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How are 2D Barcodes redefining retail and unlocking new opportunities in Asia Green at checkout, grey in transit: Can e-commerce escape its packaging problem?
Southeast Asia’s response in a Second Trump Presidency: Exclusive Insights from Moody’s Analytics
“It’s never more apt to describe today’s supply chain world than to use the term “butterfly effect,” where chaos theory suggests that “… something as small as the flutter of a butterfly’s wing can ultimately cause a typhoon halfway around the world.”
No matter what industries you are working in and which part of Asia you reside in, you cannot escape the incoming tornado of trade-related changes hitting supply chains as we grapple with the unfolding of the measures implemented by the new US administration.
If you, like the team at Value Chain Asia, are constantly reflecting on the pressing topics that resonate with our community—balancing the urgency of timely information with the need to deliver the most relevant and impactful insights—we are excited to spotlight retail and e-commerce topics in this issue.
Happy 2025! The Value Chain Asia team wishes all readers and our community a great year ahead. I am excited to welcome you to our first issue of 2025: We cover retail as our headline topic in this issue.
Retail therapy is seared into our collective consciousness, and that took a leap through the pandemic years as all brick-and-mortar players, if not already dipping their toes into selling online, became full-fledged online only stores. They survived due to trusty logistics! Logistics, if anything, is more than essential services; it is the lifeblood of society’s needs, and the supply chain community would be the power moving things along even when the world was not normal.
Yet, on the back of how all of us have shifted to purchasing online, we examine the impact of packaging as a result of e-commerce to make shopping online more sustainable. Moving to tech in retail, we learn about 2D barcodes vs 1D barcodes and how this is enabling more information about the product to be made available to consumers as this gets progressively rolled out.
In our mainstay sections, we are really pleased to feature an article with Moody Analytics, helping all of us make sense of where the economy is going with the steady stream of announcements from the second Trump presidency. We all operate in a globally connected
business world; even if you are a fishmonger in a local market, all these changes to how we operate as a business have a real-world impact on how we work.
Beyond retail, supply chain strategy remains critical. With the 3PL market consolidating, should companies rethink their reliance on third-party logistics and instead build in-house capabilities? As fewer players dominate, do buyers still have real choices? And as costs surge globally, is air freight a viable alternative to sea freight, or does the balance between speed and cost remain immovable?
Finally, AI is transforming supply chains and workforce management. We explore how companies are leveraging AI to build resilience, streamline operations, and future-proof their logistics and HR functions. Wishing everyone a great spring ahead - enjoy the issue!
For editorial inquiries, contact editor@valuechainasia.com
Sincerely,
Wee Wee Chia Co-Editor-in-Chief
FOUNDER, CO-EDITOR-IN-CHIEF
AMOS TAY
SENIOR EXECUTIVE (MEDIA)
MATTHEW PARRA
MULTIMEDIA ARTIST
PRECIOUS ROMATICO
CO-EDITOR-IN-CHIEF
WEE WEE CHIA
STAFF WRITER
TRISHA ANJANETTE BALLADARES
SHERAZ AHMED
MUHAMMED YASSIN
BERNARD RAMIREZ
GRAPHIC DESIGNER
YASMIN ISMONO
Green at checkout, grey in transit: Can e-commerce escape its packaging problem?
How are 2D Barcodes redefining retail and unlocking new opportunities in Asia
20: The future of 3PL in a Consolidating Market: In-House Logistics and the Battle for Bargaining Power
16: Southeast Asia’s response in a Second Trump Presidency: Exclusive Insights from Moody’s Analytics BUSINESS AND ECONOMY TECHNOLOGY
How can AI offer supply chain resilience amid black swan events?
Scaling Up: Asia-Pacific’s Wind Energy Supply Chain in the Race to 1.5°C
SUPPLY CHAIN & MANUFACTURING
34: Balancing Cost and Speed: Is Air Freight a Viable Alternative to Sea Freight?
BY TRISHA ANJANETTE BALLADARES
In an era of convenience and consumerism, e-commerce has transformed how we shop. Yet beneath the allure of one-click purchases and doorstep deliveries lies a stark environmental contradiction: the explosion of packaging waste. Nowhere is this dichotomy
more apparent than in Asia, a region that has embraced online shopping fervently.
Despite growing calls for sustainability, the e-commerce industry grapples with a fundamental question: can it deliver goods sustainably without excessive packaging waste?
The
The modern shopper is often encouraged to bring reusable bags to brick-and-mortar stores, a small but impactful shift toward reducing single-use plastics. Yet when these same consumers shop online, their items arrive swathed in plastic, bubble wrap, and cardboard layers. This disconnect stems from the logistical needs of e-commerce: goods must travel long distances, withstand multiple handling stages, and arrive intact at their destination. Packaging, therefore, becomes both a protector and a polluter.
For Jian Ai, a social media personality in China,
“ I want to use less plastic, so if I have the choice, I opt for the simplest packaging to reduce waste, but a lot of shops tend to overpack or use a lot of cushioning materials.”
Asia, home to some of the world’s largest e-commerce markets like China, India, and Indonesia, is at the epicenter of this issue. The region’s rapid urbanization and digital penetration have driven a surge in online shopping, with sales in Asia-Pacific accounting for nearly 60% of global e-commerce revenues in 2023. However, this growth has come at a steep environmental cost. According to Greenpeace, China alone generates 250,000 tonnes of packaging waste annually from e-commerce, which has doubled since 2018.
The supply chain has witnessed a wave of innovations to reduce packaging waste. Companies are experimenting with materials, designs, and logistical systems to balance sustainability and functionality.
One promising trend is the shift toward biodegradable packaging made from cornstarch, seaweed, and mushroom mycelium. These materials decompose naturally and can replace plastic fillers and bubble wraps. In Indonesia, startups like Evoware produce seaweedbased packaging that is edible and fully compostable. Similarly, India’s Ecoware offers biodegradable tableware and packaging solutions that break down within months. Another innovation gaining traction is reusable packaging systems. Companies like Loop, an initiative by TerraCycle, have introduced a circular model where consumers return empty packaging for cleaning and reuse.
Despite these advancements, critics argue that “sustainable packaging” in e-commerce is often a misnomer. The premise of online shopping—individual items shipped to dispersed locations—inherently generates more waste than traditional retail, where goods are transported in bulk. Even biodegradable and reusable materials come with caveats. Compostable packaging, for instance, requires specific conditions to decompose and may not break down in standard landfill settings. Reusable packaging systems, while innovative, face logistical hurdles and high upfront costs.
Moreover, the carbon footprint of e-commerce packaging extends beyond the materials themselves. Packaging is only one component of a larger problem that includes emissions from transportation, warehouse energy consumption, and reverse logistics for returns. Even the most eco-friendly materials risk becoming a Band-Aid solution without systemic changes.
