This article first appeared in Digital Edge, The Edge Malaysia Weekly on September 12, 2022 - September 18, 2022
Online shopping used to be the more leisurely option. People rushed for bargain buys or non-essential curiosities like singing cacti, instead of essential items that they needed immediately. However, all that changed when the Covid-19 pandemic hit in 2020.
The promise of same-day or next-day delivery — also known as quick or Q-commerce — has become the norm, says Alvin Gan, head of technology consulting at KPMG in Malaysia. “The pandemic accelerated digital adoption and reshaped customer buying behaviour and expectations.”
Citing findings from Facebook and Bain & Co’s SYNC Southeast Asia 2020 report, Gan says the acceleration of digital consumerism has exceeded initial 2025 forecasts and is here to stay, thanks to the pandemic.
Malaysia has one of the highest numbers of digital consumers in Southeast Asia and is considered a top e-commerce market. This growing trend has encouraged more businesses to set up e-stores and support the emergence of fleet and on-demand delivery services to send out more deliveries on time.
With the abundance of choice, customers have more power in their hands to choose the best courier service.
“Customers now prefer to choose companies that can provide a better experience over brand loyalty — new services and methods need to be considered to serve new demands and win customers’ trust,” says Gan.
As e-commerce becomes more convenient, customers’ expectations grow. Based on responses from a Quora forum in 2020, consumers can tolerate a three-day lead time; day 1 where they check out an item from their cart; day 2 for processing and delivery; and day 3 to receive the item.
Moreover, all respondents agreed that delivery of items should not take longer than a week, and this expectation is only set to surge with constant efforts by e-commerce and logistic providers to enable same-day delivery.
Most same-day delivery options are offered in urban areas within the peninsula, which are enabled by smaller courier providers such as Borzo, Zepto and GoGet.
“Meanwhile, larger delivery companies have identified plans to further enhance their infrastructure and operations to address the market demands of same-day delivery,” says Gan.
Logistics giants such as Ninja Van, Lalamove and DHL are already planning to upgrade their facilities and hire more employees to manage and expand their delivery fleet size to increase efficiency in the country.
To improve customers’ shopping experience and prevent drop-offs at checkout, online retailers provide same-day delivery to create a similar experience to in-store shopping. For example, fashion marketplaces such as Zalora and FashionValet provide same-day delivery across Peninsular Malaysia and the Klang Valley respectively.
The groceries sector has picked up Q-commerce more progressively. Online grocery purchases doubled in 2020 from 2019, aided by companies such as HappyFresh, GrabMart and pandamart.
However, the speed of delivery has tapered as the country is transitioning towards endemicity. The average transit time during the lockdown period was 4.6 days, faster than the average of six days pre-pandemic. The rate has since gone back to the pre-lockdown period at the beginning of 2021.
Smart warehousing should be a part of the readiness of an organisation’s infrastructure to enable faster same-day delivery, says Gan.
In conventional warehouses, workers need to manually manage storage flow. It is subject to human error and is time-consuming. Most warehouses in Malaysia have yet to adopt smart warehousing solutions due to high costs.
“With a modernised warehouse, businesses can achieve a faster inventory turnover rate as it improves inventory management and provides better visibility of stock,” says Hann Yang Tan, business director of Intelli-Mark Consolidate Sdn Bhd, a digital delivery solutions company.
The warehouse management system (WMS) is the brain of smart warehouses. WMS manages inventory tracking and automates replenishment systems to top up stock picks. Artificial intelligence assists WMS to improve record accuracy, and product availability and fulfilment periods can be calculated more realistically for customers.
Hann explains that smart warehouses contribute to faster same-day delivery through a routing algorithm that helps to process orders better.
The routing algorithm will help warehouse staff create a strategy to manage orders by knowing when items should be picked while locating the product within the warehouse through real-time inventory.
Smart warehouses are also supported by technology that is accurate and reduces human errors such as automatic identification and data capture (AIDC), 2D barcode scanners and radio-frequency identification (RFID).
