catering for niche requirements removing middlemen commissions. Technology today is equipping as well by providing cold storage options and special packaging businesses with the ability to track customer interactions and give services. Capturing precious data on movements in the supply rewards and offers to the right person, at the right time, in the chain down to the individual customer-level, the platform also right place. The DTC model allows brands to develop relationships provides feeds back information that brands can use to plan with customers and build brand loyalty, which promises to boost marketing or sales activities.

Table 1: Fulfilment and Logistics Solutions for E-commerce and Omnichannel Sales

Startup Description Country Founding Year Funding

MyCloudFulfillment Fulfilment solution for e-commerce Thailand 2014 Seed- US$144K https://www.mycloudfulfillment.com/ and omnichannel businesses.

Iruna is an eLogistics & delivery Iruna Seed- company focusing on serving 2016 https://iruna.id/ Undisclosed Commerce players & local brands.

Anchanto provides a SaaS platform Anchanto S e r i e s C- for e-commerce logistics and multi- 2011 https://www.anchanto.com/ US$11.1M channel selling.

Source: Crunchbase, Tracxn, respective company websites.

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Reinventing Last Mile Delivery

Not surprisingly, the rise of the DTC model has prompted an influx of startups that are trying to solve the last mile conundrum in this region. With thousands of islands making up some of the Southeast Asian countries, poor infrastructure and urban congestion across most of Southeast Asia, the last mile tends to be the most expensive part of the physical journey of goods7.

Southeast Asia has seen many last mile delivery startups sprout up in the past few years, from dedicated courier and moving services by the likes of Ninja Van, GOGOVAN, and Lalamove, to parcel delivery services as an offshoot of ride-hailing players Grab and Go-Jek. With the improvements to drone technology and increasing sensitivity to urban planning, last mile delivery is also moving beyond wheels and into other paradigms as well.

Table 2 – Last Mile Delivery Startups

Startup Description Country Founding Year Funding

Ninja Van is a last mile delivery Ninja Van Series C – service that provides tracking and Singapore 2014 https://www.ninjavan.co/ US$117.5M real time updates.

Box24 is a locker service provider Box24 catering to multiple businesses Seed- Thailand 2015 https://www.box24corp.com/ like laundry, courier companies & Undisclosed e-commerce.

PopBox allows people to send, collect and return a parcel anytime, PopBox Seed- anywhere. People can register on the Indonesia 2015 https://www.popbox.asia/ Undisclosed website to become a host for Popbox lockers.

Source: Crunchbase, Tracxn, respective company websites.

Smart lockers, for instance, present a last mile solution that promises less failed deliveries and more flexibility for customers, which in turn assures better sales. In , Thailand, locker service Box24 is present at residential and commercial facilities. Under their flagship WashBox24 service, customers drop off their dirty laundry at the closest locker, then get notified to collect it at their convenience when the laundry is cleaned and delivered back to the locker. Since then, Box24 has expanded to other targeted segments, including a payment solution. The concept of having conveniently-located, 24/7 accessible smart lockers, where transactions and goods can be tracked through an app, remains to be explored by a greater variety of consumer verticals.

Elsewhere in the region, the locker system is also taking a hold. Over the years, Ninja Van has expanded their services offerings from wheel-based last mile services to include self-collection and locker options (Ninja Box). Even traditional postal service Singapore Post has introduced their version of lockers called POPStation, which are usually placed in malls and other busy intersections in Singapore.

7 https://ecommerceiq.asia/insights-last-mile-smart-lockers/ 06 Converge - Paving the Way for the Future of Southeast Asian Logistics

Drone Delivery on the Horizon?

For some time now, drone delivery has been touted as the next game-changer for last mile services . In urban Southeast Asia, challenges to drone deployment in urban centres can get complicated, with a range of infrastructure and building height restrictions in place, and public security regulations evolving as authorities grapple with the implications of having easily- deployed flight drones.

Startups like Fling Asia based out of Thailand are providing their expertise on hardware and software integrations, risk assessments, sensors and more, effectively playing the role of advocates to accelerate the adoption of drone-based delivery and other use cases in Southeast Asia.

Micro Delivery – Biking into Southeast Asia’s Last Mile Game

While most people think of cargo trucks and planes when they see DHL, the logistics giant is adapting itself to suit the Southeast Asian e-dommerce market. In the last few years, they have entered the micro-delivery game in Thailand by employing motorcycle couriers to provide same-day deliveries, real-time tracking and other urban consumer requirements .

