A growing number of multinationals are setting up global supply chain hubs in Asia and Germany-headquartered Henkel is one of the latest to open one in Singapore, which it says will “steer the biggest transformation” of the company.
The detergent, adhesive and shampoo giant joins other leading companies such as Dell, Hewlett Packard, and Panasonic who have established supply chain management hubs in the Republic.
Henkel’s Singapore hub will manage the purchasing, production and logistics processes of its various businesses. These include adhesive technologies, beauty care and laundry and home care products.
The 140-year-old Germany-based multinational Henkel deals in consumer and industrial goods, and is most well-known for its Persil brand of laundry detergent.
Speaking to Future Ready Singapore, Thomas Holenia, Managing Director of the global supply chain hub in Singapore and president of Henkel Singapore shared more about how the hub fits into the company’s overall plan.
The hub, Holenia explains, is to play a key role in the company’s aim to consolidate all of its supply chains into a single global supply chain.
By locating all of the company’s staff in one central location and the upgrading of their IT systems and processes with harmonised software, the hub is meant to complement the company’s headquarters in Amsterdam to coordinate the company’s operations on both sides of the world.
This is Henkel’s biggest transformation project that involves thousands of people globally, says Holenia.
As part of this consolidation, the hub will help to align the company’s purchasing, production and logistics processes across all business units and functions. This harmonisation across the entire company will lead to higher process standardisation, improved customer service levels, enhanced efficiency as well as greater sustainability.
Digitalisation in particular, is a key driver of this process for Henkel.
Henkel aims to digitise its interaction with customers, consumers, business partners and suppliers along the entire value chain in both its consumer and its industrial businesses so that “digitally-driven” sales will be doubled to more than 4 billion euros by 2020.
For example, Henkel will be introducing “omni-channel” offerings in its consumer business that link e-commerce platforms with traditional retailing.
They also plan to develop and roll-out new digital platforms and significantly expand the use of digital media.
“This creates transparency on the vast amount of data on customers, products, raw materials and logistics. This improves the exchange of knowledge significantly, brings consistency in customer service and enables managers to make informed decisions faster, resulting in quality processes across markets,” Says Holena.
These activities provide a “strong foundation” for developing Singapore into a global centre of excellence for Henkel. “At the end of the day, what we are striving for is really a standardisation and harmonisation of all our end-to-end processes spanning across the entire supply chain,” he says.
Amongst the numerous benefits offered by this consolidation, Holenia stressed that the improvements in sustainability in particular was an area of focus for the company.
“Sustainability is one of our core values at Henkel. It starts with every single person, with the setup of the office, working together with suppliers, so as to standardise all our processes,” he says.
An example he gave was how further efficiencies in the overall supply chain can be gained when planning is improved, and redundant transportation journeys are eliminated. “There are many aspects of sustainability that can and will be improved,” he adds.
Henkel in addition explained that the Singapore hub is partnering with suppliers and business partners to continually improve the sustainability impact across the entire value chain.
A growing movement
Beyond Henkel, a growing number of companies worldwide are seeing the value of embedding sustainability in their supply chains.
A report 'The state of sustainable supply chains', published in August 2016 by consultancy Ernst & Young and the UN Global Compact, shows that leading companies are creating more sustainable supply chains that deliver significant business benefits by increasing collaboration with suppliers and making better use of new technology.
The study is based on interviews with 100 sustainability, supply chain and procurement specialists from 70 companies globally (18% from Asia-Pacific) across 12 industry sectors including telecommunications, automotive, finance, life sciences, technology, and oil and gas.
K. Sadashiv, managing director, climate change and sustainability services, at Ernst & Young, says the study shows a significant shift by leading companies, from a risk and compliance approach to supply chains, to investing in sustainable supply chains.
“This is all the more relevant for companies in the region in light of ASEAN's Free Trade Areas (AFTA) with China, India, Korea, Japan, Australia and New Zealand, as well as regional free trade agreements FTAs such as the Trans-Pacific Partnership and Regional Comprehensive Economic Partnership, which promote integrated sourcing in manufacturing and regionalisation of supply chains and production networks,” he says.
Simon Yeo, assurance partner at Ernst & Young, adds that improving environmental, social and governance performance throughout supply chains can help companies enhance processes, save costs and increase labor productivity.
He says: “Results of the study show that leading companies are deriving numerous business benefits from embedding sustainability in their supply chains. These benefits include product differentiation, increasing market share, and growing consumer support.”
It is clear that Henkel recognises this, especially with the set-up of the Singapore hub to secure its sustainability and competitiveness. “With this global supply chain, we are fulfilling our vision to be a global leader.”
Asia’s growth story
Beyond finding a location that could support their large scale supply chain transformations, Holenia also emphasizes that region’s growth story also was a significant consideration to locate the hub in Singapore – the gateway to Asia.
In its recently published Asian Development Outlook 2016, the Asian Development Bank (ADB) highlights that – global headwinds notwithstanding – developing Asia will continue to contribute 60% of world growth. The ADB forecasts 5.7% growth for developing Asia in 2016 and 2017, fueled by the rising affluence and domestic demand from its growing middle class.
At the moment, Asia makes up about 17% of Henkel's global sales of 3 billion euros, a figure expected to grow further, says Holenia.
“So for us, Asia is a key focus area and key emerging market,” he says, adding that the company wants to grow its Asia business and is doing so by also locating more of its operations in Singapore.
The decision to locate in the city-state was driven by the availability of the supply chain talent here, in addition to the logistics capabilities in the city-state and the industry-wide ecosystem, he observes.
Henkel has also placed the responsibility of global sourcing for raw materials in the Singapore hub, due to its central location. These include materials like surfactants and palm oil derivatives.
Holenia says this latest office builds on the success of Henkel Singapore, which was established in 1983 and serves as a business development and technical services hub for the company’s adhesive and beauty care businesses in Southeast Asia.
The Singapore hub has grown from just four people a year ago to a 50-strong staff across 14 nationalities currently and the company is still hiring.
Henkel’s latest outpost continues to affirm Singapore’s prominence as a regional business hub.
Dr Steffen Koch, acting head of Mission of the German Embassy in Singapore, pointed out that Singapore’s “prime geo-economic location at the core of the dynamically developing Asia, its business-friendliness as well as its highly efficient ports and airport makes it the ideal choice for all kinds of logistical operations”.
Echoing similar sentiments on the topic of managing complex supply chains in emerging Asia, Lee Eng Keat, Executive Director, Natural Resources & Logistics at Singapore Economic Development Board calls attention to the fact that capitalising on Asia's emerging markets requires the ability to effectively manage the complex supply chain challenges that the region presents.
“Global businesses commonly centralise their logistics and supply chain management functions in a stable, secure location that offers access to a broader region”, he adds.
“For many corporations looking to establish a presence in Asia, Singapore is an attractive supply chain management hub because of its extensive connectivity, innovation ecosystem, and the availability of consultancies and other supply chain support services.”