Asia’s e-commerce packaging dilemma is shaped by its unique economic, cultural, and logistical landscape. Developing regional economies face significant infrastructure gaps in waste management, exacerbating packaging waste’s environmental impact. For example, less than 20% of plastic waste is recycled in India, while much of Southeast Asia’s plastic waste is in rivers and oceans. This creates a vicious cycle where innovative
materials, even when introduced, fail to achieve their full potential due to inadequate recycling infrastructure.
On the flip side, Asia also offers fertile ground for change. The region’s dense urban centers, high digital penetration, and young, tech-savvy population make it an ideal testing ground for innovative solutions. Governments and private players alike are stepping up to address the issue. China, for instance, has implemented a “green packaging standard” for its e-commerce sector, mandating recyclable materials and limiting overpackaging. In South Korea, Coupang has pledged to eliminate single-use plastics from its deliveries by 2030, while Singapore is exploring legislation to curb excessive packaging in e-commerce.
Ultimately, any solution to the e-commerce packaging problem must involve a shift in consumer behavior. While businesses and governments can introduce regulations and innovations, consumer demand often drives change. Encouragingly, there is evidence that Asian consumers are becoming more environmentally conscious. A survey by Rakuten Insight Global found that 44.5% of consumers in Asia-Pacific are willing to pay more for sustainable products, a significant increase from previous years.
E-commerce platforms are leveraging this trend to promote eco-friendly practices. Shopee, a popular Southeast Asian platform, offers consumers the option to choose “minimal packaging” at checkout. While these initiatives are still nascent, they signal a growing awareness of the issue among both companies and consumers.
One often overlooked aspect of e-commerce’s environmental impact is the packaging waste generated by returns. Across Asia, the “try before you buy” culture has led to a high return rate, especially for clothing and footwear. Every returned item doubles the packaging waste and adds to the carbon footprint of transportation. To combat this, companies are exploring virtual try-ons using augmented reality (AR) to reduce unnecessary returns. Indian fashion retailer Myntra has introduced ARbased sizing tools to help consumers make more accurate purchases, minimizing the need for returns.
A one-size-fits-all approach to sustainable packaging may not work for a region as diverse as Asia. Localized solutions tailored to specific countries’ infrastructure and cultural practices are essential. For instance, smallscale e-commerce platforms in rural India are turning to traditional jute and cloth bags instead of plastic. In Japan, the culture of meticulous waste sorting has allowed platforms to introduce recyclable packaging more effectively.
Moreover, public-private partnerships can play a pivotal role in addressing infrastructure gaps. Governments in developing Asian economies can work with e-commerce giants to improve recycling systems, creating a shared responsibility model. For example, Vietnam’s Ministry of Natural Resources and Environment has partnered with local businesses to promote plastic waste reduction through better collection and recycling mechanisms.
Addressing the e-commerce packaging problem requires a holistic, systemic approach beyond individual innovations. Collaboration among stakeholders— manufacturers, logistics providers, policymakers, and consumers—is crucial. Key steps include:
• Incentivizing Circular Systems: Governments can introduce subsidies or tax breaks for companies that adopt reusable packaging systems or invest in recycling infrastructure.
• Standardizing Regulations: Uniform standards for sustainable packaging across countries can reduce confusion and ensure consistent implementation.
• Leveraging Technology: AI and data analytics can optimize supply chains, reducing the need for excessive packaging and minimizing waste.
• Consumer Education: Awareness campaigns can empower consumers to make sustainable choices, such as selecting minimal packaging options or participating in recycling programs.
As Asia’s e-commerce market expands, the urgency of addressing its packaging problem cannot be overstated. While the journey toward truly sustainable e-commerce is fraught with challenges, it is not insurmountable. The innovations and initiatives emerging across the region offer hope, but their success depends on collective action and a willingness to rethink the convenience-driven culture of online shopping.
BY BERNARD RAMIREZ
F or over half a century, the 1D barcode has been a retail mainstay, streamlining inventory management and checkout processes. However, as consumer demands grow more sophisticated and supply chains become
increasingly complex, the limitations of this once-groundbreaking technology have become apparent. Enter 2D barcodes, a revolutionary upgrade poised to transform the retail landscape in Asia.
Unlike 1D barcodes, which store minimal information such as a product’s price and identifier, 2D barcodes can encode a wealth of data in a compact square. These new-generation barcodes can store product origins, sustainability certifications, and detailed supply chain information.
The compact size of 2D barcodes makes them ideal for modern packaging, while their ability to store detailed data such as batch numbers, expiration dates, sustainability certifications, and even URLs has made them a favorite among forward-thinking retailers.
According to Christopher Ang, CEO of GS1
Singapore,
“ 2D barcodes unlock a new level of transparency, improved inventory management, better traceability, and sustainability.
For instance, 7-Eleven Thailand implemented GS1 DataMatrix 2D barcodes across over 100 ready-toeat products in its 12,000+ stores by early 2023. These barcodes include expiration dates and batch numbers, replacing QR codes for enhanced efficiency. This transition has eliminated expired product complaints, improved quality control, and streamlined store operations. Building on this success, 7-Eleven Thailand aims to expand 2D barcode usage to more products, phasing out 1D barcodes entirely.
This trend highlights the growing importance of transparency and ethical practices to consumers, particularly in Asia. A 2023 McKinsey report revealed that over 60% of consumers globally, including those in Asia, are willing to pay more for sustainable products and factor environmental and social responsibility into their purchasing decisions.
2D barcodes offer more than just enhanced consumer engagement. Compatible with smartphones, they allow instant access to detailed product information, including sustainability credentials and nutritional data. Retailers, in turn, benefit from better traceability, inventory management, and data analytics. The widespread adoption of 2D barcodes is driving a major shift in the retail industry, revolutionizing supply chain management, boosting consumer interaction, and combating counterfeiting.
For example, Woolworths in Australia adopted 2D barcodes in 2019 for fresh meat and poultry, embedding batch details, supplier information, and use-by dates. By early 2022, half of their meat products featured these barcodes in over 1,000 stores. The technology has
reduced food waste by 40% and enhanced food safety by automating expiry date tracking and recall processes.
According to GS1, 2D barcodes can reduce inventory errors by up to 50%, allowing businesses to optimize stock levels and minimize waste. For example, Woolworths in Australia saw a 40% reduction in food waste by using 2D barcodes on fresh meat and poultry, which improved batch tracking and expiration management.
Similarly, South Korea’s agricultural sector benefits from 2D barcode technology. The integration of QR codes on produce packaging allows retailers to trace goods from farm to store, ensuring food safety and compliance with export standards.
retail is their ability to foster better consumer engagement.
They were developed to address the market’s century-long
As Asia embraces digital transformation, 2D barcodes are expected to play a key role in retail innovation. Horizon: Grand View Research, a market researching body, solidifies this claim that the global 2D barcode reader market is experiencing significant expansion, valued at USD 7.32 billion in 2022 and projected to grow at a compound annual growth rate (CAGR) of 8.5% from 2023 to 2030. The booming e-commerce sector and advancements in logistics and warehousing technologies primarily drive this growth.
