LSCMS Blog

The government procurement process is once again under scrutiny with the current cases involving former Singapore Civil Defence Force (SCDF) Commissioner Peter Lim and former Central Narcotics Bureau director Ng Boon Gay.

Both cases are allegedly linked to tenders awarded to a company that supplies IT-related products and services to several government agencies.

However, the Ministry of Finance assured the public that there aren’t any issues with the procurement rules and guidelines for the public sector.

“The review affirmed the public sector procurement rules and guidelines were fundamentally sound,” a spokesperson told TODAY newspaper a Singapore daily.

He added that government agencies are required to put in place adequate internal controls and segregation of duties when appointing officers to carry out procurement function.

Despite this, some agencies have tightened their procurement the rules and guidelines set by MOF.

Apple has recently revealed its list of global suppliers for the first time, vowing to deal with worker abuses and deflect criticism of its ignorance to poor working conditions in a mostly Asian supply chain.

Unveiling the names of the 156 companies of the company’s supply chain was an unusual move for Apple, which is known to be notoriously secretive.

Its recent supply chain audit also revealed that only 38% of the company’s suppliers adhered to its internal standard of a 60-hour, 6-day work week.

Ishan Palit, CEO of the product services division at TÜV SÜD, a provider of testing, inspection and certification services, shared that this revelation demonstrated the “severity and prevalence of inhumane working conditions within the global supply chains and the drastic requirement for immediate action”.

Yet, this move by Apple also placed the spotlight on the challenges of securing supply chain integrity, recognising that there’s a need to take control.

So what are some lessons that the supply chain industry can learn from this unprecedented move by Apple?

According to Palit “Standards such as SA8000® and BSCI have developed into effective tools to address these issues in a balanced and human manner, allowing organisations to educate the young workers and re-integrate them into society,” he said.

Palit also added that putting in place such a standard to conduct on-site audits to ensure compliance from factories is necessary. Improvements and corrections can then be identified and put into practice, which brings social, branding, productivity and risk management benefits.

“For example, it ensures workers’ health and safety, which helps boosts production efficiency, facilitates further penetration into international markets, and protects brands against the often irreparable consequences of a scandal,” he said.

In the latest Drewry report, it was mentioned that shippers should not lose sleep over the recent, short-lived jump in spot rates, but ought instead focus on ways to mitigate the risk of another sudden capacity crunch later in the year, urges Drewry Maritime Research.

Freight rates on east-west trades have been in the ascendancy of late. Drewry’s Hong Kong-Los Angeles container rate benchmark, as published in the Container Freight Rate Insight, leapt 28 percent in the first week of the year. The benchmark rose US$396 to US$1,832 per forty-foot container (FEU) and successfully sustained this level into the second week. Transpacific Stabilisation Agreement (TSA) carriers have been successful in forcing through their intended US$400 per FEU rate increases.

Shipping lines have had similar success on the Asia-Europe trade. The World Container Index (WCI) benchmark rate between Shanghai and Rotterdam soared 41 percent in the first two weeks of January to US$1,335 per FEU. The increase of US$391 per FEU was in line with carriers’ intended peak season surcharge (PSS) of US$400 per FEU. The WCI is a joint venture between Drewry and exchange specialist Cleartrade.

Buoyant shipping volumes in advance of Lunar New Year factory closures in Asia have filled ships to bursting, causing most carriers to roll containers. Some shipping lines have reported load factors in excess of 100 percent, so emboldening aggressive rate hikes.

“The big question on everyone’s minds is how sustained the rates revival will prove and what this means for 2012 transpacific contract rates?” asked Martin Dixon, research manager of Drewry’s Container Freight Rate Insight. “Once the pre-Chinese New Year rush recedes later this month spot rates will retreat back to December levels, unless carriers take action to remove surplus capacity from the trade. Shippers would be well advised to wait a few weeks before commencing contract negotiations.”

Most transpacific freight contracts run from May to April. In 2011 shippers and carriers settled at contract rates at or below the previous year’s level. However, this year shippers can expect to secure much lower shipping costs given the weak state of the container shipping market.

For instance, Drewry’s Hong Kong-Los Angeles container rate benchmark had declined 27 percent between the first week of May and the end of 2011. The spot market is often a strong lead indicator of prevailing contract rates.

“However, shippers should beware,” cautioned Dixon. “Locking carriers into low freight rates today may hinder surety of supply in the future.”

Drewry expects freight rates to rise sharply in the second half of the year as cash-burn forces carriers to slash capacity.

“A repeat of 2010 seems inevitable, when freight rates rose and space availability was highly restricted,” added Dixon. “Drewry strongly recommends shippers look at the benefits of index-linked contracts to mitigate these dangers.”

Prior to the recent bounce in pricing, east-west freight rates had been in free fall. Drewry’s East-West Freight Rate Index, a weighted average across key Asia-Europe, transpacific and transatlantic trade routes, had declined 38 percent in the 12 months to November 2011. However, other indices published in Drewry’s Container Freight Rate Insight suggest that some regions of the world have proved more stable than others. For instance, Drewry’s Intra-Asia Freight Rate Index lost just six percent through 2011 and gained four percent in the four months to November 2011.

