Whys Analysis
The retail industry in Singapore is emerging at a high scale. Urban logistics have a crucial role to play in ensuring efficient operations of the retail industry. The rapid growth in the e-commerce industry is also increasing the strategic importance of logistics business in Singapore. The strategic location of Singapore connecting Middle East with South and South East Asia is also another reason why both domestic as well as international logistics have become strategically important for the flourishing of the industrial sector of Singapore. This is the reason why a large number of market entrants started penetrating the logistics sector in Singapore, which includes the likes of LLMS logistics, Citi map Logistics and Small Objects and so on. As an outcome, Akhavan (2017), opines that the major market players are facing the paucity of staffs. The small market entrants are using the Point of Income strategy and paying larger than living wages to the logistics staff, who had permanent contracts with major logistics companies like Bigfoot Logistics, Riverwood, Schenker Singapore Pte Ltd and so on.
In Singapore, the big logistics companies like Riverwood do not maintain personal logistics supply chain. Small business owners and/or enterprises lend their vehicles and personnel to these big companies. Companies like Riverwood appoints those staff on third party payroll (Coskuntuncel and Rad 2015). However, currently the experienced staff in logistics industry are showing propensity to work for the small firms. Hence, Riverwood is at the edge of dissolving potential logistics contracts owing to the scarcity of logistics and vending staff.
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Problem Statement |
Lack of efficient staff in Riverwood |
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Why? |
Majority of the efficient staff and getting employed with the new entrants like LLMS logistics, Citi map Logistics and Small Objects and so on |
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Why is this trend on? |
The new entrants are following the Point of Purchase policy and paying more than living wages to attract the experienced contractual staff |
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Why is the company not able to compete on this issue? |
The business flow structure of Riverwood allows scope for a definite payroll structure. Since they work in large market, they cannot risk increasing their operational cost, because they have employee base in multifaceted demographic groups. |
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Why is the industry not updating? |
Since the logistics business of Singapore is dependent highly on third party franchise service partners, it is very difficult to prevent disintegration of the service providers (staff). |
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Why did the industry not adopt any alternative employee structure? |
In Singapore the third party vendors are the most experienced logistic service provides. They have an acute understanding of the business market and that is why they are capable to provide service at the most competitive price. |
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Root Cause(s) |
Lack of acute experienced staff because of which the Riverwood company have lost 3 to 6% of potential contracts in the last 2 years. |
The original market players of the logistics sector in Singapore has faced several obstacles in attracting young job aspirants to enter the logistics sector. The labour demand in the industry has increased by 21% over the last 5 years. On the contrary, only 5 to 7% new staffing have taken place in the major logistics companies of Singapore (Riverwood.com.sg 2018). Moreover, the logistics industry is excessively dependent on the logistics service providers from Johor Bauru and the allied areas. According to the data provided by the Economic Development Board of Singapore, the logistics companies are complaining that the expectations of the fresh graduate students from the logistics companies are much higher. The companies have to provide 15% higher wage to the fresh graduates than that they pay to the employees working for them at third party payroll. About 12% of the employees associated with the transit work of the big companies are from the unorganised sector (Creskoff 2016). A statistic data can be provided. The Packaging technology graduates who pass out from the universities demand at least $5000 to $7000 Singaporean Dollars, whereby the companies can afford to have the same work done by providing training to the third party workers at $70 to $75 Singaporean Dollars every day (de Souza et al. 2015). Besides the contractual nature of the appointment allows the companies to pay the employees for the particular day they work for the company. GoGoVan, Deliveree, and Ninja Van were launched in Singapore by Amazon as in-house delivery networks. After launching in 2014, these companies started to face acute difficulties for the lack of expert delivery persons. The staff appointed by them at third party payroll were basically drivers with mere knowledge of handling delivery paperwork. The companies always lost $3 to 5 Singaporean Dollars owing to their drivers’ inability to track the last mile of deliveries. Their incapability to use GPS positioning and inefficiency in using client information made it difficult to reach the pinned delivery sites. After the second quarter of 2018, the companies spotted that they were running at 10% annual loss, on an average. These companies had preinstalled centrally linked navigation devices on their vans. In case of the driver is unable to track location, the operation support executives advised them. In this process, customers’ order were delayed and approximately on 30% of the occasions, the company had to give out refund to the customers.
Hiring Challenges in the Singaporean Logistics sector
As an outcome, they are severely disinterested to pay higher wages to the same workers to get their work done. Currently, only 30% of the workforce is loyally working for the big logistics firms.
