Dr Lee Boon Yang, Minister for Information, Communication and the Arts Opening Address - Staying Competitive through Connectivity and Collaboration 8th Infocomm Commerce Conference, Suntec Singapore International Convention & Exhibition Centre
Dr Lee Boon Yang, Minister for Information, Communication and the Arts
Opening Address - Staying Competitive through Connectivity and Collaboration
8th Infocomm Commerce Conference, Suntec Singapore International Convention & Exhibition Centre
Singapore, 19 August 2004
Mr Kwek Leng Joo, President of Singapore Chinese Chamber of Commerce and Industry,
Distinguished Guests,
Ladies and Gentlemen
1. Good morning. I am happy to join you in this event for the second consecutive year.
2. In today's competitive and rapidly changing business environment, companies cannot afford not to deploy and exploit Infocomm technology as business tool. ICT is a capability multiplier. By putting ICT to work for you, you can effectively streamline your business processes, enhance your efficiency and achieve greater integration across your entire value chain. Regardless of the nature of your business, ICT is relevant to your needs and can make a difference to your business viability and profitability. At the national level it is also important for us to ensure that a pervasive ICT infrastructure is in place so that as businessmen you can plug into this grid to tap the full force and benefit of high speed transaction and information flow.
Sector-Wide Initiatives
3. In the 2003 Survey on Infocomm Usage in Businesses conducted by the Infocomm Development Authority of Singapore, 83% of companies in Singapore used infocomm. At the same time, we also witnessed an increase in broadband subscription by companies from 41% in 2002 to 54% in 2003. I have no doubt that the next survey will show that more businesses are turning to broadband to meet their ICT needs.
4. Even as we achieve high levels of infocomm usage amongst businesses, we need to deepen usage beyond the standard e-mail and use of Internet to search for information. This is why the IDA has, in recent months, announced initiatives to encourage companies in different sectors to harness the advantages of Infocomm. These initiatives will help to sharpen Singapore's competitive position.
5. In March this year, the "Collaborative High-Tech Manufacturing Plan" was launched to link up 10 groups of companies in the high-tech sector within 5 years using Infocomm technologies. Each group of companies form a supply chain - from design of a new product to manufacturing, assembly which can be done in other regional countries, testing, logistics and distribution. These supply chains adopt an international messaging standard called RosettaNet, to enable their ICT systems to exchange information. RosettaNet is well-supported by all the major global hi-tech companies. This Plan will give our high-tech manufacturing companies an additional edge in the fierce global competition for manufactured products. The lessons we learn from this demonstration project will be applied to help other manufacturers in due course.
6. In the area of Logistics, I announced in June this year that the Singapore Government would be investing up to S$50 million over 5 years in the development of an integrated ICT platform to better service the trade and logistics sectors. This initiative will allow more efficient information flow among shippers, freight forwarders, carriers and financial institutions. This is especially necessary in light of increasing competition from all around us.
7. Another recent development that has captured a lot of attention around the world is Wal-Mart's mandate to its top 100 suppliers to use radio frequency identification (RFID) tags on pallets. IDA is watching developments closely. Wal-Mart may have started a trend. Other retailers may now require their supplies to follow suit. Actually Singapore has been one of the pioneers in the use of RFID. Those of you who had occasion to visit the National Library or one of its Branches would have encounter RFID in action as this technology has been used by NLB to track the books on its shelves. We have long recognized that Singapore must be an intelligent and early adopter of technology in order to remain in the race. So we are not surprised by Wal-mart's requirement. In May, IDA announced that it would invest S$10 million over three years to kick start the implementation of RFID.
8. Last year, I informed you that IDA, together with SPRING Singapore and the Singapore Article Number Council (SANC), was developing an electronic-Supply Chain Management Ecosystem for the retail and Fast Moving Consumer Goods (or FMCG) sectors.
Benefits of Value Chain Integration
9. Today, I am happy to share with you some benefits of the value chain integration that have been realised in the retail sector. This sector, which employs about 80,000 employees in 18,000 establishments, generated total value-add of S$3 billion in 2002. One challenge which all retailers face is how to manage the flow of goods efficiently. High inventory levels would lead to high storage costs. Inefficient management of inventories could also lead to higher costs. On the other hand, inadequate stocks could lead to loss in sales because retailers are unable to meet customers' demands and expectations.
10. To reduce these inefficiencies, major retailers were incentivised to come together to build an electronic-Supply Chain Management (eSCM) Ecosystem for electronic procurements. This ecosystem comprises an Electronic Business Messaging Standard, and a National Electronic Product Catalogue (NEPC), both of which are based on open and international standards.
11. With the E-Business Messaging Standard, the ICT systems of suppliers and customers share a common language to receive purchase orders and send invoice messages electronically. New suppliers and retailers can easily join in because they know what "language" their ICT systems need to talk in. In this way, what the early adopters have built is not exclusive, but inclusive and open to new entrants. This helps us to bring in as many suppliers and customers together. Once adopted, a supplier who wants to expand its business to supply another retailer does not have to acquire new ICT hardware or install new software. The early adopters do not lose out. Not only have they taken a lead, the wider choice of suppliers is a benefit which they also enjoy. This is a truly win-win partnership.
