Dr Lee Boon Yang, Minister for Information, Communications and the Arts Opening Address - Opening of E-Business Connections 2004, Raffles City Convention Centre
Dr Lee Boon Yang, Minister for Information, Communications and the Arts
Opening Address - Opening of E-Business Connections 2004, Raffles City Convention Centre
Singapore, 30 March 2004
Mr Bill White
Chairman, RosettaNet Executive Board
Ladies and Gentlemen,
- I am very happy to be here this morning among key players in the high-tech manufacturing sector who have been pivotal in contributing to Singapore's economic success.
- Manufacturing has long been one of the key engines of economic growth in Singapore, consistently contributing between 22% and 26% to our annual Gross Domestic Product since 1991. The high-tech manufacturing cluster alone accounted for about half of the manufacturing workforce, and contributed more than 50% of the total manufacturing output of $147 billion1.
- The sector has been hard hit in the last few years when the economy dipped in response to global terrorism, the Iraq war and SARS. Companies resorted to drastic cost-cutting measures such as downsizing, resulting in thousands of employees being retrenched. Fortunately, this year we can expect the economy to recover and businesses to enjoy faster growth. Electronics continued to be a major industry underpinning Singapore's economic growth in 20032, having achieved an annual output growth of 5.5% in 2003, compared to 2002. According to the Ministry of Manpower3, employment in the goods-producing industries also rose by 3,500 for the first time in three years during the last quarter in 2003.
Global Trends in High-Tech Manufacturing
- High-tech manufacturing activities centre on supply chains which are primarily driven by brand owners of end electronic products, usually large MNCs. Supporting these product companies in the supply chains are local manufacturing companies providing raw materials, components and services such as product assembly, distribution and logistics.
- In recent years, this sector has experienced major shifts that have changed the ways companies define their value-add and how they interact with their partners along the supply chain. Some of these trends are especially pertinent to Singapore.
- First, product companies are outsourcing more activities on a global basis so that they can focus on core competencies such as design, branding and high-end manufacturing. Dell and Cisco are celebrated practitioners of such a strategy. They no longer make any of their products in company factories preferring to outsource the manufacturing to a number of well-placed and highly competitive contract manufacturers. In Singapore, Hewlett-Packard outsources the building of whole printers to contract manufacturers such as Venture Corporation.
- For outsourcing to work well, brand-owning companies need to strengthen linkages in complex supply chains. Increasingly, the competition will be among supply chains rather than among individual factories or among individual companies. Success will in part depend on the degree to which a supply chain is integrated and its responsiveness to market demands. Singapore's manufacturing companies will have to upgrade their supply chain management capabilities in order to compete effectively in this globalised market.
Emergence of Regional Manufacturing Locations
- Second, the emergence of low-cost manufacturing locations in the region, particularly China, means that companies in Singapore have no choice but to move into higher value-added activities such as product design and high end manufacturing. In this respect, it is encouraging to note that Hewlett-Packard has announced that it will be manufacturing one of its highest end server products, the Superdome in Singapore. Meanwhile, Philips' Innovation Centre in Singapore, their second largest worldwide with 1,000 staff, is developing products and components for audio-visual systems, universal serial bus or USB systems, optical storage systems and wireless applications.
- As companies spread some of their manufacturing activities across the region while keeping Singapore as a location for high end work, it is even more important that the movement of goods and information along these regional supply chains are well coordinated. Singapore, with its efficient and well-connected Infocomm services and expertise in supply chain management, can play the role of a regional supply chain nerve centre.
Shortening Product Lifecycles
- Third, product lifecycles are getting shorter. These days, it seems that high-tech gadgets arrive on the scene, and then fall off consumers' radar screens within months. Some of us have difficulty keeping up with the flood of products that hits the shelves. In mobile communication, I have heard stories of young people who change their mobile phones every few months or even keeping multiple models. Infocomm gadgets do not just serve utilitarian needs anymore. They are evolving from plain vanilla into a plethora of models that follow fashion trends, and are fast becoming lifestyle must-haves. For brand owning companies, this means that product design processes have to be streamlined and speeded up dramatically. This will require such companies to collaborate even more closely with their suppliers in product design and innovation so that they can quickly transform new ideas into must-have new products and put them into the market before their competitors and to cater to changing tastes.
Collaborative High-Tech Manufacturing Plan
- Clearly, to remain relevant in this new high-tech manufacturing landscape, Singapore has to position itself as a location for high-end manufacturing activities, as well as a nerve centre for coordinating regional supply chains that offer the whole spectrum of manufacturing services.
- To realise this vision, IDA has embarked on a project called "Collaborative High-Tech Manufacturing Plan" to develop integrated and responsive supply chains in Singapore. Linked by Infocomm technologies, companies can provide highly efficient end-to-end services from product design to distribution.
- This approach will leverage on some of Singapore's strengths. Singapore already hosts many leading international and local players in manufacturing, logistics and finance that can be brought together to form world-class supply chains. The more mature level of technology adoption amongst these players and our excellent infrastructure gives us the advantage of using Infocomm technology as a strategic tool for supply chain integration.
- IDA has set the target of building 10 end-to-end supply chains within 5 years. These chains will be centred on product companies with operations in Singapore such as Hewlett-Packard, Seagate and Maxtor, and original design manufacturers, or ODMs, such as Venture Corporation and MMI. IDA is prepared to co-fund projects that will strengthen linkages within the supply chains so that these chains can compete as a closely integrated group.
