You are here

SINGAPORE'S FUTURE ECONOMY

Logistics players ponder the industry's future as deliveries grow

Govt and academia helping shape future of sector with new models raising efficiency
Monday, June 20, 2016 - 05:50
parcel1.jpg
Winning the last mile: that's what it's all about as logistics players everywhere compete to stay relevant in the new economy.

Singapore

WINNING the last mile: that's what it's all about as logistics players everywhere compete to stay relevant in the new economy.

And it's down to consumers like avid online shopper Tan Siang Wei, 32, who buys clothing and small items from online retailers several times a year.

But after several instances of the deliveryman arriving at her home when no one was in, the communications professional decided to have her purchases delivered to her office instead.

"I often work late, and it was challenging to find time to make it to the post office before it closed, to collect the redirected parcels," she said.

This growing demand from customers is prompting a shake-up in the last-mile segment of Singapore's logistics industry, where a parcel is delivered to the final recipient.

Said Ed Hunter, vice-president of product supply in Asia at Procter & Gamble (P&G): "The consumer is requiring us to innovate that last mile. Given the constraints on resources, how can we lower costs, drive up efficiency, and be more efficient in serving the shopper and the consumer?"

In interviews with The Business Times, these players - enterprises big and small, and even a university - echoed a common view that raising efficiency for the sector comes at a crucial time when Singapore's economy is reshaping itself into becoming more innovative and productive.

Their growing concerns track the rise of e-commerce in Singapore.

Total online spending in Singapore is estimated to have reached S$2.6 billion last year - a 19 per cent increase from 2014, a PayPal report showed. And it is expected to hit S$3.4 billion in 2017.

Thus, not only do logistics players have to deal with customers' increasing demands and higher expectations, they are also trying to stake their claim in the growing last-mile segment as more competitors, aided by technology, are joining the fray. This crimps companies' margins.

"Now, a lot of companies that are competing in this space are all burning money. They have to try to amortise their set-up costs," said Teo Chung Piaw, head of the Department of Decision Sciences at the National University of Singapore (NUS) Business School.

In its latest economic survey of the economy, the Ministry of Trade and Industry (MTI) calculated that freight and transport costs make up 33.6 per cent of business costs for large companies in the transportation and storage sector, which includes those in logistics. This proportion rises to 50.2 per cent for small firms.

The transportation and storage sector contributed S$27.9 billion to Singapore's gross domestic product (GDP), or about 6.9 per cent, in 2015. It employed about 237,100 workers last December.

Hong Kong-based on-demand delivery van startup GoGoVan has thus decided to enter Singapore's "unoptimised logistics landscape" to try to facilitate better use of resources so as to lower costs, said its marketing and communications manager Jim Tan.

"The current big players . . . have a fixed fleet of vehicles for delivery jobs that are often not fully optimised. Drivers usually roam around exhausting fuel instead of fulfilling orders because they cannot find delivery jobs during their spare time," he said.

Aside from better utilisation of resources, some players are looking for new ways to make covering that last mile less costly.

For example, in order to alleviate manpower pressures, Singapore Post successfully experimented last September with unmanned aerial vehicles, or drones, for delivery.

SingPost said then that such a method would reduce delivery times greatly and allow it to redeploy postmen to other duties.

Other companies are thinking of ways to have recipients pick up their parcels before the packages reach their doorstep.

This can be done either in the form of delivering parcels to lockers or to brick-and-mortar shops - both of which would let recipients collect the packages at their convenience. SingPost, Ninja Van and Yamato Asia are some logistic companies that provide such services.

This way, deliverymen can shorten the distance they have to cover on the last mile. It also reduces failed attempts trying to deliver parcels to the absent recipient's doorstep, a time- consuming and inefficient process.

"The mode will shift from face-to- face deliveries to those that don't require this kind of contact," said Richard Chua, managing director of Yamato Asia. "Not only does it give the recipient more flexibility in deciding when they can collect the parcel, it is also more cost-efficient for us."

Beyond redesigning business models, the government and educational institutions are also helping to reconfigure the logistics sector's future.

Efforts have been drawn up by the government to transform the logistics sector.

Earlier this year, P&G and The Logistics Institute - Asia Pacific of NUS embarked on a three-year collaboration to engage in supply chain and logistics research.

In addition, a search is underway across the continents for good candidates for a new PhD programme in NUS that will see some of them engage in deep research for supply chain operations, among other sectors.

The programme is expected to commence in August next year, and will be run by a new operations research and analytics cluster in NUS, said Prof Teo, who will help run the programme.

"A lot of the problems faced in logistics are operational or analytics problems," said Prof Teo. "We have to ask ourselves: what are the new problems that come about because of a change in the way we work and the way we live?"

  • This story is part of an ongoing BT series on Singapore's future economy

READ MORE: Yamato Asia exploring open locker concept in Singapore

Powered by GET.comGetCom