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A leap of faith in logistics' last mile

EVEN in the dog-eat-dog world of the logistics industry, pooches will sometimes have to stick together.

This is the view of former air force officer Vincent Phang, who is now chief executive of home-grown ST Logistics and Toll Group's Singapore executive vice-president for global logistics. "In our journey to be a market leader here, I consider it imperative that we create inter-operable solutions for industry," he said.

Operating receipts for transport and storage services totalled S$104.77 billion in 2016, almost triple the S$36.28 billion in 2000, going by Department of Statistics figures. But, with the industry split across 12,510 establishments, market fragmentation is a sore spot.

Add to that the challenge presented by the rise of e-commerce giants such as Amazon and Alibaba. Armed with big data on customers and goods, they have gone from being purely online retail marketplaces to getting their own hands dirty in the warehouse and delivery business, in preference to relying on third parties.

And there is no end of third parties either. Besides global titans and small family outfits, the transport and storage sector - which contributed to 7.2 per cent of last year's gross domestic product - has also seen start-ups pop up for the last-mile delivery of consumers' online purchases.

Mr Phang, who used to head operational logistics for Singapore's F-16 fighter jets, said: "With the new technology players - certainly they bring a different element, a different dimension to the game. To put it very bluntly, they upped the stakes for the whole industry. Logistics and the supply chain will change. You cannot find a more exciting time to be in this industry."

And there will be no quarter given to luddites either. Futuristic solutions, such as automated goods movement and tracking on the floor, are already in place at the company's one-year-old Toll City in Tuas. The five-storey, 100,000 sq m warehouse facility cost S$228 million and is due to open officially later this month.

"If not for the technology, this is just a very big warehouse. With the technology that we apply, we hope to generate, certainly, a lot more productivity and efficiency within the businesses that we have," he said.

"Our investment into the level of technology is meant to address some of the disruptions that we see. . . What's important is for us to continue to experiment, to ensure that we stay on top of things and to see where we can embed those into our operations."

Unmanned forklifts are just the beginning. On top of an alert system that flags potential disruptions to global corridors - from storms over Japan to dock strikes in Israel - a "control tower" at Toll City tracks its trucking fleet across the island. It can flag idling and speeding lorries, as well as those that are deviating from their routes or venturing into no-go zones such as the Malaysian border.

Toll is also partnering medical-technology multinational Medtronic in a pilot for a hospital smart cabinet, which will be able to track which staff member removed what equipment for whose healthcare procedures.

Mr Phang said: "It is quite granular, but it is only through the detailed application or understanding... that we can then mine the data and get a more detailed understanding of how that supply chain should be run.

"In the process of doing so, we've actually brought significant value to our clients, both with the hospital, in having a much more streamlined supply chain, and, at the same time, triggering the replenishment response from the warehouse and even further upstream, back to the manufacturers."

This is a far cry from the trans-boundary haze crisis in 2013. He recalled that when public demand for N-95 respirator masks went through the roof, his company had no high-tech war room - and so had to co-ordinate island-wide mask deliveries armed with no more than whiteboards and telephones.

Limited resources

"You talk about last miles - that was the real last mile," he said.

With that experience behind him, solutions like the smart cabinet and fleet tracker are what he hopes will bring to small and medium-sized enterprises (SMEs) into the logistics ecosystem.

"It is inevitable that - in Singapore, for example, where there are limited resources, limited real estate, limited labour - that the idea of shared resources, shared capacities, becomes very appealing.

"How that pans out, obviously, remains to be seen, but... as a big company, it is incumbent on us to create some of those solutions that could, in time, perhaps, be inter-operable solutions across the industry."

For example, the Logistics Alliance industry group was formed in July last year. It counts among its members the Container Depot and Logistics Association (Singapore), the Singapore Logistics Association, the Singapore Transport Association and the former Singapore Aircargo Agents Association, now SAAA@Singapore.

"The concept of sharing capacity is important to me, and with the work that we do, there's always opportunity for collaboration, partnership, with some of our SME partners," he said.

"Be it an individual component within the supply chain - it could be in terms of trucking, or it could be in terms of last-mile deliveries - we try to assemble a strong value proposition for our client."

Some of this value "might be that we engage our counterparts in the industry to provide an industry solution".

Citing the fleet monitoring platform in his control tower at the headquarters, he said: "If, in time, we could extend that so that we could build an industry-wide solution rather than a singular company solution, I think that would be very positive for, say, the vision of achieving urban logistics."

Tapping the fledgling urban logistics segment is just the latest step for ST Logistics, which started life in 1970 as Chartered Materials & Services. It was part of the Chartered Industries of Singapore (CIS) group of defence-related companies that was the precursor to Singapore Technologies, which is now owned by state investment firm Temasek.

Taking wing beyond Singapore

But ST Logistics went a different route. It was bought in 2006 by Australia's Toll Group, which was in turn taken over by the privatising national mailman Japan Post in 2015. Although ST Logistics has a focus on the healthcare industry and fast-moving consumer goods, legacy public-sector clients such as the Singapore Armed Forces remain key too, Mr Phang said.

"With our new shareholders, Japan Post, there's a great desire for us to be more regional, more global and be represented across more markets. And Singapore is one of those core markets that we are looking at developing and investing heavily into.

"The shareholders have been incredibly supportive of the work that we do. Singapore offers other unique opportunities as well, in the market leadership in terms of urban logistics, for example...

"Singapore could be an example of how cities will be in time to come. We have our own challenges of labour and real estate and an ageing population. Logistics and supply chain solutions that we develop in a market like that will be relevant."

With recent collaborations that include e-commerce-related learning exchanges between Singapore institutes and their Indonesian counterparts, Mr Phang figures that neighbouring countries' investments in infrastructure mega-projects are opportunities for regional growth, not threats to Singapore's ports and warehouses. This is despite the traditional rivalry between Singapore and other hubs such as Port Klang in Malaysia.

"Logistics is not a zero-sum game, the way we see it. It's not about, say, a threat from a different market becoming more sizeable than us," he says.

"It's always about connectivity, it's about our ability to serve our clients across the whole market."