There are increasingly many small medium enterprises in Singapore which need to deliver goods to their customers as a result of the Internet boom and their E-commerce businesses. Therefore, a common growth concern is whether their business should raise or invest money to lease a vehicle and hire an in house deliveryman for these delivery jobs or to engage external courier services in Singapore.
For this discussion’s sake, we will assume that sales for the company is $20,000 with the average product’s price being $50. This means that the company needs to deliver 400 items per month. Let us also assume that profits (before taking into account the deliveries) is approximately $4,000 (or a 20% profit margin).
If you were to lease a van in Singapore, it would cost you approximately $1,300 to $1,800 a month, and if you were to include the petrol expenses, it would run up to about $2,200 a month. The average salaries of a in house deliveryman for companies run in Singapore is about $1,800 and about $2,300 with CPF payments too. At the very minimum you would need to fork out about $4,500 per month for hiring an in house deliveryman for the deliveries. Assuming 22 working days in a month, the deliveryman would need to deliver to approximately 18 locations a day. Your net profit for the month would be negative (you would actually be making a loss). You would need approximately 450 items sold per month before you can break even. This is a ridiculous amount of money to be spending just for deliveries!
On the other hand, if you were to engage courier services, it would be approximately $6 per delivery. This would mean that you would only be investing $2,400 a month for 400 deliveries! In addition, most courier companies would give discounts for delivery volumes above 100. Engaging courier services is so much more financially sensible than hiring your own deliveryman in Singapore.
As an E-Commerce business owner, you will have to manage a huge array of things. From the company strategic directions down to the operational details, you will need to attend to them to make sure that everyone goes smoothly. One big operational decision is to find a logistics company in Singapore to handle your E-Commerce distribution.
In business, it is always good to have partners to take care of the things you are not good at. Deliveries are not E-Commerce businesses’ core competencies. The logistics portion is just an add-on service to their main service of providing cheap and good products. Competitive advantage is achieved mainly through their products. For example, they may have an exclusive right to distribute a certain product in Singapore. Otherwise, they may have a way to decrease the product costs through negotiations with their suppliers. Adhering to the saying that you should concentrate on your strengths, E-Commerce businesses should focus on making their products seem more valuable to their customers. Moreover, they should also think about the future opportunities and expansions for their businesses. Logistics operations should ideally be outsourced to a reliable logistics company. In most cases, the logistics company will be able to offer you a price that you cannot beat even if you carry out the logistics operations in-house! That’s how great the economies of scale are for logistics companies.
Now that you know it makes more operational and financial sense for you to outsource your deliveries to an external logistics company, you will need to find one that will fulfill your delivery profiles.
For instance, do you need the deliveries to be carried out on the same day, next day or within 2 working days? There are different types of courier services in Singapore. Moreover, do you require the deliveries to be carried out within a specific timeslot to customers or if they can be delivered to customers anytime of the day? Another consideration is whether your customers will prefer weekend delivery service too. Most logistics companies in Singapore only operates on the weekdays.
Different logistics company will operate differently and have different value propositions. Compare their value proposition and determine the one that will suit your requirements the most.