Unfazed by its worst recession in 40 years and emerging threats from Malaysia and China, Singapore has launched a full-bore drive to become the distribution hub for all of Asia.
Peter Bradley is an award-winning career journalist with more than three decades of experience in both newspapers and national business magazines. His credentials include seven years as the transportation and supply chain editor at Purchasing Magazine and six years as the chief editor of Logistics Management.
Maybe you've never cruised across Singapore's harbor, watching the tropical sun set over waters swarming with homebuilt sampans and sleek containerships, but it's a sure bet that at least one item in your home or office has. Today, a high percentage of the goods entering or leaving Asia go through Singapore's seaport, one of the busiest in the world.
Why Singapore? Part of it's the nation's unique geographic location—an island near the southern tip of the Malay Peninsula, between the South China Sea and the Indian Ocean; but part of it's a well-orchestrated bid to become the distribution hub for all of Asia. Stung by the defection of several of its biggest ocean carrier customers to Malaysia's Tanjung containerport two years ago, Singapore is setting its sights on the broader logistics and supply chain management field—betting its future on efforts to become the region's premier transshipment hub, one that moves goods through with amazingly little friction.
And that pitch seems to be working, at least with North American businesses. Though some in Shanghai sneer that Singapore offers "logistics for beginners," that jab contains a veiled compliment. "North Americans are very comfortable in Singapore," says Harvey Donaldson, director of The Logistics Institute at the Georgia Institute of Technology. It's easy to see why: English is nearly universal (all education is conducted in English), the government bends over backward to accommodate private businesses and the nation boasts some of the most advanced telecommunications and banking systems in the Asia-Pacific region.
time to leave the island?
A 2001 survey of logistics companies in the island nation of Singapore conducted by the National University of Singapore and the Singapore Trade Development Board provided a look at logistics companies in that nation. Some of the findings:
Most of the companies are small: 45 percent of the respondents reported that they had 50 or fewer employees and nearly half reported annual revenues of under US$6 million.
About 12 percent of logistics company employees held university or technical degrees.
Supply chain software, such as warehouse or transportation management systems, was not in widespread use.
Only slightly more than a third of logistics companies in Singapore provided logistics services outside of Singapore for more than half their customers. By contrast, nearly two-thirds of foreign-owned companies performed international logistics services for more than half their customers.
Noting the flurry of merger and consolidation activity taking place among logistics companies in Singapore, the study's authors urged domestic logistics companies to look outward to develop their businesses. "Given the small and highly competitive domestic market," the report said, "logistics companies in Singapore should adopt a more outward focus in their expansion plans toward the region or even the world."
Chamber of e-commerce?
Behind this drive to expand Singapore's presence as a distribution hub is Singapore's aggressive Economic Development Board (EDB), an agency responsible for attracting business and investment to Singapore. The board has set itself the ambitious goal of building Singapore into a supply chain management "nerve center," and some are betting it wi ll succeed . "Their intention is to become the business center for the Asia-Pacific region," says Donaldson. "They have the resources and assets to do that."
As part of a broader national strategy to build a knowledge-based economy —one whose strength lies not in copra exports but in biomedical sciences, electronics, and IT and communications—the EDB has set a deadline of the year 2010 for developing Singapore into a major international integrated logistics hub. To jumpstart the process, the EDB, along with Singapore businesses and other agencies, is dangling incentives to lure both logistics service providers and customers to its shores.
Some of its initiatives have already taken root: Several major logistics players, including United Parcel Service, Exel and BAX Global, have established a major presence in Singapore, lured there in part by economic incentives. BAX Global Singapore, the international forwarder's Asia-Pacific subsidiary, for instance, has registered itself in a program called the Major Exporter Scheme, which allows companies to defer Singapore's goods and services tax on goods that are re-ex ported. (That tax wi ll jump to 5 percent from its current 4 percent next year.) "Singapore is the ultimate free trader, implementing practically no barriers to the free flow of goods across its borders" says Clayton Noble, the forwarder's vice president, logistics, Asia Pacific. He points out that Singapore has completed free trade agreements with many of the world's trade heavyweights including the United States, New Zealand, Japan, Mexico, Canada, Australia and the European Free Trade Association.
The country is also getting wired, making a big push to bring its IT infrastructure up to speed. Noble reports that the government is driving the development of an integrated and globally connected IT infrastructure designed to help companies conduct e-commerce and e-business. Already in place, he says, are efficient trade and IT facilitation systems such as TradeNet, TradeNet Plus and Singapore ONE.
