Rising tide and flow of ship suppliers

Having been president of the Singapore Association of Shipsuppliers and Services (SASS) for 11 years, Danny Lien opened the year with a poignant message to members: faced with numerous challenges in a highly fragmented industry, coupled with inconsistent and uncollated data, SASS and its members have to keep working with various government agencies to provide the industry with standard data sets to promote accuracy and efficiency in the ship supplies industry.

For 42 years, the SASS has sworn by four objectives: to promote, regulate, protect, represent and further the interests, conduct and operations of our members; to disseminate advice, industry updates and other useful information to our members; to encourage social interaction among our members and with other related organizations; to co-operate with any other organization whose objectives and activities are beneficial to the association. 

Goals stay the course, but navigation towards port for ship suppliers have been hit left and right by environmental demands and burgeoning costs. How are the members surviving? 

Danny Lien, president of the Singapore Association of Shipsuppliers and Services.

There is a pressing need for marine procurement to take advantage of digitalization. How are members handling this transformation?

Members of the SASS have started digitalization of their business, albeit at a much slower pace than some other industries. 

Although they have deployed some form of piecemeal digitalized solutions in their business processes, it is still very much paper-based. Right from Proof of Deliveries to Duty-Free Permits from Singapore Customs, hardcopies are still widely used. 

Though various government agencies are pushing companies towards harnessing the power of digitalization to transform, many small and medium enterprises (SMEs) are hesitant. Reasons often cited are lack of manpower and financial resources, tedious and painful process to apply for funding, among others. 

What are the struggles that ship suppliers are facing when it comes to the shift to decarbonization?

The biggest challenge is capital investment. The shift to decarbonize would require buying of new equipment, upgrading of existing equipment and infrastructure, and even disposing of assets that cannot comply with the requirements. This will definitely put a strain on the SMEs as most of this investment cannot be recovered in the short term. 

Many SMEs in this space will also have to pay more for products and services within the supply chain. Tracking the carbon footprint of each product and service will also require resources. They are struggling with the ballooning operating costs.

Sustainable, substantial financing and investment has been a pain point. How can government bodies rise to meet this need? What will motivate investors to pump money into companies?

Financing for SMEs is also a challenge. Although the local banks in Singapore keep promising to support local enterprises, they often pick and choose the companies they are willing to support. The government agency, Enterprise Singapore, has support programs for SMEs but ultimately the banks decide how and if they are willing to support. 

Although the government encourages entrepreneurship, new businesses have to submit three years of financial information to the banks for evaluation. So, it is very tough for startups to receive support from banks in Singapore.

Attracting investors is a separate issue altogether. Ship supplies business is considered as “not sexy”, highly fragmented and highly competitive. The government agencies should consider working with the industry to change the perception and help the industry consolidate. 

This consolidation will allow the organizations to be more efficient and perform better overall in terms of operations and financials. Investors are not keen on businesses that do not have significant topline (probably S$50 million and above) and healthy EBITDAs (earnings before interest, taxes, depreciation, and amortization) – probably between eight to 10 percent. 

There is an undercurrent of corruption and errant practices which permeates the maritime industry. How to combat such a culture?

Corruption and errant practices happen in almost every industry. So, it is the responsibility of the upstream and downstream organizations to identify and to weed out all these practices. Creating a more transparent and sustainable process can reduce some of the cases but unlikely it can be eradicated. 

What are the struggles face by ship suppliers? 

Ship suppliers are responsible to ensure the last mile deliveries to the vessels are met on time as per the vessels’ schedules. 

However, vessels’ schedules can be erratic due to reasons like inclement weather when sailing from port to port, port congestion, delays in cargo operations from the last port, engine or machinery or equipment malfunction, among others. These unforeseen delays will disrupt the delivery schedules and adjustment has to be carefully reorganized as it may also involve cold chain logistics. 

During delivery on the ship side, delays in the last mile delivery can also happen due to inclement weather, bunker operations, underwater survey or repairs and mechanical issues with lifting cranes on the ship. All these delays will inevitably disrupt the planning and increase delivery costs. This is from the operational perspective.

From the supply of products to the ships, suppliers are increasingly pressured to reduce the use of single use plastics (SUP) as well as reduce the supply of products using SUPs. The use of alternative packaging is significantly more expensive than the traditional SUPs, but some customers want to adhere while being unwilling to pay the difference in costs at the same time. 

Ship suppliers often offer additional service of offloading SUPs collected on the vessels for proper recycling here in Singapore, often with no extra charge to the customers as most are also unwilling to pay the extra costs.

The next initiative that is going to impact the marine supply chain is decarbonization. The Maritime and Port Authority of Singapore (MPA) has mandated that all supply boat operators need their assets to be electric-ready by 2030, which is under seven years away. 

Switching from fossil fuel driven boats to electric-driven boats requires significant investments from the boat operators. Not to mention how they will need to dispose of their current fleet of diesel engine boats. The capital investment is huge and the cost will again invariably be passed down to ship suppliers when the boats are hired for last mile deliveries.

Overall, as much as ship suppliers would like to adopt and support the initiatives, the suppliers often end up bearing the bulk of these additional expenses.

What contingency plans do they have in place?

The SASS is actively engaging the authorities, customers and stakeholders during this period to find solutions that will prevent a hockey stick spike in terms of associated costs. Meanwhile, ship suppliers are also engaging their customers in areas of concern where additional costs have to be dealt with in an amicable approach for the good of the industry. 

SASS is also working and discussing with MPA, PSA, Jurong Port and other relevant government agencies to explore how policies can help and support the local ship suppliers.

Photo credit: iStock/ Katrin_Timoff

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