Trust continues to be an important part of the consumer experience, even in the modern DTC model. Long- established logistics players have a strong headstart over unknown startups in this game – if they can transform their delivery models quickly and suitably for the different markets.

07 Converge - Paving the Way for the Future of Southeast Asian Logistics

Bringing Traditional Trade Stores into a By customising its technology solutions to suit the needs of New Frontier warung operators, Warung Pintar not only better ensures the user adoption of technology, it also becomes a more effective While there is a lot of interest in moving Southeast Asia to modern consolidation platform of otherwise poorly-collected data on sales best practices, it is worth noting that traditional modes of doing and distribution of consumer goods. business are still prevalent and important for many people to get the goods and services that they require. In fact, their latest acquisition in 2019 of farmer-market connection platform, Limakilo, is an exciting extension beyond the consumer According to the Deloitte Consumer Insights survey from 2018, packaged goods category into fresh produce, bringing the while consumer preferences for buying through traditional agriculture supply chain into the fold9. channels have fallen from 2017, it is still a significant 40% in Indonesia, for a variety of important reasons like location of shop Warung Pintar, Limakilo, and other startups like them are showing and price of goods (see Figure 1). the way for the digitalisation of traditional distribution channels. By forming beneficial networks amongst the various actors and allowing data to be collected on the myriad of micro-operations out Figure 1: Consumer preference for Modern vs Traditional there, all stakeholders involved have better visibility of the state of Trade rural and traditional distribution. Data collection and consolidation would also be very beneficial for the micro-entrepreneurs (and the farmers), as they can improve their earnings and livelihoods from 43% 40% having better visibility of market pricing, access to supplier bases and marketplaces, and knowledge of untapped opportunities in product-mix optimisation and other areas for potential efficiency.

57% 60% Traditional Trade

Modern Trade

2017 2018

Source: Deloitte Consumer Insights Survey (2018)

Even in the realm of the traditional, startups have been seizing on the opportunities of technology advancements to reimagine the possibilities. Making waves recently is Warung Pintar, a startup on a social mission to digitalise and improve the state of warung (roadside mom-and-pop shop) operations in Indonesia by offering warung owners digital payment and store and inventory management solutions, as well as pre-fabricated micro-storefronts with amenities like Wi-Fi and CCTVs8.

8 https://www.techinasia.com/warung-pintar-raised-35m-year-transform-asias-momandpop-stores 9 https://www.thejakartapost.com/life/2019/03/02/warung-pintar-acquires-farmer-empowerment-platform-limakilo.html 08 Converge - Paving the Way for the Future of Southeast Asian Logistics

Table 3: Startups Digitising Traditional Trade Stores

Startup Description Country Founding Year Funding

Warung Pintar Warung Pintar is a micro retail Series B – Indonesia 2017 https://warungpintar.co.id/ technology company. US$35.5M

Geraiku elevates underserved Geraiku traditional retail stores through Indonesia 2017 Private Equity https://geraiku.store/ Mobile Tech.

GrowSari Growsari is helping to build the future 2015 Undisclosed https://www.growsari.com/ of Sari Sari stores in the Philippines.

Storeking is a platform enabling small StoreKing town retailers to sell over 50,000 Series B – http://storeking.in/ products to walk-in customers Indonesia 2011 US$18.5M http://storeking.id/ without having to invest in working capital stock.

Source: Crunchbase, Tracxn, respective company websites.

The Future of Warung

Alfamart, one of the largest modern trade retailers in Indonesia, has created a platform that allows people to plug into their branding, operations, product catalogues and supplier distribution channels to start their own little retail business at a very low cost .

Called Alfamind, it is essentially an app that would-be store owners can access and transact from, while providing customers a 3-dimensional augmented virtual reality experience of shopping. Alfamind is not only being creative with technology to provide a unique consumer experience, it is making use of consumer technology to augment their existing distribution operations to include more sales channels. Best of all, in doing so, they are offering the chance for many micro- entrepreneurs to start up and succeed.

