Julian Neo, managing director of DHL Express Malaysia and Brunei speaks to ACW about the harnessing the beast of e-commerce.
ACW: E-commerce has boomed and express carriers have been at the forefront of this. For how long do you think this boom will continue at the pace it is now?
Neo: Increased consumer activity has been a recurring theme of e-commerce, especially in these unprecedented times. Online comprised half of all retail sales in Asia Pacific, and is expected to rise by 10 to 61% by 2025. This growth can be attributed to social e-commerce—the business of selling goods through social networks—largely driven in China and Southeast Asia. A 2020 study by Google revealed that Malaysia in particular recorded a 6% spike in e-commerce Gross Merchandise Value (GMV) from the previous year to US$11.4 billion while online-selling related inquiries saw a five-time jump.
For us at DHL Express, we anticipate the boom to maintain its positive trajectory. The proliferation of e-commerce has made up for, or in some cases more than compensated for, the economic downturn resulting from COVID-19. This means that the logistics sector is among those that will weather the crisis with resilience.
Indeed, the total B2C e-commerce volumes within our network increased in 2020 by approximately 40% compared to 2019. This paved the way for a total revenue of €19.1 billion (+11.9 % year-on-year) and EBIT of €2.7billion (+34.9%), marking the best financial result in our more than 50 years of history for the Express division of Deutsche Post DHL Group.
Business purchasing should not be overlooked either. Even prior to the pandemic, global revenue on B2B e-commerce sites and marketplaces had already increased by 18.2% to reach US$12.2 trillion in 2019, outpacing the market size of the B2C sector. These past two years can only accelerate that development, and the number is projected to hit US$20.8 trillion by 2027.
Even as restrictions ease, the shifting consumer behaviour that has emerged from this new normal is envisaged to persist. Millennials are now of age to be decision-makers in business environments, accounting for 73% of all procurement. Growing up with the internet and mobile phones, they are digitally native and more technologically oriented than their predecessors. They are more likely to avoid engaging with sales representatives early in the process, instead mimicking their personal shopping habits by conducting their own extensive research prior to buying commitment. Research by Gartner projects that by 2025, 80% of B2B sales interactions will occur through digital channels.
ACW: Was DHL Express prepared for the sudden boom in e-commerce?
Neo: At DHL Express Malaysia, we have practices in place to ensure minimal disruptions during peak periods, and the same applies to this e-commerce boom. Manpower-wise, we are served by a 1,500-strong workforce nationwide and hire additional associates to support delivery operations when the need arises. We further expand our capabilities by scheduling extra flights, extending pickup and drop off times, as well as imposing weight restrictions to control cargo space.
Digitalisation has been part of the logistics conversation for years but reached a fever pitch throughout the pandemic. Fortunately, it has long been a top priority of our business. In fact, our parent company, Deutsche Post DHL Group, committed €2billion until 2025 to step up transformational initiatives designed to enhance customer and employee experience as well as improve operational performance across all divisions. Efforts are already underway to comprehensively modernise our IT systems, integrate new capabilities, and offer staff targeted training. Global Centres of Excellence are being established to centrally develop key technologies like data analytics, Internet of Things, and autonomous vehicles for logistics use.
In Malaysia, we successfully rolled out our WhatsApp service, DHLontheGo, which allows shipment booking, tracking, and inquiry all through the messaging app. These have seen a warm welcome among our clientele, and we see them continue to be in demand well beyond the crisis.
We have also deployed a new system called the Advanced Quality Control Centre (AQCC), which utilises the latest technologies in artificial intelligence, big data referencing and routing, as well as automated systems. AQCC provides us with the capability to monitor in real-time 100% of our shipments and movements in a highly efficient manner. Robotic Process Automation (RPA) has also helped us to streamline vital processes, automate time-consuming repetitive tasks, and help our teams become more productive.
ACW: How does your network and infrastructure cope with surges in demand for e-commerce services?
Neo: DHL is the only logistics company with the services and capabilities to link the entire e-commerce supply chain. We are backed by a wide global network connecting us to over 220 countries and territories around the world. Our own Malaysian network encompasses six Gateways, 11 Service Centres, 137 Retail Outlets and Service Points, 347 vehicles, 73 weekly flights, four dedicated aircraft, and more than 1,500 employees that ensure we have comprehensive coverage.
