Mary Yeo
Managing director, UPS Singapore

LAST week, I woke up for a conference call at 6am with a client who is headquartered in the United States. He made no bones about his agenda: how to manage costs and find business opportunities in these challenging times. Indeed, this is the oft-heard business situation today that all companies face. I pondered his question and these are my views . . .

After more than 20 years in the logistics industry and having been through numerous business cycles, I can see that there are many unexploited opportunities, and among the most underutilised by small and medium enterprises (SMEs) today are Singapore's Free Trade Agreements (FTAs).

With the support of the Singapore government, agencies such as International Enterprise (IE) Singapore, global service partners such as supply chain providers, and legal and accounting firms, SMEs can receive counsel, support and assistance on how best to increase their export markets and handle business operations anywhere in the world. This includes finding the most efficient and cost-effective ways to transport goods across borders, manage inventory and ensure smooth trans-border custom clearance. These partners, with their deep knowledge and understanding of how businesses work globally, can help SMEs execute their businesses successfully in new markets, by providing a comfort zone of professional services in every FTA partner country.

There are, of course, risks in expansion - but there are no rewards without risk. SMEs can mitigate risks through forward planning and by finding proactive partners. A survey by United Parcel Service (UPS) and the Economist Intelligence Unit released on Dec 9 concluded that businesses which ignore risks are increasingly vulnerable to supply chain disruptions, especially as a result of tighter, leaner supply chains. Before entering a new market, SMEs need to scrutinise their supply chains for vulnerabilities and develop contingency plans. Maintaining supply chain visibility also enables companies to identify a problem as soon as it occurs - no matter where in the world it may be - so that contingency plans can immediately be put into action and business continues without disruption.

At a time when businesses are looking to manage costs better, FTAs provide tariff concessions which then boost the competitiveness of Singapore-made products in overseas markets. This is a great opportunity for SMEs to effectively grow and diversify revenue streams on a global scale. With Singapore's extensive network of 13 FTAs with 23 trading countries, including major economies and markets around the world such as the US, Japan, India and China, many companies are already building business models around FTA opportunities. I have worked with clients in the IT, electronics and healthcare industry who have taken the step to leverage on these opportunities. But there is room for much, much more.

Become stronger regional players

At present, according to IE, Singapore's domestic exports to FTA partner countries account for over 60 per cent of the nation's total domestic exports. There are thousands of Singapore SMEs, on the other hand, that have yet to fully embrace the benefits of FTAs. With the aid and expertise of global partners, SMEs can and should pursue these opportunities. Now is the time.

As a first step, SMEs should take advantage of the most popular and well-utilised agreement - the Asean FTA (Afta) which took effect in 2003 - and become stronger regional players. Operating in these challenging times, SMEs expanding overseas can increase the resilience of their supply chain by developing trusted partnerships with logistics providers. Integrated logistics partners have the ability to provider supplier management services, enable excellent visibility to products within the supply chain and implement a multi-modal strategy. They also enable smooth trans-border movements of goods and can quickly implement an alternative operating plan to get around bottlenecks.

With the knowledge and global expertise of internal logistics providers, SMEs seeking new markets can also explore opportunities in China and India, the two fastest-growing markets in the developing world which Singapore has signed FTAs with. This provides a perfect springboard for Singapore companies to more effectively penetrate and compete for business in these countries. According to findings of the UPS Asia Business Monitor (ABM) 2008, an annual survey of more than 1,200 SME leaders across 12 markets, it was found that 71 per cent want to capitalise on intra-Asia trade growth, believing it will bring them strong returns. And, with gross domestic product (GDP) growth forecasted at an estimated 7-8 per cent for both economies, opportunities abound for SMEs seeking opportunities in China and India.

Get help from IE Singapore

Outside of Asia, Singapore SMEs can also explore opportunities in the US, following the agreement signed between the two countries in 2003. A recent global study by McKinsey found that small private companies are seeking opportunities amidst the turmoil by entering markets where the competition may have been weakened, as is the case in some US sectors. While there is a general impression that doing business in the US is expensive, the FTA now allows Singapore exporters to do so at a much lower cost.

In this post-credit crisis US economy, SMEs might find their products are much more competitive in the US than they once appeared. For Singapore companies that need a hand when expanding into overseas markets, the IE Singapore Centre provides personalised in-depth advisory services from IE Consultants and Partners, as well as houses an extensive collection of resources to guide companies in their overseas venture.

In this current climate where growth opportunities become less of a priority for businesses focused on cutting costs, companies must be especially prudent when making decisions on how to cope with the challenges of a global recession. While creating tighter and leaner supply chains helps companies, big and small, to better manage costs, it also exposes companies to an increased number of risks. Businesses must realise that success in the current global economy depends, in large part, on building successful risk mitigation strategies that can turn a resilient supply chain into a competitive advantage.

My early morning conference call ended at 7.30am and, before I tackled my emails, I took a moment to reflect on the global nature of our business today. To get through this turbulent period, businesses must be shrewd in seizing opportunities to enter new markets while making well-thought decisions on how best to manage costs. As economies chug on and business continues 24/7, it is those who are brave, wise and flexible who will rise to the occasion and emerge victorious despite the challenges.

This article was first published in The Business Times on December 13, 2008.