Singapore – A supply chain hub.

Singapore has become a key operating location for manufacturers and logistics providers, with its airport and seaport among the busiest in the world.

Transport Intelligence examines the country’s growing significance to global supply chains and the sustainability of this growth, with comment from the Singapore Economic Development Board, CEVA, DHL, Infineon Technologies and Becton Dickinson.

For such a highly developed economy, Singapore continues to grow at an impressive pace. Expansion over the second quarter of 2013 implied an annual growth rate of 3.5%, yet even this is down slightly on the average 5.6% seen between 2007 and 2013. For the medium term, the Singapore government foresees a more modest 2-3% growth per annum.
Driving this expansion are a number of factors including the ‘China trade’, but also the new prosperity of consumers in South East Asia and the city state’s positioning in fast growing sectors such as electronics.

Nevertheless, logistics remains central to the Singapore economy. Always dependent on world trade, the efficiency of its container port, airport and oil terminal were key to the city-state’s growth in the latter decades of the twentieth century. However, South East Asia has seen a large expansion in modern transport infrastructure and now supply chain managers have alternatives when it comes to finding good quality sea terminals or airports.

LOCAL MARKET

The obvious advantage of Singapore’s position in the global logistics sector is its location. The Straits of Malacca may be the gateway to the wider Asia-Pacific, but Singapore also sits at the centre of the South East Asian region. The rise in GDP per head within the region and the development of the productive base of countries such as Indonesia or Thailand has been overshadowed by the noise generated by China. However, as Kelvin Wong, at the Singapore government’s Economic Development Board, suggests “within the ASEAN region we are seeing the growth of a middle class of 600m people. That’s greater than the three Chinese coastal cities or Latin America”. But this is more complex than it seems. The nature of these economies varies substantially, as do their logistics capabilities. Therefore, Singapore provides what CEVA’s Elaine Low, EVP of Business Development Asia Pacific, calls a “gateway option”. For the likes of CEVA and its customers, it makes sense to locate lower value customer goods within large markets such as Indonesia or Thailand, both in order to be nearer the customer and to exploit what are usually lower warehousing costs.