Making the right investments

IT IS an opportune time for the logistics industry given the increase in trans-border sales and the current focus on South-East Asia.

While Malaysia stands to benefit from the growth in the industry, Datuk Michael Tio notes that local players also face many challenges in trying to maximise current opportunities. This is mainly due to the lack of investments by local players to build strong, professional companies that are able to meet international standards.

Tio, group chief executive and managing director of PKT Logistics Group Sdn Bhd, says this would cost local players the larger customers – mainly multinational companies (MNCs) – as they prefer working with companies that are able to meet certain requirements.

One of the challenges faced by local logistics players, particularly the SMEs, is the low investment in technology. Tio notes that a heavy reliance on manual labour and processes would make it difficult for companies to scale up their operations and to utilise data analytics to improve the business.

“Investment in ICT is a must in the logistics industry, more so for companies that are operating warehouses, where they are keeping and distributing cargo. To do this on a big scale, you need to invest in software for stock accuracy and fast turnaround.

“If you don’t invest, you can’t get the customer, especially the MNC customers. They want that accuracy and fast turnaround,” he says.

No doubt, such investments could be heavy on some companies. But with the advent of Industry 4.0, logistics players will need to keep up with technology that will help them operate more efficiently in the long run.

Another challenge that the industry faces is the lack of skilled manpower due to the lack of investment in training talents and in equipping them with the right skills.

“With the logistics industry growing, we need to ensure that we are training people for future jobs. Most of us who are running the industry at the moment aren’t really trained logisticians. But if we want Malaysia to be a regional logistics hub, we will need a lot of trained logisticians. We need to invest in a training infrastructure,” he says.

This is also one of the reasons behind PKT’s fervent push in the education sector. He emphasises the need for more academic-industry collaboration to help produce quality talents that will bring the logistics industry forward.

One other area in the industry that has seen investments trailing is in facilities.

PKT chief marketing officer Kuan Eu Jin notes that the market is evolving and large customers are placing more emphasis on factors such as sustainability.

However, many local logistics providers have yet to upgrade their facilities or changed their processes to incorporate elements of sustainability due to the low awareness on environmental issues among local SMEs.

“Most of the MNCs already have the environment on their agenda. If we also identify with their agenda, it is easy for them to make a choice between an environmentally-aware logistics company and one that is not. If you bother with environmental issues, that also means you have matured in other areas as well and have gone past the basic services,” says Kuan.

Additionally, observers have noted that the local industry lacks a certain degree of professionalism, whereby logistics providers have difficulties with punctuality and efficiency. There is also little interest by companies in attaining international certifications for their facilities and in meeting international standards, making it difficult for the industry at large to shake off its traditional image.

The lack of international exposure among local players has also led to low awareness on international best practices, which would have enabled them to improve their operations and attract the attention of bigger customers.

Tapping opportunities While it may seem like the local logistics industry is faced with many challenges, Tio says there are opportunities to be tapped for companies that are able to address each of these specific issues.

For example, companies that are able to adopt new technology or incorporate better use of technology into their operations could see improved efficiency and transparency. Not only would this benefit the company, it would also give their image a boost when trying to court larger customers.

For PKT, its investments in technology has enabled it to come up with innovative ways to provide more services to its customers.

One such service which PKT is exploring is to provide customers with e-commerce access.

“Since we are already handling warehousing for them, it makes sense for us to give them that value-add in e-commerce.

“We see a lot of opportunities that are open for us. Every customer has a different requirement. And with adaptation over time, we can re-think some of the solutions that we have provided and tailor them to different needs so that we can grow with our customers,” shares Kuan.

In the same way, if other local companies can invest into various areas of the logistics business such as training of their manpower, applying international best practices or upgrading their facilities, they stand a better chance of expanding their clientele and market share.

Certainly, these investments may seem like a burden for some companies. However, Tio says they are a necessity in order to build professional companies that would raise the standards of the industry to tap the growing opportunities in the local as well as regional logistics industry.

Tio cites PKT’s own example in making those investments earlier which have resulted in an advantageous position for the company today.

When the company embarked on building its new warehousing facilities in 2008, Tio didn’t want a typical facility. He wanted a facility that was going to make a difference in the industry.

He made sure his facility had a unique design that would be remembered by all who saw it and that his warehouses were up to the Green Building Index standard.

Tio’s foresight some 10 years ago has helped put the company in good standing with MNC clients, which is a bonus for PKT.

In addition, the company has changed some of its practices and policies over the years to remain relevant as the industry changes.

PKT’s mission statement now revolves around becoming a socially responsible company that provides logistics services. The company is doing this by utilising local human resources, building environmentally friendly warehouse, engaging openly with the surrounding communities and by inspiring other businesses to positively impact other people and communities through CSR activities.

And its story has sat well with international clients that are looking for more sustainable and socially responsible companies to work with.

Today, PKT counts many international companies as part of its portfolio including Japan’s Daiso.

“It’s always a challenge for a company to learn something new while the industry is still on the learning curve. But we were able to make that transition (in adopting a lot of these new practices) earlier on. So when the industry moves up, we are able to scale up and skill up along. So I think we’ve made some (good investments) and we are in a good position today,” says Kuan.