With COVID-19 spawning a boom in e-commerce throughout Southeast Asia, delivery players in the region are grappling with ways to maintain and build on their success. To gain insights into developments in the region, Jasmine Joh from the financial services team at GLG Singapore recently spoke with Chang Wen Lai, co-founder and CEO of Ninja Logistics Pte Ltd, commonly known as Ninja Van, a Singaporean multinational delivery services company; Paul Good, owner of GL Terminal in Jakarta, Indonesia, and earlier the CEO of BSA Logistics Indonesia and a managing director at Kuehne+Nagel; and Jerry Jara, a regional supply chain consultant at CBRE Group and formerly chief operating officer at Magsaysay Shipping and Logistics in the Philippines.

Edited excerpts of their virtual roundtable discussion, moderated by Chang Wen Lai, follow.

Chang Wen Lai: What do all see as the biggest challenges facing logistics providers in Southeast Asia currently?

Paul Good: The biggest issues are space and freight rates. There’s a land grab for space among all the carriers that’s not going to end soon. While there’s a lot of warehousing space available in certain areas of Southeast Asia, warehousing near ports and infrastructure like freeways is in short supply and very much sought after.

Jerry Jara: Consider that the value of internet retailing in Southeast Asia went from (US)$495 billion in 2019 to an estimated $581 million in 2020. Warehouses typically were about 1,000 square meters, but now the demand is for multi-level warehouses that can be up to 10,000 or 15,000 square meters.

Chang Wen Lai: It’s worth remembering that throughout the pandemic, people have been shopping online like there’s no tomorrow. And with that has come a movement away from buying only small and easy-to-carry items online, like fashion, into buying almost everything, including larger and heavier goods like home improvement items and gym equipment, for example. That’s really put a strain on a lot of last-mile logistics networks. For a time, in fact, our sort centers were jammed up and our vehicles were filled to the brim.

Jerry Jara: Despite the challenges, it’s important to note that in terms of last-mile delivery, people are becoming more innovative.

Paul Good: I agree. Over the past five or six years, the advances in last mile have been quite significant. And I think that serves as a bit of a wake-up call to the mid-mile space that it must get its act together.

Chang Wen Lai: Let me share some of thoughts on what makes a successful last mile. It really means being “asset efficient,” or having a blend of self-owned vehicles, leased vehicles and driver-owned vehicles. That mix enables us to handle a base load with owned vehicles, where you see the highest margins. As volumes increase, a leased model with subcontractors is used, and finally there’s the most asset-light segment in which subcontractors use their own vehicles.

This combination has allowed the last-mile logistics sector to really flex and move very easily when volume grows. But don’t get me wrong — 50% to 100% increases in volume still hurt, but it’s not as painful as I’m certain it is for those in warehousing and for those on the middle mile side.

Paul Good: One thing I’ve noticed in the last-mile segment is that some new players have raised remarkable amounts of money, which I see them just burning through because I simply can’t understand their business model.

Chang Wen Lai: You’re right. Some last-mile aggregators, who claim they are optimizing the business fail to understand that this is an oligopolistic industry where three or four players own 90% of the market and the other 10% are in niches. The reality of such a market is that it’s difficult to add value to it. Aggregators buying a service from us for $5 and selling it for $4 is not a sustainable long-term model.

I’d also like to add something about warehousing and help dispel the commonly held notion that last-mile businesses require huge amounts of it. They don’t. With  just a few large cross-dock centers totaling 500,000 square feet they can push through more than a million parcels a day. Doing that, however, requires a very strong infrastructure network to consolidate and de-consolidate across the country. But the reality of this in infrastructure terms is that the entire network is surprisingly low capex and takes up a very small footprint.

Jerry Jara: I agree with you, but let me clarify what I said before about demand growing for bigger warehouse spaces. It’s the fulfillment warehouses for ecommerce that need to have this huge amount of space. They must make sure they have room for all the items that will have to be distributed the next day.

Paul Good: Let me add another point: Quality. Even in a developing environment like Indonesia, it’s something where you just cannot compromise. The standards within your four walls must be the same as in a developed market, and I think that’s where a lot of people go wrong.

Chang Wen Lai: What kinds of returns are investors demanding for a warehouse business?

Paul Good: Generally, in the 20% to 25% range.

Paul Good: But let me add a note of caution about margins. What you come to realize is that the e-commerce market in Southeast Asia is just so undeveloped or unprofessional that the inventorying of goods frequently runs into some quite serious problems.

Chang Wen Lai: That’s true. What you don’t see on the P&L are a lot of the write-offs that warehousing providers must do because goods go missing due to operations not being tight. These numbers don’t hit the P&L until much later and they’re not booked anywhere on the balance sheet. But there is the potential here for huge losses.

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This logistics industry article is adapted from the March 11, 2021, GLG Remote Roundtable “The Rise of Logistics Fulfilment in Southeast Asia – Success Beyond the COVID-19 Pandemic.” If you would like access to other roundtables like this or would like to speak with logistics experts like these or any of our more than 900,000 industry experts, please contact