Their report projected a significant growth of 10% at a compound annual growth rate from 2024 to 2030, reflecting the increasing integration of these technologies into the retail sector.
In particular, the rapid expansion of e-commerce platforms and the continued rise of logistics hubs in key Asian markets—such as China, India, and Southeast Asia—demand advanced tracking systems. 2D barcodes are emerging as essential tools to meet this demand, allowing retailers and manufacturers to manage sales data, track inventory in real time, and ensure transparency
across complex supply chains. The ability to track products seamlessly, from warehouse to doorstep, is becoming a cornerstone of the modern retail experience in Asia. GS1 is leading the effort to drive the adoption of 2D barcodes in retail, transforming the way information is shared and accessed. GS1 is a not-for-profit, international organization developing and maintaining its own standards for barcodes and the corresponding issue of company prefixes. The best known of these standards is the barcode, a symbol printed on products that can be scanned electronically.
With Asia’s retail sector set to become a global leader in digital transformation, 2D barcodes are not merely an enhancement but a necessity. As these technologies evolve and integrate with other innovations, such as automated billing systems and wireless solutions, their role in the region’s retail supply chain will only become more pronounced. Retailers across Asia already recognize the strategic importance of adopting these systems to stay competitive in an increasingly transparent and datadriven market.
We thank GS1 for their invaluable insights in shaping the future of retail through 2D barcode innovation. V
BY MATTHEW PARRA
S outheast Asia finds itself at a crossroads as Donald Trump secures a second term in the White House. In this exclusive feature, Value Chain Asia speaks with Katrina Ell, Head of Asia-Pacific Economics at Moody’s Analytics, to gain expert insights into how the region can navigate this shifting landscape.
As a leading authority on macroeconomic analysis,
Moody’s Analytics operates independently from Moody’s Ratings, and provides financial intelligence and analytical tools to understand a range of risks.
With key exporters like Vietnam and Malaysia bracing for potential tariff hikes and economic stability hanging in the balance, how will Southeast Asia (SEA) adapt to this new geopolitical and economic reality?
SEA’s deep integration into global supply chains and its dual reliance on the United States and China make the region sensitive to disruptions. With its economies dependent on exports, policy shifts under Trump could have significant effects on the region. According to Katrina Ell, the immediate challenge lies with tariffs
“The direct impact for southeast Asia is via the threat of tariffs that will hurt export performance. This will be particularly pronounced for those where exports are a large share of their economy including Singapore, Vietnam, Thailand and Malaysia.
Tariffs targeting key export industries could result in economic slowdowns, with countries like Vietnam and Malaysia particularly vulnerable. These countries have benefitted from the first trade war that emerged from the first Trump presidency.
Beyond direct trade measures, the implications of a stronger U.S. dollar are already being felt by weaker currencies.
“The more indirect impacts are being felt now via a stronger dollar. Weaker currencies across southeast Asia from November onwards has meant that central banks are treading more carefully when it comes to monetary policy normalization. For most of these economies, including Indonesia and the Philippines this isn’t a big concern given that domestic demand has remained relatively resilient, but the longer that policy settings remain in restrictive territory, the more pressure these economies will come under.”
SEA nations are also navigating a complex geopolitical landscape. This is because of balancing their reliance on U.S. military support with their economic dependence on China. This dual reliance has evolved in recent years, as regional players reassess their strategic alignments.
“Some economies in southeast Asia, including Vietnam and Malaysia have become closer to the U.S. in recent years as China has become a less desirable source of imported goods.”
However, maintaining this balance is becoming increasingly difficult. Growing superpower rivalries between the U.S. and China require SEA nations to carefully calibrate their policies.
“China and the U.S. are large and critical markets for southeast Asia.
Ell explains.
“It is a difficult path to walk to maintain trade and political relations given that China and the U.S. have become more adversarial. It is expected that economies will be increasingly allied to either China or the U.S. rather than balancing both. This is already happening with the Philippines and the U.S. tied via defense agreements and Vietnam politically aligned with China.”
SEA’s supply chains have already undergone significant changes due to Trump’s first presidency and the COVID-19 pandemic. According to Ell, the vulnerabilities exposed by these events have prompted companies to diversify their supply chains.
“
Trump’s first term followed by the pandemic crystalised the importance of diversified supply chains. The focus shifted from minimizing the cost of producing goods and towards minimizing the risk of goods being delayed by political and/or other factors like a pandemic.
Ell emphasized that this diversification has increased SEA’s role in global supply chains as companies reduce their dependence on China.
“Southeast Asia has become a more important cog in the supply chain as both the U.S. and Europe have tried to reduce their exposure to China. This has manifested in Southeast Asia being a more important producer for intermediate and capital goods exported to the U.S. while
China has become a more important market for final consumer goods into the U.S.”
However, renewed tariffs under Trump’s presidency could disrupt this progress. Country-specific tariffs targeting SEA exports could diminish their competitiveness and negatively affect economic performance.
”Deglobalization has been a growing trend as geopolitical tensions have overwhelmed multilateral trade agreements in recent years. Country-specific tariffs, which is what is expected under a Trump presidency will make those impacted goods less desirable and hurt overall export performance. But the macroeconomic impact is contingent upon the level of tariff imposed and how much this comprises the export basket.”
The technology sector, known to be particularly vulnerable to tariffs, has already seen manufacturers frontloading shipments to avoid anticipated disruptions.
”There was a renewed flurry of shipments out of Asia in the final months of 2024 as manufacturers front-loaded orders to try and circumvent tariffs. Tech has stood out as a strategic industry that is at particular risk of tariffs.”
Trump’s push for reshoring jobs to the U.S. could further influence foreign direct investments and regional
manufacturing dynamics. While countries like India and Mexico are positioning themselves as alternatives, SEA retains a competitive edge due to its established infrastructure and integrated supply chains.
”While India is continuing to build its manufacturing base, its supply-chains and efficiencies generally lag that of southeast Asia.”
Ell explains that
“
With China the focus of Trump’s protectionist rhetoric, India has positioned itself as a strategically important partner that can help counter China’s rising influence. During Trump’s first term, the diversion of trade away from China benefited India, particularly its exporters of textiles and apparel, pharmaceuticals, and chemicals and organic products.
Despite these advantages, structural challenges in alternative hubs like India remain a concern.
“That said, not all tariffs that are potentially imposed on China will be unequivocally positive for India. For instance, during Trump’s first term, Indian manufacturing, especially the electronics and automobiles industries, experienced higher input costs due to their heavy reliance on Chinese raw materials and machinery. Structural issues such as infrastructure bottlenecks and restrictive labour policies within India also hindered trade and investment gains.”
A second Trump presidency has the potential to significantly reshape the economic and geopolitical dynamics of Southeast Asia. While challenges like tariffs and superpower rivalries loom large, the region’s resilience, adaptability, and lessons learned from previous disruptions position it to navigate this complex environment.
