OUT OF THE CRISIS

Logistics Insight Asia, 1/1/2009

Record oil prices, commodity inflation, financial meltdown, global recession – 2008 was nothing if not a truly tumultuous year. In this special report, logistics industry leaders reflect on the highs and lows and reveal their strategies for meeting more challenging times in 2009.

2008 will be remembered as the year of two extremes: inflation with market supply shortages of raw material, followed quickly by defl ation and price collapse. However, even in these difficult times Schaefer cranked up both its manufacturing facilities to increase steel output by 25 percent, and newly incorporated Schaefer India hit the ground running, gaining some good contracts from MNCs.

Consolidating growth in the 12 countries where Schaefer has established its own offices, our goal in 2009 will be to bring innovation solutions to our customers to help them reduce warehousing and distribution cost. For our markets in Australia, Middle East and South Asia, where we work with business partners, we plan to launch a new initiative at our Distributor Conference scheduled for June 2009, adopting joint marketing and sales approach to the respective markets.

Brian Miles
Regional Director,
SSI Schaefer

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Agility’s expansion in the Greater China market, which equated to an investment of close to US$150 million, was the most significant development for the company in 2008 in Asia Pacific. The acquisitions of Cosa Freight and Baisui Logistics, as well as the integration of Runtong into the company, provide a broader service offering and expanded network capability. We also broke ground on a chemical logistics hub for Borouge in Shanghai that has strengthened our capabilities in this fast growing sector.

India was another focal point in 2008, with an investment of close to US$120 million to build up our cold chain, distribution, warehousing and trucking capabilities. The fragmented nature of India’s logistics sector and its vast land mass has meant that Agility is investing in strategic assets led by customer demand. We also saw progress in Pakistan with construction of a new warehouse for one of our largest customers and the further development of a road freight network that offers access to the north of the country and to Afghanistan.

Southeast Asia has been strong with our expansion in the oil and gas logistics sector, and our Fairs & Events division headquartered in Singapore secured a contract to be one of three on-site logistics providers for the Shanghai World Expo in 2010.

For 2009, in light of the adverse global economic situation, increased efficiency through improved processes and implementing a broad range of cost saving measures internally will help to reduce expenditure. However, emerging markets around the world, notably Intra Asia, are still forecast to grow in 2009, although at a significantly reduced rate from 2008. We will be working closely with our customers to help them reduce supply chain costs and increase efficiency during the economic downturn.

Wolfgang Hollermann
CEO,
Agility Asia Pacific

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2008 was a year of drastic change and intense focus on the global supply chain. Energy and commodity prices shot skyward forcing businesses to rethink where and how to source and manufacture their wares. Just as supply chain professionals were figuring out how to redesign their supply networks for high transport costs, the bottom fell out of the world economy and all bets were off .

Looking ahead to 2009, supply chain and logistics professionals should continue to see their importance to business rise as marketing, R&D and finance people begin to appreciate what supply chain means to the company.

Extreme volatility last year taught us all that supply chain agility is essential to sustained financial success. For logistics providers this means customers expect more visibility, intelligence and flexibility than has traditionally been offered. Technology providers will face strong resistance to initiatives requiring up front investment, but plenty of appetite for software-as-a-service based solutions.

Kevin O’Marah
Senior Vice President,
AMR Research

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Our Asia Pacific organization had a lot on its plate last year – from being the first region to fully integrate both its freight management and contract logistics businesses as one Ceva “face” to the market, to launching new facilities and services as we increase our presence in the region. In just a year, we have expanded our Malaysian operations with new distribution center, launched an air freight hub in Hong Kong, and established a vehicle logistics business in Thailand.

Clearly, 2009 will be a challenging year for all industries globally. It is not even certain (at time of this writing) that the market has bottomed out and there may be worse to come. But because of our diverse business portfolios, Ceva is somewhat in a better position to weather this storm. We have lined up a robust game plan and believe we have the momentum and capability to succeed in tough times.

We are highly capable to create serious supply chain improvement in a more comprehensive manner, and in some cases, radical changes in our customers’ businesses. Ceva is in a more positive position than many companies – we have a strong and stable debt structure, our cash headroom is good, and we operate in markets which are still growing.

In Asia Pacific, we will continue to focus on growth, further develop true supply chain mastery among our workforce, continue to build our functional capabilities by connecting both Contract Logistics and Freight Management competences at all levels. So whilst 2009 will be challenging, we see it as a time for great opportunity.

Vittorio Favati
President,
Ceva Asia Pacific

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Just prior to my joining the organization in April 2008, the A P Moller – Maersk Group announced that Maersk Logistics would operate independently from Maersk Line, with a new model to focus on creating more clarity on responsibility and authority. Following closely on the heels of this, our industry saw the early signs of a tumultuous chain of events that left the financial market in disrepair, and oil price fluctuations that left many globalised industries in dire straits.

