The term Centre of Expertise (CoE) has been quite trendy in the business scene as of late. In 2015 alone, there were no less than five newly setup CoEs in the country, with Accenture’s Internet of Things Centre of Excellence for Resources unveiled as the first of its kind in Singapore, built to help companies transform their businesses through innovative technologies. In the same year, Singapore Power launched the Singapore Power CoE to develop, pilot, and integrate the latest technologies in Singapore’s infrastructure networks.

But how effective is CoE in the long run? Is this simply another supply chain trend with an expiration date? These questions can only be answered by those who have been managing CoE over a number of years, or seven years in the case of Mr Wong Kwee Meng, the Senior Supply Chain Manager for the Asia region at 3M Asia Pacific CoE headquarters in Singapore.

With over 17 years of experience with 3M Company, Mr Wong’s portfolio includes a strong focus on supply chain optimisation as well as strategic sourcing, transportation and distribution operations in Asia. Since 2009, he has been instrumental in the establishment of Asia Pacific CoE for the region of Southeast Asia to improve the company’s competitiveness by redesigning the 3M supply chain operational footprint.

“In a multi-national company like 3M, branches in different countries cannot work in isolation. This easily leads to a high number of overlapping products and a complicated supply chain. After extensive research and trials, we have come to the conclusion that CoE is the answer to achieving shorter lead time to customers while minimising cash investments,” explains Mr Wong in a personal interview with Supply Chain Asia, where he also shares his thoughts on the upcoming Trans-Pacific Partnership (TPP) agreement, the lacking industry talent and why Singapore continues to be the choice destination for distribution centres.

Revolutionising the business

Prior to 2009, each 3M branch in the Asia Pacific had its own respective supply chain processes and strategies. It was up to the individual country manager to manage the vendors and decide on the inventory volume. This method, however, gradually became unsustainable due to the proliferating stock keeping units (SKUs) and low inventory visibility.

“With each country receiving high volume of the same products, eventually, we were running out of warehouse space. There was no control over vendor management and our supply chain became extremely complicated. When it is overly complicated, there is minimum visibility. This was when we decided something has to change,” says Mr Wong, who also championed the start-up of Regional Distribution Centre in Hong Kong to cater for the business growth in North Asia region.

The transformation started by managing key vendors in a single centralised location. Then, careful strategic planning was carried out to centralise the inventory so that 3M branches were not stocking their warehouses with every available product. Mr Wong cited the case study of the port strikes in Los Angeles last year to highlight the importance of CoE.

“It is only when such incidents happen that people realise the importance of supply chain. During strikes and union negotiations, there were no cargo movements from the West to the East Coast. This means that lead time from the typical 35 days can increase up to 60 days. Without CoE, each country could only prepare for this crisis by increasing their inventory stocks so that customers can continue to receive their goods without delay. But if there is a CoE, it is only the centralised stocking area that will have an affected replenishment cycle time. There will be no need to increase the stock in each country, but only in CoE,” explains Mr Wong, who believes that a successful supply chain is the ultimate key behind customer satisfaction.

In fact, 3M’s strategy always centres on placing inventory as close to the point of consumption as possible. It is not just about getting the goods to the customers quickly, but also to respond to them faster.

“3M generally has our inventory and coordination of supply chain operations in the same timezone. We believe in the need for overlapping communication and responding to what is happening on the ground quickly,” adds Mr Wong.

Leveraging on free trade agreements

By positioning Singapore as a super hub, 3M uses the country’s status as a free port country to make products for export purposes. While there are no costs to import to Singapore, other countries may have to pay import duty fees when receiving goods from Singapore. But with Singapore’s close ties and free trade agreements (FTA) with many countries, 3M is able to leverage on these agreements to save costs.

“Similarly, we are very excited for TPP and Regional Comprehensive Economic Partnership (RCEP) to take off. We have done our homework and we have found the sweet spot, which is the overlapping spot of the Venn diagram of TPP and RCEP put together. I believe that not many other companies can match 3M’s expertise in leveraging FTAs,” remarks Mr Wong.

He also believes this is why despite the high real estate and labour costs, companies continue to set up their logistics hubs and distribution centres in Singapore. Not only does the country have over 20 FTAs, it also has excellent global connectivity with world-class port infrastructure.

“If we decide to move our distribution centre to Johor, we could easily cut at least 18 per cent off our expenses. Cutting costs is easy. But although you can move your cargo in, how do you move it out? You cannot move it, because there is no connectivity. If I need the cargo in Johor port to leave tomorrow to Sydney, there is no way to do so because there is no connection. In Singapore, we have cargo leaving everyday to everywhere in the world, so the point of distribution becomes very powerful,” describes the senior supply chain manager.

Being in Singapore, however, means 3M has to rely on technology to improve efficiency and cut costs. Technology adoption does not only involve using the latest software but also warehouse automation.

“We do not use the conventional racking system with 1.82m aisles for forklifts because that is a waste of space. We use a radio shuttle system, which is a new kind of storage management systems with high density storage racking and electrically powder pallet runners. This system does not need an aisle, so not only have we eliminated unnecessary forklift usage, we also use less space,” says Mr Wong.

Finding talent in the backyard

In today’s dynamic landscape, talents can be difficult to come by. This is why 3M has an internal job postings initiative that allows employees, who have been working in a position in 3M for at least 24 months while meeting the required performance expectations, to move to a different functional area.

“A person holding an engineering position in the manufacturing post can apply for a post in the supply chain department. To me, that is better than hiring someone with the relevant skill set but struggles to understand 3M’s complex structure. That is the value behind this initiative,” explains Mr Wong, whose talent has been recognised through winning an individual award in the recent Supply Chain Asia Awards 2015.

Despite this programme being a success, he still believes talent in the overall supply chain sector is an ongoing concern.

“I think more can still be done to equip graduates with the right skill sets to dive straight into the industry. In fact, for areas, such as distribution and transportation, accumulated experience and industry knowledge can far outweigh the educational qualifications,” says Mr Wong.