When asked what factors keep companies invested in Southeast Asia despite external pressures, Ell emphasized:
“The efficiency and integrated supply chains.
As Southeast Asia recalibrates its strategies in the face of new uncertainties, Moody’s Analytics provides a vital macroeconomic perspective. The region’s ability to maintain its competitive edge while navigating the between the U.S. and China will determine its trajectory over the next four years.
V
BY MUHAMMAD YASIN
As the logistics world changes, companies face a big choice. Should they stick with third-party logistics (3PL) providers or take control by building in-house capabilities?
The stakes are higher than ever. 3PL players now have more bargaining power thanks to industry consolidation. They offer advanced,
tech-driven solutions for efficiency and growth. However, in-house logistics tools are becoming more accessible, making companies rethink the outsourcing model.
This raises a big question for businesses. Is outsourcing logistics still the best choice for cost and strategy, or is it time to take control back?
The 3PL market has experienced significant growth in recent years with projections estimating it will reach USD 1.68 trillion by 2029. This expansion is driven by the increasing demand for scalable logistics solutions to meet the rising challenges of e-commerce, globalization and evolving consumer preferences.
As more companies outsource their logistics, the importance of 3PL service providers continues to increase. The industry is expected to grow at an annual growth rate of 5.48% between 2024 and 2029.
At the same time, the 3PL market is undergoing a trend of consolidation as larger 3PL providers merge or acquire smaller firms to expand their service offerings, enhance technological capabilities and achieve economies of scale.
Companies like XPO Logistics, DHL, and Kuehne + Nagel have been acquiring smaller firms to expand their services in high-growth sectors like e-commerce, healthcare and logistics for emerging markets.
This consolidation trend is reshaping the 3PL market by increasing the size and influence of dominant players. Larger 3PL providers use their power to negotiate better contracts, offering integrated solutions like automation, AI-driven logistics systems and real-time tracking
When companies assess their logistics strategies, they must choose between managing logistics in-house or outsourcing to 3PL providers. Both options offer distinct advantages and challenges. Below is a breakdown of the pros and cons of each:
Pros:
1. Control and Customization
Companies have complete control over their logistics operations, allowing them to tailor processes to specific needs and respond quickly to market fluctuations. UPS’s hub and spoke model enables efficient package delivery, handling over 15 million packages daily worldwide and illustrating the benefits of strong in-house control.
2. Cost Savings
Over time, in-house logistics can be more costeffective by avoiding the premium fees associated with outsourcing to 3PL providers. For instance, FedEx’s internal logistics efficiency has contributed to significant long-term savings.
3. Technology Integration
Investing in technologies like Warehouse Management Systems and Transportation Management Systems provides real-time visibility into supply chains and optimizes inventory and delivery schedules. UPS’s ORION platform, which uses AI to optimize delivery routes, has significantly reduced fuel use and mileage.
4. Competitive Edge
The integration of AI and automation boosts efficiency, providing advantages in inventory management, route optimization and predictive demand planning.Amazon’s warehouse robots accelerate order picking and packing, enabling faster and more accurate fulfillment, giving it a strong edge in e-commerce.
1. High Initial Investment
The upfront costs for infrastructure, technology and skilled staff can be significant, making it difficult for smaller businesses to manage logistics in-house. In 2024, the logistics industry is experiencing a digital shake-up, requiring companies to invest heavily in digital infrastructure to remain competitive.
2. Complexity
Managing logistics internally requires expertise in areas like supply chain management, transportation, inventory control and data analytics, which can overwhelm many businesses. For instance, designing simulation-based decision support tools involves advanced modeling, integration of data sources and realtime processing—highlighting the difficulties in optimizing logistics systems.
3. Technology Integration
Small and medium-sized businesses (SMBs) may lack the necessary resources and infrastructure to effectively support an in-house logistics operation. For example, a small manufacturer investing heavily in logistics may delay product development or marketing, risking competitive losses.
1. Expertise and Specialization
3PL providers offer specialized knowledge and expertise in transportation, warehousing and order fulfillment, allowing companies to focus on core operations.For example, C.H. Robinson’s Navisphere platform showcases its transportation expertise, providing real-time visibility and multimodal logistics solutions including trucking, air and ocean freight.
2. Scalability
Outsourcing logistics to a 3PL provider allows businesses to quickly scale their logistics services up or down as demand fluctuates without needing to invest in additional infrastructure.Strategic partnerships between shippers and 3PLs, as highlighted in the 2024 Third-Party Logistics Study, improve decision-making, reduce costs and enhance agility. The study found 95% of shippers and 99% of 3PLs consider their relationships successful with 89% noting improved service and 80% reporting cost reductions.
3. Access to Advanced Technology
3PL providers often use cutting-edge technology including AI, automation and real-time tracking systems, which can improve operational efficiency and reduce costs. AI-driven demand forecasting helps 3PLs improve inventory levels by 35%, reducing stockouts and enhancing efficiency.
4. Flexibility
1. Loss of Control
Outsourcing logistics means losing direct control over delivery schedules, customer service and inventory management, which can lead to inconsistencies and customer dissatisfaction. As noted by Joe Spisak, companies transitioning from in-house to 3PL fulfillment often relinquish significant control over the final touchpoints of their products, which can be unsettling for businesses accustomed to managing every aspect of logistics internally.
2. Higher Costs for Specialized Services
As companies grow and require more customized logistics services, they may face higher costs with 3PL providers, especially in a consolidating market. For instance, handling hazardous materials like lithium batteries often incurs additional surcharges for storage and shipping, increasing overall expenses.
3. Limited Negotiating Power
Smaller businesses may struggle to negotiate favorable pricing and terms with larger, consolidated 3PL providers, leading to higher costs and less flexibility.
4. Potential for Service Inconsistencies
With multiple clients, large 3PL providers may struggle to provide the level of personalized service that smaller companies need, leading to issues with quality and customer service.
Maintaining strong bargaining power with 3PL providers is essential for businesses outsourcing logistics to ensure optimal service and cost control. The ongoing shift between outsourced vs. in-house logistics means companies must strategically negotiate contracts with 3PL providers to secure flexible terms and avoid high fixed costs.
As the 3PL market consolidates, smaller businesses may struggle to negotiate better prices and terms. To improve leverage, companies can form long-term partnerships with trusted 3PLs and ensure steady business volume.
Moreover, real-time updates through technologies like WMS and TMS are increasingly expected from 3PL providers. While these systems are becoming standard, the level of access and customization they offer can vary. Companies that secure detailed visibility into these systems gain critical insights into service levels and operational performance, allowing them to negotiate better terms and optimize their logistics strategies.
In today’s tech-driven logistics landscape, businesses must stay informed about 3PL challenges and market trends to manage relationships with providers and decide when to shift to in-house logistics for better control and efficiency.