Maersk Logistics’ simplified organizational structure enabled us to be more responsive and focus on customers’ individual needs at market level. In the past 10 months alone, by using our end-to-end supply chain management expertise to drive efficiencies in our customers’ supply chains, we realized cost savings of over US$2.9 million for our customers across the retail, apparel, and furniture industries.

Following the failures in the financial sector in 2008 and its far-reaching impact on world economies, we expect that 2009 will be one of further consolidation and restructuring for companies to survive the challenges ahead. Customers will be looking even more towards streamlining their supply chains; general sourcing trends will move away from China; goods will increasingly be shipped by sea rather than air; and more companies are will look to outsource the management of their supply chain so as to focus on the core business.

As 2009 unfolds, we expect our customers to look for value-add services and knowledge that we can lend to their businesses in order to achieve a sustainable supply chain model and come out stronger at the end of this year.

Tony Hotine
Regional Manager,
Maersk Logistics Asia-Pacific

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2008 was a year of continued expansion, and two achievements stand out. Firstly, our focus on the Sustainability agenda has led the 3PL environment in Asia Pacific. We partnered our customers to build long term sustainable supply chains with new facilities designed to meet and exceed current global standards for “green” facilities. Secondly, we continued to invest and develop young talent in the region, where there is a shortage of supply chain skills, enhancing the overall skill set for our industry.

Despite the tumultuous economic times we are taking a “glass-halffull” approach to 2009. Customers will look for cost savings which we will deliver through a greater focus on efficiency, delivering innovative solutions and extending our First Choice customer-focused quality initiatives. Taking a long term view, we are extending our existing product portfolio with value added services, and strengthening our IT portfolio to offer best-in-class solutions.

The challenging economic environment also presents us with opportunities. We expect customers to outsource more to reduce headcount or assets, a move we are well-placed to accommodate. Where other 3PL providers may scale back services or cease operations, we are ready to commit our people, and this will be a core differentiator in challenging times.

Paul Graham
CEO,
DHL Exel Supply Chain Asia Pacific

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Facing today’s economic challenges calls for alternative views on issues we encounter. However, does it not make room for innovation? Does it not spur us on to improve quality, lower cost and offer what our customers really want? In spite of the economic meltdown, Dematic continues its culture of innovation with new solutions such as the Multishuttle, Automated Mixed Case Palletiser, and integrated Pick by Voice with automatic guided vehicles.

As we enter 2009, we need a warm heart and cool mind. While experiencing the chill of a financial winter, we should explore and act in anticipation of the warmth of a refreshing spring.

Going forward, aside from keeping or recreating jobs that the company needs in meeting the market demands with value innovation, we will continue to provoke new ways of thinking and motivate the entire organisation. It is not about what will happen but how we will perceive and handle the challenges that make the difference.

Han Kian Kwang
Regional Director,
Dematic SEA

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I would like to remember 2008 as the year in which NXP embarked on a successful redesign program aimed at reducing our annual costs by US$550 million. We took proactive steps to improve our financial strength by retiring some older wafer plants, overhauled central R&D to be in line with the new size and product focus of the company, and removed unnecessary support functions.

Towards the end of 2008, we increasingly heard comments about market dynamics remaining very fluid. It comes as no surprise then that NXP also needs to act and adapt its business model and practices to suit the market’s needs. We will continue to invest for growth where we see real opportunities to create new business, with a focus on maintaining and increasing market share in our key segments. A recovery will eventually come, so we need to be prepared and in a solid position to outperform our competitors.

Looking specifically at the RFID market, with food safety still an important issue in Asia, the HITAG μ product, based on our HITAG S range offers the highest level of RF performance for the effective tracking of livestock and industrial logistics applications with industry-benchmark read distances. And for public libraries and archives, our ICODE chips off ers a guaranteed data lifespan of at least 40 years.

We have close to US$2 billion in cash that can be invested where we see the right opportunities. There are only a handful of semiconductor companies that are in our position, so as the industry continues to be shaken out, we can prepare ourselves for growth.

T L Chow
VP, Regional Manager South AP,
NXP Semiconductors

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In 2008, wide-ranging investigations into the global freight forwarding and air cargo industry by anti-trust agencies led to heavy penalties for errant companies that had been violating anti-restrictive business laws with price fixing of cargo rates, fuel and other surcharges. For the global logistics industry, this is a big step towards the eradication of unfair and restrictive business practices, and not only helps level the playing field for those who practice good corporate ethics but more importantly, customers benefit through greater transparency and competitive pricing.

