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OM201 PRINCIPLES OF OPERATIONS MANAGEMENT 1
UNESCAP Regional Conference of freight forwarders, multimodal transport operators and logistics service providers
20 June 2014 Beijing, PRC
Associate Professor Ruth Banomyong (Ph.D.)
The impact of logistics infrastructure and facilitation on the ASEAN
Economic Community Development
Head of International Business, Logistics Transport, Thammasat Business School Director of Logistics Research Center, Thammasat University
Synthesizing the Impact of Thailand’s Logistics Infrastructure Management and Supply Chain Redesign within the context of the ASEAN Economic Community (AEC) 2
GSM is a simulation model based on Spatial Economics, aka New Economic Geography.
Road network in IDE/ERIA-GSM 4
• Introduction
• The ASEAN Economic Community (AEC)
• The Master Plan on ASEAN Connectivity
(MPAC)
• The impact of the AEC
• ASEAN 2025?
OM201 PRINCIPLES OF OPERATIONS MANAGEMENT 3
Ruth Banomyong (PhD)
• Faculty at Thammasat Business School since 1993
• Winner James Cooper Cup for best PhD in logistics 2001 from CILT UK
• Consultant for World Bank, Asian Development Bank, UNCTAD, ESCAP, OECD, ASEAN, etc.
Synthesizing the Impact of Thailand’s Logistics Infrastructure Management and Supply Chain Redesign within the context of the ASEAN Economic Community (AEC) 4
ASEAN The Association of Southeast Asian Nations, or ASEAN
Regional Inter-governmental Organization
10 Members
4.4 Million KM2
600+ million people (Growth 1.5%)
Synthesizing the Impact of Thailand’s Logistics Infrastructure Management and Supply Chain Redesign within the context of the ASEAN Economic Community (AEC) 5
The Three Pillars
OM201 PRINCIPLES OF OPERATIONS MANAGEMENT 6
Free Flow of goods
Free Flow of services
Free Flow of investment
Free Flow of capital
Free Flow of skilled labour
(Priority Integration Sectors : PIS)
Liberalisation Facilitation
Tariff and NTB elimination Synchronized external tariff
alignment
Full market access and national treatment Remove
substantially all restrictions on trade in services
All industries and services incidental to these industries
for ASEAN investors
Harmonization of standards in education and training ; MRA on
vocational training
Harmonize capital market standards ; facilitate market driven efforts to
establish exchange and debt market linkages
Transparency ; streamlined Procedures, avoidance of double
taxation ; joint promotion
Customs integration Standards and technical barriers to trade
Relax capital control measures on intra-ASEAN portfolio
investment
Remove discrimination in employment
Conduct a bi-annual review to monitor the status, progress and effectiveness of the PIS roadmaps to ensure timely implementation
Identify sector-specific projects or initiatives through regular dialogues or consultation with stakeholders, particularly the private
sector (Food, Agriculture and Forestry)
Single Market and Production Base Five core elements
MRAs on professional services;
professional exchange
1) GAP, GAHP, GHP, GMP, HACCP.
2) Harmonise SPS, MRLs, Safety and Standard, animal health control, chemical in aquaculture
Synthesizing the Impact of Thailand’s Logistics Infrastructure Management and Supply Chain Redesign within the context of the ASEAN Economic Community (AEC) 7
• Master plan on ASEAN Connectivity (MPAC) is a key for AEC integration. Soft and Hard Infrastructure will be developed according to this plan. Routes and conditions are updated at 2010, 2015, reflecting the development according to MPAC.
• Time and costs at the border crossing half in 2015 due to AEC, and roughly double in 2020 according to congestion.
• Tariff/NTB: Tariffs and NTBs are updated according to various FTA/RTA including AEC.
Synthesizing the Impact of Thailand’s Logistics Infrastructure Management and Supply Chain Redesign within the context of the ASEAN Economic Community (AEC) 8
ASEAN Scorecard AEC Pillar I: Single
Market and Production Base
• Free Flow of Goods
• Free Flow of Services and Skilled Labor
• Free Flow of Investment
• Freer Flow of Capital
• Priority Integration Sectors (PIS)
• Food, Agriculture and Forestry
AEC Pillar II: Competitive
Economic Region
• Competition Policy
• Consumer Protection
• Intellectual Property Rights
• Infrastructure Development
AEC Pillar III: Equitable Economic
Development
• Development of Small and Medium Enterprises (SMEs)
• Initiative for ASEAN Integration (IAI)
AEC Pillar IV: Integration into the
Global Economy
• External Economic Relations
Tracking the AEC: Milestones and Accomplishments
To ensure a timely implementation of the AEC initiatives, ASEAN has established a monitoring mechanism called the AEC Scorecard. As a compliance tool, the AEC Scorecard reports the progress of implementing the various AEC measures, identifies implementation gaps and challenges, and tracks the realisation of the AEC by 2015.
