Mr Lim Hng Kiang at the Retail & Food Services Productivity Conference, 20 Sep 2011

SPEECH BY MINISTER FOR TRADE AND INDUSTRY MR LIM HNG KIANG AT THE RETAIL & FOOD SERVICES PRODUCTIVITY CONFERENCE AT RAFFLES CITY CONVENTION CENTRE ON 20 SEPTEMBER 2011 AT 9.10 AM

Distinguished Guests,

Ladies and Gentlemen,

Good morning.

I am pleased to be here with you for the Retail & Food Services Productivity Conference. This conference is one of the key events in our national productivity agenda. The Retail and Food Services sectors are important ones, as they play key roles as an employer and contributor in our economy and society. These two sectors support the tourism industry and contribute to the Singapore’s reputation as a modern, cosmopolitan city to work, live and play in.

National Productivity Drive

In the past few years, Singapore’s economic growth has been driven by labor force growth as one of the key drivers. This is not sustainable. Last year, the Government set the target of improving productivity by 2 to 3 per cent each year for the next ten years as the key driver of our economic growth going forward. To achieve this target, the Government established the National Productivity & Continuing Education Council (or NPCEC) to spearhead the national productivity drive. The Government also set up the National Productivity Fund to support this push to improve productivity levels across key sectors of Singapore’s economy.

The Council has endorsed productivity plans for ten industry sectors

[1]

which include both Retail and Food Services sectors. As I said just now, you play a vital role in Singapore’s economy. Together, the two sectors generate $5.7 billion in value added – about 2.2 per cent of Singapore’s GDP. These sectors also provide jobs for many workers. There are about 24,000 establishments in the two sectors employing 190,000 workers

[2]

.

There is room for these sectors to grow further. The productivity levels of retail and food services, measured by value added (VA) per worker, are less than half the national average of $89,800. In retail in fact, VA per worker is only $37,000. It is even lower for food services, where VA stands at only about $22,300.

Importance Of Raising Productivity In Retail And Food Services

Like the rest of the economy operating in a tight labor market, the retail and food services sectors cannot continue to rely on labor force growth alone to meet increasingly demanding local customers, tourists and business visitors. With rising business cost, it is critical for the retail and food service companies to improve their efficiency and to raise productivity. Given the importance of the retail and food services sectors, the Government has set aside more than $160 million over the next five years to drive productivity improvements in these two sectors.

Broadly, the productivity plans aim to equip companies in the two sectors with the capabilities, knowledge and tools in three areas - process improvement; manpower development and deployment; as well as building up a culture of productivity and continuous improvement. To date, these plans have supported 80 productivity improvement projects with a funding of $6.7 million.

Let me elaborate on each of these areas.

Improving Business Processes through the use of technology

First, on process improvement, there is much that can be done through greater technology adoption. Traditionally, retail and food services have been heavily-reliant on manual operations. Technology can help these companies to simplify processes and improve efficiency at different stages of their operations – from the point-of-sales to backend inventory and supply chain management.

For example, restaurants can empower their customers and simplify the process of taking reservations by using online reservation systems. With the click of a button, customers can indicate their preferences and obtain a confirmation of their table reservations at their convenience.

In restaurants such as Sakae Sushi, a mobile wireless ordering system allows customers to browse the menu and submit their orders directly to the kitchen. The orders are also automatically captured into the Point-of-Sale (POS) system as well as the kitchen display system for the chefs to prepare their food. Their employees can even process credit card payments at the customer’s table using an iPod and a small printer. As a result, the companies have experienced an improvement in turnaround time, leading to faster and better customer service.

In the area of food preparation, restaurants can leverage on various automation technologies to improve consistency, speed up food preparation, reduce manual labor and optimize kitchen space. For example, restaurants such as Ruyi and Lerk Thai use automated woks for cooking dishes like fried rice. Restaurant chains Paradise Group and Pu Tien have set up automated central kitchens to support their food preparation operations.

In the retail sector, long queues at cashiers may become a thing of the past with the introduction of mobile Point-of-Sale (mPOS) devices. Such systems could allow sales staff to check inventory status, access customer information, and process check-out anywhere in the store. These systems could provide a differentiated customer experience for the company. For example, Apple in the US has successfully deployed the mPOS system to eliminate long queues and increased sales with a superior in-store experience. Back home, Metro is also exploring the mPOS system with further enhancements to empower their sales staff and to provide this differentiated customer experience. Metro is also developing an iPhone-based application for customers to make purchases using their smartphones.

