Scaling
down resources, downsizing not the best options for
logistics firms
Scaling down resources, downsizing
not the best options for logistics firms IMPROVE services
and relationships rather than scale down resources,
hire the best instead of downsizing, and simplify rather
than complicate. These are three measures logistics
companies may adopt in order to thrive in these uncertain
times. This advice was offered by Enrique C. Castillo,
Director of Distribution for Avon Cosmetics, to participants
of the recently concluded PortCalls Cargo Economics
Conference at the Hyatt Hotel and Casino Manila. "We
have to stay focused rather than change our priorities
to harness growth in these times of uncertainty,"
said Castillo, who is also a professor at De La Salle
University-Graduate School of Business, in a presentation
attended by CEOs and other top-level managers of third-party
service providers. "Business requirements have
not changed - speed, reliability, cost. We have to continuously
provide superior customer service at a continuously
reducing cost," he said. Castillo pointed out that
uncertainty, both in the area of politics and economics,
is the key reason for the slowdown in growth and shutdown
of windows of opportunities not only in the logistics
sector but most business sectors in the country. Providing
the uncertainty are the new e-VAT law which took effect
Nov 1; inflation increases to 8.5%; and continuous oil
price increases. In these trying times, Castillo said
companies should seek sustainable solutions and execute
them well. "Define your strategy, establish metrics,
align your organization, re-engineer, redesign processes,
and use technology as enabler." He added, "Implement
non-conventional ways. Renegotiate prices with suppliers."
Non-core businesses must also be outsourced. In addition,
excellent business relationships must be maintained.
"We have to make suggestions and give guidance
to take the principals further. Think about the principals'
success," Castillo advised.
2006-07 critical for business: PISFA
chief THE next two years are the most critical for businesses
in the country, according to the Philippine International
Seafreight Forwarders Association (PISFA). "This
year and the next two years will be the most critical
time for businesses in the country. It is a battle for
survival. Next year, businesses will just try to operate
to give people jobs and not expect anything in return,"
PISFA president Rico Brizuela told PortCalls in an interview,
adding that prospects will only improve if "we
get our act together as a nation." Brizuela said
the current economic and political situation has made
more gloomy what is already to begin with a not-so ideal
business climate. "Our customers are restless,
pointing to the political situation and the high price
of energy as the culprit plus the fewer and fewer cargoes
coming into the country," he explained. "Businesses
are really hurting right now." In order to survive
the next two years, companies have started adopting
cost-cutting measures such as those related to maintenance,
travel, fuel and, to some extent, security. They are
also contemplating laying off workers to further save
on cost. Brizuela, however, said layoffs are companies'
"last alternative. If we can't survive just cutting
expenses, then we may have no choice but to cut our
workforce," he lamented. Earlier, industry players
have said they are writing off 2005 even as they expressed
a mixed outlook for next year. PISFA members specifically
have cut growth projections from positive to negative
this year and the next.
ATSC posts P92.7M loss in third quarter
ABOITIZ TRANSPORT SYSTEM CORP. (ATSC) reported a slight
improvement in its financial performance for the first
nine months of the year posting a P6.3 million in total
revenues. However, during the period, ATSC registered
a net loss of P92.7 million. ATSC said this is due to
the increase in overall costs and expenses, including
finance cost. Its report to the Philippine Stock Exchange
showed total costs and expenses hit P6.1 billion, 7%
over the same period last year. The increase is largely
attributable to the 19% rise in depreciation of ships
and improvements. Total depreciation of ships and improvements
reached P699 million for the period in review, up 19%
from the same period last year. "Other factors
contributing to the rise in costs and expenses include
the 13% increase in terminal expenses and 6% rise in
operating expenses as fuel prices excalate," ATSC
said in the report. Consolidated assets at the end of
the third quarter amounted to P9.2 billion, while total
liabilities reached P5.1 billion. Total bank debt is
approximately P2.6 billion, with no additional borrowings
made during the period. Stockholders' equity stood at
P4.1 billion. Cash generated from operations amounted
to P1.1 billion. The company internally funded its capital
expenditures of P664 million and reduced debt by P362
million for the period. Cash and cash equivalents at
the end of the nine-month period ending September 30,
2005 was at P205.7 million.