12. The National Electronic Product Catalogue (NEPC) is an electronic register of product codes. This gives a listing of a product, say a certain brand of toothpaste of a specific weight, its "Unique Number" or product code. Furthermore this listing of product codes is now linked to the Global European Article Number Party Information Registry. This international catalogue lists global suppliers' products. With this link, more than 1,600 suppliers registered in the NEPC today are able to promote their 8,500 products to over 1 million companies from over 65 countries including Asia, Europe, Latin America and the USA. This has opened up substantial new market possibilities.
Transformation through Connectivity and Collaboration
13. A number of supermarket chains have also adopted the electronic procurement system. FairPrice supermarkets have reaped the benefits of an integrated and connected system. It currently has about 500 suppliers on its e-Procurement system. Approximately S$400 million worth of business is done annually. Fairprice is able to enjoy benefits such as reduction in out-of-stock situations, higher customer satisfaction, increased sales and productivity gains. Fairprice's e-Procurement system is an important component of its total business structure. It has helped Fairprice streamline its operations with its suppliers, making them more efficient and responsive.
14. As a result other retailers, such as the Cold Storage Group and Carrefour Singapore, have also embarked on developing their electronic procurement system.
15. The experience of the retail sector can be applied to other sectors, including the hospitality industry. Hospitalitybex, a subsidiary of Raffles International, has developed an e-procurement system on the same platform for suppliers and buyers to transact electronically.
16. Today, about 75 active buying organisations like hotels, retailers and more than 6,000 suppliers are using this platform, and they have been able to realise substantial savings in business cost.
Best Practices - Collaborative Planning, Forecasting and Replenishment
17. Having established firm foundations of common standards and connectivity in Phase One of the retail eco-system, IDA is now planning to introduce Phase Two of its retail ecosystem to deepen ICT adoption in the industry.
18. One key initiative of the plan is to develop new supply chain management capabilities known as Collaborative Planning, Forecasting and Replenishment or CPFR1. Let me use an analogy to explain CPFR. As a young couple starts to make plans for their future together, they soon realise that they would need to share information like their financial positions, commitments and future income projections. CPFR is a similar arrangement, but applies to two firms in the business context. Two companies start out by doing business with each other. As the partnership and trust deepen, they find that their commercial transactions can be made seamless and more cost-efficient if they share planning and business operations data. CPFR involves the exchange of data such as sales and inventory status between business partners, to enable collaborative activities such as joint product sales planning, sales promotion management and replenishment planning. For the retailer, this means revealing sensitive information about sales and how well the business is doing. But, the advantage of such a collaborative relationship is that the retailer can help his supplier better plan his own operations. The store shelves can then be replenished with the right goods at the right time, minimizing business costs.
19. Let me illustrate how CPFR can work. When tubs of ice cream are sold at the supermarket outlet, the Point-of-Sales (POS) machine captures the information and sends it to the supplier to inform him of the reduction in stock and, if necessary, request for replenishment. In times of promotions and the consequent surge in demand, CPFR is able to give real time information on stock availability thus reducing the incidence of out-of-stock and missed sales opportunities for the supermarket. It is estimated that CPFR can help companies realise 4% additional sales from reduced out-of-stock situations. CPFR enables this to be done with lower inventories, which means that consumers can get fresh ice-cream and more choices at cheaper prices from their favourite neighbourhood stores.
20. CPFR has proven to be a global best practice in the Retail/FMCG industry and is being championed by global players like Proctor & Gamble, Tesco and Wal-Mart. More than 100 firms have established CPFR relationships in US, Europe and Asia.
21. IDA is pleased that a number of retailers and their partners have come forward to participate in the CPFR initiative. Sheng Siong Supermarket, a home-grown retailer, is planning to collaborate with five of its major suppliers. Sheng Siong expects to reap benefits such as improved customer service and increased sales through efficient management of stocks. Another company, Watsons Personal Care Stores is also embarking on its own CPFR initiative with its major suppliers.
Conclusion
22. As the theme of this conference has hit the mail on the head, "Connect For Growth in the Global Economy", Singapore companies must connect to the global marketplace through the following ways. Firstly, connect among business partners using open and international standards. Secondly, benchmark ourselves by embracing best practices like CPFR, and thirdly, leverage on useful Infocomm technologies like RFID to further differentiate ourselves. There is no doubt that by connecting and integrating with our partners and suppliers through the use of Infocomm technology, we can achieve greater efficiency, cost savings and higher revenues.
23. On this note, I wish you all a fruitful session and rewarding conference.
24. Thank you.
Note to Editors:
1Global institutions such as Voluntary Inter-industry Commerce Standards (VICS), Uniform Code Council (UCC), Global Commerce Initiative (GCI) and Efficient Consumer Response (ECR) have endorsed the CPFR initiative.
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