Singapore Logistics Market: Navigating Challenges, Unleashing Potential - Will Technology Disruption Fuel the Next Era of Growth?

Singapore's logistics market has witnessed remarkable growth in recent years, driven by increased export and import activities and the expanding E-commerce industry. This growth has been further propelled by technological advancements and government initiatives that have significantly improved operational processes. However, despite these positive developments, certain roadblocks have hindered the market's full potential.
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1. Logistics Companies in Singapore face various challenges in terms of shortage of automation in warehousing facilities, space utilization, and resource allocation, and un-availability of skilled manpower

After effects of Covid-19 outbreak

The Singapore logistics industry has not yet recovered from the disruptions cased by the Covid-19 pandemic. The industry is still recovering from supply chain disruptions and lower demand in certain sector.

Warehousing Challenges

There is no legal framework for the governing of warehousing sector in Singapore. The inconsistent warehousing laws like Licensed warehousing scheme and SFA licenses poses a market entry challenges in the market leading to higher prices or legal indecisions.

Shortage of Automation in Warehousing

The need for 100% automation is required in warehouses across the country (Currently 25%-30% warehouses are automated) if the industry needs to retain its position as one of the best logistics hub and to reduce human errors, increase cost and time efficiency.

Un-Availability of Skilled Manpower

The industry is facing acute shortage of skilled manpower (84% talent shortage all over the industries in 2022)¹ in the industry and with more digitization/technology oriented operations, the skill requirement to work in the industry increased to a whole new level.

Space Utilization and Resource Allocation

Singapore has been facing space crunch to establish big logistics hubs to encourage growth of the industry and to consolidate various players in the market. It is of the major challenges that warehouses in the country are currently facing.

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2. But, the Singapore government has provided support by launching supply chain 4.0 initiatives aims to integrate more technology to assist SMEs and Logistics and Supply Chain Industry Transformation Map

Singapore Government Initiatives for Logistics Industry

New Supply Chain Initiative to Help SMEs

• Singapore’s announced the launch of an S$ 18 Mn Supply Chain 4.0 Initiative in 2021.
• Aims to integrate more technology to assist SMEs.
• Singapore launched the Singapore Trade Data Exchange (SGTraDex) in mid-2021 and facilitates the secure sharing of data between supply chain ecosystem partners through a common data highway.

Logistics and Supply Chain Industry Transformation Map (ITM)

• The ITM is a government-led initiative aimed at driving the transformation and growth of the logistics and supply chain industry in Singapore.
• The ITM aims to accelerate the adoption of digital technologies, such as automation and artificial intelligence, and to enhance the productivity and competitiveness of the sector.²

Productivity Solutions Grant

• The Productivity Solutions Grant (PSG) supports companies keen on adopting IT solutions and equipment to enhance business processes.
• PSG covers sector-specific solutions including the retail, food, logistics, precision engineering, construction and landscaping industries¹

Source: Interviews with Industry Experts, Industry Articles and Ken Research Analysis, 1. Enterprise Singapore 2. Ministry of Trade and Industry

2.1 Further, the Regional Comprehensive Economic Partnership (RCEP) trade agreement will drive more companies to consider a Singapore logistics hub

Singapore Government Initiatives for Logistics Industry

I4.0 Solution Adoption

• The launch of the government’s Networked Trade Platform and PSA International’s B2B and B2G platform. This can be felt on several links, ranging from optimized resource planning and warehouse management systems to intelligent transport systems, where the security of information and data is becoming increasingly important.

Demand Surge driving govt to approve license quickly

• 20-30% rise in frozen food demand has put the strain on existing CSFs in Singapore as importers are running out of space
• Authorities are emphasizing on diversification and are approving licenses for new CSFs to open more swiftly to aid the Supply
• SkillsFuture Singapore or SSG is launching shorter form, modular courses to train staff prepared for supply chain sector

Logistics Industry Digital Plan

• Two digital roadmaps have been developed – the IDP Digital Roadmap lays out digital solutions for SMEs at different stages of growth.
• About 5,300 Logistics SMEs and 86,300 workers expected to benefit from the refreshed Logistics Industry Digital Plan.²

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3. Presently, the logistics market in Singapore is majorly driven by growing demand for e-commerce and increasing cross border trade

Drivers, Restraints, and Opportunities for Singapore Logistics market

DRIVERS

• Growing Demand in E-commerce Sector: After Covid-19, the demand in e-commerce sector in Singapore surged. The e-commerce GMV grew from S$2.5 billion in 2019 to S$ 6.2 billion in 2022.¹
• Increasing Cross-Border Trade between Singapore & its neighboring countries: Singapore entered a multilateral trade agreement with the Pacific Alliance. The establishment of the PASFTA provides exclusive opportunities in Singapore to engage, transact, and capitalize on the Latin American market with decreased tariffs and eased trade restrictions.²

RESTRAINTS

• High Logistics Cost: Delivery and transportation costs are the largest expense for logistics, with last mile delivery accounting for 50% of total shipping costs³. For instance, last mile costs around $10 per package delivered and can be higher for heavy items in Singapore.
• Low Labor Availability and Driver Shortages: Lorry drivers are striking against high diesel prices in Asian countries like Singapore, threatening global supply chains.⁴ Truck drivers’ shortage in Singapore is resulting in rising costs and delays in product distribution.

OPPORTUNITIES

• Infrastructure Development: The development of logistics infrastructure, such as intermodal connectivity, logistics parks, and ports, is creating business opportunities. The government is also accelerating the development of Singapore’s public charging infrastructure for electric vehicles.⁵
• Sustainable Technologies: The government is focusing on sustainable development of the country with the introduction of automated and sustainable products. Sustainable technologies are integral to the new Tuas Port, which will become the world's largest automated container terminal when its fourth and final phase will be completed in 2040.⁶

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4. High Pre-commitment rates to upcoming supply, Growing Demand in E-commerce Sector and Automated Guided Vehicles are some of the growth drivers and recent trends in the market

Growth Drivers of Singapore Logistics Market

Government Initiatives

• Singapore’s Manufacturing 2030 plan is driving research and innovation in advanced manufacturing operations with demand for high-specification warehouse facilities continuing to grow.

High Pre-commitment rates to upcoming supply

• Specifically for prime logistics (investor-grade ramp-up warehouses), where vacancy rates remain low and pre-commitment rates to upcoming supply are high, the market is seeing healthy rental growth on the back of strong demand, thus driving the logistics market in Singapore.

Growing Demand in E-commerce Sector

• The demand in e-commerce sector in Singapore was exponential and the e commerce GMV grew from S$ 2.5 Bn in 2019 to S$ 6.2 Bn in 2022¹ this paved path for the growth of logistics market. E-commerce companies invested in new technologies and explored new ways to fulfilling the demand in the market.

Technological Advancements

• Singapore Logistics Association (SLA) has begun piloting the use of Automated Guided Vehicles (AGVs) with local robotics firm Hope Technik in a third-party logistics (3PL) warehouse. It will help not only to reduce cost but also to minimize human errors and reduce time lags.

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5. Technologies such as Dynamic Route Optimization, Connected Trade Platforms, Autonomous last-yard delivery, and autonomous last mile delivery are expected to drive Industry growth in future

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