Global Logistics—August 2006

U.S. Businesses Sing Singapores Praises

Though Singapore is a small country, it is starting to carry a great deal of clout among global businesses. U.S. enterprises are just beginning to recognize the city-state’s emerging potential as a strategic logistics location.

Motorola recently announced it would invest $60 million over the next two years to make Singapore its Global Supply Chain Control Tower (SCCT) and capitalize on the location to undertake activities across its entire value chain—from R&D and software development, to volume manufacturing and supply chain management.

The Asia-Pacific Rim plays a central role in the mobile device manufacturer’s global network—it operates 37 R&D facilities and four manufacturing sites in the region. Establishing the Global SCCT in Singapore enables Motorola to create and drive global operational efficiencies in supply chain management and manufacturing.

"The enhancement of Motorola’s key supply chain activities in Singapore reflects our commitment to quality, operational efficiency, and excellence at every level," says Ed Zander, chairman and CEO of Motorola Inc. "Using Singapore as its supply chain base will enhance Motorola’s ability to respond swiftly to market needs and challenges."

Motorola’s move comes on the heels of wireless software developer Sybase’s own inroads into Southeast Asia. The company opened an R&D facility in Singapore in 2005, its first such facility outside the United States.

The center serves as a reference site for all Sybase mobile innovations and incubation projects in the region, specifically in telecommunications, radio frequency identification, health care, and mobile government technologies. Sybase’s executive staff singled out the country’s dense IT infrastructure as a primary consideration for locating a facility there.

That U.S. businesses are migrating to Singapore’s shores is not all that surprising. The country’s logistics pedigree has been on a fast-arcing curve for the past few years, thanks in equal part to its location on the periphery of an exploding Asian market, its transportation infrastructure, highly skilled labor force, and developed telecommunications network.

Singapore’s port ranks first in the world in cargo volume, its airport is the eighth-busiest in terms of cargo, and the country ranked sixth in the World Economic Forum’s 2005 Growth Competitiveness Index.

Stateside economic development interests in Singapore have been similarly bolstered by the U.S.-Singapore Free Trade Agreement, which passed both the Senate and the House in 2003. The pact marked the United States’ first free trade agreement with an Asian country and served as a noteworthy mile marker for U.S. commercial expansion in Asia generally, and Singapore specifically.

Crisis Logistics: Risky Business

For most logistics professionals, getting supplies and equipment in and out of remote, war-torn, or disaster-stricken areas is a nightmare. For Ron Cruse, it’s a typical day’s work.

Cruse has had a front-row seat for nearly every major world crisis during the last 20 years, as president and CEO of Alexandria, Va.-based Logenix International, a logistics firm offering global planning, implementation, and forwarding services for government agencies and contractors, as well as humanitarian organizations.

Whether delivering pharmaceuticals to radiation exposure patients affected by the Chernobyl nuclear disaster, helping run supplies to the Afghan mujahideen in the Afghan-Soviet War, or more recently, assisting with tsunami relief in Banda Aceh, Indonesia, Cruse has navigated the globe in the name of logistics.

Inbound Logistics caught up with him recently—back from working on a water reclamation project in Lebanon just before the recent round of fighting with Israel broke out—to discuss the challenges of efficient supply chain management under the most extreme conditions.

RC: Infrastructure is an important issue for Lebanon—the ports are excellent, and the airport is good. But there are no real highways, mostly rural roads running between villages, which is challenging for moving heavy equipment. Checking incoming cargo is another issue. There are two road routes into Lebanon—through Israel and Syria. If the Israelis don’t allow relief goods in, the road from Syria is the only option.

If convoys are coming into Lebanon from Syria, however, it is hard to know how much humanitarian aid they are carrying, or if they are carrying missiles. The Israelis are saying right now that any truck is a bad truck.

However, I don’t expect the humanitarian relief for Lebanon to be as encompassing as, say, Banda Aceh. Lebanon is not isolated; agencies bringing supplies don’t have to cover huge distances to get there. Much of the aid will likely come in to Lebanon through Jordan. The roads through Syria are better, but that route poses bombing threats. Cypress is also close to Lebanon; organizations can stage operations there and bring supplies across by ferry.

The main factor is stopping the violence so organizations can get into Lebanon. The political issues may have the largest effect on supply delivery.