High on the ALPS
Of course, in the logistics game, the infrastructure that really counts is the transportation network. And Singapore has kept up its end here, even in the face of its worst recession in 40 years. The country recently opened the Airport Logistics Park of Singapore, or ALPS, located at Singapore's Changi Airport. ALPS, a 64-acre free trade zone that can accommodate up to 20 third-party logistics providers, was built in hopes of attracting companies that handle high-value goods requiring fast flow through and value-added services. In addition to its proximity to the airport, ALPS boasts links to major seaport facilities.
ALPS's first tenant was Menlo Worldwide Logistics, a major California-based third-party logistics provider, which opened a regional logist ics hub there in October. In November, Exel added its name to the list, breaking ground on a $13.1 million supply chain hub scheduled for completion in August.
Though Singapore is a relatively high-cost place to do business, ALPS represents a good location for a company like Menlo, says Frank Lange, the company's director of international development. ALPS's proximity to the airport gives Menlo quick access to inbound and outbound transportation. Its free trade zone status means goods moving through are exempt from many customs requirements and taxes. As a result, Menlo reports that turnaround time is 43 percent shorter and costs are 55 percent lower than at non-ALPS facilities.
In another infrastructure upgrade, Singapore has established a chemical logistics hub, the Banyan Logistics Hub, on Jurong Island. A nearly 200-acre marine facility for chemical plants located on the island, it's part of an EDB focus on specific niche areas of logistics, including automotive, chemicals, biomedical sciences and aerospace.
Georgia's on their mind
But efforts to build a knowledge-based economy—and provide advanced logistics and supply chain management services—hinge on the availability of an educated workforce. And that could be a problem: A 2001 survey of Singapore's logistics companies conducted by the National University of Singapore (NUS) and the Singapore Trade Development Board projected a future shortage of university-trained logistics professionals.
To help plug the hole, Singapore's Economic Development Board went in search of a foreign university with which it could develop a collaborative program. It found that partner in Georgia Institute of Technology. Georgia Tech's Logistics Institute (TLI), in turn, established The Logistics Institute-Asia Pacific in conjunction with the National University of Singapore. TLI-Asia Pacific conduct s research into critical areas of logistics and offers advanced education for logistics students, including a joint master's degree program in logistics that is now completing its second year.
Under the program's terms, about 25 students from Singapore and elsewhere in Asia are offered full scholarships for an 18- month program, including a semester in Atlanta. In return, the students agree to work for at least three years in Singapore after they complete their degree program.
John J. Bartholdi, research director at The Logistics Institute at Georgia Tech as well as a staff member at The Logistics Institute Asia-Pacific, says research is underway on air cargo, ocean cargo, chemical logistics, and logistics security and efficiency. Recently, a team from the institute completed research into the logistics industry in China. (See sidebar.)
"We like to think that the research programs raise the level of logistics performance," says Bartholdi, explaining that the goal is to help bring the sort of advanced logistics practices and decision support to bear on the significant assets already available in Singapore. "We're trying to make sure we're a source of trained professionals. Plus, we attend to the higher level things—the kinds of things Georgia Tech has specialized in—the rocket science things. You succeed [in logistics] based on how intelligently you use assets. It is really a battle of IT systems and mathematical models, those that can trim expenses by 2 percent here and 6 percent there. You get better and you get faster. Singapore can no longer compete with cheap labor."
China syndrome: logistics is hot, performance is not
An executive for a major U.S. building products retailer that sources in China was mystified: Why were all the goods in ocean containers arriving depalletized? he wondered. The goods, after all, had left the factories in China on pallets.
A visit to the port revealed the cause: Lift trucks are expensive, and labor is cheap. It was more cost effective at the ports to hand load containers than to buy and make use of a lift truck.
In China today, almost everyone with a truck claims to be in the logistics business. But in many parts of the country, logistics is still in its infancy.
China, the most populous nation on earth, has the world's largest manufacturing base and may soon be the largest single market in the world. Over the last two decades, the Chinese economy has transformed itself into a market economy. The nation has invested heavily in roads, ports, airports and warehouses. Logistics operations, however, have a long way to go.
How far? Last year, a team of researchers decided to find out. Composed of members from The Logistics Institute-Asia Pacific, a collaborative venture between Georgia Tech's Logistics Institute and the National University of Singapore, and the Institute of Logistics and Transportation, which is part of the China Communications & Transportation Association, the team wanted to find out just where things stood. "There's obvious interest to Singapore and to everyone else with China's growth," says John Bartholdi, director of research for Georgia Tech's Logistics Institute. "The bottleneck there is the logistics system. It is very chaotic there now."