To help companies adopt such technological improvements, the NPCEC has also introduced the Productivity and Innovation Credit (PIC) scheme. Businesses can enjoy 400 per cent tax deduction up to $400,000 of their expenditures in each of the six broad categories of investment for productivity. The Enterprise Development Centers (EDC) have organized PIC clinics, with the support from the Inland Revenue Authority of Singapore (IRAS) and SPRING, to advise SMEs on how to tap on the PIC Scheme. The PIC Clinics have been well-received. More than 250 small and medium enterprises have attended the clinics since April 2011.

Workforce Development

The second area with a large potential for improvement is manpower development and deployment. It is also one of the productivity improvement levers identified by a benchmarking study done by SPRING, which I will elaborate later. The nature of retail and food services is such that there are significant fluctuations in customer traffic and business volumes, with extreme peaks and troughs. But it is not practical or viable for companies to maintain a sizeable staff to cater for the peaks, as this would add to the costs significantly. The tight labor situation and the high turnover rate make it even more difficult to maintain such staffing levels.

Many companies employ a significant proportion of part-timers. But unlike countries like Japan, Singapore does not have a stable part-time pool and many of the part-timers are not adequately trained. This in turn affects service quality and lowers customer satisfaction.

One solution that has been identified is to pool these part-timers, provide them with proper training and offer better employment benefits similar to those in full-time employment. Proper training will raise their skills and service quality. Better benefits such as medical insurance and employer CPF contribution will make it more attractive for those who are currently not working, such as students and homemakers seeking to return to the workforce, to join the part-time workforce and for the existing part-timers to stay longer in the labor market. Pooling these part-timers will provide economies of scale for training and benefits, as well as provide greater flexibility in scheduling their deployment. Restaurants and retailers, especially the smaller ones, can then tap on this pool for their manpower needs.

SPRING, WDA, NTUC and a manpower service provider are currently working together to pilot this concept of a pool of part-timers in selected shopping malls. The response to date is encouraging - 50 retail and food services companies have signed up for this initiative, and they can tap on a growing pool of some 1,300 part-timers.

Ladies and gentlemen, I have touched on a few areas that your sectors can work on to improve productivity. There are also Government assistance schemes to support you in your productivity improvement efforts. All the information on these schemes are consolidated at the Productivity@Work website. I would like to encourage all of you to visit this website to find out more.

Knowledge Is Essential To Build A Culture Of Continuous Improvement

To keep up with today’s rapidly evolving economy, we cannot rely on what we know today. We need to keep abreast with the latest technologies, innovations, best practices and trends. Your ability to stand ahead of your competitors is determined by the speed that you can learn and adapt. Companies should seek to foster a culture of continuous learning and improvements.

For continuous improvements to be made, it is vital to have regular assessments on performance. To help companies compare their performance with their competitors in the same sector or with the best-in-class performers internationally, SPRING has commissioned an industry-wide benchmarking study for the retail and food services sectors. The study also identifies best practices that can be emulated.

The interim findings show that the retail and food services industries in Singapore is on par with other major international cities in terms of two measures - sales per employee and sales per square foot. However, the higher sales have not translated correspondingly into higher value and profits.

The study reveals that companies in Singapore tend to focus on quick solutions to drive their top-lines, such as opening more outlets or offering discounts. But they have not paid enough attention on improving their business operations, identifying critical bottlenecks and developing capabilities for long-term sustainable growth. These include leadership, operational efficiency, workforce development and customer management. The Boston Consulting Group, which conducted the study, will be sharing more details of the study later today.

Conclusion

This Retail and Food Services Productivity Conference is an opportune occasion for all of us to raise awareness in the retail and food service industries on the concept of productivity. By having leading companies, both local and overseas, share their experiences and best practices, we can draw insights on how we can similarly take action to improve on our operations and create a productive work culture.

The global economic outlook remains uncertain, and consumer confidence and demand will likely be affected. It will be challenging in the months ahead, but I am confident that Singapore companies will continue to make efforts to stay competitive by being more productive.

I wish all of you a fruitful and insightful discussion ahead. Thank you.

[1] These are Electronics, Precision Engineering, General Manufacturing, Construction, Retail, Food Services, Hotels, Logistics & Storage, Transport Engineering, and Healthcare. In addition, the NPCEC has endorsed the productivity blueprint for the Landscape industry, which is part of the Admin & Support Services sector.

[2] Based on 2009 statistics from Department of Statistics