09 Converge - Paving the Way for the Future of Southeast Asian Logistics

Moving the Bulk – Optimisations for Logistic Players

Before entering the last mile to reach the end consumer, most goods were probably transported in bulk overland or through Internet of Logistics to sea routes and held in storage at various points. While bulk Improve Supply Chain movements allow for unit costs to go down, unfilled capacity within bulk shipping facilities and warehouses is likely to pose a major cost Management concern to facility owners. From trucking to warehousing to packaging, 10 With internet penetration increasing in Southeast Asia , startups Internet of Things (IoT) enablers like sensors and are emerging with online platform solutions that help to match the trackers are becoming commonplace along the many providers of capacity with the many sources of demand. supply chain, making it possible for data to be collected over the physical journey. The efficient use of large-scale logistics facilities is an important aspect of the development of the logistics sector in most countries Smart product and packaging startup EVRYTHNG in the region. In the emergent economy of Myanmar, aggregated , for instance, helps companies embed digital trucking service platform Kargo (not to be confused with the identities onto any physical object, making startup of the same name from Indonesia) has brought some the physical world trackable and manageable organisation and simplification to the logistics scene that is made from a cloud-based platform. Meanwhile, fleet up of many small fleets. Beyond serving Myanmar, it is also looking management telematics provided by startups like towards expanding their footprint into the region, where there are Thailand-based DRVR allows devices and sensors similar needs. to send and receive information across large distances, track vehicle hardware performance, Even in a small country like Singapore, startups like Haulio and also driver user behavior, including details like have come to the fore to optimise the matching of supply and braking habits or even unscheduled stops. demand amongst the fleets available in the container-moving industry. Meanwhile, Indonesian startup Waresix provides an online platform linking up customers with inventory for storage to multiple third-party warehouses, helping warehouse owners soothe over seasonal fluctuations from their traditional demand sources. With real-time access to a cloud-based inventory system, customers get full visibility and control of their stored goods across these warehouses.

Having access to real-time data at each stage of the journey, right down to the unique actor and product level, presents an invaluable opportunity for supply chain analytics to become part of the new business-as-usual. Businesses are now able to keep tabs on the product supply chain lifecycle to ensure product and shipping quality, as well as mitigate the risk of product losses. With data-backed insights, logistics providers are able to look for improvements for their businesses and for their employees alike. The possibilities with IoT are endless.

10 https://medium.com/financex/southeast-asia-mobile-internet-usage-increasing-dramatically-bb63266affb5 10 Converge - Paving the Way for the Future of Southeast Asian Logistics

Table 4 – Logistics Marketplace Startups

Startup Description Country Founding Year Funding

Haulio is a marketplace for booking trucking services. The haulage management platform connects users with a network of carriers Haulio and other stakeholders like freight Singapore 2018 Seed – US$747K http://haulio.io/ forwarders, drivers and port operators. Carriers can further collaborate with other stakeholders on the platform to offer industry level sharing.

The Lorry is an online platform to book cargo transportation services. TheLorry The users can book the services Series B – Malaysia 2014 https://thelorry.com/ from site or mobile app and mention US$7.35M the boxes, packing and work power needed.

Kargo offers an online platform Kargo which can be used by businesses Myanmar 2016 Seed- US$825K https://kargo.com.mm/ or individuals to request a truck for pickup and delivery services.

Kargo provides its users to book transporters for medium and heavy goods transportation. It partners Kargo up with various transporters and Indonesia 2015 Seed – US$7.6M https://www.kargo.co.id/ provides them with a platform to book their empty spaces with requests from Kargo consumers.

LOGIVAN develops technology LOGIVAN Venture Series - solutions to help businesses find and 2017 https://www.logivan.com/ US$7.9M manage trucks online.

Waresix is an online platform for on-demand warehousing. Customers can use the online platform to book Waresix available warehouses. Additionally, Indonesia 2017 Seed – US$1.6M https://waresix.com/ customers can manage inventory from multiple warehouses using the cloud based WMS on the platform.

Source: Crunchbase, Tracxn, respective company websites.

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Table 5 – Supply Chain Analytics Enablers

Startup Description Country Founding Year Funding

EVRYTHNG gives each item an Active Digital Identity™, giving brands an unprecedented opportunity to EVRYTHNG apply data science intelligence on an United Series B – 2012 https://evrythng.com/ item by item basis, drive new digital States US$41.3M applications, gain control over their supply chains, and engage with their customers.

Covering fleet, cold chain, bike tracking and most recently vessels, DRVR DRVR connects vehicles to the Thailand 2014 Seed - US$522k http://www.drvr.co/ Internet using smart IoT sensors, processing data and then turning it into actionable knowledge.

Source: Crunchbase, Tracxn, respective company websites.

12 Converge - Paving the Way for the Future of Southeast Asian Logistics

Blockchain - The New Mediator for Trust and Transparency

With globalisation, a broader range of stakeholders and processes are involved in a widening supply chain, and business agreements have become tedious to manage and monitor effectively and efficiently. Blockchain technology, with its ability to securely record transactions between parties without the need for intermediaries to verify, record, and coordinate transactions, has captured the imagination of how much more efficient and transparent logistics management can be in the future.