The new market players in the logistics industry prefer to employ employees under the Point of Purchase model. They offer the employees higher wages and other employee benefits. Logistics industry of Singapore is highly increasing. Hence the major international clients offer assignments to all the companies. Hence the market which the big companies like Big-Foot and Riverwood used to share is now segregated among all the market players. As an outcome, the revenue channels of the new companies are flourishing at a higher rate and they are able to logistics companies are eyeing the international logistics business. They are now getting about 60 to 70 contracts per year from the international players like DHL or UPS (Doerner, K.F. and Maniezzo 2018). The big domestic companies in Singapore like Bigfoot have lost the faith of the international companies and that is why they are not able to gross the potential international which the new companies are now enjoying. Companies like Rohlig Logistics, Region UP and others have recently expanded their business in Malaysia. The analysis of the online job posting of these companies reveals that they are appointing people having on year or more working experience with indigenous logistics firms of Singapore at a much competitive wage. They are paying out a wage scale of $5000 to $12000 to employees for working as assistant staff to the primary delivery officers (Wirawan and Chua 2015). These companies are appointing new graduates as zone based logistics managers, who are selecting delivery persons for each delivery, training them to handle various kinds of delivery staff and directing them. This is how they are developing area based delivery supply chain which are much more professional and adept than the franchise based delivery chain of companies like Riverwood.
The logistics customers nowadays demand a lot of transparency in their services. They require live tracking of their delivery and online tracing of their parcels. However, they are not willing to pay any excess for this work. Now, the employees who enter in to employment contracts with the new and emerging companies get scientific training and as an impact they learn how to monitor GPS tracking devices and submit live feed en route (Gelareh, Monemi and Nickel 2015). As an outcome of learning all these they become better capable to handle logistics transit and their enhanced skills aggravate their future career scope. On the other hands, the employees while working with the big companies lack these facilities also.
Shifting of the employees towards new entrants
As discussed earlier, the big companies like Riverwood and others have lost potential clients in the last two fiscal years. This is why the companies are suffering from acute credit crisis. The international as well as the domestic clients are not ready to give them bulk orders or high end orders above $10,000 Singaporean Dollars (Handoko and Lau 2016). This credit crises is taking a high toll on the industry as the logistics business is most emerging business in Singapore. This is why the existing organisations are facing the demands of the rise in inflationary demands like hike in compliance regulations, additional capacity with increase in demand over the key cost centres and decline in industrial demand. The government is stressing on providing industry standard wages to the workers. Since companies like Riverwood are unable to pay standard wages like $5000 to $10,000 to the workers lacking professional and technical knowledge who have already been appointed by the company (Irarrazabal, Moxnes and Opromolla 2015). Whereas, the much more integrated delivery network of the newer companies like The Lorry or the Ninja Van are enticing the major market players like Alibaba and Amazon to give the major international logistics contracts to them. As an outcome of obtaining these contracts, the revenue stream of these smaller companies are also flourishing. Hence, they are also able to give competitive wages ranging from $8000 to $10,000 Singaporean Dollars.
The McKinsey model helps in analysing how well the management of the Riverwood Company is addressing the organisational perspectives. In this context, the various HR faceted approaches of the company can be analysed in order accomplish an in depth understanding of the measures that have been taken or might be adopted by the company in addressing the staffing needs of the company.
Values reflect the central beliefs, core values as well as the attitudes which the company stands for. As such the company’s staffing goals do not comply with the current industry standards. Only because the company have a large demographic variety in customer base and have high contribution in the industrial growth that have been accomplished over the last decade. In terms of sharing value, the new companies are generating much more significance towards their employee base by giving those living salaries that are about 15% higher than that companies like Riverwood are providing (Hassan, Zaharudin and Yunus 2015). The company do not have a stable base of corporate logistics employees. There are only contractual terms with some potential enterprises, however that is not also full time employment.
Improvement of the Customer Service
The company’s employment strategy can be discussed under this criteria. The company do not necessitate the employment of new and fresh graduates of packaging and transit technology. Rather their over dependence on the present contractual employees is the chief reason why they have lost business recently.
In this context, the biggest problem of the company is that the organisation does not have a centralised organisational hierarchy. The decentralisation in the employee structure allows the new market players to sneak the potential employees from them (Jiang et al. 2016). As an outcome of the lack of a proper hierarchal control, the line of communication between the employees and the executive and discretionary management is also feeble.