Promoting RosettaNet Standards
- To facilitate the integration of supply chains, we will need internationally accepted and standardised e-business process content that will allow product companies and their suppliers to communicate in a plug-and-play manner. This is where RosettaNet comes in.
- With the support of more than 500 companies representing US$1 trillion in combined revenues, including the who's who of high-tech, RosettaNet has evolved into the de facto standard for business to business communications in the high-tech industry. Originating in the US, RosettaNet has now established presence in Europe and Asian economies such as Japan, China, Korea, Malaysia, Philippines, Taiwan and Singapore.
- In Singapore, IDA has been a strong supporter of the RosettaNet since 2000. Over the past 3 years, IDA has co-funded RosettaNet adoption efforts by pioneering companies in Singapore. Currently, about 100 companies in Singapore are using RosettaNet partner interface processes, or PIPs, to automate mature business processes like procurement, inventory management and shipment notice.
Developing and Test-Bedding New Supply Chain Capabilities
- While we will continue to promote these mature PIPs to build a broad base of RosettaNet adopters, we will also need to develop and test-bed new supply chain capabilities such as e-payment, collaborative design and e-logistics.
- Moving forward, we aim to position Singapore as a location to test-bed new RosettaNet processes and standards that enable these new capabilities. We will encourage companies in Singapore to undertake pilot implementation of newly developed PIPs in e-logistics and e-payment. Such projects will leverage on the relative ease of gathering together world-class players across industries in Singapore. For example, Seagate and ST Microelectronics are working with their banks in Singapore today on the testing of e-payment PIPs. With this process in place, the reconciliation of invoices and payments will be automated, thus saving the daily grind of manually matching invoices with money received, and figuring out how much the banks have deducted from their accounts!
- Another advanced supply chain activity that IDA is working on is collaborative design. As companies move up the value chain into designing more complex products, the ability to manage the product development process becomes critical. Streamlining and integrating information flows can help companies realise shorter lead time and lower costs. This can be achieved through the adoption of IT applications such as product lifecycle management, or PLM systems.
- Design collaboration usually starts from within the enterprise, as internal product design processes are optimised and engineering data flows are coordinated. But as other design partners also adopt PLM solutions, these PLM islands can be linked together through RosettaNet PIPs to form design partnership networks.
- In the automotive industry, where the need for well-coordinated supply chains is similar to that of the high-tech sector, PLM solutions are being used by companies such as Volvo to share development data internally and externally.
Formation of RosettaNet Global Logistics Council
- For e-logistics, we have taken an even more exciting step. Since the logistics sector cuts across many industries, the implications of standardising logistics communications and business processes extend far beyond high-tech, which is the traditional domain of RosettaNet. With more than 3,200 flights a week to 152 cities, and as the busiest container transhipment port in the world, Singapore understands the importance of moving goods around the world efficiently and with minimal fuss. I am therefore pleased to announce the formation of the RosettaNet Global Logistics Council, a partnership between IDA and RosettaNet.
- This Council, with participants such as Hewlett-Packard, Intel, Cisco, Exel, UPS, Federal Express, DHL, Menlo Worldwide and Portnet, is an important initiative in standardising communications and processes between manufacturers, logistics service providers and various players along the logistics supply chain. Through the Council, Singapore hopes to play a more active role in helping to facilitate the development of new e-business standards in logistics and supply chain management.
Using Web Services for Flexible Integration
- In terms of content delivery, web services will become a very useful alternative tool for integrating supply chains. The web services approach offers a flexible and lower cost option for automating business processes and integrating supply chains. In situations where the process is complicated and non-standard, as in multi-party sharing of product design or engineering information, web services can facilitate collaboration.
- E2Open, a leading international platform for supply chain integration, is using web services as one of the channels to connect product companies and their suppliers. In Singapore, Gridnode, a home-grown leading solutions provider for RosettaNet and business integration is helping MMI, a local contract manufacturer to share quality control data with one of its major partners via web services.
- I understand that RosettaNet is also working on incorporating web services to deliver its business process content. We welcome this move as it complements our own effort to promote web services applications.
- In conclusion, I would like to encourage high-tech companies and their suppliers, whether they are global multinational corporations or local SMEs, to take up the challenge of linking up with business partners to form strong and responsive supply chains. IDA is prepared to work with you to integrate your supply chain.
- When fully implemented, the Collaborative High-Tech Manufacturing Plan is expected to result in annual savings of about $700 million from higher efficiency and generate additional manufacturing revenues of about $2 billion through expansion into higher value-added activities. The development of the 10 end-to-end supply chains will also generate an estimated $40 million worth of ICT spending. In short, this plan harnesses ICT to give a competitive edge to Singapore's manufacturing and design industry, thus helping to entrench and enhance Singapore's competitiveness as a high-tech manufacturing base.
- The target of building 10 supply chains in 5 years is a challenging one. However I am confident that by working together we can achieve this goal and realise the vision of developing Singapore into a hub for high-end manufacturing and a nerve centre for coordinating regional supply chain management.
- I look forward to your participation in this new and exciting journey.
1Economic Development Board
2EDB media release on 4 February 2004, "Electronics and Precision Engineering industry 2004 : Electronics and Precision Engineering remain major contributors to Singapore economy"
3MOM mdia release on 30 January 2004, Preliminary Employment, Unemployment And Retrenchment Estimates For Fourth Quarter 2003