Upping the entrepot ante
Singapore's transport and logistics sector aims for higher growth, gears up for global challenges
Even back when Singapore was known more as an entrepot than
anything else, the business of transport and logistics has been at the core of
the country's economy. Over the years, other sectors have grown, but the
seemingly simple and mundane job of moving goods from Point A to Point B has
also flourished and become more sophisticated.
But, the basic mission remains the same. “Logistics, in
fact, is the bigger picture that controls crucial fl ows of information along
the supply chain and helps us plan ahead, to be ever more efficient and competitive,” says Euleen Goh, chairman of International Enterprise (IE)
Singapore. This sector, as a whole, contributes 9.1% of Singapore’s GDP in 2004,
employing some 110,000 people.
IE Singapore, an agency under the Ministry of Trade and
Industry, has been helping Singapore-based companies — including those in the
transport and logistics sector — expand their business overseas. Currently, the
agency is servicing 80 to 100 companies in this sector.
Raising the bar
Minister of Trade and Industry Lim Hng Kiang (right)
and IE Singapore chairman Euleen Goh at the launching of the book, Movers
and Shakers. Lim says the outsourcing trend provides excellent opportunities
for Singapore’s 3PL players to serve MNCs.
Last year, IE Singapore helped these companies identify
overseas investment opportunities worth more than S$135 million — a sign that
Singapore-based transport and logistics companies are taking the development of
overseas markets seriously. The top line is showing results, too; in the same
period, IE Singapore helped these companies win more than S$200 million in
“This year, our target is to grow this figure by 20% at least,” says Kathy Lai, IE Singapore’s director for international trading and
transport and logistics, in an interview with
The Edge Singapore.
“Singapore’s logistics sector is a
brand name. We have a long history of being a logistics hub.”
“Singapore’s logistics companies started off as trucking
companies — stevedores.
They are now more sophisticated companies, with some of
them managing the entire supply chain,” says Lim Meng Hui, IE Singapore’s
assistant director for transport and logistics.
“As Asia becomes the factory of the world, more and more
MNCs will be relocating their production lines here,” says Minister of Trade and
Industry Lim Hng Kiang. “This outsourcing trend will therefore provide excellent
opportunities for our 3PL [third-party logistics] players to serve the MNCs. To
stay ahead, they have to constantly adopt new business models and strategies to
keep their costs down. Outsourcing has been recognised as an effective strategy
to streamline operations and stay focused.”
Speaking at the launch of an IE Singapore jointly published
Movers and Shakers — Showcasing Logistics, Singapore Style,
the minister also reminded logistics players that consolidation is happening at a
more rapid pace within the industry. Some recent unions include DHL and Exel;
Schenker and BAX Global; and within Singapore and on-going, Toll Holdings and
“The creation of such new mega-logistics companies with
global networks and one-stop integrated services point to an increasingly
competitive global market. And unless our local players are able to rise to the
challenge by forming strategic alliances with other players, they run the risk
of being nudged out of the competition,” he says.
Form partners, establish networks
To meet this new trend, IE Singapore is actively encouraging the companies — in
logistics and transport — to combine their strengths and capabilities, says
IE Singapore’s Lai.
“Networks are very important. Forming alliances is a way
of growing their network very quickly. Overseas companies are doing it,
local players should look at it as well,” she says. The problem now is to
motivate them enough to look for their own merger-and acquisition
opportunities. “We are now seeding the idea, that, if they don’t want a
formal merger, they should at least join the iPartners Programme,”
referring to a formal scheme under IE Singapore, which brings together
companies with different capabilities to form an alliance, firm up some
project-based structure and jointly bid for projects in new overseas
logistics sector is a brand name. We have a long history of being a
Loi: If you want to get freight volume, you have to be in China; there’s no
Poh: Smaller companies are much more
The Singapore Airport Consortium is one of the first
groupings set up under the iPartners Programme. The members are CPG Consultants,
Inter-Roller Engineering, SIA Engineering, Singapore Airport Terminal Services
and Sing-apore Technologies Engineering, among others. “If you give them a piece
of land, a greenfield project, this basket of companies can do the whole project
from end-to-end,” says Lai.
Take stakes, take part
In some fast growing, yet tough-to-crack markets like China
and India, it makes more sense to acquire instead of trying to grow organically
since different licences are required for different segments of the operations,
in a market that is not quite fully liberalised.
