The Singapore Surge

With both China and India losing ground within the Association of Southeast Asian Nations (ASEAN) this past year, it appears that tiny Singapore is regaining business from U.S. multinationals seeking a stable shipping and sourcing alternative.

China has recently been hard hit by a credit squeeze and a collapse in export growth. Meanwhile, India’s economy has entered a period of economic turbulence, with structurally high inflation as well as large fiscal and current-account deficits. But because Singapore made logistics a priority long ago, it remains on the cutting edge of globalization.

What has been the secret to Singapore’s resiliency? A great seaport and airport are two obvious answers, but its strategic location is key, if not paramount.

Kelvin Wong, Singapore Economic Development Board’s Executive Director for Logistics, told SCMR in an interview that multinationals are keen to capture the Pacific Rim opportunities, but that the Asian geography is very complex, with little standardization of regulations, business practices, and infrastructure development.

“In order to effectively distribute to these emerging end markets, logistics companies and manufacturers need to build up their pan-Asian expertise in areas such as customs and transportation networks,” says Wong.

The combination of a strong talent pool, access to service providers and consulting firms and supply chain research capabilities add to the attractiveness of Singapore. Consider the following:

• Third-party logistics providers (3PLs): Singapore is a prime location for major 3PL firms, with 20 of the top 25 global logistics players conducting operations there—with most of them setting up regional or global headquarters on the island. For example, UPS has a 300-person Asia Pacific headquarters in Singapore with the local team overseeing regional decision making that covers 15 countries including China and India. Kuehne+Nagel’s 26-man competence center in Singapore has worked on regional and global contracts with customers such as General Electric, Philips Healthcare, P&G, and British America Tobacco. Solutions provided could include distribution network optimization, inventory optimization, and transportation route planning.
• Strategy & management consulting firms: Consulting firms like McKinsey & Company, Boston Consulting Group, and Accenture have been investing steadily in Singapore as a base for reports and research on Pan-Asian supply chain trends and forecasts.
• Tax consulting firms: Both PricewaterhouseCoopers and KPMG use Singapore to offer “value chain transformation” solutions with capabilities including tax, supply chain management, and risk management to support organizations to align their tax, legal and operating models during supply chain transformation.
• Carriers: The presence of leading air and ocean carriers using Singapore as a hub to serve their regional needs have enabled manufacturers to negotiate and secure global freight deals. Examples include Maersk Line, OOCL, Cargolux, and Lufthansa. In addition, carriers like NOL and NYK have also established their global contracting teams or pricing control centers here.
• Education: Singapore’s location has also proven to be a strong attraction to logistics and supply chain intellectual property and represents a hub where talent is harnessed and developed to drive success in Asia. It’s home to a strong base of qualified talent with academic background in industrial systems engineering, decision sciences, operations research, and operations management.

China and India represent the foundation for emerging national economies (BRICs) and no one is counting them out in the supply chain arena. However, shippers with an eye for constancy and reliable resources understand why the World Bank ranks Singapore number one in logistics capability.

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