Logistics weathering through the MCO
04 Apr 2020
It may seem that logistics companies are enjoying a brisk spike in business during the movement control order (MCO) period, particularly those involved in last mile delivery – but that does not seem to be the case.
GD Express Carrier Bhd (GDEX) managing director and group CEO Teong Teck Lean notes that there had been high growth in shipments of surgical face masks and vitamin supplements throughout the MCO period, but there was a slowdown in shipments for other goods during the first week.
“Only in the last couple of days did we begin to see a pick up in e-commerce activity of non-essential goods.
“GDEX has also been adapting to changes in the logistics landscape by catering to delivery pick-up from homes, ” he tells StarBizWeek.
Teong says the customer-to-customer (C2C) segment has changed drastically, and is the highest growth segment for GDEX, as more individuals begin selling goods on social media.
Social media platforms are highly accessible for individuals to start a business, given its almost-free set up cost, as compared to the larger e-commerce platforms.
Currently, the C2C segment only contributes about 3% to 4% of GDEX’s total revenue, while the business-to-business (B2B) segment makes up 60%.
“The B2B segment is the worst hit segment during the MCO.
“The Covid-19 pandemic is a wake-up call to businesses who were slow to adopt digital initiatives.
“I believe that the way businesses will be run after the Covid-19 outbreak is over will be the new normal, with a greater adoption of digitalisation, ” says Teong.
Teong also hopes that during this challenging business environment, last mile delivery players will realise the importance of setting a floor price for merchandise delivery, instead of selling at a loss.
“Unlike document delivery, which can be reproduced, the delivery of goods or merchandise need to be compensated, should there be any delivery issues, loss or damages.
“At present, with no floor price for merchandise delivery, it is insufficient to cover the cost of insurance and there is no minimum compensation value.
“There should be healthy competition, yet a sustainable business environment, ” he explains.
Going forward, GDEX intends to focus on growing the C2C segment by innovating on its range of service offerings and is in the midst of adding frozen food delivery as part of its services. GDEX is also working with insurance companies to provide more coverage options for its deliveries.
‘All about survival’
“The year 2020 is all about survival.
“I will be happy if we (GDEX) can achieve a small growth in topline this year, but I am more focused on ensuring that we survive the year, through managing costs and ensuring that our cash flow remains healthy, ” adds Teong.
While Century Logistics Holdings Bhd is not involved in the last mile delivery segment of logistics, the group has experienced a slowdown in procurement logistics and contract logistics, since the beginning of the global Covid-19 outbreak in January.
This has impacted the global raw material supply chain, of which the bulk of it are sourced from China.
Century Logistics managing director Steven Teow Choo Hing says the group’s strategy to tide over this down time is to focus on its ship-to-ship and property (warehousing) segments, while controlling costs and curbing expansion. “We have new tenders in the works, and we have been able to fill up our warehouses.
“There may also be an adjustment of our budget in the first half of the year.
“The group is taking a conservative and careful stand, thus, any expansion plans will be deferred to the second half of 2020, ” he says.
In Tiong Nam Logistics Holdings Bhd’s case, the group has also experienced a decline in both regional and domestic business activity following the MCO implementation. Despite that, Tiong Nam has been able to partly mitigate the decline in business activity through a higher utilisation of warehousing facilities and maintaining logistics support for essential products, such as food and beverage (F&B), healthcare as well as oil and gas sectors. Apart from the gradual increase in activity in F&B, consumer goods and medical equipment supplies, Tiong Nam executive director Victor Ong anticipates more activity in the related supporting industries to come on stream.
“We are in a strong position to meet the higher demand in these sectors, as our earlier investments into new warehouses and expansions at various sites across the country provides us with adequate space and capabilities to serve our clients’ requirements.
“We thus remain committed in playing our vital role in replenishing essential goods in this critical period, ” he says.
At this juncture, Ong notes that it is preliminary to determine which sectors were the hardest hit during the MCO period.
The MCO period has incentivised consumers to utilise e-commerce platforms to get their daily essentials, while various industries have shown increased reliance on e-commerce and last mile delivery services to get their goods to consumers during the MCO.
As such, Ong expects accelerated demand for e-fulfilment and warehousing services going forward.
“We thus have the opportunity to expand our brand presence and target growth in these segments by leveraging on our integrated solutions, as well as robust fleet and infrastructure.
“Meanwhile, we also anticipate growing interest in decentralised warehousing and management services by industries as they review their business continuity plans and strengthen their supply chain.
“Therefore, logistics players as well as related technology providers with the experience and scale would be well placed to support this industry trend, ” he says.
Logistics and warehousing services made up 90% of Tiong Nam’s group revenue for the nine months ended December 31,2019.Hotel, property development, and investment segments made up the remaining 10% of revenue during the nine-month period.
After the MCO, Ong expects an increase in business activity, driven by consumers restocking essentials and resuming work, in addition to the fulfilment of backlogged orders by various industries. “We remain ready to support these activities, backed by our extensive fleet and infrastructure across the country.
“Additionally, we would remain focused on executing our long term strategies to further enhance our logistics fleet and warehousing capabilities, which would ensure that we continue delivering high standards of service to our MNC and SME customers.
“These efforts include future investments into enhancing sustainability and studying Industry 4.0 technologies, such as green technologies, fleet management and route optimisation, as well as warehousing automation and efficiency, ” says Ong.
Source: The Star