Synthesizing the Impact of Thailand’s Logistics Infrastructure Management and Supply Chain Redesign within the context of the ASEAN Economic Community (AEC) 9
Overview Connectivity
Dimension Strategy
Physical
1. Complete the ASEAN Highway Network
2. Complete the implementation of SKRL project
3. Establish an efficient and integrated IWT network
4. Accomplish an integrated, efficient and competitive
maritime transport system
5. Establish integrated and seamless multimodal transport
system to make ASEAN the transport hub in the East Asia
region
6. Accelerate the development of ICT Infrastructure and
services in each of ASEAN Member States
7. Prioritise the processes to resolve institutional issues in
ASEAN energy infrastructure projects
Scorecard Initial Qualitative Assessment
Synthesizing the Impact of Thailand’s Logistics Infrastructure Management and Supply Chain Redesign within the context of the ASEAN Economic Community (AEC) 10
Overview Scorecard Initial Qualitative Assessment
• In terms of physical connectivity a check–list of what is missing would have been sufficient to reflect upon the actual physical links
But • It is not enough if the goal is to understand the output
and outcome of such physical connectivity.
Synthesizing the Impact of Thailand’s Logistics Infrastructure Management and Supply Chain Redesign within the context of the ASEAN Economic Community (AEC) 11
Overview Scorecard Initial Qualitative Assessment
Institutional
1. Fully operationalize the 3 framework Agreements on transport
facilitation (AFAFGIT; AFAFIST; AFAMT)
2. Implement initiatives to facilitate inter–state passenger land
transportation
3. Develop the ASEAN Single Aviation Market
4. Develop an ASEAN Single Shipping Market
5. Accelerate the free flows of goods within ASEAN region by eliminating
barriers to merchandise trade.
6. Accelerate the development of an efficient and competitive logistics
sector, in particular transport, telecommunication and other
connectivity–related services in the region
7. Substantially improve trade facilitation in the region
8. Enhance border management capabilities
9. Accelerate further opening of ASEAN member states to investments
within and beyond the region under fair investment rules
10. Strengthen institutional capacity in lagging areas in the region and
improve regional–sub–regional coordination of policies programmes and
projects.
Synthesizing the Impact of Thailand’s Logistics Infrastructure Management and Supply Chain Redesign within the context of the ASEAN Economic Community (AEC) 12
Overview Scorecard Initial Qualitative Assessment
• The concept of institutional connectivity requires additional specification.
• Many of the devised key actions focus upon following up on ASEAN member states in terms of ratification, implementation of agreements and how liberalized market access can be followed through as per the various strategies.
• The devised key action can only reflect the status or the possible direction and requires that additional attention be paid to the formulation of each action to enable the monitoring effort.
Synthesizing the Impact of Thailand’s Logistics Infrastructure Management and Supply Chain Redesign within the context of the ASEAN Economic Community (AEC) 13
Overview Scorecard Initial Qualitative Assessment
People to
people
1. Promote deeper intra–ASEAN social and
cultural understanding
2. Encourage greater intra–ASEAN people
mobility
• The formulation of the actions under the people–to–people dimension is more precise than the physical or institutional connectivity, which readily facilitates the monitoring process.
• However, the people–to–people dimension requires additional work to identify and specify output and outcome indicators.