The choice between in-house logistics and outsourcing to a 3PL provider depends on a company’s size, resources and goals. Large corporations often have the capacity to manage logistics internally, while smaller businesses rely on 3PL services. These differences influence their strategy, bargaining power and approach to logistics.
Large businesses like Amazon and Walmart have the resources to manage their logistics internally. By investing in in-house logistics they gain greater control over their operations and can tailor logistics processes to meet their specific needs.
These companies can use AI-driven supply chain management and automated warehouses to reduce costs, improve efficiency and offer faster delivery. Large firms can also absorb automation costs, giving them a competitive edge.
Their ability to scale operations and adopt advanced technologies helps them maintain higher service levels and optimize supply chain strategies. For these companies, shifting to in-house logistics is often seen as a long-term strategy to gain better control over costs and service quality.
Smaller businesses face different challenges in logistics. They often lack the capital and infrastructure to run an internal logistics network. As a result, outsourcing to 3PL providers is typically the most feasible option.
As the 3PL market consolidates and larger providers gain bargaining power, smaller companies may face higher costs, less flexibility and fewer service options. To address this, smaller businesses can explore partnerships
with specialized 3PL providers offering niche services tailored to their needs.
They can collaborate with other small businesses to pool resources, gaining economies of scale and bargaining power to secure better pricing and terms with 3PL providers.
The logistics landscape will continue to evolve, with both in-house operations and 3PL providers adapting to the shifting demands of businesses.
While consolidation among major 3PL players may lead to higher costs and less flexibility for smaller companies, those with the resources to invest in in-house logistics will benefit from enhanced control and operational efficiency. Some businesses may also choose a mixed strategy, combining in-house logistics for key operations with 3PL services for scalability or specialized needs. This approach offers a balance of control, cost management and flexibility, leveraging the advantages of both models.
Moreover, as technology becomes increasingly integrated into supply chains, the battle for bargaining power will intensify. Companies of all sizes will need to be agile in choosing the best logistics strategy. By leveraging data, forging strategic partnerships and embracing automation, businesses can navigate this changing market. This ensures they stay competitive in an increasingly complex and fast-paced global economy. V
BY SHERAZ AHMED
In an era where supply chain disruptions are increasingly common, artificial intelligence (AI) is emerging as a critical tool for boosting efficiency, productivity and resilience. From improving inventory management to enabling real-time visibility, AI is helping companies navigate complex
supply chain challenges.
But how can businesses truly thrive in an environment where unpredictability has become the norm? By using AI, can companies not only anticipate disruptions but also turn them into opportunities for innovation and growth?
The use of AI in the supply chain market of Asia Pacific is growing rapidly. It’s expected to exhibit a compound annual growth rate of 28.2% from 2024 to 2030 and an estimated market size of $40.53 billion by 2030.
This also aligns with larger investments made in AI within the region, especially in China and Japan. The market is projected to grow to $110 billion from 2023 to 2028 at a compound annual growth rate of 24.0%.
Alibaba, Asia’s largest e-commerce giant, has its logistics and supply chain operations integrated with AI technologies. Its Alibaba Cloud AI Supply Chain solution employs advanced data intelligence and deep learning models to deliver end-to-end real-time monitoring.
This enables the business to precisely diagnose and optimize inventory, anticipate future demand, and proactively plan supply chain activities. The platform ensures accurate forecasting by leveraging businessspecific data, helping companies align their inventory strategies with market needs.
The solution also incorporates inventory simulations based on business objectives and constraints, allowing firms to avoid stockouts and minimize disruptions. These AI-driven capabilities empower businesses to streamline operations, reduce sales losses and enhance capital efficiency.
Another company Foxconn, a global leader in contract electronics manufacturing, has long leveraged AI to refine workflows. By automating key aspects of production, Foxconn achieves smoother operations, reduces costs and accelerates output.
These AI applications allow Foxconn to meet high demand efficiently, particularly as a supplier to some of the world’s largest tech companies. The company’s commitment to AI is evident in its “3+3” strategy
Foxconn’s “3+3” strategy is a comprehensive approach to diversify the business model by focusing on three emerging industries: electric vehicles, digital health and robotics. These will be supported by three core technologies: AI, semiconductors and next-generation communications like 5G.
This strategy has seen significant developments, particularly in the EV sector, where Foxconn has leveraged its manufacturing expertise and formed strategic partnerships. The company is also integrating advanced technologies like AI and digital twins into its manufacturing processes, as evidenced by its collaboration with NVIDIA to build AI factories and supercomputers.
These initiatives are part of Foxconn’s broader effort to remain competitive in rapidly evolving markets, with promising projections for growth in these sectors due to increasing global demand for sustainable transportation, advanced healthcare technologies, and automation.
Taiwan Semiconductor Manufacturing Company (TSMC) is leveraging AI to enhance its manufacturing processes. This is notably through AI-driven inspection systems that have boosted defect detection rates by more than 30%.
According to a TMSC sustainability report, this improvement not only increases the quality of their semiconductor products but also streamlines the overall production process. In addition to inspection, TSMC is integrating machine learning-based process control. This is to further strengthen the capabilities of its advanced packaging fabs.
“Our business in the third quarter was supported by strong smartphone and AI-related demand for our industry-leading 3 nanometer and 5 nanometer technologies,
TSMC SVP and CFO Wendell Huang said in a 2024 quarterly earnings call
Without the right experience and skill sets on the team, it can be challenging to integrate any digital tool, and this is especially true with AI.
says CEO and executive coach Rhett Power at leadership consulting firm Accountability Inc.
Moreover, the extent to which AI can be used across diverse industries and regions, particularly in Asia, is still uncertain. While major players like Alibaba and Foxconn have already integrated AI, smaller businesses may find it challenging to adopt this due to cost barriers or a lack of technical expertise.
As the market continues to evolve and the technology becomes more accessible, it’s likely that AI will play an increasingly pivotal role.
BY TRISHA ANJANETTE BALLADARES
The Asia-Pacific (APAC) region stands at a pivotal crossroads in the global fight against climate change. With renewable energy identified as a linchpin in achieving net-zero emissions, wind energy has emerged as a critical driver in the push to limit global warming to 1.5 degrees Celsius. Onshore wind capacity in the region is projected to more than double, while offshore installations could exceed 162 GW by 2030
The amount of wind energy a country uses as a percentage of its total energy supply varies by country. Wind power is the largest source of
renewable energy in the U.S., supplying more than 10% of the country’s electricity. In 2022, China was responsible for almost 40% of global wind generation growth. In 2023, the share of renewable energy in the European Union was estimated at 24.1%. In 2018, Germany produced the highest amount of wind power in Europe, with up to 29% of wind installations.
Despite these optimistic forecasts, the development of the wind energy supply chain in APAC faces significant hurdles that threaten to undermine its potential.
The wind energy supply chain in APAC is a study in contrasts. China and India dominate the market, boasting robust domestic manufacturing ecosystems capable of producing turbines, blades, and associated components at scale.