With the onset of the global financial meltdown, all businesses including the transport and logistics market are now entering a period of uncertainty as the effects of the crisis, start to be felt. In the interconnected world which we operate in, all industries and markets will be affected to varying degrees.

Logistics companies that are well financed and have sufficient resources to ride out the tough times will capitalise on the inevitable opportunities that always arise at times of crisis. For GAC, it is important that we stay competitive by improving the efficiency of our business operations while continuing to enhance our services. We will also continue to look at various acquisition opportunities, and are currently in the process of expanding our existing investments as well as products and services.

Bill Hill
Group Vice President,
The GAC Group (GAC)

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In terms of business expansion, Infor is doing extremely well. We acquired over 500 new customers in Asia Pacific during 2008. In fact, Asia Pacific was awarded Region of the Year within Infor for outstanding performance.

Apart from our expansion, we are also pleased to see our customers grow together with us. Being able to increase the utilization of materials, reduce waste and improve production capacity is a sound investment in the current economic climate. Indeed, a small or mid-sized company can grow into a sizable and renowned enterprise with the right choice of IT system, and our model of acquisition and innovation provides these customers with scalable and integrated solutions that help grow their business.

One particular focus for Infor this year is process manufacturing, particularly in China. Customers there tell us that that they need to address the processes around product safety, traceability and compliance. This is a critical task that will improve the performance and reputation of China’s food and beverage manufacturers, as well as other types of process manufacturers in the country.

Lawrance Chan
President APAC,
Infor

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2008 was a great year for the Motorola Enterprise Mobility business as well as for the industry. Motorola completed the strategic acquisition and integration of AirDefense, which gives our business the added strength to comprehensively address all the wireless security concerns of our customers. Another highlight of the year was the fruition of our efforts to build products specifically tailored for the Asian enterprises based on the feedback from Asian customers. We hope to bring these new products shortly to the market.

We remain optimistic about our growth in 2009 because Enterprise Mobility technologies are becoming more and more critical to improving business productivity. According to IDC, there will be a trend towards demanding more value from vendors; a greater focus on total cost of ownership as compared to return on investment; and an emphasis on solutions rather than on “nice to have” technologies. Industry experts have also projected that despite the global economic slowdown, Asia will continue to register a higher percentage of growth, especially markets like China, India and Vietnam.

We are focused on continuing to partner with customers across a wide range of verticals to facilitate processes so that they can streamline their everyday operations, improve their response to customers, drive greater efficiency, and gain a competitive edge.

Mike Muller
Vice-President Asia Pacific,
Motorola Enterprise Mobility

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Kuehne + Nagel’s commitment to offer value-added integrated logistics solutions benefitted the Asia Pacific organization in 2008. In addition, the fact that enterprises increasingly focus on their core competencies led to a rise in the demand for our logistics services.

Looking ahead, we are aiming to further improve our sea and air logistics services across the Asia Pacific region through innovative developments in products and processes and enhancement in productivity. In addition, we will continue to provide tailor-made services for specific niche sectors, such as aviation, hospitality and beverage, reefer and perishable commodities, oil and gas, as well as fairs and exhibitions.

Contract logistics is another area where we are dedicated to provide value to our customers and business partners. Kuehne + Nagel plans to further expand its warehousing, distribution and lead logistics activities in the region, particularly in China and India. Meanwhile, we will further strengthen our network in order to support our customers that operate in these markets.

Andy Weber
Managing Director,
Kuehne + Nagel (Asia Pacific)

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It was a roller coaster ride year in 2008: the first half at a blistering pace, but then a dramatic drop in the second half as we started feeling the impact of the global crisis.

Nevertheless, IT solutions are mission critical for logistics players, as well as being used to gain competitive advantage. Hence, regardless of the crisis, companies that need to change their legacy systems or need to replace and upgrade their old systems, continue to do so, although they may be more careful in what they spend and how much they will spend. As long as it justifies their business and operations needs, forward looking companies still invest in good IT solutions for their future and continual survival.

With the financial crisis in 2009, as supply chain companies continue to tighten their belts they will continuously look at their business strategy to be more agile and responsive to market changes. We believe that Kewill solutions, which cover the logistics supply execution chain and help manage customers’ costs as well as improve their efficiency and productivity, become even more essential to enable them to survive and thrive.

Julie Lim
Director of Sales & Marketing,
Kewill-IPACS

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In 2008, TNT Southeast Asia announced a landmark investment of €100 million to strengthen our network coverage, connectivity and infrastructure, including the introduction of our own thrice-weekly Boeing 747-400ERF into Singapore plus a suite of freight services for time-sensitive heavy shipments. Riding on the momentum, we also expanded and enhanced Singapore’s Country Depot and Customer Contact Centre and launched new international and domestic road hubs in Thailand and Vietnam.

