Movements toward loosening coronavirus pandemic-related restrictions on activities have begun in some countries, but it remains unclear whether the countries’ economies will return to their prior state. It is thought that the pandemic will continue to exert effects in many industries. These negative impacts are thought to be large for many industries, such as aviation, yet some industries will benefit from tailwinds. Growing logistics demand in areas such as home delivery to accommodate stay-home behavior is one example. Despite the expansion of a world in which electronic data comes and goes, areas that involve the physical movement of items can avoid decline through streamlining, and I believe demand for physical movement will remain.
Logistics is an important point in selling automobiles. I believe that the vehicles sales are greatly affected by logistics strategy, especially in regions where sales growth is anticipated (particularly in developing regions).
Logistics must aim to transport goods (automobiles) in a timely manner without damage and with as little cost as possible, with several important points required for the optimal achievement of this.
Based on my modest experience in logistics work in the Middle East, I would like to discuss several points that I consider important in automobile logistics, including inventory storage.
Key points in logistics strategy
Country stability (in terms of legal structure, infrastructure, etc.)
As with other industries, I believe that for at logistics bases, the maintenance of a degree of stability in terms of legal structures is an important matter that also involves sales costs. When inventory is stored in a free zone serving as an export transit point, there is a risk that legal revision will eliminate the free zone status of the location. It is also necessary to pay attention to the status of logistics infrastructure development. As an example, when inventory is temporarily stored in a transit point country on the way to the final export destination, whether a customs system is in place in the transit point country affects the smoothness of procedures for shipping from the inventory location, and the frequency of trouble in transport procedures.
I believe that whether geopolitical risk often materializes in the country is also an important point of concern in establishing a logistics base.
Securing an inexpensive inventory location
Estimating expected sales numbers is difficult even at normal times, and it is very possible to miss business opportunities if you are unable to make timely deliveries when sales demand has suddenly arisen. Particularly when transporting vehicles from a distant location via export, the transport time to the final export destination may be several months following the end of production. In some cases, holding vehicles as inventory near the final export destination is effective for sales promotion. In such cases, the cost of inventory is an important point when determining the location of inventory, and it is necessary to consider not only the rental or purchase costs but also expenses such as customs procedure charges and port handling charges. In some cases, rent fees may be low but the expenses associated with each transaction when moving vehicles into or out of the inventory location may be high.
Quality of port operations
When a vehicle is carried by ship from the country of origin, damage may stem from the handling of the vehicle at the port. Whether the port of unlading for the vehicles is normally used for the export and import of automobiles is an item to consider. Damage or defacement can occur easily when workers at the port are not accustomed to handling automobiles. If the port is operated by the national government, educating port workers can be difficult and may lead to ongoing defacement.
Quality of logistics operators
In export transit countries and final export countries, it may be necessary to engage in outsourcing of work or collaboration with local logistics operators. To maintain the quality of vehicles during transport, it is necessary to understand how much care the local logistics companies take with vehicle quality, and how much training the employees require. This sharing of understanding takes time, and requires strengthening relationships with the logistics operators. However, I believe that it will lead to higher overall logistics efficiency and flexible transport operations in the end.
Inventory bases as modification locations
For some vehicles, it may be necessary at the transport transit country to perform modification for use as mobile medical vehicles, refrigerator vehicles, and so on, prior to sale. It can be a good idea to use a location for efficient modification as the inventory location as well. This involves aspects of legal systems, but as the vehicles will be stored in a bonded state in the transport transit country, it is convenient if that country is equipped to allow in-country modification of vehicles in a bonded state.
While the coronavirus pandemic clouds the scenarios that await us in the future, the automobile industry is said to be in a once-in-a-century transitional period, with the possibility of a transition from an ownership era to a usage era. Even under these present circumstances, I believe that there are regions among the developing countries where sales will expand in the future, unlike in developed countries where demand has been saturated.
In such countries that offer the potential for automobile sales growth, I believe that the optimization of logistics (including costs), rather than a leap into local production, will be an important point in expanding sales.
The points to be considered in logistics strategy that I’ve noted are only some of the main points. I hope that they will serve as help in supporting automobile sales competitiveness through the formulation of a comprehensive plan that also includes other points, according to circumstances.