The financial as well as the recruitment process are the two area because of which the company is facing an acute staffing issue in the current business context. The Singaporean government is in the favour of the market entry of new players in the logistics business. However, because of that the government have introduced complications in the regulatory framework of logistics and transit (Lin 2017). The organisational structure of the new companies are much more simplified because of the regulatory complications they face are considerably less.
The staff of a company is the backbone of the executive strength in a company. On the contrary, the employee turnover rate of the Riverwood Logistics is 24%. This is the major problem that is presented in this report.
The company had been only concerned with the achievement of the organisational goals. They did not feel the necessity to adapt with the current industry standards and because of that the current staffing issue needs are not fulfilled (Sayareh and Mehtarkalateh 2016). ON the other hand, the new companies have concentrated on building a strong task force.
The level of distinctive capabilities of the employees of Riverwood are not up to the industry standards. The employees of Riverwood are not adept in tracking their live position or sending live feed to clients, unlike the employees of many other logistics companies in Singapore.
From the above analysis it can be stated that McKinsey 7S Model is one of the most important tools to identify the changes in the internal situation on the organizations. In case of Riverwood, the seven elements are aligned as well as mutually reinforced. This particular model has helped to identify the prerequisites to improve the performance and maintain the alignment during restructuring. The strength of this theory is associated with its ability to understand how these seven elements are interrelated with eth functionality of the firms (Channon and Caldart 2015). This can be implemented in any type of change starting from new proves, new systems, leadership change, restructuring and organizational merger. However, the weakness of this theory is associated with its efficiency to understand the external environment. On the other hand, the 5 Why model is quite easy to use as well as apply. Its easy application in understanding the issues in the organization makes it practical tool for analyzing root cause of the problem solving. The management using this particular tool can identify root causes within a short period of time but they cannot avoid the disadvantages of using this tool (Mitchell et al. 2015). First of all, this tool does not help in root cause identification if the reason of the issues is unknown. Secondly, the appropriateness of this tool is to some extent contingent upon the skills with which the tool is applied.
In this regard the five principles of Fayol can be applied in the Riverwood company’s staffing. This will help in breaching the gap of the McKinsey 7S Model which does not discuss the external factors of staffing issues faced by the company (Hatchuel and Segrestin 2018). This theory focusses on the planning, organizing, commanding, coordinating and controlling the measures found out in the analysis process which will be managed by the firm. In addition to this, the Iceberg Model can help the organization to analyse the skills and knowledge of the firm (Irarrazabal, Moxnes and Opromolla 2015). Skills and knowledge are needed for the HR department and will help the company to employ the staffs by their own. These two theories can help to manage Riverwood Logistics to solve staffing issues in the system of the company.
Inflexible hiring in Riverwood Logistics is the main problem for which the company needs to initiate some of the major steps and change the entire system of staffing in the organization. The company employs workers from third party payroll so that it can save wages and facilities given by other similar companies but it does not understand that the country has 9% labor force is engaged in the organized sector and if not utilize this huge labor force the company can never get success in future.
First of all, the company needs to demolish the employment system through third party but strengthen its own HR section and employ the workers of their own. This HR department will reduce turnover by establishing a strong and open communication system before the problems increase. This open-door policy will help the company to understand the expectation of the employees and identify their concerns more accurately. These labours need to have an inhouse training facility from which they will be given all the technological support to understand and learn modern GPS system useful for logistics. In some cases, the company can face the understaffing problem in terms of talent. The HR department will identify the skills of the staffs and make teams under them. This grouping method will be highly productive as well as efficient.
Conclusion
In the course of this report, the problems regarding staffing that the Riverwood logistics company faces have been discussed in detail. In the problem statement, the current staffing issues that exists in the company have been highlighted. Riverwood logistics have been facing a high turnover rate. Analysing the current industry standards in the Literature review, it can be concluded that staffing issue have been faced by many big corporations like Riverwood in Malaysia. The 7 step model of McKinsey have been provided here to show the contrast with the new and emerging companies and the Riverwood Company. Analysing the differences between the companies it can be commented that the hierarchal corporate structuring of the employees in companies like Small Objects and others are lacking in Riverwood. The implementation of the Iceberg Model and Fayol’s theory shows that employee retention is the HR approach where the Riverwood Company is lacking. In order to mitigate the current industrial gaps, recommendations have been provided in the last part of the report also.
References
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