The survey responses came from 33 logistics companies in China —25 domestic and eight foreign. Most of the companies have already established extensive domestic networks and plan to expand further. Most of them outsource transportation services, generally using overthe-road transportation.
Though the survey results yielded a few surprises—for example, foreign logistics joint ventures had a slight edge over Chinese domestic companies in domestic transportation—the results only confirmed perceptions regarding China's general backwardness in logistics. Take warehousing, for instance: The report says that most warehousing facilities are fairly rudimentary and make little use of information technology.
The survey also identified potential impediments to further logistics development in China. Both foreign and domestic logistics providers say that the shortage of logistics professionals is one of their prime concerns. Domestic companies also worry about whether sufficient resources are available for future development. Foreign companies cite policy restrictions and regulations in China as their biggest challenge.
Most of the apparel sold in North America is manufactured in Asia, meaning the finished goods travel long distances to reach end markets, with all the associated greenhouse gas emissions. On top of that, apparel manufacturing itself requires a significant amount of energy, water, and raw materials like cotton. Overall, the production of apparel is responsible for about 2% of the world’s total greenhouse gas emissions, according to a report titled
Taking Stock of Progress Against the Roadmap to Net Zeroby the Apparel Impact Institute. Founded in 2017, the Apparel Impact Institute is an organization dedicated to identifying, funding, and then scaling solutions aimed at reducing the carbon emissions and other environmental impacts of the apparel and textile industries.
The author of this annual study is researcher and consultant Michael Sadowski. He wrote the first report in 2021 as well as the latest edition, which was released earlier this year. Sadowski, who is also executive director of the environmental nonprofit
The Circulate Initiative, recently joined DC Velocity Group Editorial Director David Maloney on an episode of the “Logistics Matters” podcast to discuss the key findings of the research, what companies are doing to reduce emissions, and the progress they’ve made since the first report was issued.
A: While companies in the apparel industry can set their own sustainability targets, we realized there was a need to give them a blueprint for actually reducing emissions. And so, we produced the first report back in 2021, where we laid out the emissions from the sector, based on the best estimates [we could make using] data from various sources. It gives companies and the sector a blueprint for what we collectively need to do to drive toward the ambitious reduction [target] of staying within a 1.5 degrees Celsius pathway. That was the first report, and then we committed to refresh the analysis on an annual basis. The second report was published last year, and the third report came out in May of this year.
Q: What were some of the key findings of your research?
A: We found that about half of the emissions in the sector come from Tier Two, which is essentially textile production. That includes the knitting, weaving, dyeing, and finishing of fabric, which together account for over half of the total emissions. That was a really important finding, and it allows us to focus our attention on the interventions that can drive those emissions down.
Raw material production accounts for another quarter of emissions. That includes cotton farming, extracting gas and oil from the ground to make synthetics, and things like that. So we now have a really keen understanding of the source of our industry’s emissions.
Q: Your report mentions that the apparel industry is responsible for about 2% of global emissions. Is that an accurate statistic?
A: That’s our best estimate of the total emissions [generated by] the apparel sector. Some other reports on the industry have apparel at up to 8% of global emissions. And there is a commonly misquoted number in the media that it’s 10%. From my perspective, I think the best estimate is somewhere under 2%.
We know that globally, humankind needs to reduce emissions by roughly half by 2030 and reach net zero by 2050 to hit international goals. [Reaching that target will require the involvement of] every facet of the global economy and every aspect of the apparel sector—transportation, material production, manufacturing, cotton farming. Through our work and that of others, I think the apparel sector understands what has to happen. We have highlighted examples of how companies are taking action to reduce emissions in the roadmap reports.
Q: What are some of those actions the industry can take to reduce emissions?
A: I think one of the positive developments since we wrote the first report is that we’re seeing companies really focus on the most impactful areas. We see companies diving deep on thermal energy, for example. With respect to Tier Two, we [focus] a lot of attention on things like ocean freight versus air. There’s a rule of thumb I’ve heard that indicates air freight is about 10 times the cost [of ocean] and also produces 10 times more greenhouse gas emissions.
There is money available to invest in sustainability efforts. It’s really exciting to see the funding that’s coming through for AI [artificial intelligence] and to see that individual companies, such as H&M and Lululemon, are investing in real solutions in their supply chains. I think a lot of concrete actions are being taken.