Synthesizing the Impact of Thailand’s Logistics Infrastructure Management and Supply Chain Redesign within the context of the ASEAN Economic Community (AEC) 14
ASEAN Strategic Point for Connectivity
Kunming
Chennai
Ho Chi Minh City
Bangkok
Mandalay Kolkata
Dhaka
Chiang Mai
Yangon
Mekong-India Economic Corridor Link
Dawei SEZ
India Northeast
Thilawa SEZ
Kyaukphyu SEZ
:Existing link
:Potential link to be developed
Myanmar is an Important Strategic Point for Connectivity in East Asia Source:ERIA
OM201 PRINCIPLES OF OPERATIONS MANAGEMENT 15
Macro Logistics System Framework
Infrastructure
Logistics System
Service Providers
Institutional Framework
Traders/ Manufacturers Banomyong et al, (2008)
Synthesizing the Impact of Thailand’s Logistics Infrastructure Management and Supply Chain Redesign within the context of the ASEAN Economic Community (AEC) 16
GSM is a simulation model based on Spatial Economics, aka New Economic Geography.
Road network in IDE/ERIA-GSM 4
• To simulate the dynamics of population and industries for long-term
• To analyze the effects of infrastructure projects and customs facilitation on the economic activities at prefecture level
Source: ERIA Report
FY2011 FY2012
Number of Cities 4,355 5,708
Number of Routes 7,203 10,792
Rest of the World 2 regions (EU, USA)
63 countries
World Coverage (Population)
63.9% 80.0%
World Coverage (GDP)
81.9% 93.9%
Synthesizing the Impact of Thailand’s Logistics Infrastructure Management and Supply Chain Redesign within the context of the ASEAN Economic Community (AEC) 17
GRDP Differences in Year 2030
GSM Analysis by Banomyong et al &
AEC impact on overall ASEAN members GDP about 26,298 Million USD or +0.32% GDP
This scenario shows the economic impacts
of AEC comparing without AEC.
Synthesizing the Impact of Thailand’s Logistics Infrastructure Management and Supply Chain Redesign within the context of the ASEAN Economic Community (AEC) 18
This scenario shows the economic impacts of AEC comparing without AEC.
THAILAND Perspective
AEC affects positively for all provinces of Thailand. AEC impact Thailand GDP about +1,806 Million USD, this resulted +0.05% of GDP in 15 years after AEC Integration
GRDP Differences in Year 2030
GSM Analysis by Banomyong et al &
OM201 PRINCIPLES OF OPERATIONS MANAGEMENT 19
Supply Chain Re-design after AEC
Synthesizing the Impact of Thailand’s Logistics Infrastructure Management and Supply Chain Redesign within the context of the ASEAN Economic Community (AEC) 20
• Survey of +60 Potential Investors and Influencers from Japan
Note: Survey has done in Japan by the support of IDE-JETRO
Synthesizing the Impact of Thailand’s Logistics Infrastructure Management and Supply Chain Redesign within the context of the ASEAN Economic Community (AEC) 21 Source: ASEAN Automotive Federation (2013)
• Myanmar and Vietnam are potential investment destination for Japanese Investor in Automotive Industry
• Indonesia is significantly attractive compare to Thailand
• Supply Chain Re-design mostly effects Part Providers not Auto Assemblers
Degree of Attractiveness
Synthesizing the Impact of Thailand’s Logistics Infrastructure Management and Supply Chain Redesign within the context of the ASEAN Economic Community (AEC) 22
Degree of Attractiveness
• Singapore, Malaysia and Thailand are major exporters of E&E in ASEAN (2011)
• Vietnam and Myanmar are mostly attract Japanese Investor in E&E Industry
Synthesizing the Impact of Thailand’s Logistics Infrastructure Management and Supply Chain Redesign within the context of the ASEAN Economic Community (AEC) 23
Degree of Attractiveness Textiles Export in 2009
Source: WTO
• Indonesia, Thailand and Vietnam are major exporters of Textiles in ASEAN (2009)
• Myanmar, Cambodia and Lao PDR are newly attracted destination to Japanese Investors
Vol. Mkt.Share
Synthesizing the Impact of Thailand’s Logistics Infrastructure Management and Supply Chain Redesign within the context of the ASEAN Economic Community (AEC) 24
Key player: The Logistics Service Industry
• The quality of logistics services depends on
– The structure of the logistics industry
–Contractual arrangements for providing logistics services.
• The size of the enterprises depends on
–Barriers to entry,
–Extent of regulation
– Level of demand.