Early initiatives have yielded impressive outcomes that have been widely reported, like how it takes IBM’s blockchain-based Food Trust solution11 a mere 2.2 seconds to trace a food source instead of the usual 7 days or so. In Singapore, Standard Chartered executed its first cross-border trade finance transaction on a blockchain-based platform in January 2019. The deal, which was related to an agri-business supply chain, took a mere day to complete compared to the usual 5 to 7 days needed for documents to be checked and processed12. The potential upside of widespread implementation of blockchain in logistics and supply chain is immense, improving efficiency and traceability by leaps and bounds, and promoting trust and accountability amongst all stakeholders.

Blockchain is a technology layer that can serve many use cases and aspects of logistics and supply chain. From logistics-focused blockchain-based solutions provided by startups like LogisticsX and Yojee, to supply chain financing solutions by startups like DLT.sg that provided the platform for Standard Chartered’s deal, this technology presents a game-changing frontier that will continue to inspire new ideas and arrangements for logistics and supply chain management in time to come.

Table 6 – Blockchain-related Logistics and Supply Chain Startups

Startup Description Country Founding Year Funding

Yojee provides an artificial intelligence-based fleet management software based on blockchain. Its Yojee features include real-time tracking Singapore 2015 Public - IPO https://yojee.com/ and communication, AI-powered routing and dispatch, and analytics dashboard.

LogisticsX is a decentralized platform LogisticsX for last mile delivery services, Singapore 2018 Unfunded https://logisticsx.io/ connecting multiple stakeholders.

DLT.sg provides supply chain management decentralized applications for enterprises, including DLT.sg smart contract-enabled cross-border Singapore 2017 Unfunded https://dlt.sg/ transactions that be used to digitize and automate the execution of bills of lading, letters of credit, invoices and POs.

Source: Crunchbase, Tracxn, respective company websites.

11 https://techcrunch.com/2018/09/24/walmart-is-betting-on-the-blockchain-to-improve-food-safety/ 12 https://www.businesstimes.com.sg/banking-finance/stanchart-makes-its-first-singapore-trade-finance-deal-using-blockchain 13 Converge - Paving the Way for the Future of Southeast Asian Logistics

Technology to Bring Logistics into the Future

Logistics may be an indispensable operational cost of business (see Table 7) but it can certainly be optimised and improved on as domestic and cross-border business environments change.

Table 7 – Percentage of Logistics Cost as GDP

Country Percentage of Logistics Cost as GDP (2017)

Indonesia 23%

Vietnam 20%

Lao PDR 17.7%

Cambodia 16.2%

Thailand 15%

Brunei 14.9%

Malaysia 13%

The Philippines 13%

Singapore 8.5%

Source: Armstrong & Associates, Global 3PL Market Size Estimates

While this report did not touch on the regulatory environment for the logistics sector, it is worth noting that governments, customs authorities and the Association of Southeast Asian Nations (ASEAN) have a major role in this ecosystem, given their overall ability to facilitate or inhibit trade through policy and regulation. It is certainly a positive outlook; against a backdrop of a booming ASEAN region, bolstered by initiatives like the ASEAN Economic Community and trade-facilitative instruments like the ASEAN Free Trade Agreements and ASEAN Single Window, country governments are cooperating and acting to improve trade efficiency.

The public sector aside, there is clearly much that can be done by the private sector, given the available technology in this era. Increasing mobile-first internet penetration in Southeast Asia has allowed producers and consumers across the supply chain to connect more directly. This has also allowed platform services to take off and improve the efficiency of matching demand and supply. The digitisation of logistics services promises not only data-backed insights for businesses and greater convenience for customers, but also the prospect of greater transparency and accountability. Blockchain technology in particular points to greater improvements in future for the retrieval and processing of provenance, financial, customs and other necessary documentation.

Disintermediation is the name of the game in the future of logistics and supply chain management in this region. In improving the flow of goods, services, information and capital in this region, businesses and livelihoods are uplifted, propelling the region ahead in its trajectory of growth and prosperity. If logistics is the bloodline of any business, the prospects that startups in Southeast Asia present and the new technology they bring are the shots we need to stay in the game.

14 Converge - Paving the Way for the Future of Southeast Asian Logistics About Deloitte Southeast Asia Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firms, and their related entities. DTTL (also referred to as “Deloitte Global”) and each of its member firms and their affiliated entities are legally separate and independent entities. DTTL does not provide services to clients. Please see www.deloitte.com/about to learn more.

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