Over the past year, Malaysia’s logistics sector has been increasingly in the spotlight, driven largely by the fast growth of e-commerce. Through its National E-Commerce Strategic Plan, the Malaysian government has set a goal for e-commerce to be growing at 21% by 2020, up from 10.8% in 2016. Already, e-commerce contributes 6.1% of national GDP. “The evolvement of (the) e-commerce sector will put Malaysia on track as a leading ASEAN logistics hub, which will place it on the global logistics map”, said then-Transport Minister, Datuk Seri Liow Tiong Lai last year.
A key government initiative has been the launch of the Digital Free Trade Zone (DFTZ), backed by Chinese tech giant Alibaba, to support the growth of Lazada, its Southeast Asia subsidiary and Malaysia’s largest e-commerce platform. The DFTZ is designed to make cross-region shipments more affordable for Malaysian small to medium enterprises, which make up nine out of ten businesses in the country.
According to Mike Davies, managing director of DHL Supply Chain in Malaysia, e-commerce is “causing a lot of fragmented pieces in the transport industry to consolidate and to come up with more ideas, concepts and solutions for the customer”. This is partly because of the role that logistics plays the customer’s overall e-commerce experience. Usually the delivery driver provides the only human interaction in the customer journey. ‘’I call this the moment of truth,’’ he says of the moment when driver and customer meet face-to-face. ‘’We are not just representing DHL anymore. The importance that we need to place on that delivery is a lot higher than it’s ever been before.’’
Several innovations are being deployed to improve quality and accuracy, one of which is ring scanner technology. Replacing paper picking lists, the ring scanner fits on a finger and is linked to a smartphone, leaving the hands entirely free for moving packages. In addition to lowering the risk of dropped items, it has also led to improved warehouse productivity.
Another new technology is ‘pick to light’, where after scanning the pick list, the item locations light up and display the correct quantity. Warehouse staff can follow the lights and press a button on the shelf to automatically update the warehouse management system that the pick is correct and adjust inventory levels.
Cash-on-delivery (COD) models are another area where DHL is working closely with contract customers. Despite COD accounting for an estimated 80% of ecommerce transactions in Southeast Asia, only 20% of Malaysian e-retailers offer this service, according to the iPrice research report, State of Ecommerce in Southeast Asia 2017. “It’s the last mile that’s the challenge,” says Davies, “in particular to get a cash on delivery process up and running that is robust, auditable and compliant in this environment, especially when you go further into tier two or tier three cities. We are currently working with our sister company that has achieved this technology integration to facilitate the COD process.”
Looking beyond e-commerce, Davies sees pharmaceuticals and tech manufacturing as other sectors that are driving growth for the logistics industry. The need for manufacturers to make space in factory environments has created demand for warehousing from companies like DHL. The additional pressure to move towards real-time manufacturing requires the two companies to work ever more closely together. Warehouse systems and data quality take centre stage in this arrangement: “it’s all about being able to do things real time, rather than have to batch process from paperwork into a system,” he says.
One of the challenges is integrating customer data into the controlled environment of DHL. Davies notes that “some of the information flow needs to be faster and more accurate than it has been in the past, and we assist clients in getting to that.”
The company is currently exploring technology areas such as augmented reality, robotics and big data, and takes a long term view on recouping investments. With supply chains becoming ever more vertically integrated, the ability to rapidly adopt new innovation will certainly be key to future competitiveness.
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