China alone accounts for over 60% of global wind turbine production, leveraging economies of scale, advanced technology, and a supportive policy framework.
According to Xuyang Dong, a China energy policy analyst at Climate Energy Finance,
“With a domestic supply glut and world-leading technology, China will increasingly seek to export turbines.
Meanwhile, India’s wind sector has made significant strides, with domestic firms like Suzlon and international players such as Vestas contributing to the country’s renewable energy targets. However, outside of these two giants, the supply chain in the rest of the APAC region is underdeveloped.
Markets like Indonesia, Vietnam, and the Philippines have immense wind energy potential but lack the domestic manufacturing capacity and infrastructure to capitalize on it. Instead, these countries rely heavily on imported components, leading to higher project costs and longer timelines. The absence of localized supply chains also poses logistical challenges, further hindering the expansion of wind energy in these markets.
Wind energy plays a vital role in APAC’s sustainability ambitions. The region is home to some of the world’s largest carbon emitters, and the transition to renewable energy is crucial to meeting global climate targets. By replacing fossil fuels with wind power, APAC countries can significantly reduce greenhouse gas emissions, improve air quality, and decrease reliance on imported fuels.
In China, wind energy contributed approximately 8% of the country’s electricity generation in 2022, a figure set to rise as more capacity comes online. India’s wind sector is integral to its ambitious goal to achieve 500 GW of renewable energy capacity by 2030.
Meanwhile, emerging markets like Vietnam have seen exponential growth in wind installations, driven by favorable policies such as feed-in tariffs and power purchase agreements. Beyond environmental benefits, wind energy also drives socio-economic development. The sector creates jobs across the value chain, from manufacturing and installation to operation and maintenance. Localized supply chains can further amplify these benefits, fostering economic growth and resilience in communities.
Despite its promise, the wind energy sector in APAC faces several challenges. Policy and regulatory uncertainty in many APAC countries deter investment and slow project development. For instance, sudden changes to Vietnam’s feed-in tariff policy in 2021 caused delays and financial losses for developers. Infrastructure bottlenecks, such as limited port capacity, inadequate grid infrastructure, and insufficient transmission networks, pose additional barriers to scaling wind energy in the region.
Offshore projects, in particular, require substantial investment in specialized ports and vessels, which are lacking in most APAC countries. High capital costs also remain a major issue. The reliance on imported components and the absence of economies of scale result in higher project costs for many APAC markets, while financing remains a challenge, especially for smaller developers in emerging markets.
Additionally, the concentration of manufacturing capacity in China and India creates vulnerabilities, particularly during geopolitical tension or supply chain disruptions, as evidenced during the COVID-19 pandemic.
The next few years will be critical for the wind energy sector in APAC. By 2025, the region’s onshore wind capacity is expected to exceed 800 GW, with offshore installations projected to cross 50 GW. To achieve these milestones, APAC countries must focus on enhancing regional collaboration and building resilient supply chains through joint ventures, technology transfer agreements, and regional trade partnerships. Such initiatives can
facilitate the development of localized manufacturing hubs and reduce reliance on imports.
Policy reforms will also play a crucial role. Stable and transparent regulatory frameworks are essential to attract investment and accelerate project timelines. Incentives such as tax breaks and subsidies can further lower the cost of wind energy projects. Technological innovation is another key driver. Advances in turbine technology, such as larger rotors and floating offshore turbines, can unlock new wind resources and reduce costs. Investing in research and development will be crucial for maintaining the sector’s momentum.
Additionally, capacity building through training programs and workforce development initiatives can address skill gaps in the wind energy sector, creating a pipeline of qualified professionals to support the industry’s growth.
Wind power offers several advantages over nonrenewable energy sources. It is emissions-free, sustainable, and increasingly cost-competitive. The levelized cost of electricity (LCOE) for wind energy has fallen significantly in recent years, making it competitive with coal and natural gas in many APAC markets. However, wind energy also has limitations. Its intermittent nature requires complementary technologies, such as energy storage systems or hybrid renewable solutions, to ensure grid stability. Wind projects’ upfront capital costs remain higher than fossil fuel plants, although falling costs and technological advancements are narrowing this gap.
The feasibility of scaling wind energy in Asia depends on several factors. Many APAC countries have abundant wind resources, particularly for offshore projects. For example, Japan and South Korea have significant offshore wind potential, while countries like Mongolia boast high onshore wind speeds.
Rapid urbanization and industrial growth in APAC drive energy demand, creating a strong market for wind energy. Governments’ commitments to renewable energy targets further enhance the sector’s prospects. While financing remains challenging, innovative models such as green bonds and public-private partnerships are emerging as viable solutions.
International institutions like the Asian Development Bank are also crucial in funding renewable energy projects. At the same time, the concentration of manufacturing capacity in China and India underscores the need for a diversified supply chain. Countries must navigate geopolitical tensions and trade dynamics to ensure the resilience of their wind energy sectors.
The race to 1.5 degrees Celsius demands urgent and transformative action, and wind energy is poised to play a leading role in APAC’s renewable energy transition. While challenges persist, the region’s immense wind resources, growing energy demand, and supportive policy environment create a compelling case for investment and innovation in wind energy. APAC can scale its wind energy capacity and contribute meaningfully to global climate goals by addressing supply chain bottlenecks, fostering regional collaboration, and embracing technological advancements. The road ahead may be fraught with challenges, but the potential rewards—a sustainable, lowcarbon future—make it worth undertaking. V
BY TRISHA ANJANETTE BALLADARES
In the rapidly evolving digital age, artificial intelligence (AI) is reshaping industries across the globe. Among its many applications, one of the most transformative is its integration into human resources (HR). In Asia, where diversity, population size, and unique labor market dynamics create distinctive challenges and opportunities, AI is revolutionizing the HR landscape. By 2025, this synergy of technology and human capital management is set to redefine workforce strategies across the region.
AI in HR is no longer a novelty. Companies leverage AI to enhance talent acquisition, employee engagement, and organizational efficiency globally.
In Asia, however, this integration comes with unique regional nuances. Countries like Japan, China, and Singapore are leading the charge, driven by technological innovation and competitive labor markets. Meanwhile, developing economies such as Indonesia, the Philippines, and Vietnam are exploring AI solutions to address laborintensive industries and workforce challenges.
The adoption of AI in Asian HR is driven by three primary factors: the need for efficiency in managing large workforces, the increasing importance of employee experience, and the demand for data-driven decisionmaking.
For Nimish Panchmatia, the chief data and transformation officer of DBS Bank-Singapore,
“We see gen AI as a copilot to supercharge our employees, and our immediate focus has been on driving efficiency gains and quality improvement. CSO Assistant is a prime example of how we leverage gen AI innovatively to remove toil in the way we work, which in turn enables our people to enhance customer journeys and deliver differentiated customer outcomes
These factors catalyze a shift from traditional HR practices to tech-enabled solutions, fundamentally altering how organizations approach workforce management.
