Opening Address at SMF Awards 2014 & SMF 82nd Anniversary Gala Dinner

Mr Tan Chuan-Jin, Minister for Manpower, Fairmont Singapore, Fairmont Ballroom

Mr. Teo Ser Luck, Minister of State, Ministry of Trade and Industry

Mr. Sam Tan, Minister of State, Prime Minister's Office & Ministry of Culture, Community and Youth

Mr. George Huang, President of Singapore Manufacturing Federation

Distinguished Guests, Ladies and Gentlemen

Introduction

1. Good evening. I am honoured to join you in celebrating SMF’s inaugural Awards ceremony as well as its 82nd birthday. Let me offer my sincere and hearty congratulations as very few organisations in Singapore have a history as long and rich as that of the Federation.
2. When the Singapore Manufacturing Federation (SMF), formerly known as Singapore Manufacturing Association, was established back in 1932, we lacked a strong manufacturing foundation. Today, manufacturing with its significant contribution to GDP and employment, is a critical pillar of growth for our economy and will remain so¹. We have a globally competitive manufacturing sector that generates good jobs for Singaporeans, with diverse occupations and skill requirements across a wide range of industries. The strength of manufacturing today is a testament to the concerted efforts of organisations such as SMF, working together with the Government, to grow the sector over the decades.
   
   Succeeding in our Restructuring Journey
3. We have been on the journey of restructuring for a few years now, towards quality growth driven by innovation and higher productivity. It is not an easy journey. Our tight labour market continues to be a feature of Singapore’s economy, and our land space is likewise limited. In such a context, our value proposition in the global market cannot be based primarily on costs, but on value – driven by the innovations in our businesses, the creativity of our ideas, and the resulting quality of our products.
4. Everyone here knows that this is easier said than done. The difficulty of finding sufficient manpower, and difficulties in coping with business costs are real challenges that companies across the economy, especially SMEs, contend with on a daily basis. But we do need to persevere and forge ahead to ensure that these short-term pains translate into long-term gains. As a sector and as individual companies, how can we come out of restructuring stronger, more productive and more competitive?
   
   Business Transformation
5. First, we must focus not merely on coping, but on transforming and thriving. It is understandable for prevailing challenges to occupy our minds and our time and resources. However, our business strategies must extend beyond the immediate horizon to the medium and longer-term. Where do we want to be in the market space, what is our niche, how do we not just survive but enhance our competitiveness?
6. This will mean a fundamental relook at the business, be it about processes, organisational structure, or products and services. It has to go beyond trying to cut costs, or simply growing the topline. The Government has put in place measures and schemes to support businesses in these efforts to enhance productivity including broad-based measures such as the Productivity & Innovation Credit (PIC) scheme and the PIC Bonus.
7. This year, we introduced further incentives to deepen our support for companies’ efforts in business transformation and capability building, such as the PIC+ for SMEs, tax incentives to encourage private Research & Development investment, and the ICT Productivity and Growth Programme (IPG) to support scaling up the adoption of relevant ICT solutions. I know many of you have tapped on these schemes and found them beneficial. While these schemes do provide some relief, their main objective is not to ameliorate pain but really to encourage and enable growth, innovation and most importantly transformation.
8. I am heartened to learn that a number of the SMF Award recipients tonight here have been successful in their transformational efforts and should be lauded for their outstanding achievements. As Mr Huang mentioned, there are many exemplars of success, but let me share with you the story of LHT Holdings. The reason for sharing such stories is for us to realise that there is a path forward and many companies, not just those who have won awards today, have begun embarking on their journey of transformation. It is key for organisations and associations like SMF to find the opportunities to share these stories to inspire and show others that transformation can be done.
9. Established in 1977, LHT Holdings was initially a manufacturer of pallets made of natural wood. In view of environmental considerations and business pressures, the company decided to move into green products, by redesigning and re-engineering process wood instead of using natural wood. By leveraging technology and innovation and building capabilities such as zero waste management, they developed a new pallet series made from waste wood. Not only is the new series more environmentally friendly, but it reduces the number of steps in the manufacturing process by more than half. This has led to increased production output and cost savings.
10. Companies like LHT Holdings have demonstrated that it is necessary and possible to continually adapt to an evolving operating environment and different economic conditions, so that the business continues to grow.
    