RC: Everything from weather to infrastructure to geographic positioning makes a difference to humanitarian logistics and projects in developing countries.

Take the Darfur region in Africa, for example. Darfur is the most challenging situation right now—logistics there is as hard as it gets. The government is against outside help, there is a huge refugee population, the infrastructure has been damaged by years of war, mines are everywhere, and the area is extremely remote.

In Banda Aceh, we dealt with a different set of circumstances. When I worked throughout the Commonwealth of Independent States in the early days after the breakup of the Soviet Union, it had a strong rail system—that was the key to getting assistance there. Iraq has good roads and is close to central delivery areas including Dubai and Kuwait, but it is incredibly dangerous.

For each situation, you have to evaluate the violence levels, infrastructure quality, and how far the area is from other stable regions.

RC: Humanitarian relief agencies on the whole are savvy—they buy the right supplies, and they know how to get them to affected regions.

In Banda Aceh, for example, malaria was a big problem. Because these agencies have experience in the area, they knew they had to bring spraying equipment and insecticide into the region.

There are about 40 great dedicated humanitarian groups such as Medecins Sans Frontires (Doctors Without Borders, an international organization that delivers emergency medical aid to people affected by conflicts, epidemics, and disasters).

However, they can’t go into an affected region and run an airport or a distribution/supply line; they need help in that area. The United Nations has the infrastructure to enter these areas and quickly deliver relief to a lot of people. Their infrastructure usually provides the base for all other agencies involved.

Usually disorganization occurs when the location in question is isolated. Waste and inefficiency can also be factors when an agency tries to apply the formula it used in, say, Darfur somewhere else in the world. The issues and the type of goods needed are different for each project.

Also, overcoming bureaucratic hurdles is tough—problems can pop up if the local government is not ‘massaged’ the right way. As well-intentioned and needy as a local government may be, dealing with them can be perplexing. It is hard for organizations to do this if they don’t understand the area—that also applies to corporate entities that want to help.

RC: The key is understanding culture—this is what Westerners struggle with most in the developing world. Being successful in this type of logistics has to do with how well you can navigate and understand local issues.

When I was running relief to the mujahideen in the 1980s, for example, we tried to deliver food, but they wouldn’t eat the type of food we brought them. The intent to help is insufficient by itself; it is a good idea to hire local people to guide you.

The effective private volunteer agencies excel in this respect—they have ongoing relationships where they deal with local cultural issues, and they know what it takes to succeed in a particular area.

RC: Companies need to have a good evacuation procedure in place for their employees. And they need to know that at the first sign of a problem, it’s time to leave the area.

I got caught in Sri Lanka in 1993 when President Ranasinghe Premadasa was assassinated. Riots never erupted, but I didn’t get out of there as fast as I should have.

Companies located in places that are prone to civil unrest must have a plan to get people out quickly and efficiently. That’s the only thing that works.

Tackling the Hazmat Threat

Companies shipping hazmat goods within the United States have a new program to become familiar with. Drivers licensed in Canada or Mexico to commercially transport hazardous materials are now required to undergo a background check under the Bureau of Customs and Border Protection’s (CBP) Free and Secure Trade (FAST) program before transporting placarded amounts of hazmat cargo in the United States.

The measure was passed under last year’s Safe, Accountable, Flexible, Efficient Transportation Equity Act (SAFETEA-LU) and put into place this month. But is it enough to quell fears about terrorists using cargo trucks to smuggle explosives into the country?

The new background check—which allows commercial drivers licensed in Canada or Mexico to transport hazmat cargo, including explosives, within the United States—is similar to that required for U.S. operators with a hazmat endorsement.

In 2004, the Transportation Security Administration (TSA) initiated the Hazmat Threat Assessment Program, which requires commercial truck drivers applying to obtain, renew, or transfer the hazmat endorsement on their state-issued commercial driver’s licenses to undergo security threat assessments conducted by TSA.

TSA has determined that CBP-issued FAST cards satisfy the vetting standard requirements under SAFETEA-LU for commercial vehicle operators registered to transport cargo in Mexico or Canada.

The solution should enhance security while also promoting commerce across borders, says Stephen Sadler, TSA’s director of Maritime and Surface Credentialing.