One of AI’s most visible impacts on Asian HR is talent acquisition. Recruitment has always been resourceintensive, particularly in countries with vast labor markets like India and China. AI-driven tools now automate repetitive tasks, such as resume screening and interview scheduling, allowing HR professionals to focus on strategic activities.
Platforms powered by AI are also enhancing candidate matching. These tools recommend candidates who best fit organizational needs by analyzing data points from resumes, social media profiles, and past hiring patterns. For instance, Japan’s recruit holdings have developed AI algorithms that streamline job matching, making recruitment faster and more precise. In Singapore, AI-powered chatbots engage candidates during the application process, providing real-time updates and improving the overall candidate experience.
Moreover, predictive analytics is transforming workforce planning. AI tools can forecast hiring needs based on historical data, market trends, and organizational goals. This proactive approach enables companies to build a talent pipeline, reducing time-to-hire and improving longterm workforce planning.
Beyond recruitment, AI is playing a pivotal role in enhancing employee engagement. In Asia, where cultural diversity and generational differences often shape workplace dynamics, personalized employee experiences are becoming a priority. AI-driven platforms are helping organizations tailor engagement strategies to individual employee needs.
For instance, AI-enabled pulse surveys and sentiment analysis tools monitor employee feedback in real-time. These tools provide HR teams with actionable insights, allowing them to address concerns promptly and improve workplace satisfaction. Companies leverage AI to measure employee morale and recommend interventions to boost engagement.
AI is also revolutionizing learning and development (L&D). Adaptive learning platforms use AI to assess employees’ skills and recommend personalized training programs. Companies in China, for example, are integrating AI into their L&D strategies to upskill employees for roles in emerging industries like renewable energy and advanced manufacturing. This personalized approach enhances employee satisfaction and aligns workforce capabilities with organizational goals.
biases and recommend actions to promote equity in the workplace. Companies in countries like Singapore and Malaysia are adopting these tools to build more inclusive organizations, reflecting their commitment to diversity as a business priority.
AI’s efficiency and ability to streamline recruitment, employee engagement, and workforce analytics are undeniable. Still, HR is fundamentally a human-centric discipline that thrives on empathy, emotional intelligence, and personal connection. This human touch must not be overshadowed or disregarded by technological advancements.
While the potential benefits of AI in HR are immense, its adoption in Asia is not without challenges. One major hurdle is the lack of digital readiness in some markets. In developing economies, limited access to technology and inadequate infrastructure can impede the implementation of AI-driven HR solutions.
Data privacy and security concerns also pose significant challenges. The collection and analysis of employee data require robust safeguards to ensure compliance with data protection regulations. In Asia, where regulatory frameworks vary widely, companies must navigate complex legal landscapes to avoid potential pitfalls. Additionally, there is a need for reskilling HR professionals to effectively use AI tools. Many HR teams lack the technical expertise to fully leverage AI capabilities, creating a gap between technology adoption and practical application. Overcoming this challenge will
By 2025, AI is expected to become an integral part of HR strategies across Asia. The technology will evolve from an efficiency tool to a strategic partner that shapes organizational culture and drives business success.
Here’s what the future holds:
First, adopting AI in HR will become more widespread, extending beyond large corporations to small and medium-sized enterprises (SMEs). As AI solutions become more affordable and accessible, SMEs across Asia will harness their potential to improve workforce management and competitiveness.
Second, the focus on ethical AI will gain prominence. Companies will prioritize transparency and fairness in AI algorithms to build trust among employees. Ethical AI practices will also play a key role in addressing biases and ensuring equitable treatment in hiring, promotions, and performance evaluations.
Third, AI-driven HR will align closely with sustainability goals. In countries like Japan and South Korea, where aging populations pose workforce challenges, AI will support strategies for extending workforce participation among older employees. Similarly, AI tools will enable remote and flexible work arrangements, contributing to broader sustainability objectives by reducing commuting and office space requirements.
Lastly, AI in HR will foster greater collaboration across industries and regions. Cross-border partnerships and knowledge-sharing initiatives will accelerate innovation
The integration of AI into HR is not just a technological evolution—it is a transformative shift that redefines the role of human capital in organizational success. In Asia, where diverse labor markets and dynamic economic conditions create unique challenges, AI is emerging as a powerful enabler of growth and innovation. By 2025, the AI value in Asian HR will extend beyond efficiency gains to drive meaningful change in employee experiences, organizational culture, and workforce sustainability.
However, this transformation requires a careful balancing act to preserve the “human element” that is at the heart of HR. While AI excels in efficiency and data-driven insights, the emotional intelligence, empathy, and personal connection integral to human resources cannot be automated. Whether supporting employee well-being, resolving workplace conflicts, or fostering a sense of belonging, these responsibilities demand a level of care and understanding that only humans can provide. Organizations must adopt AI to enhance, rather than replace, human interactions, ensuring that technology complements—not overshadows—the critical humancentric aspects of HR.
As companies navigate this transformation, the ability to balance technological advancements with humancentric strategies will determine their success. In the race to harness the full potential of AI, Asian HR stands at the forefront of shaping the future of work, not just for the region but for the world.
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SUPPLY CHAIN AND MANUFACTURING
BY MATTHEW PARRA
Sea freight has long been the backbone of international logistics, offering unmatched capacity and cost efficiency. However, ongoing supply chain disruptions are prompting businesses to reassess air freight as a viable alternative.
Airfreight, traditionally viewed as a premium option due to its higher costs, is now gaining traction as a means to balance disruptions and stringent delivery deadlines. DHL’s 2024 market
report highlights a promising outlook for air cargo, predicting double-digit growth spurred by demand across key trade lanes.
With airfreight still carrying a significantly higher price tag than ocean freight, why are businesses increasingly willing to absorb these costs? Are the speed and reliability of air cargo enough to justify the financial trade-offs, or are broader market dynamics at play influencing this shift?
Sea freight is generally much cheaper and air freight. In DHL’s white paper, unlock the true value of your supply chain, they report the experience of one company in the study who shifted from air to sea freight for their services between Hong Kong and South Korea. This change led to a 27% improvement in logistics costs, despite the increased lead time.
However, the growing tension between cost and speed is pushing businesses to reevaluate their logistics strategies, especially when choosing between ocean and air freight.
According to DHL’s Ocean Freight Market Outlook, demand for sea freight remains robust. This is fueled by China’s export surge ahead of potential U.S. tariffs and the early Lunar New Year preparations.
Despite this, capacity challenges are becoming more evident. Transatlantic carriers have reduced capacity by closing loops and replacing larger ships with smaller units, while adverse weather conditions continue to delay vessels and create equipment imbalances.
According to DHL, capacity is also tightening. Larger containerships operating at near-full utilization and annual dry container production at record highs. Freight rates, meanwhile, have soared across the board—up 245% for intra-Asia routes and 147% to the U.S. West Coast.
