We spoke with Mr. Brett Turner, Vice President Supply Chain Management at DKSH (Thailand) to learn more about the strategy behind FMCG transportation and distribution in the ASEAN region and he also shared with us his vision focusing on future development of Thailand through this business.
Could you please tell us, what are some of the challenges facing transportation in the ASEAN region?
“To start, there are very specific and different local laws and regulations, which must be respected and enforced, such as health and safety regulations, delivery restrictions, CO2 emission, temperature controls and driver regulations, just to name a few. The local laws and restrictions will differ depending on the specific country and region and can make transportation of goods very complex.”
“Hence, our transport partners have to be trained and shown how to comply with and maintain the correct standards to ensure all laws required by compliance are adhered to and reports are quality-driven. Regular audits show our success in this area.”
“Beyond that, that are specific rules for Fast Moving Consumer Goods (FMCG). These mainly focus on the supply chain compliance depending on the consumer goods being distributed. For example, food will be required close to BBD (best before date) and batch control is necessary for recalling and tracking purposes. This is further enhanced when food requires specific temperature control. It must be clearly demonstrated that the temperature is controlled in all aspects of the supply chain, including storage, picking, packing, transporting and receiving; where products are returned, the temperature chain must not be broken, otherwise the product is deemed unusable and must be destroyed.”
How do you deal with the geographical or infrastructure-related challenges of transporting FMCG in ASEAN?
“One example of how we cope with challenges, is DKSH’s capability to deal with any temperature through the ASEAN countries. Temperatures differ greatly from country to country and in some cases within the same country. In mountainous areas, for example, we need to keep the products warm, while near the equator or at sea level, the opposite is required. It is therefore important to hire local specialists and listen to their experience and knowledge, but also to have the necessary technology in place to ensure the temperatures are maintained at all points throughout the value chain.”
“A further example of how we adapt to regional challenges is how we handle delivery in Vietnam, where we use cross-docks in the main cities to enable faster and timely deliveries to our customers. We move our products from our main DCs via the cross-docks, which act as a location from which our final mile deliveries take place.”
Do you have any services for transporting FMCG that sets you apart from your competitors?
“DKSH offers different solutions to its business partners: from our completely bespoke solutions, tailored to our customers’ requirements, to the 4PL model, where we purchase the stock from the clients and control all aspects of the distribution model from sales through to delivery, including promotions, real time stock control and sales analysis, new product launches”
“In the very near future we will be implementing case barcode scanning at delivery for complete system control from order creation to final delivery. Doing this at case level ensures complete BBD and batch compliance with real-time, accurate issue reporting. We back this up with full training, ensuring our operations at each point of the distribution network maintain DKSH’s and our customers’ high standards and compliance.”
“DKSH also offers a wide range of value-added services, ranging from simple outer packaging labeling to the latest naked product compliance for healthcare and health science with full re-packaging capabilities and product labeling. This is all completed on-site to the highest quality controls and standards. Due to the on-site presence, we are also able to eliminate additional transportation costs.”
“All the above is supported through our customer call center and quality team. We create the right customer experience and a balance of service quality aligned with cost control, full order, real time visibility and legal and local compliance. This is to ensure the product is always delivered to our highest standard.”
What innovation, technology, or services has DKSH introduced to satisfy FMCG customer transportation needs?
“There are a number of innovations we’ve introduced, such as tracking. We are implementing and investing in a complete end-to-end transport management system and central control tower ideology. We use the latest in digital software and equipment to track all deliveries through real-time milestone management. Then we report directly to our customer support functions and, where required, to our customers, showing all planned and actual distribution networks across the whole of ASEAN.”
“In addition, we train all employees to ensure compliance with all our existing and new customers, enhancing the service experience and resulting in improved performance management. Recruiting locally also improves our knowledge base. All of this creates end-to-end transparency and customer experience improvement for everyone.”
“As part of the system implementation and training, we implement health and safety compliance and controls as part of the system tracking and planning. This is also included in the performance reviews for both, our direct employees as well as our transport vendor employees.”
What kind of FMCG are most popular in the ASEAN region, and do you see any trends in the future?
“In a globally growing category, Asia Pacific comes in as the world’s fastest-growing FMCG market. South East Asia, with its more than 630 million inhabitants, represents an important part of that Asian growth. Very notably in Asia, where multinational companies have always led the way, the trend is shifting towards home-grown FMCG companies. According to Kantar Worldpanel, local brands in Asia attract 74% of shoppers’ FMCG spend, and they are growing at twice the rate of multinational brands.”
