Gaps and misses in billion-ringgit logistics industry

 

Big 3PL players are driving the expansion of markets for businesses, generating job opportunities for riders and drivers, and offering customers the convenience of online shopping. (Freepik pic)

PETALING JAYA: Siblings Ryan and Elsie Fun used to run workshops on art and journal compilation as a living until the Covid-19 pandemic changed everything.

“When the pandemic hit, this was no longer possible,” Ryan told FMT Business.

It was then that they decided to start a new venture, making hand-crafted stationery such as rubber stamps and sticker planners. They call it Elsiewithlove.

At a time when venturing out on delivery rounds was impossible, the siblings depended largely on third-party logistics (3PL), a move that has happily also taken their business to a new level.

“These platforms helped us tap into the international market. Now our products have reached 24 stores worldwide,” he said.

Elsiewithlove is among the two million Malaysian sellers on Shopee, a platform that kick-started their business journey.

E-commerce giants like Lazada and Shopee also provide 3PL services, essentially solving the first-and-last mile problems faced by most small and medium enterprises in the country.

A boon for all

But it’s not just entrepreneurs like the Fun siblings who have benefited.

Others, such as undergraduate Amir Syahmi, have also become heavily dependent on these e-commerce giants.

Amir is among the 100,000 p-hailing riders in Malaysia, most of whom are under the age of 30, who deliver online orders.

He says 3PL has provided him and many others with income opportunities.

“As a student, I have many expenses. This enables me to earn a side income that I can spend on fuel, books for my studies and food,” he told FMT Business.

Big business

Third party logistics play a crucial role in bolstering the economy by facilitating e-commerce, fostering connections between sellers and customers, and unleashing economic opportunities, particularly for rural communities.

In 2019, the logistics sector accounted for 3.8% of the country’s GDP, according to the Malaysian Investment Development Authority. The 3PL segment is a category within logistics.

The growth of the digital economy, facilitated by government initiatives such as Jendela and the 5G rollout, is expected to lead to a surge in demand for 3PL services.

Estimates by data gathering and visualisation service provider Statista show that the 3PL market in Malaysia is likely to amount to RM18.2 billion this year and will rise to RM20.2 billion by 2027, for an annual growth rate of 2.67%.

Logistics analyst Stella Ong of Sunway University said it is crucial for all stakeholders to work together on innovations to support the industry’s growth.

“Even traditional stall operators are now open to learning about these platforms. They are willing to embrace these platforms because they understand the potential to earn more for higher profitability,” Ong said.

“They can now broaden their customer base and deliver over longer distances,” she added.

Ong said the government can also help by introducing consistent and effective policies and strategies to support 3PL growth, such as improving the quality of roads and other infrastructure to enable delivery companies to reach under-served areas.

Gaps in the industry

However, the 3PL industry is still “punching below its weight”, according to an industry source.

The source, who declined to be named, cited areas away from towns and cities in Sabah and Sarawak that remain under-served because of inadequate infrastructure.

The contrast with Peninsular Malaysia is stunning.

For avid online shopper Marina Noordin who lives in Seremban, getting what she wants is just a few clicks away.

“I don’t have to travel all the way to a store to buy clothes or food. It is very convenient,” Marina told FMT Business, adding that she uses these services on a near-daily basis.

On the other hand, shopping is a major logistical undertaking for Claudia Vica.

Claudia, who lives in Kampung Sutong, about 10km away from Sri Aman in Sarawak, said delivery services do not cover her area.

“I have to drive up to 10km to the town post office just to collect my purchases. It’s a bit of a trek for me,” she told FMT Business.

“Food delivery service providers such as Foodpanda do not even come close to my village,” she said.

But, for the industry source, there is a remedy.

“Simply put, the gaps can be filled but it depends on the policies. Infrastructure needs to be boosted to cater to the strong demand from consumers and SMEs alike,” the source added. - FMT