LF Logistics is on a mission to create the supply chain of the future. Part of a three-year plan launched by its parent supply chain company Li & Fung, it aims to satisfy customers in the digital economy.
“Most consumers are highly digitised and digitalised in the way they operate but, interestingly, the process of producing, supplying and making the products available to consumers on retail shelves is still highly analog,” LF Logistics Executive Director and Head of ASEAN, Emmanuel ‘Noel’ Bautista, tells The CEO Magazine. “The supply chain of the future is a recognition that there is a big gap between the level of digitalisation from the consumer’s point of view, and that from the point of view of producing, delivering and supplying the product to the consumer. That gap needs to be addressed and we recognise that.”
LF Logistics offers warehousing solutions for the more than 400 brand owners that use its services. It provides everything from transport and distribution centre management to freight forwarding and omnichannel services, delivering around 100 million units of consumer products a day.
To become the supply chain of the future, the company has three specific areas in mind: speed, digitalisation and innovation, Noel explains. “Speed, meaning we want to be able to respond, develop and deliver on new services much faster than before; digitalisation, meaning we want to be able to capture everything in digital form; and innovation, meaning we need to be able to foster a culture of experimentation,” he says. “We want to have more experiments happening in various corners of the organisation that are testing and trashing – failing fast – but embracing pockets of success, and supporting them so that we can commercialise them very quickly. As our group CEO Spencer Fung says, ‘Speed trumps price right now’.”
Harnessing the power
Noel has been in the logistics industry for more than 30 years and joined LF Logistics in the Philippines in 2001. He highlights that the company’s strength is in technology – its biggest area of capital expenditure. “We are heavily invested in systems to help us operate our basic activities,” he explains. “But we’re also investing heavily in systems that allow us to be productive in our workplace – systems that are converting us into a truly paperless environment and are minimising the amount of double work or double handling. These systems are immediately reconciling figures in our databases.”
The company has 235 warehouses worldwide and employs close to 8,000 workers. In 2016, it completed the construction of its World Gateway warehouse in Singapore – the largest automated and customs bonded warehouse in the country. The facility uses several technologies including LED motion sensor lights, energy conserving material handling equipment, and automated storage and retrieval systems. It is also focused on sustainability, with green-certified cranes, conveyors and pallet shuttles.
Alongside the company’s overarching strategy to forge the supply chain of the future, is a vision to become the most operation-centric logistics service provider in Asia. LF Logistics constantly experiments with new technologies it believes will become mainstream in the industry. It is on the verge of rolling out an advanced tracking system that can monitor the productivity of workers using radio-frequency identification (RFID). Plus, it’s looking into the use of automated driving vehicles in its warehouses to minimise dependency on manual driving.
Further, LF Logistics has been piloting the use of drones to perform inventory counts in a number of its large facilities. And there is also the company’s foray into robotics. “Rather than people moving to the goods to box the orders, the robots will move the goods to the people,” Noel explains. “And so we can minimise the number of workers we need to process orders. It’s very exciting.”
With technology comes an emphasis on optimisation, and LF Logistics implements processes to ensure all its resources – from its trucks to its workspace to its data – are optimised. “We have a huge database that can be very valuable,” he says. “We’re now in the process of analysing the data in ways that will prove meaningful to our customers as well as us. Our vision is to provide valuable insights to our employees, business partners and, most importantly, customers, whether it be the transactions, orders, deliveries, routes, or the co-packing activities we perform. It is not only so they can understand what happened in the past, but also to help them plan for the future, to anticipate purchasing patterns and the rise in demand.”
Noel identifies the three biggest challenges currently facing the company; the first of which is infrastructure. “At LF Logistics we operate in a lot of developing markets, and these markets’ infrastructure continues to be substandard or inadequate,” he says. “It’s quite a challenge. I know that many government administrations are doing a lot to improve them but, unfortunately, it is not fast enough. So, we’re doing our bit to optimise the way we operate to minimise the number of resources we have on the ground as well as our carbon footprint.”
The second major obstacle is the scarcity of talent. Noel says there is a “dearth of talent” and in many developing markets, the number of yearly graduates in the logistics field is not enough. “In fact, it’s only now we are seeing courses that are specific to logistics, transportation and supply chain,” Noel asserts. “We have to beef this up – support internal training and development programs.”
