Chief Supply Chain Officer Forum: ‘strengthen our ports and upgrade logistics capabilities’

Ever since the sea container was introduced to the industry back in 1956 by the American entrepreneur Malcolm McLean and the 20 and 40-foot container became the international standard in 1961, the container has changed the logistics industry. The container allowed an efficient facilitation of intermodal transport between road, rail and water. Transportion over water has the lowest costs as compared to road, rail and air; and would naturally therefore be the preferred mode of transport. The container resulted in lower supply chain costs, inceasing trade volumens, increase of vessel sizes and development of pure transhipment hub ports. However, according to Ms. Arifah Abu Bakar, a student from Malaysia University of Science and Technology, delays at ports are not uncommon, resulting in long port times for vessels and dwell time of cargo in ports. According to her, important factors that contribute to delays are port infrastructure, port superstructure (container terminals with their large ship-to-shore cranes), port & terminal management, port authority policy, intermodal connections, and customs.

As the various trade agreement such as the ASEAN Economic Community (AEC) and the Trans Pacific Partnership are coming into place over the coming years, container volumes are expected to increase in ASEAN. The Chief Supply Chain Officer Forum, held in Singapore on 4 and 5 November, discussed with captains of industry the future of Asia supply chains and logistics. At this forum it was clear that in particular Malaysian and Vietnam ports could benefit from these trade agreements. However, as new ports are being developed in Indonesia, Vietnam, Thailand and Myanmar over the coming ten years, it is very important to further strengthen existing ports and upgrade logistics capabilities in AEC countries.

Four areas have been identified that will need to be addressed by ports and logistics businesses in the coming ten years in Asia:

1. Reduction of port times and cargo dwell time by enhancing its efficiency of physical operations and customs; Efficient ports are of pivotal importance to ensure low total supply chain costs of a country.
2. Extend control of the port hinterland; Key will be the development of an efficient transport network to connect hub seaports to surrounding countries via sea, rail, and road to support their hub function.
3. Upgrading of port logistics clusters through development of highly mechanised and automated Regional Distribution Centres (RDC). This new generation of Mega Distribution Centres, which are multi-user sites and largely solar based, will be much bigger than the current distribution centres we see in Malaysia today. These RDCs will need to be well connected with other ports and logistics clusters along the Trans ASEAN Transport Network, connecting Singapore, Malaysia, all the way to China.
4. Increase utilisation of transportation assets: trucks, vessels, rail shuttles and planes.

According to the Chief Supply Chain Officer Forum, collaboration between the logistics industry and universities as well as research firms is not very common in Asia. This needs to change according to the Forum for higher levels of innovation in the ports and logistics industry and securing sufficient supply of new talent.  The perception of the ports and logistics industry is not glamorous enough for many students, which today is dominated by men, which could benefit from a more diverse workforce.

How to organise big events?

Last weekend, a fire at a nightclub in Bucharest (Romania) killed at least 27 and injured many more. Up to 400 people may have been inside the club, which was hosting a rock concert. One of the two emergency exits was blocked. In September this year a stampede during one of the last rituals of the Hajj, the annual Islamic pilgrimage to Mecca, killed more than 700 people and injured nearly 900 others in Saudi Arabia. These are only two examples how large events can go terribly wrong.

With the growth of the economy and increase in leisure time, the number of large sports, cultural and music events increase. Event logistics provide an event concept in a safe and service oriented environment. Unfortunately practice shows that in many cases the larger the event gets, the lower the service level and reduction in safety. Delivering a large event and at the same time meeting safety requirements for visitors is for many organisers a tough problem. Safety is often perceived as a burden.

Event logistics concerns the planning, coordination, the actual service delivery and the control during the planning, execution and evaluation of this planned event. In event logistics there are five main logistics processes: supply of customers, supply of goods, supply of facilities, event site logistics and event shutdown. In the supply of customers, the transportation to the site, queuing, and ticketing are examples of sub processes. In the supply of goods, the transportation, receiving and estimation of needs are examples of sub processes. Supply of facilities includes processes such as security, power, water, contractors, etc. The event site logistics are the logistics activities during the event itself, covering processes such as flow of artists and equipment, VIP and media requirements, communication, crowd management, crowd control, emergency procedures, etc. Finally the event shutdown covers processes such as removal and cleaning.