    Building a Productivity-based Culture
11. The second point is that we need to build a pervasive productivity-based culture.
12. Productivity is not just about finding one or two silver bullets that will solve all of a business’s challenges. Rather, it is achieved through a culture of continuous improvement and innovation that encourages all levels of employees in a company to improve productivity in big and small ways. It is important for business leaders and managers to set the tone and culture required to spur productivity in their companies.
13. International studies have shown that leadership and management are key drivers of productivity as they steer the change within organisations. They also play an important role in creating a progressive and productive work culture, which is capable of embracing changes, encouraging experimentation and recognising good ideas from the bottom-up.
14. Indeed, companies that have managed to keep evolving successfully through the economic ups and downs are usually those where management have put in place a productivity-centred work culture. For example, Mr James Wong, founder and MD of O.E. Manufacturing, a producer of high pressure precision hydraulic cylinders, implemented the “5S” workplace organisation methodology to improve the management of inventory. The “5S” methodology is a tool used for organising a space in a systematic, clean, efficient and safe manner using orderliness, standardization and visual cues. It also helps to encourage teamwork and discipline as individuals explore how to improve their productivity and efficiency.
15. Beyond the manufacturing facility, Mr Wong also implemented it within his own office space to enhance his personal productivity. His example inspired his colleagues and employees to adopt productivity tools in their daily work processes.
16. In addition, OE Manufacturing introduced a reward system and inter-department contests to motivate staff to pursue productivity improvements at work. These coupled with regular dialogues, increased staff engagement and built an open-communication and solution-oriented culture. This made the workplace not only better organised but more productive. In return, the company managed to reduce inventory obsolescence, resulting in productivity savings of 20%.
17. Such a workplace culture is what we hope to cultivate at a national level - a culture that engages employees, fosters innovation and fuels productivity. Such benefits are especially important for SMEs, who need to reinvent and adapt themselves to stay relevant. As studies have shown that management quality is significantly weaker amongst our SMEs, especially the smaller ones, and we are looking to step up our efforts to upgrade their leadership and management capabilities to help them institute a culture of productivity within their companies.
    
    Investing in Every Worker
18. Third, we need to redouble our investment in the most important and valuable resource - our people.
19. Our workforce composition is changing, with an increasing number of better-educated locals entering the labour market and seeking higher value-added jobs. However, raising productivity is not just about a workforce of higher qualifications, but of building deeper and more relevant skills to the industry. It is not just the education and training institutions, but workers, the industry, and every company that have an essential part in this.
20. Skills and productivity are intertwined. The successful application of new technologies invested in, is dependent on skills and expertise. Streamlining and redesigning work processes require re-skilling and up-skilling the workforce. As we shift towards quality growth driven by productivity and innovation, we will need a highly skilled workforce, with deep skills and expertise in order to remain competitive and relevant. DPM Tharman will be leading the new SkillsFuture Council, which will work with the unions, employers, education leaders and individuals towards the objective of building skills relevant to the future, and a future based on mastery of skills in every job.
21. While we will look into building skills mastery in our industries through more industry-relevant education and training, we also need to shift from the mindset that workers should be readily equipped with all the skills required for a job. This is because every occupation and business is unique in some way, and our business environment, industries and technologies are constantly changing. For individuals, this reality should motivate us to keep learning and sharpening our skills. As employers, we have to see the value in investing in continuous training and developing our people, whether on-the-job or at an industry training centre or at educational institutions.
22. We also have to be prepared to pay greater attention to career and wage progression in order to retain the experienced and skilled workers as they contribute more. This emphasis of continuously investing in the skills and expertise of every worker has to be deliberate, especially when other pressing issues often take up the attention of managers and business owners. This mind-shift may not happen overnight but we have to start now.
    
    Conclusion
23. In conclusion, Singapore is in a good position. We are anchored in a region of growth. The big centrepiece is China. But even in our own immediate neighbourhood, countries are growing and it is a very large market. Often, our own position of strength is a relative one. It is not just about our making the right decisions; it is not just about us creating the right environment for businesses to grow. Singapore may not be the cheapest place to operate, but on a net basis, when you look at political stability, transparency and lack of corruption, how we are wired up in many different ways, financial and legal systems, these are big pluses that we have. I think we do have an edge over our competitors and for the medium term, the opportunities are good. In fact, for many of you here, the challenge is not a problem of growth nor is it a lack of opportunity. In fact, we have that in abundance. The challenge is how we see those opportunities and tap on them, because of the constraints that we have.
24. Restructuring is not new to the Singapore economy. But transformation and growth do not happen by chance. It requires deliberate strategies, leadership focus, culture and investment in people to make it happen. So, where are we going with our manpower policies? We will maintain our present position and we certainly don’t envisage ourselves liberalising. We don’t have immediate specific plans to tighten either. We will continue to weight the balance of support towards businesses which are taking serious steps to innovate and transform, so that on the whole, the economy comes out of the transition better off. Having seen the companies here today, I am optimistic that we will do well in our journey towards quality driven growth. If we are able to transit through the next couple of years, dealing with the challenges that we face today, we will become a much more productivity-led and value added economy.
25. On this note, I would like to extend my sincere congratulations to all the recipients of the SMF Business Model Innovation Awards and SMF Sustainable Growth Awards. May your outstanding achievements inspire others to re-think, transform and thrive. I would also like to thank Mr George Huang for his dedication and support during the years of his leadership and provide my best wishes to Mr Douglas Foo in his new role.
26. I wish everyone a pleasant evening. Thank you.