Logistics costs eating into firms' revenues

Logistics costs eating into firms' revenues
Bangkok Post (17 October 2007)

Thai companies should work harder to minimise logistics costs increase profits in the long term, said experts. The profitability of Thai companies was falling due to higher fuel prices and tougher competition among business operators, said Assoc Prof Ruth Banomyong, the director of Thammasat University's logistics research programme. As well, he said, the local economy is projected to grow slowly, so business opportunities would be limited. Economic expansion is forecast at between 3.5% and 4% this year and only slightly higher next year. ''Private companies should turn to focus on managing logistics as it will be able to help them reduce operation costs and eventually increase profits as well,'' he told a seminar yesterday. In today's highly competitive market, the pressure on organisations to find new ways to create and deliver value to customers has grown even stronger. Logistics can help achieve cost reduction and service enhancement. Last year, Thailand saw logistics costs ate as much as 23.9% of the country's gross domestic product (GDP), up from 19.4% in 2005. The upward trend would continue, experts said. Chakkaphant Manutsathit, chairman of the board of Team Precision Plc, said his electronic parts production business needed good logistics management as the company was required to deal with many suppliers and deliver finished goods to different customers. ''If we can't manage our logistics well and the product delivery is not on time, that means the business will be damaged. We are forced to manage production costs and times at the same time, and the key to success is to link all information in the production and logistics chain and mange it properly,'' he said. Mr Chakkaphant noted that Thai companies, especially exporters, could not escape the negative effects from the strong baht so they should find new ways to offset this, including reducing costs, increasing production capacity, managing logistics and exploring new markets. Thai Ha Plc, a producer of packaged jasmine rice and soybean and glass noodles under the Kaset brand, said it had already raised glass noodle prices by 10% from 900 baht per package as it could not shoulder rising costs. ''We'll try to maintain prices of other products until the year-end even though our production costs have risen by 20-30%,'' a company executive said. ''We still have enough inventories carried from the second quarter.'' The company's total revenues would be between 1.45 billion and 1.5 billion baht this year, up from 1.23 billion last year, as exports have been growing. However, the company said that local sales offered higher gross product margins than exports.