Over the decades, we have seen isolated incidents that have caused minimal and temporary supply chain issues, but then came 2020 on the heels of the Covid-19 pandemic and the global supply chain network as we knew it was forever changed. Two years on, alongside ongoing US-China trade tensions, rising nationalism, and now the Ukraine-Russia war, global supply chain woes continue.
According to the Monetary Authority of Singapore (MAS), being an upstream manufacturer with geographically diversified imports, Singapore’s trade was not materially affected by pandemic-related disruptions during its peak in 2021 compared to other Asian markets. Despite this, Singaporean businesses were not exempt from delays in shipments of raw material supplies and higher freight costs stemming from worldwide shortages in containers and vessels and unprecedented levels of port congestion.
As the world’s largest transshipment hub, shipping agents in Singapore found themselves in daily battles to get their cargo onboard, dealing with various issues from overbooked vessels to having their load bumped off by higher-paying companies. During the pandemic, a shipment of frozen lobsters from Boston to Singapore took over two months instead of 35 days, and shipping costs from the US and Perth to Singapore increased three and six times, respectively.
Prolonged disruptions on the horizon have forced many businesses in Singapore, like elsewhere, to rethink a just-in-time supply chain strategy by stockpiling and diversifying their suppliers. There is increasing talk of near and re-shoring to improve supply chain and logistics resilience. But supply chain adjustments can be timely and costly. They require sustainable, well-thought-out approaches that tap all the key sources of competitive advantage beyond cost savings to include innovation, quality, sustainability, speed, and risk management.
As the Asian Trade Centre observed, every C-suite suddenly needed to become an expert in the movement of goods and associated services. This phenomenon is at the heart of our latest book — Profit from the Source — which puts the CEO in the driver’s seat of a company’s supplier relations.
Today’s CEO must covet their procurement like never before
While in the past, CEOs were found to spend just 1% of their time with suppliers, that ship has sailed! When the links between companies and their suppliers have either been weaponised or compromised by disruptive events and happenings, business heads need to rethink how they manage their suppliers.
It starts with bringing procurement into high-level, long-term decision-making. As owners of the company’s relationship with its suppliers, no other business function offers the same holistic view of the company — from suppliers who provide the organisation with raw materials and components to consumers who buy the finished product.
Fortunately for CEOs and business leaders in Singapore, the government’s efforts to expand its services and infrastructure to meet the evolving challenges of global trade offer viable solutions to manage supply chain disruptions.
Last year, the government of Singapore announced a $18 million Supply Chain 4.0 Initiative to integrate digital and automated solutions such as AI to assist small and medium-sized enterprises in better cope by making changes ahead of time or forecasting demand for new products in the event of any disruptions to their supply chains. Companies from various sectors, from pharmaceuticals to fast-moving consumer goods and electronics, have demonstrated an interest in participating.
In the middle of last year, the Singapore Trade Data Exchange (SGTraDex) was launched as a public-private partnership (PPP) to facilitate the secure sharing of information between the supply chain ecosystem participants via a common data corridor. This will enable logistic players and shippers to optimise cargo handling and operations by building end-to-end container flows visibility, improving container utilisation, and tackling bottlenecks at warehouses and depots. SGTraDex will also make green and sustainable trade finance easier by digitising verification data, such as sustainability certificates, and making them more easily accessible for participants along the supply chain.
To benefit from stronger collective resilience in the future, CEOs and their procurement functions, especially across Singapore’s small and medium enterprises (SMEs) and manufacturing sectors, must be plugged into these digital supply chain ecosystems.
In February last year, the Economic Development Board (EDB) and Enterprise Singapore announced the formation of the Southeast Asia Manufacturing Alliance (SMA), a tripartite agreement with private sector partners to help businesses grow their manufacturing footprint in Southeast Asia.
The SMA’s first three Strategic Partner companies are CapitaLand, Sembcorp Development and Gallant Venture. These companies operate over 10 industrial parks across Malaysia, Vietnam, and Indonesia.
The initiative will help Singaporean SMEs and suppliers diversify their supply chain networks and create opportunities to offer their products and services to global manufacturers through co-innovation, joint product development and joint investments.
An intelligent CEO’s guide to getting maximum value from supply chain trends
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Profit from the Source outlines principles to help business leaders take advantage of these trends within Singapore’s business and trade ecosystems, some of which we’ll explore here. These principles are designed to guide companies to better engage with their suppliers for their own needs and to work with their network of suppliers to strengthen and evolve the collective ecosystem.
Forge dynamic relationships with the most important suppliers: The relationship between procurement and suppliers must be mutually beneficial rather than be an arm-wrestling match to see who can squeeze the best deal. Working with suppliers rather than against them can make all the difference in times of disruption where only the most vital relationships will see the company through.
Achieve breakthrough innovations by pooling R&D resources with suppliers: Business leaders face increasing pressure to offer ‘the next best thing’ in products. As the company and its suppliers engage in R&D, why not invest in it together to co-develop innovations that give them a first-mover advantage in the market?
Deliver unbeatable quality by joining forces with suppliers to wage war on errors: Achieving a “zero defects” goal that applies to every stage of the product lifecycle from design to production and distribution is best achieved through collaboration with suppliers.
Become truly sustainable by allying with suppliers to meet environmental, social, and governmental (ESG) standards: Companies that work with their suppliers to develop sustainable products and services are more likely to avoid sustainability breaches and prosper in the new ESG-conscious world.
Go twice as fast by collaborating with, not competing against, your suppliers: The same-day delivery and instant gratification era call for working closely with suppliers to reconfigure the procurement, supply chain, and product development processes.
By applying these principles, CEOs and business leaders, alongside their procurement teams, can continue to thrive in volatile markets and fully benefit from Singapore’s digitised and expanded supply chain opportunities. They will help businesses generate extraordinary value while building the competitiveness of their supplier networks and optimising the entire value chain, including domestic supply chains.
The smart CEO is ultimately one that empowers its procurement to keep abreast of key supply chain opportunities and formulate faster, better, safer and more sustainable ways to source and make products.
Alex Dolya is managing director and partner at Boston Consulting Group; Chittaranjan Jha is a partner and associate director at Boston Consulting Group