ATI gets PPA nod for revised SH master
plan THE Philippine Ports Authority (PPA) recently approved
Asian Terminals, Inc.'s (ATI) request to revise its
master plan for the development of South Harbor. The
terminal operator wanted to restructure the master plan
to allow the port to accommodate the unpredictable general
cargo traffic flow. In recent years, there has been
a drop in general cargoes handled, reflecting shippers'
preference for containerized cargoes. ATI admitted the
operation of competitor Harbor Centre Port Terminals
also contributed to the decline in market share in the
break bulk arena. "The growth assumptions for general
cargoes in the existing contract are now all wrong due
to the shift to containerized cargoes, which affected
not only the projections but also the planned development
of the South Harbor based on our contract signed with
the PPA in 1988," ATI president and CEO Jerry Rickcord
explained in an earlier interview. While it won PPA
approval to restructure the master plan, ATI was not
successful in convincing the PPA to restructure its
present contract for another 25 years and spread the
balance of its $300-million commitment for the development
of South Harbor over the same number of years. ATI has
until year 2013 to operate the pier. "Basically,
the time element is still the same, what has been affected
is the development of some key infrastructure projects
in the South Harbor," PPA assistant general manager
for corporate and special projects Raul Santos told
PortCalls in an interview. He explained that the PPA
agreed to ATI's request to revise the master plan due
to the reduced traffic on general cargoes. Affected
due to the revision of the master plan is the rehabilitation
and extension of piers 13 to 15, piers 5 and 3 of the
South Harbor. The implementation of other projects have
ICTSI's
Brazil subsidiary handles record throughput TECON SUAPE
S.A. (TSSA)
International Container Terminal Services,
Inc.'s (ICTSI) Suape Container Terminal (SCT) in Pernambuco,
Brazil is on track towards achieving hub status with
the recent acquisition of new container handling equipment.
Photo shows the SCT receiving two new post-Panamax quay
cranes and two rubber-tired gantries manufactured by
Shanghai Zhenhua Port Machinery Co. of China.
FPI proposes several measures to combat
smuggling THE Federation of Philippine Industries (FPI)
has recommended the creation of an oversight committee
on smuggling under the backing of the Department of
Finance (DOF) similar to the Cabinet oversight committee
on anti-smuggling (COCAS). This was one of the recommendations
put forward by the FPI to the DOF in a meeting recently.
FPI president Jesus Arranza said the oversight committee,
which should be headed by the Finance secretary, could
replicate efforts of the now-inactive COCAS led by Interior
and Local Government Secretary Angelo Reyes. Arranza
said under his leadership, Finance Secretary Margarito
Teves could have a free hand to rid the Bureau of Customs
(BOC) of pending cases and reestablish measures to curb
if not eradicate incidences of smuggling. At the same
time, the FPI said the BOC should address the issue
of valuation and classification by making public the
cost-insurance-freight value of all imported items and
by linking all ports through one central computer system
that would ensure correct and uniform valuation of imports,
Arranza also said the BOC should start cleaning up records
of importers and customs brokers to eliminate fictitious
or fly-by-night operators. To finally put an end to
unscrupulous traders, the FPI recommended that the BOC
review the customs bonded warehouses (CBWs) to determine
their legitimacy. The FPI said the BOC should limit
the type of CBWs to industry-specific ones, which would
make it a requirement that the industry concerned is
consulted to determine the legitimacy of the CBW applicant.
For CBWs already in place, Arranza said the BOC should
require operators and economic zone locators to submit
a monthly liquidation report of imports and exports.
Some CBWs have been allegedly chanelling their imports
to the domestic market. Arranza said the government
could look at the standard practice of China's special
economic zones of requiring all importers to initially
pay taxes and duties of all goods, subject to the immediate
refund thereof if the product is re-exported. The federation
cited the need to address unliquidated balances of CBWs
such as Generics Liebert and National Steel Corp., now
Global Steel, which have outstanding liabilities totaling
P607 million. The FPI also reiterated earlier requests
for the BOC to require shipping lines to furnish the
agency with a copy of inward foreign manifests which
would warn and alert the BOC of incoming shipments and
prevent tampering of bill of lading. Other measures
proposed by the FPI include the review of all pending
cases related to smuggling before the Department of
Justice to facilitate its prompt resolution and the
immediate passage the anti-smuggling bill. The bill
has been approved on third reading by the House committee
on ways and means.
Marina pushes for hub-and-spoke system
THE Maritime Industry Authority (Marina) is pushing
for the development of the port hub-and-spoke system
to lower logistics cost in the country, said Marina
administrator Vicente Suazo, Jr. in an interview with
PortCalls. Under the hub-and-spoke system, only a few
ports will be designated as hubs with the rest functioning
as spokes, feeding cargo into the hubs. The present
system focuses on the development of ports in almost
every municipality to boost regional trade. The system,
said Suazo, needs enormous investments which the country
can ill afford at this time. It also encourages traders
to ship products as they please pushing logistics cost
higher, eventually resulting in higher market prices.
Suazo identified four major ports that could serve as
hubs: Manila, Cebu, Cagayan de Oro and Davao. The four
handle 60%-70% of the total local and foreign trade
of the country. The hub-and-spoke system will also entice
shippers to consolidate their cargoes and ship in bulk,
cutting logistics cost. In addition, it will allow vessel
operators to command trips and go to hubs with the most
volume of cargoes to utilize the entire capacity of
vessels. To date, only about 50% of the cargo capacity
of vessels are utilized, a situation that also contributes
to high logistics cost. "Developing our ports into
hubs and spokes is the best set-up for the Philippines
now since other ports are no longer viable for businesses
due to high costs," Suazo said.