“DKSH is one of the largest companies in the region, employing more than 27,000 specialists across all ten ASEAN markets. DKSH’s distribution centers cover a total surface area equivalent to more than 60 soccer fields, and the region-wide capillary distribution network enhances the quality of life for millions of people, by distributing consumer goods and healthcare products that meet their daily needs.”
“Aside from representing many international clients and brands in the ASEAN region, DKSH has also helped grooming local players into true ASEAN stars. DKSH has been instrumental in expanding the presence of Malaysia’s Old Town White Coffee across ASEAN. Likewise, Haw Par, the Singapore-based producer of Tiger Balm, sells its healthcare products in several ASEAN markets through DKSH.”
“DKSH works across a multitude of categories, and we note that both personal care and snack categories are showing strong growth. An important factor for growth is to develop a strong brand with market recognition; a quality product alone is not enough to succeed in this highly competitive market.”
How does DKSH develop or train its employees with regards to the transportation of FMCG?
“We offer career and development opportunities to our specialists through ongoing training programs locally and in the region delivered through our Fantree Academy. The Fantree Academy is a symbol of our corporate spirit and common values across our company. The programs aim to establish a common DKSH leadership culture and support the development of our internal talent at all levels of the organization, thereby supporting the implementation of our strategy for sustainable, profitable growth.”
“We deliver training at three distinct levels, globally, regionally and locally. The global training packs are delivered to senior management. These will then be developed regionally for the next level managers before being developed again in the local language for the local target audience – as a formal presentation or training pack to ensure alignment and a common understanding at all levels. The training is delivered by appointed and skilled trainers who have undergone training modules to enhance their training and engagement skills.”
“In addition, all employees in distribution are inducted into the DKSH family and shown the high standards and compliance we expect. This is clear in the health and safety improvements DKSH is driving through training, awareness and compliance management. We take training as the single most important tool to ensure our employees understand the basic principles.”
How can you build the confidence of business partners in using your FMCG service?
“DKSH already has a respected name within the FMCG sector for service and integrity. We are building on these foundations to enhance the customer experience and create a real-time digital transparency. This is to ensure that our customers and clients have the most up-to-date information in the easiest format possible, reducing paperwork and increasing the speed and efficiency of our reporting network, while reducing waste and carbon footprint.”
“We are entering a digitalized phase and implementing complete transparency to create the real openness that is required between client, distributor and customer to truly improve the service and cost analysis data expected. We are doing this knowing we will share good and bad experiences, but we feel this is necessary to drive the change required throughout the supply chain and to offer a perfect service.”
“Part of this transparency will be the route planning, the on-time delivery information, the inventory information, partial delivery information and digitalized POD real time feedback. This will lead to operational decisions being made real-time, not historically once a month at the customer KPI review, when the data is already outdated and makes the decisions and changes at least six weeks late in delivering. We believe through this real-time digitalized data, we can enforce change immediately, when required.”
What is your outlook on the future of FMCG in Thailand?
“Private consumption and consumer confidence in Thailand are improving, however, the whole sector still operates in a challenging environment. As a trend, we see that modern trade in Thailand is on the rise, taking an expected 50% of the grocery market share in 2020. This is mainly driven by the rise of convenience stores, which can be attributed to smaller households purchasing lower volumes, an aging population requiring close-to-home shopping and price levels in convenience stores that do not justify a trip to a hypermarket.”
“While modern trade and convenience stores are evidently on the rise, traditional trade, such as the mom-and-pop stores, will continue to play an important role in Thailand. These shops, which still make up about most of the Thai FMCG market, remain resilient. Although urbanization is swiftly taking place, many Thais still live in rural areas. They have often built a personal relationship with the shop owners.”
“DKSH recognizes Thailand as an ideal hub for engaging the region, and DKSH Thailand supports this by providing highly-trained regional leaders, specialists and regional logistic capabilities to engage other markets from Thailand. This enables our clients to optimize their supply chains as well as engage our specialist to support market expansion.”
“DKSH is also transforming the way we do business with its partners, encouraging digital transformation. For example, we have initiated pilot projects with clients to have an entirely paperless engagement to the point where they will rely on our original filing of documents, should they have a need at a point in future. We also are evolving platforms for our clients to participate seamlessly through omni-channel distribution and we are continuously developing our operating models to keep pace with the demands and opportunities of emerging distribution channels.”