Logistics: Outsourcing logistics

This article first appeared in Enterprise, The Edge Malaysia Weekly, on November 12, 2018 - November 18, 2018.
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As companies race to embrace e-commerce, one of their main challenges remains their ability to handle customer orders, which have a direct bearing on customer loyalty, retention and earnings.

For the most part, these companies handle their logistics internally but, more often than not, this process is time-consuming, eating up the valuable time of the business owner — particularly in start-ups and small and medium enterprises (SMEs) which could be better spent developing the company’s core competencies.

This is where third-party logistics (3PL) providers are able to reshape the landscape, says DHL eCommerce Southeast Asia CEO Kiattichai Pitpreecha. DHL eCommerce is a division of the logistics company, Deutsche Post DHL Group.

“For SMEs, using a reliable 3PL service is very important because they are selling every minute and hour. Sales are happening at a fraction of a second on their e-commerce platform and could be happening from anywhere in the world.

“When there is an order, you have to make sure that the product gets delivered to the customer, and this can be outsourced to a third-party, so you can concentrate on selling the products rather than having to worry about transport and delivery,” says Kiattichai.

In August, DHL eCommerce partnered Shopee, a Singapore-headquartered e-commerce platform, to offer domestic delivery for sellers and buyers across Malaysia.

Shopee is used across Southeast Asia and Taiwan. It is a marketplace where users can browse, shop and sell on the go.

The latest partnership is an extension of the integration of DHL eCommerce logistics services with Shopee in Thailand. With this service, sellers on Shopee Malaysia can now opt to ship their goods via DHL and have them delivered to buyers the very next day to most locations across Malaysia, and within two or three days to other, more remote locations.

This collaboration also allows sellers on Shopee to access DHL ServicePoints — services that allow online merchants to easily drop off their parcels at outlets located across Malaysia. Alternatively, sellers with large quantities of parcels can arrange for a pickup by DHL for door-to-door delivery service from their location to their buyers.

One of the advantages of leveraging such partnerships, is cost efficiency, says Kiattichai. “SMEs are not big organisations so they would have one or two people working on logistics, usually the owners.”

This compares to 3PL players, who own cutting-edge logistics technology with capabilities such as enterprise resource planning, customer relationship management and data management, among others.

In some cases, 3PL companies even offer facilities to house inventory. This reduces the cost of labour, storage and transport.

“Small companies will not have the capabilities, particularly the bandwidth to handle a lot of the feedback and complaints from customers. They would not have a team of customer service people or call centres. This is why engaging the right third-party logistics company is very important.

“Smaller companies, especially start-ups and SMEs, have cash flow issues to deal with as well. They rely on day-to-day cash flow to run their business. So with our cash-on-delivery service we ensure fast remittance to the seller. In fact, they will get their cash the very next day. With this service, they do not have to wait 30 days to be paid.

“Customers are looking for speed, convenience and clients need to have strategic control and the flexibility. This enables companies to focus on their core business of selling,” says Kiattichai.

Shopee’s head of operations Esten Mok says that the partnership is crucial as 3PL providers are the subject matter experts. “They know this sector the best and they are able to offer their expertise to our users, so they have been our main logistics channels when it comes to distributing orders placed on Shopee.”