Gan adds that the next step for personalised logistics throughout the year revolves around connecting customers with greater convenience. He predicts that an increase in pick-up and drop-off (PUDO) points, the wide usage of parcel lockers and loyalty programme initiatives from courier companies will entice customers.
Ninja Van, for example, has set up 4,575 PUDO points with 95% coverage of rural areas. Besides that, it has also built parcel lockers at LRT, MRT and Monorail stations.
The National Postal and Courier Industry Lab by Malaysian Communications and Multimedia Commission has also identified an initiative to establish a parcel point network via an interoperable platform to be utilised by all courier players.
This will be a win-win situation; customers can pick up items sent by various courier companies at a central PUDO hub, and courier companies can save time and cost from having to build individual PUDO points.
To retain customers amid the intense competition between logistics players, Gan believes that loyalty programmes can be introduced. “Customers are currently spoilt for choice and enjoy attractive delivery cost, so retaining customers and creating loyalty will be a priority for courier companies.”
FedEx’s “Reward Programme”, for example, allows customers to collect points based on customers’ total spending on its services, which can then be exchanged for attractive rewards such as gadgets, wellness products or FedEx vouchers.
“Finally, we foresee that the drive towards net zero climate commitments will likely play a significant role in the future of logistics.
“The sustainability drive is particularly integral to future transport fleets, including reduction of emissions through alternative fuels and optimised route planning,” Gan says.
The logistics industry is looking into leveraging the versatility of autonomous technologies such as drones to satisfy the demand for faster deliveries.
Many delivery companies have been leaning towards drones since Amazon launched Amazon Prime Air in 2016. While Amazon Prime Air was not successful, other players have swiftly adopted the technology.
Manna Drone Delivery, for example, is one of the biggest drone delivery companies in Ireland. It operates a food delivery service where users can select a restaurant or grocer, purchase items and have them delivered to their doorstep by a fleet of drones.
Manna’s drones handle 2,000 to 3,000 flights per day, flying at 80kph at 150ft to 200ft. According to Manna’s CEO Bobby Healy, the average time to complete a drone delivery is two minutes and 40 seconds — a vast difference compared with the 30-minute average waiting time for food in Malaysia.
The success of Manna’s drone delivery mechanism is backed by drone-friendly European regulations. Manna is the first company to receive the light unmanned aircraft system operator certificate (LUC). The certificate is issued by the Irish regulators and enables the company to operate across Europe.
European drone companies have to adhere to the uniform rules of the European Union and the Federal Aviation Administration. This includes pilot tests, classification of rules according to the drone’s usage and specifications and flying distance from public and sensitive areas to reduce risks.
Local logistics companies have been experimenting with drones for deliveries since 2021 with courier companies signing memorandums and conducting pilot tests. Companies such as AirAsia, DHL and Ninja Van are pioneering the commercialisation of drone delivery.
But it was pharmaceutical behemoth Pharmaniaga Bhd that first explored the usage of drone delivery by establishing Project Eagle in November 2021, sending 3kg of medical supplies to Pangkor Island, Perak.
The pharmaceutical company also collaborated with Meraque Services Sdn Bhd to send medical supplies to Kuala Langat and Taman Sri Muda during the freak floods that hit the Klang Valley and displaced 14,000 people last December.
Meraque CEO Md Razalee Ismail explains that contrary to the concrete guidelines in Europe, the local authorities only approve drone delivery flights based on routes the company has applied for. “Currently, all drone deliveries will undergo a proper verification and risk analysis by the Civil Aviation Authority of Malaysia (CAAM). They will go through every route to verify the details to ensure that it is safe [to fly]. For now, there are no [flying] limitations for approved routes.”
Beyond deliveries, one-stop technology solutions provider OFO Tech Sdn Bhd utilises drone technology to empower various sectors, for example, highway mapping. The company also integrates data collecting technology such as artificial intelligence (AI), augmented reality and virtual reality to optimise drone operations.
