21 June 2018
Horses for Courses and Drones for the More Inaccessible of Homes…
Bespoke solutions were the order of the day at the Last Mile Fulfilment Asia expo, as the great and the good among the region's leading cross-border e-commerce players gathered in Singapore to compare notes on the best ways forward.
With the lofty – and, occasionally, all but undecipherable – promise of connecting "online and offline retail to the parcel / logistics and post-click e-commerce technology industries via glocalised fulfilment", the Last Mile Fulfilment Asia expo returned to Singapore for the fourth time earlier this year. Thankfully, clearly eschewing the management double-speak favoured by the event's organisers, many of the speakers adopted a far more down-to-earth approach to the many challenges facing Asia's e-commerce sector.
Striking a distinctly factual note from the off, Lui Tong, the Chief Operating Officer of Strawberrynet, the Hong Kong-based online cosmetics vendor, said: "We currently operate in 190 countries and across 38 languages and need to operate 24 hours a day throughout the year. With many of our items typically low in cost and small in volume, logistics charges are huge issues for us. Currently, we aim for one-day delivery on local orders and, typically, an overseas delivery time of between three and four days. Making deliveries in certain countries, however, remains quite a challenge. In some of the more remote parts of India, for instance, it can take up to 15 days for orders to arrive.
"At present, our fulfilment centres are in Hong Kong, although in order to reduce the per-parcel cost, we are now looking to establish additional centres in other major cities. For us, customer service is critical, with some 70% of all inquiries relating to logistics – Where is my parcel? When will it arrive?
"In a market such as China, for instance, one parcel can easily change hands up to 10 times before it reaches the end-user. In future, we hope such a service can be provided by just one company, a development that should solve a number of customer-service issues, while also reducing costs."
Maintaining this straight-talking approach, James Chang, Group Chief Crossborder Officer for Lazada, the Singapore-headquartered e-commerce portal, addressed the particular challenges presented by Southeast Asia, saying: "Overall, the region is home to the world's third-largest population, after China and India, while also having an unusually young median age, expected to settle down at around 33 by 2030. It also has one of the world's fastest-growing connected populations, with some 480 million individuals expected to have regular internet access by 2020. In the run-up to 2025, the region's e-commerce market is expected to grow by an average of 31% per annum, taking it to a total value of US$88 billion, of which $13.8 billion will be cross-border.
"For our part, more than half our transactions come from outside the region's major cities. At present, 80% of our deliveries are via post, with the remaining 20% reliant on either DHL or a local courier firm. In light of this, we see our key challenge as streamlining the cross-border e-commerce process so that it becomes as straightforward and as risk-free as making a domestic purchase."
While for both Strawberrynet and Lazada it was remote locations that posed particular logistics challenges, New Soon Tee, Director of Trade and Connectivity for Singapore's Inforcomm Media Development Authority, focused on the problems emerging from the accelerated rate of urbanisation across the region. Singling out increased congestion as a particular consequence, he said: "As more people across the world live in densely-packed urban environments and as we all begin to purchase more and more online, this has led to a vast increase in the number of delivery vehicles required to fulfil that last mile. This also means that vehicles are going out with less than full capacity, occasioning more trips, creating a greater build-up of traffic, resulting in delays, missed deliveries and subsequent re-delivery attempts. As a result, delivery vehicles now account for 25% of all road traffic in Singapore.
"One way forward would be the wider use of self-collection lockers. This would mean that trucks could leave warehouses fully-laden, while convenient pick-up times could be arranged for customers at collection points that were just a few minutes' walk away. In order to achieve this, though, there would have to be drastic changes to the current locker landscape. At present, companies are unwilling to share their locker facilities with rival operations and the resulting lack of scalability has resulted in poor geographical coverage."
One company that seems to have made headway with both its urban and rural delivery programmes is JD Logistics, the Beijing-headquartered delivery arm of JD.com. Explaining how the company had achieved 99% coverage of China, with more than 90% of orders delivered within 24 hours, Director of Strategy Beth Bao said: "We have successfully leveraged on Artificial Intelligence [AI] and other related technology to increase our efficiency and cost at every stage. Our use of unmanned warehouses, for instance, has reduced our costs by 30%.
"On the road, meanwhile, we've reduced transport costs by 10%, while our delivery efficiency is up 25%. Currently, we're experimenting with autonomous trucks, drone deliveries and autonomous ground vehicles. Our drone delivery system, the first in the world, has already been in operation for more than 170,000 flight hours."
Despite JD Logistics' apparent roadmap to success, Hussein Sulaiman , Head of Operations for Zilingo, a Singapore-based online fashion retailer, maintained that, when it come the diverse South and Southeast Asia markets, there is no one-size-fits-all solution. Citing the example of one particular market, he said: "Much of the growth in Southeast Asia is driven by Indonesia, by far the sexiest market. Given the country stretches across 17,000 individual islands, last-mile delivery is a huge challenge, despite the fact that the majority of customers are admittedly in Java. Current growth, though, is coming mainly from beyond the big cities, with addresses in many of the rural areas somewhat vague and one postal code often stretching across a huge area of land.
"In Thailand, meanwhile, where cash on delivery remains king, the challenges are quite different. Although many are starting to make online payments via the Line messaging app, by and large, delivery companies still have to act as collection agencies."
While many delegates were keen to emphasize the priorities of their own businesses, Satyaki Banerjee, Transformation and Operations Group Head for Luxasia, the Singapore-based online cosmetics and fragrance vendors, brought things back to what consumers across the region seemed to want, saying: "Overall, 70% are looking for the cheapest form of home delivery, while 23% expect same-day delivery. By contrast, only 5% see accurate delivery timings as a must.
"There are also a number of key differences across the world's major markets, with Chinese customers, for instance, twice as likely to want same-day delivery as their US counterparts. Customers are also usually willing to pay up to $2-3 more for home delivery, as opposed to having to visit a pick-up point.
"In the future, we will inevitably see significant cost reductions and greater efficiencies in last-mile delivery, with increased economies of scale and new modes of delivery. These will vary from market to market, with autonomous ground vehicles likely to be widely deployed in the US, Europe and certain Asian markets. This is less likely in China and in those parts of Southeast Asia with particularly low labour costs. When it comes to remote locations, drones will work best, but only if costs drop significantly, while, in the denser urban areas, it will be bikes that prove to be the cheapest option."
The 2018 Last Mile Fulfilment Asia (LMFAsia) expo took place from 15-16 March at the Singapore EXPO Convention and Exhibition Centre.
Ronald Hee, Special Correspondent, Singapore