While the year ahead will be challenging, we maintain an optimistic outlook and will stay on course of our growth strategy for Southeast Asia. We will be implementing additional features to the freight products launched in 2008, and upgrade our regional infrastructure with some major enhancements. These investments are set to further address our customers’ freight needs between Southeast Asia, Europe and China and enable them to streamline their supply chain solutions.

We will continue to integrate the Asia Road Network which currently connects to our international express network in China, to enhance our coverage and reach, with expansion across the rest of Southeast Asia (Cambodia, Laos) in due course.

To offer greater value to customers, we are also in the midst of additional research in the area of aftermarket services as well as more value-added services for our key verticals i.e. high-tech, healthcare, and equipment and machinery. We will be implementing new developments in these areas in 2009 to fuel TNT’s growth in a sustainable way over the next five years in the region and beyond.

Onno Boots
Regional Managing Director,
TNT Southeast Asia

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2008 was an excellent year for YCH on many fronts. We had the honor of being the first logistics company in the world to receive the ISO28000 international supply chain security management system standards certification, acknowledging our adoption of a total supply chain approach to security. On the technology front, our efforts in the development of Southeast Asia’s first RFID-enabled Supply Chain Management Nerve Centre were given industry recognition. In China, the YCH Lingang Logistics Park is the first RFID-enabled warehouse in the Shanghai Lingang Logistics Zone.

For 2009, I look at the current economic situation as an opportunity to work more closely with our customers to innovate and fi nd solutions that will change the way we work and raise the bar across the industry. Customers are more willing to try new things in order to realize savings that will positively impact the bottom line.

The trend for large companies to outsource their logistics functions is another opportunity that YCH has recognized and will be tapping on. The downturn also makes it easier for us to explore opportunities, such as investing in key infrastructure projects, that were close to impossible when material prices were at their peak,.

This is also a good time to build up on staff training and development, to ensure that our people are skilled and have the knowledge to make the best use of innovative technologies, which are necessary to help us scale. Most importantly, when the upswing comes, we are already prepared to take advantage of the recovery situation and progress at full speed.

Robert Yap
Chairman and CEO,
YCH Group

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For Intermec, one of the important milestones in the region in 2008 was the appointment of ECS Computers (Asia) as our value added distributor (VAD) for the entire range of Intermec mobile computers, bar code printers, and media solutions usually deployed in the supply chain environment. Through this arrangement, Intermec’s solutions will reach out to more supply chain customers in Singapore, Malaysia, Thailand, Vietnam, Indonesia, and the Philippines.

An efficient supply chain is one of the cornerstones of a successful business, especially during economic slowdowns. And Therefore, in 2009, the need for cost effective and compelling supply chain technologies, such as Intermec offers, becomes even more appealing to companies. We remain confident – because of our technology portfolio, our strong history of innovation and technological leadership, and our enhanced distribution network.

Jack Tay
Senior Manager,
Intermec

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Risk management is a constant challenge for any company, regardless of good times or bad. Today’s organizations face a number of common supply chain risks compounded by the globalized scope of modern business that exposes more potential points of failure in the network.

Simply adopting “best practices” in an environment where rapidly shifting conditions may be changing too quickly may not be the best approach. Instead, agility is the key to supply and logistics chain success in today’s dynamic, risk-saturated world. No one can afford to be left behind.

Oracle’s focus is to help companies be even more conscious about building their supply and logistics networks with agility and resilience in mind, so they can predict requirements, flex and innovate to keep pace with rapidly shifting business conditions, and align operations across global networks.

Shippers and logistics service providers will increasingly see the value in selecting IT partners that offer comprehensive, integrated solutions that have the breadth and depth to serve increasingly complex value chain requirements to help to identify, manage and mitigate risks.

David Morgan
General Manager,
APAC Oracle

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2008 will be remembered as the year UPS strengthened its fundamentals and dedicated resources to harness the “one UPS” approach. By optimizing synergies between UPS Express and Supply Chain Solutions, we have been able to drive growth and deliver consistent and competitive services to customers through one company.

This concerted effort remains a key priority in 2009, a year when the challenging economic climate remains a great concern and companies have to find innovative ways to manage costs and better serve their customers. UPS, with its extensive portfolio of logistics solutions, is in a unique position to help our customers get through these trying times.

In fact, through the years, UPS has weathered many economic crises, learning lessons along the way. This helps UPS better strategize our business to overcome any potential impact for both ourselves and our customers, ensuring that we emerge stronger when the economy rebounds.

Mary Yeo
Managing Director,
UPS Singapore