Pos Malaysia aims to return to its glory days

One year on, CEO Brewer’s job is far from over

IT may seem ironic, but almost every week, Malaysia’s largest delivery player by network – Pos Malaysia Bhd – does “mystery shopping” by sending out parcels through its competitors.

The group, which has a history of over 200 years, sends parcels from different places of origin to different destinations using the delivery services of all courier players in Malaysia.

Charles Brewer, who celebrated his first year as Pos Malaysia’s CEO this month, says this is done to understand how the competitors are faring and how Pos Malaysia can do better.

“When we started the journey, we were doing about 50% next-day delivery but the market was around 65%.

“Today, our performance has reached 95.2% for next-day delivery. There is nobody in the market that comes close to this, we are way ahead of our competitors,” the British national tells Starbizweek.

Brewer, a former high-ranking executive of logistics giant DHL, was brought into Pos Malaysia in August 2021 to turn around the loss-making company and revamp its operations.

He was the fourth CEO in a period of five years, as the Drb-hicom Bhd as the parent company desperately tried to reinvent the postal service provider.

Brewer is a very “hands-on” CEO. He listens to customers’ complaints via Facebook, Twitter and Linkedin, and responds to them.

“I also rang 200 customers that stopped using our service and asked them why they stopped.

“I spent a lot of time on the ground,” he says.

Just before his appointment, Pos Malaysia recorded a net loss of Rm121.84mil against a revenue of Rm533.9mil for the quarter ended June 30.

Brewer’s work is far from over. But, some notable improvements have been made.

Recently, Pos Malaysia announced that it has delivered a profit – albeit marginally – for the first time in 15 consecutive quarters.

In the second quarter ended June 2022, the group posted a profit before tax of RM172,000, against, against a revenue that rose 6.8% quarter-on-quarter to Rm517.26mil.

On a net income basis, however, Pos Malaysia remains loss-making, recording a net loss of Rm5.25mil in the second quarter.

Pos Malaysia attributed its improved performance to better customer mix and yield, and effective cost management, which resulted in lower transportation and delivery costs.

Brewer acknowledges that Pos Malaysia is burdened by “a lot of legacy costs”, but the group has been working on reducing or even eliminating them.

“We have also improved our average revenue per rider by about 15%, but there is still a long way to go.

“When I came in last year, we were delivering 70 to 80 parcels per rider a day, now we are doing about 130 parcels.

“But we didn’t accomplish this by pushing our employees too hard, but rather through smarter ways using technology and digitalisation,” he says.

Brewer notes that Pos Malaysia’s two main hubs in Malaysia, namely Shah Alam and Kuala Lumpur International Airport (KLIA), are automated but not entirely.

“One of our efforts is to automate the forklifts using the Automated Mobile Robots (AMRS).

“So, instead of having 40 forklifts driven manually like we used to in the Shah Alam hub, the AMRS operate on channels and tunnels based on digital design.

“This massively improved the safety of our workers in the hub as well as the productivity,” he says.

It is noteworthy that the Shah Alam facility handles about 250,000 parcels a day, while the KLIA hub handles about 150,000 parcels a day.

“We are getting smarter in terms of customer experience, getting smarter in what we charge, getting smarter with the accessorial fees, and making sure we are getting our pound of flesh correctly for every parcel we send,” Brewer points out.

Pos Malaysia’s biggest top line generator is the postal segment, which contributed over 65% of the revenue in the first half of financial year 2022 (1H22).

The segment comprises three types of services, namely, mail, parcel and retail (renewal of driving licences, road tax and others).

Brewer says the mail delivery business has been seeing a drop in volume as people opt for emails and digital documents, instead of letters.

“In the last four to five years, the mail volume has come down by 13%. But, the business is still profitable,” he adds.

However, the parcel delivery or courier business, which is the main revenue stream for the postal segment, is bleeding financially.

Brewer attributes this to unfair competition in the Malaysian market.

Interestingly, he is not the only one complaining about unfair competition.

GDEX Bhd’s boss Teong Teck Lean has mentioned about the damaging effects of the unfair competition in the courier business.

Brewer explains that about 50% of the total parcels volume in Malaysia originates from ecommerce platforms, largely Shopee and Lazada.

The problem is that, Brewer claims, very few of the deliveries are handled by courier players that are not owned by Shopee and Lazada.

“Ultimately, buyers and sellers cannot choose their preferred courier service providers because of this issue. It is unfair for them.

“There are 122 courier licence holders in Malaysia, and 60% of them are active today.

“Those courier providers that are not owned by major ecommerce players fight for the remaining 50% volume.

“After the economic reopening, parcel traffic has come down by 30% to 40%, and so, the competition has become even tougher,” he says.

Brewer also says that certain courier companies that are backed by “private equity dollars” are engaging in price dumping by charging below their cost to deliver.

The practices are not sustainable for the domestic industry players, according to Brewer.

Amid the challenges, Pos Malaysia is working towards managing its costs and maximising its yield in order to make the most out of the parcel delivery business.

Wherever it is possible, the group is also merging its mail and parcel delivery networks.

For example, Pos Malaysia handles mails and parcels in a single facility, instead of having two separate facilities in the same locality previously.

As for its two other business segments – logistics and aviation – Pos Malaysia says they have been seeing signs of recovery.

It is, however, noteworthy that only the aviation business was profitable in 1H22, while the logistics and postal segments were in the red.

Looking ahead, Brewer has several revenue generation ideas for Pos Malaysia, including by tapping into new areas.

“For example, we have 3.2 million sq ft of retail spaces (through our post offices nationwide), probably the largest retail space owned by any company in Malaysia.

“We can hugely leverage that.

“We have the opportunity to create an international product, so we are working heavily on how we can have a slightly different end-to-end international product.

“We are working on an ecommerce fulfilment. We have 650 retail locations with 3.2 million sq ft, and at the back of those retail points, we have some form of warehouse.

“That space is an opportunity for companies to place their products closer to customers. So that when you order, Pos Malaysia can pull the product and deliver it to you in two or three hours,” he says.

Brewer says Pos Malaysia is working on four or five experiments, which will be implemented once the concepts and details have been ironed out.

“In two or three years, we shouldn’t be talking about just the domestic market, there are plenty of other opportunities that we can capitalise on,” he adds.

“Our performance has reached 95.2% for next-day delivery. There is nobody in the market that comes close to this, we are way ahead of our competitors.” Charles Brewer