To solve this problem, LF Logistics has partnered with universities to work with their industrial departments. The company takes part in a week-long program that involves sharing case studies with students, listening to their presentations and giving presentations about its business. At the end of the week, LF Logistics takes on some of the students as interns, and eventually selects a few of these to become management trainees after they graduate. “We’re doing our best to reach out to the universities and help them develop » programs, as well as training students in our facilities,” Noel adds. “In fact, some of my colleagues and peers are active in terms of teaching roles in operations management in academia.”
The third obstacle is one that is felt by supply chain companies the world over – the continuing rise in customer demand and expectation. “In the past, we used to deliver to some of our key accounts once a week,” Noel recalls. “Now we’re delivering to them every day. We used to deliver to the central distribution facilities of some of these large retailers, now we have to deliver to their stores. In fact, with the onset of ecommerce, we’re now delivering directly to consumers. And we’re delivering smaller quantities of orders, more frequently, and at higher rates to consumers. This level of demand is driven by customer expectations and will only increase over time. And that’s something we have to be prepared for.”
It takes a team
To overcome these barriers, the company has its best weapon: its people. “Our people are a very important factor in helping us stand out from the rest of the competition,” Noel says. “I sincerely believe in that. We have a strong human resource program, which ensures we have the best possible expertise, experience, and variety of skills most relevant to our industry and, most importantly, the highest level of engagement between our staff and the organisation. Our people are committed to our vision and the way to realise it. They are very keen to participate in the process.”
“Our people are committed to our vision and the way to realise it.”
This enthusiasm among its employees is backed by the company’s regular engagement surveys conducted by third-party agencies. “In the past few years, the results of the engagement surveys indicate that the level of engagement among our employees is far higher than the industry benchmark across the region,” Noel continues. “So this gives us a lot of confidence that our people certainly make the difference.”
Along with its strong internal workforce, the company ensures it extends its support externally by giving back to the community. Through the Li & Fung Foundation, the company supports blood donation, outreach programs and cancer awareness campaigns. Further, Noel says the organisation finds ways to contribute to its communities in areas that are integrated into its everyday business.
Noel mentions LF Logistics’ program to enhance vendor relationships, especially with trucking companies, which are crucial to its business. “In the market, we’re involved with trucking companies that tend to be relatively small, privately owned, and not quite as established as LF Logistics,” Noel says. “But we encourage them to do well in their business so we can help each other. By being a partner of LF Logistics, they get a lot of incentives, such as discounts on the price of fuel and insurance premiums, as well as access to vendor financing programs at very competitive rates.
“We also have a lot of training programs with these trucking companies, so they can be professional in the way they provide their service. And we empower them with technology, which they would otherwise not be able to afford. We’re creating improvements in the way they run their business, and we see a lot of them growing over the years. They’re helping themselves and helping our company. It’s mutually satisfying.”
There’s more to come
The company has been growing over the years and is entering new markets in Asia including Indonesia, Korea, Japan and Vietnam. “In the Philippines, we’ve grown tremendously,” Noel adds. “In fact, we’re in the process of working on a build-to-suit distribution centre in Cebu. That’s how important that market segment is for us.”
The next Asian market the company is targeting is India. “We set foot in India in early 2017 with two very important customer partnerships, and we see that as a springboard to a potentially huge business,” says Noel. “Within our portfolio today, China is the largest market, but we see India as being the only other Asian market that can rival, if not surpass, China, as far as this industry is concerned.”
Over the next three years, the company has plans to transform its transportation business. Noel highlights that transportation services have great expansion potential within its portfolio and the company is going to capitalise on that by employing various elements such as technology, new business models and increased business development.
In addition, LF Logistics aims to unleash the power of ecommerce. “Ecommerce is a phenomenon that has grown so quickly in the northern region of Asia and LF Logistics is a prime player in that space,” Noel explains. “In north Asia, we are the provider of choice for all footwear and apparel companies that require ecommerce logistic services. We would like to replicate, if not to build on, that success in other parts of Asia.
“We have the necessary tools. We have the customer relationships, technology, systems and expertise to design the facilities optimally. It’s just a matter of harnessing all that so we can benefit from this in other parts of the region.”
With all these plans on the horizon, the supply chain of the future is set to become better than ever.
“In north Asia, we are the provider of choice for all footwear and apparel for companies that require ecommerce logistic services.”