What are risks we can identify and the logistics consequences?

With large events, traffic congestions can occur around the event site. The logistics consequence would be to organise extra busses, trains and coordination with highway authorities. With air shows, possible accidents can occur and big fires. Therefore the access of the site by the fire brigade and ambulances is important. With large football events, vandalism, violence, disturbance of the public order can occur. Certain routes will be closed for groups of supporters and space will be created for police and riot police squad. Large public events with VIPs, need to be protected from possible attacks, which requires blocking certain areas and routes. Large concerts have the risks of visitors pressed against racks and walls as well as stampede. This requires crowd control and supply of fencing and routes for people that are wounded, as well as proper escape routes in case of evacuation.

To enhance the safety of events, structural causes of unsafe situations have to be removed where possible. Second, preventive measures are implemented to minimise the chance of incidents and escalation of incidents. Third, preparations are made to combat incidents effectively. Then of course people have to be well trained and prepared for actual incident management. Finally, measures are necessary to bring back the situation to ‘normal’, after an incident.

The government has an important function to issuing permits for large events and reviewing if plans of the event organisers are C4: correct, consistent, complete and clear.

Logistics sector expected to gain from Trans-Pacific Partnership

The inking of the Trans-Pacific Partnership (TPP) agreement last week provides new opportunities for Malaysian companies. The TPP agreement gives Malaysia direct market access to attractive markets, such as the United States, Canada, Mexico and Peru. Malaysian products will become cheaper for these markets, which will increase exports from Malaysia.

TPP will therefore strengthen Malaysia’s position as leading production hub for palm oil (related products), petrochemicals, electrical & electronics, aerospace, machinery and equipment and many more. TPP will also directly benefit the Malaysian sea and airports in terms of increasing volumes, instead of depending on Singapore’s trade network where a significant volume of Malaysian products (like agriculture products such as fruits, vegetables, flowers, and ornamental fish) are repacked and relabelled in Singapore.

Currently China is the manufacturing hub of the world for many industries, but is heavily constrained by its natural resources: from water to land to energy. Pollution has caused a lot of the existing water to be unusable without being cleaned up. A shortage of skilled labour increased the cost of labour in China. Several labour-intensive industries in particular electronics and textile are starting to move to cheaper locations in Southeast Asia, such as Vietnam and Indonesia. The result is that the manufacturing hub of the world is slowly moving towards Southeast Asia, hereby shifting also the logistics gravity towards Southeast Asia. For sea shipments between South East Asia and the East Coast of the Americas, cargo goes westbound via the Suez Canal in the Middle East, rather than sailing east across the Pacific Ocean. Both Vietnam and Indonesia are attractive places to manufacture goods, due to their large low cost labour force, but a logistics nightmare. Malaysia is well positioned along the Trans Asean Transport Network, well connected by road, rail, sea and air to its neighbouring Asean countries such as Vietnam and Indonesia. Malaysia is therefore an excellent transportation gateway and logistics hub for these countries. As a result, it will directly benefit the seaports Port Klang, PTP, Penang Port and the airport KLIA. There will be room for Asean Mega Distribution Centres at these locations to facilitate consolidation, value added logistics, and distribution activities.

TPP will drive exporters and their shipping companies to explore new routes to Pacific Rim markets. Although duties and barriers aren’t coming down immediately, businesses are going to start exploring and developing those export markets, supply market for specific raw materials, and supply chains. The agriculture-exporters are already working on deals with buyers. The Americas are large exporters of halal meat, whereas Asia is a large importer of halal meat. Connecting those markets and further processing in Malaysia, could strengthen Malaysia as halal food hub. The Americas are large exporters of corn and soya, whereas Asia is a large importer of these products. Malaysia could further process these raw materials into processed food products for the Asian markets. Malaysia is a large exporter of palm oil, whereas the Americas are one of the primary importers of Malaysia’s palm oil. As a result, TPP will become an accelerator for Malaysia’s farms, manufacturing, trade and logistics sector.

TPP represents real market opportunities for Malaysian companies of all sizes, a chance for them to compete on a more level playing field with markets around the Pacific Rim, and strengthen Malaysia’s position as the preferred logistics gateway to Asia.