“Few trades can claim this level of sustained stability,” observed Dixon. “Despite cascading tonnage from other overburdened trades, rates on Asian regional trades have remained remarkably stable thanks to burgeoning traffic growth.”

It took low-cost long-haul carrier AirAsia X four years to secure the right to serve Sydney, and the carrier is now putting the matter behind it following its confirmation it will serve the Australian city from Kuala Lumpur with a daily service from 01-Apr-2012, with the likelihood of a double daily to follow. Another Australian city will later be added, to reach its goal of serving five Australian cities by the end of 2013. Also on the carrier’s expansion list is increased services to its existing Asian destinations, many of which are not served daily.

While the Sydney route progressed in likelihood following restrictions being lifted in Jun-2011, the route became a certainty after start-up competitor and Singapore Airlines subsidiary, Scoot said it would make Sydney its first destination from the middle of this year. The possibility of Malaysia letting a competitor based in Singapore, its fierce rival, serve Sydney before a Malaysian low-cost carrier was simply unacceptable!

Singapore Customs will make it compulsory for declarations of all exports to be submitted before they leave Singapore by 1 April 2013.

Known as Advance Export Declaration (AED), it aims to strengthen supply chain security and align its export declaration practices with international norms.

With the implementation of this initiative on 1 April, companies will be given 18 months, till 1 October 2014 to adjust and comply fully with the requirements set.

Presently, only the exports of controlled items or exports by land require declarations to be submitted in advance and this new rule is a big change in the current process where shipment declerations would only need to be made after a shipment has left Singapore.

Singapore Customs’ director general Fong Yong Kian said the AED will help Singapore become a trusted and secure global trade hub, and assist a more effective trade facilitation.

Steven Lee, chairman of the Singapore Air Cargo Agents Association agreed, adding: “The AED will definitely provide additional protection to the aviation industry from the security perspective. It will enhance the status of Singapore as a free port in terms of higher security and safety, which will promote more cargo flows via Singapore as a regional hub.”

Diesel prices in the US market continued heading down, decreasing 6.6 cents to $3.828 per gallon, according to the Department of Energy’s Energy Information Administration (EIA).

This marks the fourth straight weekly decline, following decreases of 3.7 cents, 3.3 cents, and 4.6 cents, respectively, for an 18.2 cent cumulative decline over that period. The price per gallon for diesel fuel has been down five of the last seven weeks. And prior to this four week decline, prices were up a cumulative 12.3 cents over a two-week period. The question on the minds of Logisticians in the Asia Pacific region, is whether we will experience a similar trend in this part of the world.

While prices in the US are trending down on a weekly basis over the past month, it was not long ago that prices were north of $4 per gallon, reaching $4.01 the week of November 21. This represented the first time diesel hit the $4 per gallon mark since checking in at $4.061 the week of May 16.

Additionally, despite the recent weekly declines in the price per gallon for diesel, many shippers have reported they are forecasting for steady fuel increases in their supply chain and transportation budgets should diesel prices continue to hover around the $4 per gallon mark.

This was evident in the results of a recent Logistics Management reader survey, which found that nearly 40 percent of 344 respondents said their average fuel surcharges are 20 percent or more above base rates.

The Malaysia Institute for Supply Chain Innovation (MISCI) plans to commence a new research project into the halal logistics sector given growing demand for such services, and the need for consistency in maintaining certain food handling conditions.

MISCI was formed earlier this year as a joint venture between the Malaysian government and the Massachusetts Institute of Technology’s Centre for Transportation and Logistics in the US.

“We are engaged in discussions with industry partners and seeking to appoint personnel who are active in the halal logistics space,” said Mahender Singh of the MISCI according to London’s Containerisation International. “Our excellence as a world class centre for supply chain education and research, and the fact that Malaysia is a leading country in the halal trade, puts us in a unique position to understand these fast-growing supply chains.”

Mr Singh said halal logistics represents a major opportunity for manufacturers and service providers. “This is at a time when many companies are searching for new growth opportunities around the globe with two billion Muslims,” he said.

One problem with halal food is that companies handling it need to adhere to Sharia law. The report said that traceability of cargo from origin to destination is becoming a critical concern as it offers a means of monitoring contamination during its journey.

It said that 30 per cent of halal trade is expected to involve food items, and according to Sharia law these products must be kept “clean and pure and segregated from non-halal goods”.

We recently launched our discussion forum through Google Groups and discussions have been going hot! Some of the topics that have been addressed to date include:

• Lean Warehousing & Field Warehouses
• Reverse Logistics
• KPIs for Retail Logistics

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The LSCMS Discussion Group, hosted through Google Groups, has been kicked off and has already begun with some interesting topics.

These have included:

• Optimisation
• Reverse Logistics
• Retail Logistics KPIs
• Contingency Planning in the Supply Chain
• Logistics Software

- and that has been only in the past week! We hope that Logistics Professionals globally will look to this resource as a way of communicating with peers, and we see that this is a great way to discuss and communicate issues, share readings and interesting information that we find, develop an understanding of concepts and to enable us to build a global network of professionals that are interested in contributing to a knowledge resource.

If you have not already joined the group, all you need is an email address, and then head across to the Logistics & Supply Chain Discussion Group.

This blog has been set up to allow key contributors to the LSCMS to post information and updates for the benefit of members.

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