Singapore’s location at the heart of the APAC region, expertise in logistics and cold chain management, and smart investment in infrastructure has helped make the Lion City an indisputable global heavyweight in pharma logistics.
“From a logistics standpoint, Singapore serves as a pivotal gateway to the broader region—namely because of its efficiency, established infrastructure, and high caliber talent.”
Sungantha Natarajan, DB Schenker
“From a logistics standpoint, Singapore serves as a pivotal gateway to the broader region—namely because of its efficiency, established infrastructure, and high caliber talent,” extolls DB Schenker’s Sugantha Natarajan. Indeed, Singapore has developed into a regional management hub for multinationals across a wide range of industries, including as a production site for a number of leading chemical and pharmaceutical companies, and as Narajan clarifies “many companies establish and stabilize their operations here first, before venturing off into the frontier.” When the time comes for companies to expand from Singapore into the surrounding ASEAN countries – or as Singapore plays an increasingly important role in supporting and supplying business at the Asia Pacific level – the companies operating on this little red dot start to generate significant demand for cargo, freight and logistics services.
Of course, it has taken much time, investment, and professional development amongst logistics providers to position Singapore as the premier logistics hub in the Asia Pacific region. On a general note, Thomas Page, UPS’s VP for healthcare and contract logistics in Asia Pacific, asserts “Singapore has done a tremendous job in attracting healthcare companies to use Singapore as a financial and logistical hub, as it poses low risks but also serves as an optimal hub for value-added activities… I also applaud everything that Singapore is doing related to their infrastructure to be a reliable and reputable member of the supply chain.”
Moreover, as the pharma industry’s mentality towards cost and expenditures continues to evolve in light of persistent scrutiny of, and downward pressure on, prices around the world, many companies are doubling down on their regional distribution operations in Singapore to improve efficiency. Page explains, when “an additional location is added to the distribution hub, this reflects up to 29 per cent more inventory, leading to obsolescence and an enormous investment on the balance sheet under inventory. Companies are looking to pull this inventory back to a regional hub with proximity to market and lower labeling costs for optimal inventory and flexibility. We are seeing this as a trend and one of the added benefits of Singapore as a hub.” The logic is much the same for packaging and labelling operations, as “once the product is labeled there is no longer the ability to be geographically flexible with that inventory,” and “when the product is labeled in-country, inventory is then sprinkled throughout the region tying up working capital.” Running a physical or virtual distribution center in Singapore via a third party logistics provider can allow companies to cover significant sections of Asia Pacific markets with relatively low inventories on hand – a significant concern for companies selling very high value innovative compounds in low volumes.
At the heart of the Singapore logistics hub lies Changi International Airport, which was voted the World’s Best Airport for the fourth time in a row in 2016 by the passenger oriented Skytrax survey, and also holds a wide range of air cargo focused awards, including the Asia Pacific Airport of the Year from Payload Asia, which it won for the third consecutive year in 2016. Ms. Phau Hui Hoon, Assistant VP for cargo and logistics development at Changi Airport Group, explains that “we have seen pharmaceuticals as a high potential niche for several reasons. Global spending on cold chain pharma shipments is growing at between eight and nine percent per year, and over the next few years Asia will account for one of the largest shares of that global growth. Given our geographic location, connectivity, infrastructure, and capabilities and a whole range of other factors, we feel [Changi Airport is] well located to capture a significant portion of this growth in pharmaceutical airfreight. As such we have made significant efforts to position Changi as an optimal hub for these shipment volumes,” and efforts have proved successful as “pharma cargo volumes have grown at a CAGR of 13 percent from 2010 to 2015.”
Since “Changi Airport Group itself is not a direct service provider,” Phau clarifies that the airport’s “role was to work with our stakeholders in the airport ecosystem to raise awareness about the potential the pharma industry represented, and some of the necessary investments that would be needed to capture that.” The first visible success of this awareness initiative arrived in 2010 when one of the airport’s ground handlers, SATS, opened their Coolport facility; “DNATA, our other airport ground handler, followed with their investment in their own cold chain facility in 2013,” adds Phau. Beyond infrastructure, Changi Airport Group has also spearheaded the effort to get companies working in the Airport ecosystem certified to handle pharma products. In this respect, the group has selected the relatively new IATA-CEIV Pharma certification, and SATS once again was the first mover getting certified in 2014; Phau excitedly shares that “we are expecting six different companies to get their IATA CEIV Pharma certification in 2017.” The next step for the airport has been joining the recently established Pharma.Aero community of IATA-CEIV Pharma certified airports around the world, with the eventual goal of being able to offer end-to-end services guaranteed under the same quality standards. Phau states “Changi Airport is proud to be a strategic member of the international Pharma.Aero community alongside Miami International Airport, Brussels Airport, Sharjah airport in the UAE, Singapore Airlines cargo – other members include Brussels Airlines and Brinks Life Sciences.”
Today, Singapore’s position as the premier logistics hub for pharmaceuticals in Asia is unassailable. As explained by President of Singapore Airlines Cargo Chin Yau Seng, “pharmaceutical companies need to be able to have easy access to even more locations to ensure that their products reach their ultimate customers without compromising product integrity. That’s where direct air links are particularly important… [and Singapore and] SIA Cargo is in a good position to fulfil those needs as we have a substantial global flight network with extensive coverage of the Asia Pacific region.” Altogether, Singapore has direct flights to over 330 cities, including 32 in China, 15 in India, and at least 13 in Indonesia – a level of connectivity unparalleled by other airports in the region according to Phau.
Writer: Alex Ackerman