Singapore's transport and logistics sector aims for higher growth, gears up for global challenges

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 overseas sales.

“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.”

Trends, challenges

“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 book, 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 SembCorp Logistics.

“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,” says Lai, 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 markets.
Lai: Singapore’s logistics sector is a brand name. We have a long history of being a logistics hub	Loi: If you want to get freight volume, you have to be in China; there’s no choice	Poh: Smaller companies are much more flexible

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 operating officer.

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 intended end-user

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,” he says. 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