Its managing director Armi Majid believes that risk assessment is the main concern for the authorities to approve drone delivery. “Having drone deliveries in a rural area has lower risks. This is because if the drone were to crash, it may get stuck in a tree [and is less likely to hit passers-by]. Urban areas are a bit challenging [to do drone deliveries] due to high-density dwellings.”
Although the technology for drone delivery is available, the infrastructure such as the system for the authorities to monitor drone flights, namely the Unmanned Traffic Management (UTM) and the regulation to allow Beyond Visual Line Of Sight (BVOS) drones, is not mature.
To accelerate the use of Unmanned Aerial Vehicles (UAV) such as drones as a mode of delivery transport, Razalee stresses that a UTM has to be built first.
UTM is a traffic system that monitors drone routes and prevents aerial vehicles from crashing into one another. “If we were to have UTM, we would have a swarm of drones flying on multiple routes,” says Razalee.
He believes that the UTM can be integrated into the larger Aircraft Traffic Management network. “It should be a safe environment for both aircraft and UTM.”
Supportive infrastructure for drone delivery such as pods being built on condominiums for drones to drop off items are also crucial, says Razalee.
Amsyar Faiz, business development director at OFO Tech, says that while there are funds available for start-ups to explore the drone industry in Malaysia, the lack of regulatory framework is delaying commercialisation.
“The [drone] framework [set by the government] is only limited to Cyberjaya. Some big food delivery companies have led several drone companies to venture into drone delivery. However, there seems to be some hindrance,” says Amsyar.
As far as public safety is concerned, Armi says that little research has been done on the impact of drone crashes. “We have a few potential solutions involving drones, but that solution requires flying along live highways (highways with active road users). There’s a very huge concern (risks to drivers).”
Moreover, drone delivery is still relatively more costly than what Malaysians are used to paying for.
While the cost is likely to reduce as drones become more ubiquitous, Razalee says in the beginning stages, drone deliveries should be prioritised for urgent items such as medical supplies. “You have to save lives at any cost. When the volume is there and when the technology has matured, then we can go to the next sector [of retail deliveries].”
According to Manna, its delivery charges range from US$4 to US$5, covering areas in Dublin. They aim to move to the US later this year and extend its operations across the European Union next year.
Same-day delivery has been made possible thanks to the ever-growing gig economy, with riders being able to send out items in real-time. In 2020, the sector made up about 26% of the country’s labour workforce, equivalent to four million people.
The commercialisation of drones for deliveries is said to better enable gig economy workers by bridging distances and extreme geographic locations that land vehicles cannot reach.
“I think drone delivery and the gig economy is a whole ecosystem of last-mile deliveries,” says Razalee. He believes that there is no urgency to use drones in urban areas as there are enough riders to support such deliveries.
Armi envisions drone delivery being added to existing car-or-bike delivery options in the future. However, “drones might not be practical for fragile items such as cakes”, he adds.
The greenhouse-gas emissions per parcel were 84% lower for drones than for diesel trucks, notes Razalee.
To prepare for the rapidly growing industry, AirAsia through its academic subsidiary, AirAsia Academy, has been conducting remote drone pilot training at its headquarters in KL Sentral.
AirAsia chief safety officer and head of unmanned aircraft systems (UAS), Captain Ling Liong Teng, says the company took the first step in training remote pilots so that they will be ready when drones are commercialised.
“For us to enable drone delivery, we will have to train the people (remote pilots) first. As infrastructure and systems start to be available, we will have the people trained up already. We are ready to go forward,” says Ling.
Currently, AirAsia Academy has taken more than 100 remote pilots under its wing, and more than 100 more candidates are waiting in line. To become a remote pilot, one has to be above 18 years old and complete drone training courses set by CAAM-certified organisations.
Apart from delivery, certified drone remote pilots may venture into various sectors including photography, inspection, surveillance and even agriculture mapping.
When asked if drone remote pilots will be a top career choice for the youth, Ling is optimistic. “I hope so. It may not be in the nearest future, but in the coming years, we will see more and more need for remote pilots.”
Save by subscribing to us for your print and/or digital copy.