DHL Express is investing around €750 million from 2020 to 2022 to bolster its aviation network and ground infrastructure across Asia Pacific to support the unprecedented growth in shipment volume and address the ever-growing demand for time-definite express deliveries. In recent months, DHL Express has introduced several new dedicated flights powered by the new Boeing 737, 777, and Airbus A300.
In Malaysia, we invested RM11.4 million to improve our last-mile delivery efficiency with new additions to our vehicle fleet. Processing, sorting, and distribution also received a boost with RM7.4 million going towards equipment overhaul nationwide and the refurbishment of 11 facilities. To cater to the growing needs of the communities we serve, our Seberang Perai (RM13 million) and Kuala Lumpur Gateway (RM198.7 million) locations moved to bigger premises that expand our shipment handling capacity and productivity. Through these upgrades, we ensure sustained operational excellence so that we can continue fulfilling our purpose of connecting people and improving lives.
ACW: What have the current capacity constraints in the air cargo industry meant for e-commerce?
Neo: The situation in the airfreight market remains challenging in general. On one hand, we see high volumes and similarly high demand; on the other, limited handling capacities due to COVID-19 and infrastructural issues.
DHL Express has risen to these challenges. We operate over 280 dedicated aircraft with 15 partner airlines on over 2,200 daily flights across more than 220 countries and territories. In particular, our Asia Pacific air network is supported by four main hubs—Central Asia Hub in Hong Kong, North Asia Hub in Shanghai, South Asia Hub in Singapore, and Bangkok Hub—linking to 50 gateways in the region.
We recently expanded our airfreight capacity to cater to rising intra-Asia demand and between Asia Pacific and the US. Our K-mile Asia flight will add over 200 tonnes of capacity weekly between Hong Kong and Bangkok; Air Hong Kong’s introduction of a sixth flight rotation enhances two routes with 1,200 tons of weekly total gross payload; while our joint venture cargo airline AeroLogic offers 610 tonnes of capacity with its six-time-a-week service from Hong Kong to Cincinnati.
Throughout this period, DHL Express has demonstrated that we are a strong partner for our customers, even in the most unprecedented times. We have a robust network, capacities, and expertise in place to put the right solutions at the right time, even during a crisis. We are fully committed to leveraging all these assets for the benefit of our customers.
ACW: An increase in e-commerce has extremely damaging effects on the environment. How do you think this growth can become more sustainable?
Neo: The pervasiveness of e-commerce has normalised the demand for purchases to be delivered in the quickest, cheapest, and most convenient method possible—translating to increases in packaging waste and carbon emissions.
Despite this, sustainability now occupies a higher place in the customer agenda than ever before. Today’s consumers have a heightened sense of social and environmental awareness, which extends to their buying decisions. Many expect businesses to play a positive role in society and bear a bigger responsibility in driving positive change. As social media continues to proliferate, this call will only grow louder.
As the world’s leading logistics provider, we are aware of our environmental accountability. As part of its Sustainability Roadmap announced earlier in March, our parent company Deutsche Post DHL Group has pledged to.5 billion) in measures to reduce CO₂ emissions, in line with the overall target to invest €7 billion (approx. RM 33achieve zero emissions by 2050.
Globally, more than one million miles have been driven with electric vehicles, 86% of electricity usage is from renewable sources, numerous facilities have received environmental ISO certification, and over 70,000 employees have successfully become Certified GoGreen Specialists through DHL’s in-house environmental training program.
Our pursuit of carbon efficiency and green last-mile have also taken shape in Malaysia. On our way to clean logistics operations, the electrification of every transport mode plays a crucial role and will significantly contribute to our Group’s sustainability goal of zero emissions. We have therefore committed to electrifying 60% of our fleet by 2030. To this end, we entered into a MOU with a national energy provider, Tenaga Nasional Berhad (TNB), which involves the introduction of electric vans starting the first half of 2022. The partnership will extend beyond making deliveries more eco-friendly to include cooperation in zero carbon and cost reduction initiatives, encompassing energy-efficient equipment, building energy management systems, and rooftop solar panels. DHL Express is also assessing TNB’s current electricity supply chain and identifying opportunities for improvement.
Of course, we cannot go at it alone so we include our stakeholders in the process. Customers are provided with additional carbon reporting services that allow them to analyse their environmental footprint and manage their carbon emissions. We place a special focus on supporting SMEs to go international whose values reflect our own, and recently on boarded a company that offers sustainable, eco-friendly packaging.
For us, and our customers, these are very important steps in our decarbonisation journey and represent steps forward for the logistics industry as a whole.