Synthesizing the Impact of Thailand’s Logistics Infrastructure Management and Supply Chain Redesign within the context of the ASEAN Economic Community (AEC) 25
Structure of Logistics Industry and Service
• Trucking, warehousing, forwarding and clearance firms tend to be small, flexible and hesitant to invest
• Rail, ocean, and air transport enterprises tend to be large and formal with more investment resources
• A mix of large and small provides the best service
Synthesizing the Impact of Thailand’s Logistics Infrastructure Management and Supply Chain Redesign within the context of the ASEAN Economic Community (AEC) 26
Major Policy Areas for ASEAN Priority Integration
Sector Logistics Roadmap 1. Encourage the Integration of the ASEAN National Logistics
Systems
(by increasing communications at the regional level to identify actions in the logistics sector to support and facilitate trade flows between ASEAN countries)
2. Encourage the Progressive Liberalization of Logistics Services
(to make them better able to respond to the opportunities available for ASEAN integration and increasing competitiveness)
3. Increase Trade, Logistics and Investment Facilitation
(to identify the means needed to improve transport logistics facilities and the priorities for investment)
4. Build ASEAN Logistics Capacity
(by encouraging human resource development in the sector, and an environment conducive to developing the sector)
5. Promote ASEAN Logistics Service Providers
(by identifying them and providing channels for their greater participation in the sector)
6. Promote Multimodal Transport Capacity
(especially containerized transport)
OM201 PRINCIPLES OF OPERATIONS MANAGEMENT 27
NO. MEASURES IMPLEMENTING BODY TIMELINE
SPECIFIC ISSUES
I Member country shall endeavour to achieve substantial liberalisation of
logistics services in the following sectors:
1 Maritime cargo handling services CPC 741 Coordinating
Committee on Services
(CCS)
2013
2 Storage & warehousing services CPC 742 CCS 2013
3 Freight transport agency services CPC 748 CCS 2013
4 Other auxiliary services CPC 749 CCS 2013
5 Courier services CPC 7512** CCS 2013
6 Packaging services CPC 876 CCS 2013
7 Customs clearance services CCS and Customs
Coordinating
Committee (CCC) 2013
Structure of the ASEAN roadmap
OM201 PRINCIPLES OF OPERATIONS MANAGEMENT 28
Maritime transport services
8 International Freight Transportation
excluding Cabotage
CPC
7212
CCS 2013
Air freight services
9 Implement ASEAN Multilateral
Agreement of the Full Liberalisation
of Air Freight Services
Senior
Transport
Officials
Meeting
(STOM)
December
2008
Rail freight transport services
10 International rail freight transport
services
CPC
7112
CCS and
relevant STOM
Working
Groups
Beginning
2008
Road freight transport services
11 International road freight transport
services
CPC
7213
CCS and
relevant STOM
Working
Groups
Beginning
2008
Structure of the ASEAN roadmap
OM201 PRINCIPLES OF OPERATIONS MANAGEMENT 29
II Enhancing Competitiveness of ASEAN Logistics Services Providers through
Trade (including Documentation Simplification) and Logistics (Transport)
Facilitation
II (a) Trade and Customs Facilitation
II (b) Logistics Facilitation
III Expanding Capability of ASEAN Logistics Service Providers
IV Human Resource Development
V Enhance Multi-Modal Transport Infrastructure and Investment
Structure of the ASEAN roadmap
Synthesizing the Impact of Thailand’s Logistics Infrastructure Management and Supply Chain Redesign within the context of the ASEAN Economic Community (AEC) 30
• Development mostly are concentrated • Countries with better Facilitation will have better impact. • Soft Infrastructure better impact in short and medium range,
Hard Infrastructure better in long range. • What about 10 years after AEC?
Source: ERIA / IDE-JETRO GSM Team.
Industrial Agglomeration
Automotive Cluster
OM201 PRINCIPLES OF OPERATIONS MANAGEMENT 31
Economic corridors
OM201 PRINCIPLES OF OPERATIONS MANAGEMENT 32
Social
OM201 PRINCIPLES OF OPERATIONS MANAGEMENT 33
Safety and security
OM201 PRINCIPLES OF OPERATIONS MANAGEMENT 34
Technological
OM201 PRINCIPLES OF OPERATIONS MANAGEMENT 35
Fuel Efficiency
OM201 PRINCIPLES OF OPERATIONS MANAGEMENT 36
Operational efficiency
OM201 PRINCIPLES OF OPERATIONS MANAGEMENT 37
Environment
OM201 PRINCIPLES OF OPERATIONS MANAGEMENT 38
Competitiveness
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