And yet we know that reducing emissions by half on an absolute basis by 2030 is a monumental undertaking. So I don’t want to be overly optimistic, because I think we have a lot of work to do. But I do think we’ve got some amazing progress happening.
Q: You mentioned several companies that are starting to address their emissions. Is that a result of their being more aware of the emissions they generate? Have you seen progress made since the first report came out in 2021?
A: Yes. When we published the first roadmap back in 2021, our statistics showed that only about 12 companies had met the criteria [for setting] science-based targets. In 2024, the number of apparel, textile, and footwear companies that have set targets or have commitments to set targets is close to 500. It’s an enormous increase. I think they see the urgency more than other sectors do.
We have companies that have been working at sustainability for quite a long time. I think the apparel sector has developed a keen understanding of the impacts of climate change. You can see the impacts of flooding, drought, heat, and other things happening in places like Bangladesh and Pakistan and India. If you’re a brand or a manufacturer and you have operations and supply chains in these places, I think you understand what the future will look like if we don’t significantly reduce emissions.
Q: There are different categories of emission levels, depending on the role within the supply chain. Scope 1 are “direct” emissions under the reporting company’s control. For apparel, this might be the production of raw materials or the manufacturing of the finished product. Scope 2 covers “indirect” emissions from purchased energy, such as electricity used in these processes. Scope 3 emissions are harder to track, as they include emissions from supply chain partners both upstream and downstream.
Now companies are finding there are legislative efforts around the world that could soon require them to track and report on all these emissions, including emissions produced by their partners’ supply chains. Does this mean that companies now need to be more aware of not only what greenhouse gas emissions they produce, but also what their partners produce?
A: That’s right. Just to put this into context, if you’re a brand like an Adidas or a Gap, you still have to consider the Scope 3 emissions. In particular, there are the so-called “purchased goods and services,” which refers to all of the embedded emissions in your products, from farming cotton to knitting yarn to making fabric. Those “purchased goods and services” generally account for well above 80% of the total emissions associated with a product. It’s by far the most significant portion of your emissions.
Leading companies have begun measuring and taking action on Scope 3 emissions because of regulatory developments in Europe and, to some extent now, in California. I do think this is just a further tailwind for the work that the industry is doing.
I also think it will definitely ratchet up the quality requirements of Scope 3 data, which is not yet where we’d all like it to be. Companies are working to improve that data, but I think the regulatory push will make the quality side increasingly important.
Q: Overall, do you think the work being done by the Apparel Impact Institute will help reduce greenhouse gas emissions within the industry?
A: When we started this back in 2020, we were at a place where companies were setting targets and knew their intended destination, but what they needed was a blueprint for how to get there. And so, the roadmap [provided] this blueprint and identified six key things that the sector needed to do—from using more sustainable materials to deploying renewable electricity in the supply chain.
Decarbonizing any sector, whether it’s transportation, chemicals, or automotive, requires investment. The Apparel Impact Institute is bringing collective investment, which is so critical. I’m really optimistic about what they’re doing. They have taken a data-driven, evidence-based approach, so they know where the emissions are and they know what the needed interventions are. And they’ve got the industry behind them in doing that.
The global air cargo market’s hot summer of double-digit demand growth continued in August with average spot rates showing their largest year-on-year jump with a 24% increase, according to the latest weekly analysis by Xeneta.
Xeneta cited two reasons to explain the increase. First, Global average air cargo spot rates reached $2.68 per kg in August due to continuing supply and demand imbalance. That came as August's global cargo supply grew at its slowest ratio in 2024 to-date at 2% year-on-year, while global cargo demand continued its double-digit growth, rising +11%.
The second reason for higher rates was an ocean-to-air shift in freight volumes due to Red Sea disruptions and e-commerce demand.
Those factors could soon be amplified as e-commerce shows continued strong growth approaching the hotly anticipated winter peak season. E-commerce and low-value goods exports from China in the first seven months of 2024 increased 30% year-on-year, including shipments to Europe and the US rising 38% and 30% growth respectively, Xeneta said.
“Typically, air cargo market performance in August tends to follow the July trend. But another month of double-digit demand growth and the strongest rate growths of the year means there was definitely no summer slack season in 2024,” Niall van de Wouw, Xeneta’s chief airfreight officer, said in a release.
“Rates we saw bottoming out in late July started picking up again in mid-August. This is too short a period to call a season. This has been a busy summer, and now we’re at the threshold of Q4, it will be interesting to see what will happen and if all the anticipation of a red-hot peak season materializes,” van de Wouw said.
