Mr Lim Hng Kiang at IE Singapore's Logistics Forum cum Book Launch

OPENING ADDRESS BY MR LIM HNG KIANG, MINISTER FOR TRADE AND INDUSTRY, AT ie singapore’s LOGISTICS FORUM CUM BOOK LAUNCH, MONDAY, 10 APRIL 2006, 9.30AM, Hotel INTERCONTINENTAL BallROOM 3, level 3

Distinguished Speakers and Panel Members,

Ladies and Gentlemen,

Introduction

I am pleased to be here this morning at the forum on “Opportunities and Challenges in the Asia Logistics Industry”. Logistics has always played a vital role in Singapore’s economy. Our supply chain management systems are among the most sophisticated in the world.This has ensured that Singapore maintains its position as a leading logistics hub in Asia, and continues to attract global traders and manufacturers to base their regional operations here. It is therefore critical for the industry to be forward looking so that Singapore can stay ahead and remain relevant in the global context.

Sinagapore As A Global Transport & Logistics Hub

SINGAPORE AS A GLOBAL TRANSPORT & LOGISTICS HUBSingapore offers one of the best sea and air connectivity in the world. Last year, 200 shipping lines called on Singapore, connecting us to 600 ports across 123 countries around the world. Singapore was the world’s largest container port in 2005, handling 23.2 million twenty-foot equivalent units (TEUs).There are also more than 4,000 weekly scheduled flights connecting us to over 180 cities globally, thus making us the Asia’s fourth largest cargo airport in 2005.

Logistics is a key enabler of our economy.In 2004, the transport and logistics industry contributed 9.1 percent of Singapore’s GDP and employed over 110,000 workers. Total business spending in the industry was a record S$460million, representing a 7 per cent increase over the previous year.

There are over 8,000 logistics establishments in Singapore, including 17 of the world’s top 25 Third Party Logistics (or 3PL) companies.Two home-grown companies, APL Logistics and Sembcorp Logistics, were also named among the world’s top 25 3PL companies in a survey by Global Logistics & Supply Chain Strategies Magazine in May 2005.

Today, the achievement of our logistics industry is the result of our companies’ continuous efforts to upgrade their infrastructure and adopt the latest technological capabilities.Our world-class infrastructure has given the logistics industry an excellent base, to hone our capabilities and compete effectively in the global environment.It is vital that our logistics companies continue to evolve and develop their strengths to meet the needs of high growth markets overseas.

Global Trends In The Logistics Industry

Let me now touch on some global trends affecting the logistics industry.The first is the outsourcing of non-core operations by the multinational corporations. According to the World Trade Organisation, world trade grew two-fold from 1994 to 2004, reaching US$18.6 trillion.The rapid growth of world trade has important implications for 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. From call centres and data processing in India, to manufacturing plants in China and Vietnam, outsourcing is now an important part of MNCs’ competitive growth strategies.

DELL is an example of an MNC that has successfully outsourced its supply chain management to service providers. This not only enabled them to keep costs low in the supply chain, but also supported their business strategy, which emphasised customer service.As Asia becomes the factory of the world, more and more MNCs will be relocating their production lines here. This outsourcing trend will therefore provide excellent opportunities for our 3PL players to serve the MNCs.

The second trend is the growing demand among MNCs for partnership with Singapore’s logistics companies.Singapore is strategically located at the crossroads of major trading routes and in the heart of fast-growing Asia. Our strategic location has given us the competitive advantage to be a key redistribution centre and strategic launch pad for global companies to reach out to Asian markets. Nearly 180 global traders have therefore chosen to base their procurement and marketing activities in Singapore. In addition, Singapore is home to six automotive regional distribution centres (or RDC).

To expand into high growth markets such as India and China, the MNCs will need to partner reliable and experienced logistics players with a good understanding of the region. It makes business sense for them to tap on the strengths of our Singapore-based logistics players to complement their RDCs in Singapore. This is because Singapore logistics companies have established comprehensive distribution networks, excellent track record in terms of quality, speed and flexibility, and advanced IT capabilities to support their growth and expansion in Asia.

For instance, the YCH Group, a home-grown logistics player, is the selected RDC for Louis Vuitton Moet Hennessy. They are responsible for transporting all the Dom Perignon & Veuve Cliquot champagnes bubbling to the rest of Asia. As a form of customised service for this client, YCH provides Radio Frequency IDentification (RFID) and tracks the shipment of Hennessy XOs across Asia by individual serial numbers.

The third trend is the increasing consolidation within the logistics industry.In January 2006, Kuehne & Nagel’s ₤440 million acquisition of ACR Logistics led to an exponential increase of their network in Eastern Europe and Asia. This is the latest wave of acquisitions and consolidations that has hit the logistics industry. Other examples include the purchase of Exel by DHL, and BAX Global by Schenker.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 up to the challenge by forming strategic alliances with other players, they run the risk of being nudged out of the competition.

Some of our companies are doing well in this respect.APL Logistics, for example, entered into a joint venture in last December with European logistics specialist, Christian Salvesen, to provide global supply chain services for their European customers. Last month, Accord Express Holdings merged with Korean company, CJ Global Logistics Service, to create a larger entity that is expected to boost its market position in Asia and move it into the world’s top 25 ranking.

Logistics companies looking forward to venture abroad may consider working with IE Singapore through the International Partners Programme.The programme facilitates and supports the formation of alliances among local companies venturing overseas. By working together, companies can offer a more complete suite of services and a wider geographical coverage to their clients overseas. Such partnerships among our Singapore logistics companies will increase their chances of success overseas.

Book Launch - Logistics Success Stories

In view of the global trends in the logistics industry, it is therefore timely to launch the book, “Movers and Shakers - showcasing logistics, Singapore style”. The first of its kind on the Singapore logistics industry, this book profiles the internationalisation success and supply chain capabilities of 17 3PL and logistics-related companies. We hope that their experience would provide interesting insights and inspire more Singapore logistics companies to seek overseas growth and partnerships. This will also be a good handbook for manufacturers and traders who are looking for Singapore logistics players to fulfil their logistics needs in Singapore, Asia and beyond.

Conclusion

On this note, I would like to wish all participants a most fruitful and rewarding forum ahead.

Thank you.