“The clock in Singapore just doesn’t quite work the same,
say, in China and India,”
says associate professor Mark Goh, director for
industry research at the Logistics Institute Asia Pacific. Yet, this market is
one that can’t be ignored. “If you want
to get freight volume, you have to be in China; there’s no choice,” says Loi Pok Yen, group CEO of CWT Distribution. IE’s
Singapore solution? “It is very difficult to go in and build a network point,
one by one. So the most logical way is to acquire, or at least try to get a stake,” says IE Singapore’s Lim.
This is exactly what some companies like Freight Links
Holdings are doing in China. “We invest in warehouses and other facilities,
[and] take a minority stake instead of acquiring. We work together with our
local partners, to understand the market better first,” says Yap Soo San,
Freight Links’ senior vice-president.
Finding niches, growing new markets
At the end of the day, just like what other companies in
tiny Singapore have done, the answer is to find a segment where they can compete
effectively. “Logistics is a game for the big boys. The challenge for the local
companies is to fi nd out how to stay relevant.
They have to find their own niches,” says IE Singapore’s
Lim. For example, some companies, like YCH Group, are experts in managing supply
chains for the chemical and electronics industries. For others, like Accord
Express Holdings, if they can’t
beat the global giants in terms of size, they
try to win by being more nimble. “For
smaller companies, we are much more f
exible. We can move a lot faster, improve our performance and therefore, that
becomes an advantage for us,” says Poh Choon Lay, Accord Express’ chief
Move like a Cougar
During a restructuring in preparation for the listing of its
parent company this January, Cougar Express Logistics Pte Ltd had the chance to
change its name. “I am happy we didn’t,” says CEO Heinz-Peter Faust. The company
is operating in an increasingly fast-paced environment that calls for greater
agility, speed, energy, focus and responsiveness. “I also see that, more and
more, we follow the spirit of the animal which we have gotten our name from,” says Faust in an interview with
The Edge Singapore.
The company, which was established in 1986, is expecting
turnover to hit $30 million for the current financial year. It has made a name
for itself in the car industry, with various regional distribution centres that
cover a total of 15,650 sq m in Singapore and Malaysia.
Cougar Express Logistics also runs distribution centres for
Japanese audio video products, as well as wines and spirits. On average, it
distributes wines and spirits to 80 to 100 locations across Singapore daily. Its
network of cargo transportation covers more than 20 countries in the region.
Cougar has made a name for itself in the car industry,
with various regional distribution centres that cover a total of 15,650 sq m
in Singapore and Malaysia
Faust: For our customers, it is essential to get their
products in top condition with the right quality and quantity to the
While its own reach is already expansive, Cougar Express
Logistics knows that there are bigger cats around. “We are not only sparring
with local players for local customers, but with internationally operating
companies on a multi-country, if not regional, platform. Venturing out of our
home-markets, we need strong partners with excellent local knowledge to deliver
our high-standard services with consistency in all markets we intend to operate in,” says Faust.
Then, there are also external macroeconomic conditions to
deal with. “One challenge is, of course, the cyclical nature of the logistics
industry, which calls for an excellent balance of assets and resources, a
flexible and problem-oriented IT system as well as a customer-focused service
team all the way to the end-user of the product,”
Just like many of its peers, the company is also betting on
the growing trend of outsourcing as an area where they can hitch a ride.
Customers are focusing more on what they do best and letting service providers
handle the rest. “Logically there is an outsourcing requirement for… ‘non-core functions’. We are seeing that companies are now not just ‘subcontracting’ these
services, but realising that a service provider can add significant value along
the supply chain,” says Faust.
But customers are asking more, of course, since hardly any
company can say that it has less competitive pressure than before. The pace has
quickened, and end-users are demanding more. “We are all not doing our business
in isolation anymore. It was, of course, not like that 20 years ago, but the
pace of globalisation has surely gotten faster,” says Faust. “For our customers,
it is essential to get their products in top condition with the right quality
and quantity to the intended end-user. Time to market is ever more important.”
If the whole business chain were to be more fully
integrated, there should be deeper understanding and closer partnership between
the customers and service providers like Cougar, Faust says. “A service provider
cannot be a subcontractor anymore, but must be a partner. We have carved out our
niche where we want to be in. We strongly believe that more and more customers
will follow this trend in order to execute their strategies,” he says.
Regional presence of Singapore-based logistics companies
Click on the image to view larger image
Source: Beyound Singapore Apr 2006 issue