The report cites data showing that there are approximately 1.7 million workers missing from the post-pandemic workforce and that 38% of small firms are unable to fill open positions. At the same time, the “skills gap” in the workforce is accelerating as automation and AI create significant shifts in how work is performed.
That information comes from the “2024 Labor Day Report” released by Littler’s Workplace Policy Institute (WPI), the firm’s government relations and public policy arm.
“We continue to see a labor shortage and an urgent need to upskill the current workforce to adapt to the new world of work,” said Michael Lotito, Littler shareholder and co-chair of WPI. “As corporate executives and business leaders look to the future, they are focused on realizing the many benefits of AI to streamline operations and guide strategic decision-making, while cultivating a talent pipeline that can support this growth.”
But while the need is clear, solutions may be complicated by public policy changes such as the upcoming U.S. general election and the proliferation of employment-related legislation at the state and local levels amid Congressional gridlock.
“We are heading into a contentious election that has already proven to be unpredictable and is poised to create even more uncertainty for employers, no matter the outcome,” Shannon Meade, WPI’s executive director, said in a release. “At the same time, the growing patchwork of state and local requirements across the U.S. is exacerbating compliance challenges for companies. That, coupled with looming changes following several Supreme Court decisions that have the potential to upend rulemaking, gives C-suite executives much to contend with in planning their workforce-related strategies.”
Stax Engineering, the venture-backed startup that provides smokestack emissions reduction services for maritime ships, will service all vessels from Toyota Motor North America Inc. visiting the Toyota Berth at the Port of Long Beach, according to a new five-year deal announced today.
Beginning in 2025 to coincide with new California Air Resources Board (CARB) standards, STAX will become the first and only emissions control provider to service roll-on/roll-off (ro-ros) vessels in the state of California, the company said.
Stax has rapidly grown since its launch in the first quarter of this year, supported in part by a $40 million funding round from investors, announced in July. It now holds exclusive service agreements at California ports including Los Angeles, Long Beach, Hueneme, Benicia, Richmond, and Oakland. The firm has also partnered with individual companies like NYK Line, Hyundai GLOVIS, Equilon Enterprises LLC d/b/a Shell Oil Products US (Shell), and now Toyota.
Stax says it offers an alternative to shore power with land- and barge-based, mobile emissions capture and control technology for shipping terminal and fleet operators without the need for retrofits.
In the case of this latest deal, the Toyota Long Beach Vehicle Distribution Center imports about 200,000 vehicles each year on ro-ro vessels. Stax will keep those ships green with its flexible exhaust capture system, which attaches to all vessel classes without modification to remove 99% of emitted particulate matter (PM) and 95% of emitted oxides of nitrogen (NOx). Over the lifetime of this new agreement with Toyota, Stax estimated the service will account for approximately 3,700 hours and more than 47 tons of emissions controlled.
“We set out to provide an emissions capture and control solution that was reliable, easily accessible, and cost-effective. As we begin to service Toyota, we’re confident that we can meet the needs of the full breadth of the maritime industry, furthering our impact on the local air quality, public health, and environment,” Mike Walker, CEO of Stax, said in a release. “Continuing to establish strong partnerships will help build momentum for and trust in our technology as we expand beyond the state of California.”
That result showed that driver wages across the industry continue to increase post-pandemic, despite a challenging freight market for motor carriers. The data comes from ATA’s “Driver Compensation Study,” which asked 120 fleets, more than 150,000 employee drivers, and 14,000 independent contractors about their wage and benefit information.
Drilling into specific categories, linehaul less-than-truckload (LTL) drivers earned a median annual amount of $94,525 in 2023, while local LTL drivers earned a median of $80,680. The median annual compensation for drivers at private carriers has risen 12% since 2021, reaching $95,114 in 2023. And leased-on independent contractors for truckload carriers were paid an annual median amount of $186,016 in 2023.
The results also showed how the demographics of the industry are changing, as carriers offered smaller referral and fewer sign-on bonuses for new drivers in 2023 compared to 2021 but more frequently offered tenure bonuses to their current drivers and with a greater median value.
"While our last study, conducted in 2021, illustrated how drivers benefitted from the strongest freight environment in a generation, this latest report shows professional drivers' earnings are still rising—even in a weaker freight economy," ATA Chief Economist Bob Costello said in a release. "By offering greater tenure bonuses to their current driver force, many fleets appear to be shifting their workforce priorities from recruitment to retention."