Air freight is no different. According to the International Air Transport Association (IATA), the industry faces all the challenges common to logistics.But air freight has grown more than expected. While it was forecasted to grow by 5% in 2024, IATA reported that Asia-Pacific airlines saw a 17.6% year-on-year demand growth for air cargo in June, the strongest growth of all regions.
This growth is indicative of a broader trend in logistics, where demand for faster, more reliable delivery is creating new opportunities for air freight, despite its higher costs. The shift toward air freight highlights the importance of timely delivery for certain industries, such as electronics, pharmaceuticals, and high-value consumer goods, where speed often outweighs cost concerns.
This growth for the air freight industry was driven by a perfect storm. IATA reports that disruptions in maritime shipping, like the Red Sea Crisis, caused a sharp drop in relative air cargo rates over maritime shipping in 2024. This is because disruptions reduced the availability and reliability of sea freight making air cargo a more attractive alternative.
Moreover, the year’s e-commerce boom also increased the demand for air freight services, as retailers sought faster delivery options to meet customer expectations.
The surge in e-commerce is not just a temporary phenomenon. With consumer expectations for faster shipping continuing to rise, businesses are being forced to adopt more flexible logistics strategies to remain competitive. This trend is expected to persist well into the future, as consumers become accustomed to next-day or even same-day delivery.
DHL also reports solid growth in the air freight industry, driven by the holiday shopping season and increased
consumer spending. E-commerce continues to be a major driver of air cargo demand, especially for high-value and time-sensitive goods.
“For air freight, we’re seeing sustained demand driven by e-commerce. This sector is consuming available capacity and paying premium rates, which has a double impact. E-commerce is absorbing available air freight capacity and thus increasing overall market rates.
says Jérôme Petit, Global Air and Ocean Leader of CEVA Logistics.
However, much like ocean freight, bottlenecks are still evident in air freight. According to DHL, air cargo is facing tightening capacity amid high demand and limited freighters as 2024 comes to a close.
This is due to the extremely high demand outpacing available air cargo capacity, especially on key trade routes. Capacity constraints are further exacerbated by reduced belly cargo capacity on passenger flights and a limited supply of widebody freighters.
Moreover, following Trump’s victory in the 2024 U.S. elections, air cargo inbound to the United States has surged as importers rush to prepare for anticipated tariff increases. Retailers, already front-loading inventory due to a shortened holiday season and global shipping bottlenecks, are now accelerating their purchases in response to the looming threat of a mid-January port strike and the tariff hikes.
“Next year is going to be very strained, particularly in the U.S. market, due to low consumer confidence and increasing import tariffs.” says Joshua C. Bowen, Global Head of Ocean Freight of CEVA Logistics, in a 2024 interview.
The difference between air freight and sea freight is a decision that hinges on industry needs. This is crucial because logistical considerations significantly impact businesses operations. In the Philippines, one of the primary methods of logistics is sea freight. However, there has also been big investments in developing the air transportation industry within the region. Both to cater to domestic and foreign logistics needs.
1. Transit Time: Air freight shipments typically take two to four days to deliver. This is seen especially in e-commerce transits, pharmaceuticals, plant products and other time crucial cargo. Sea freight usually takes more time and may last from one week to one month depending on the schedule. However, both can still experience significant delays.
2. Cost: Air freight generally costs more because they are calculated based on the size and weight of your cargo as well as the cost for the jet fuel consumption. The cost of fuel is a main factor driving the price of transportation. The cost of sea freight on the other hand is dependent on the space occupied by your cargo.
This is because the space available for cargo for airfreight is different versus seafreight. For larger size cargo, sometimes seafreight is the only option as the large shipment can only be carried in transport containers which goes on ships but not planes. While air freight can utilize both dedicated freighters and passenger flights, freighters are less widely available and do not cover all routes or origin-destination pairs, limiting their accessibility.
3. Weather Conditions: For countries in Southeast Asia, typhoons are extremely prevalent. When this happens, flights get cancelled, causing delays for millions of air cargo shipments. Sea freight ships on the other hand can sustainably handle bad weather. Moreover, Sea shipping companies can reroute before ships leave ports. Port closures due to weather are also generally rare.
4. Cargo Accommodation: Air freight is normally more ideal for smaller, time-sensitive or high value cargo. This includes cargo like food, jewelry, cosmetics, for e-commerce products from flash sales. Sea freight however tends to have more space to move high volume goods and equipment.
The premium to pay for air freight is significant, however numerous industries are already opting for this option. This is mostly due to businesses who ship perishables with shorter lifespans, temperature sensitive items, high value goods that require careful handling and e-commerce products.
However, certain limitations exist in air freight that does not happen in sea freight. According to DHL, air freight capacity is struggling to keep up with growing demand. Because of this, air freight cargo is moving to commercial passenger flights which have less weight and space capacity and regular cargo planes.
This shift has significantly limited the type of products air freight can ship. This is because goods that include lithium-ion batteries, items that are toxic, corrosive or flammable can’t be transported on passenger flights. These restrictions are becoming more stringent and complex.
Sustainability is also a huge cause of concern. International freight platform Freightos reports that on average, air freight pollutes 20-30 times more than sea freight. Cargo ships emit approximately 10-40 grams of carbon dioxide per kilometer, while air freight produces 500 grams per metric ton per kilometer.
Air freight then produces an estimated 80 times more carbon than shipping by sea. In 2024, air freight operators increased their greenhouse gas emissions by 25% compared to 2019. This amounts to almost 94 metric tons overall, while belly cargo emissions have bounced back to almost 90% of pre-pandemic levels.
Moreover, geopolitical conflicts and new regulations are
severely disrupting global air cargo operations. According to DHL’s 2024 state of the airfreight industry report, new security regulations in the west are driving operational challenges and higher rates. This is due to new prescreening and compliance demands.
The report also noted that there are currently numerous flight cancellations to and from Lebanon by most airlines due to ongoing Middle East conflict. This has led to industry backlogs, constraining exports. However, a cargo rush is also underway in Asia as businesses try to avoid incoming threats of increased tariffs from the United States.
As global trade evolves, airfreight is playing an increasingly prominent role in supply chains. For businesses, the decision to choose airfreight or seafreight hinges on factors such as cost, speed and sustainability. Airfreight’s ability to deliver goods quickly makes it an attractive option for industries where time is critical.
According to IATA, air traffic is expected to grow in 2025, albeit at a slower pace, as all regions surpass prepandemic levels. In 2024, the cargo market boosted airline traffic, driven by booming cross-border e-commerce and ongoing challenges in ocean shipping. With global air cargo yields stabilizing around 30% above pre-pandemic levels, the outlook for 2025 remains strong.
Moreover, ongoing investments in infrastructure and sustainability are bolstering its appeal. While seafreight remains indispensable for transporting large volumes at lower costs, airfreight offers a valuable complement, providing flexibility and resilience in navigating today’s complex logistics landscape.
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