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Shippers' interests take centerstage in SCMAP Perspective, written by Ed Sanchez, executive director of the Supply Chain Management Association of the Philippines. SCMAP is the association of logistics and distribution managers in the Philippines.

You are now in: SCMAP Perspective Archive : 2004 Q4

*Busy and tough year end (November 15, 2004)

*Top 1000 (November 1, 2004)

*Yearend update (October 18, 2004)

*Escalating Costs (October 4, 2004)

 

Busy and tough year end

More on Financials

Last time we provided some financial info about companies in the sea transport sector. Below we make comments about Sulpicio, correct an error about NMCCLI, and give an update about PPA.

The negative profit reported by Sulpicio Lines for 2003 might look like it is in dire need of a rate increase. However, with a closer look at its FS for 2003, the loss can be attributed to a large depreciation on appraisal increment. In 2002 Sulpicio reported a similar large depreciation on appraisal increment, and also had a loss. Solid Shipping, which reported a large depreciation on appraisal increment in 2002, resulting in a loss, did not do so in 2003.

What is this appraisal increment? It is just an accounting entry made by bookkeepers to bring the value of fixed assets closer to market value, if it has fallen out of line with market value. Thus would you believe that the reported P7.4 billion fixed assets reported by Sulpicio is over 70% just an accounting entry? Obviously this accounting entry involved no investment on the part of Sulpicio. Without this depreciation on appraisal increment, Sulpicio would have reported large profits in 2003 and 2002.

The figures appearing on the fixed assets side and the expenses side are shown below.

Last time, we reported NMCCLI revenue at P186 million. We apologize for this error. This figure represents only the revenue from one vessel, the M/V General Ricarte. The correct total revenue for 2003 is P588.2 million. The P19 million net income we reported is correct.

PPA net income for first half 2004 was P1.22 billion, compared with total year 2003 net income of P845 million. This was probably accompanied by large increases in net income for ICTSI and ATI.

Shipping Rate Increase Update

MARINA's hearing on DMAP's complaints vs. the domestic shipping lines' two-tiered rate increase (9% increase on October 15 and 5.5% in January) went on as scheduled on November 11. Hearing officer was Atty. Kalaw.

DMAP officers, with high expectations due to a new MARINA Administrator at the helm, were somewhat disappointed. There were two sources of disappointment:

• Shipping lines lawyer Arthur Lim emphatically stated that they had not formally received a copy of the complaint. MARINA had not served them a summons, but MARINA issued orders to the shipping lines to show cause why MARINA should not intervene and set the hearing for Nov. 11. Thus the hearing could not continue.

• Lawyer Arthur Lim also stated that the rate increases sought by Sulpicio Lines were already authorized, according to the MARINA. This implied that MARINA had decided on the increase while there was still a complaint.
  

Also at the hearing, Consumer Complaints Center President Vicente Gambito asked about the status of the letter complaint he filed with the MARINA. Tet Gambito had alleged that the simultaneous filing of rate adjustments by the PLSA was cartelized behavior, which was a direct violation of RA 9295, the Domestic Shipping Development Act of 2004. Tet was told to await the result of the investigation being made by the Maritime Legal Affairs Office, to where his complaint was referred.

RA 9295

RA 9295 was the subject of a marathon hearing at the MARINA Board room on November 2, 2004, which was presided over by Administrator Vic Suazo himself. The implementing rules and regulations were discussed and the session ended at near nighttime. Everybody is now awaiting the final IRR.

Trucking Rates

On another front, DMAP is also busy facing North Harbor truckers who are asking for a rate increase.

PCCI Disappointment

As the year end gets nearer, DMAP officers cannot but feel disappointed with the 2004 administration of PCCI President Noemi Saludo. The year is almost over, yet DMAP did not get invited to a single meeting of the PCCI Transport Committee, or of its Sea and Air sub-committees. Only the Land sub-committee contacted DMAP. Thus, the apprehension expressed by DMAP in early 2004 about the service provider-dominated composition of the Transport Committee proved correct. To think that DMAP even got Ms. Saludo to be its inducting officer for the 2004 officers.

DMAP Election

DMAP will elect its Board of Directors and Officers for year 2005 at its general membership meeting on Nov. 16. Three Directors out of the current Board are almost sure to be replaced. Ike Castillo of James Hardie has begged off and will be unable to serve if elected, because of his heavy involvement in the DMAP-DLSU Logistics Management program. After the first module on Intro to SCM, Ike will also handle the Transport module.

DMAP Christmas

DMAP's annual Christmas fellowship will be on Dec. 3. The theme is "DMAP at 15, A Christmas Celebration". Attire is "a touch of white". The theme refers to the fact that DMAP's first meeting was held in August 1989. Apart from past Presidents, who are traditionally invited, Charter members will be invited and honored.

Charter members are the ten individuals who formed DMAP in 1989. These are: Antonio Abellera, Renato Simpao, Camilo Reyes, Malou Santos, Ed Sanchez, Mandy Guerrero, Louie Nacorda, Simpson Go, Quezon Chua, and Remigio Calingal.

Basic Warehousing Seminar

DMAP's Basic Warehousing Seminar is all set for Nov. 25-26, at the Astoria Plaza, in Pasig City. The seminar is conducted for DMAP by SSSR Consultants. Speakers will be Malou Santos (J&J Consultant), Norman Adriano (WG&A), Larry Go (Auto ID Phils.) and myself.

Address inquiries and comments to Ed Sanchez at tel. 671-8670, fax 671-4793, cell 0918-914-1689, or email dmap@i-manila.com.ph.

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Top 1000

BusinessWorld recently published its Top 1000 Corporations for the year 2003. The most amazing item here is the emergence of a new No. 1, displacing No. 1-for-the-past-decade National Power Corporation. The new No. 1 for 2003 is TI (Philippines), an American electronics and semiconductor export company.

The complete lineup of the top 15:

1. TI (Philippines)
2. Toshiba Information Equipment
3. Manila Electric Co.
4. National Power Corp.
5. Petron Corp.
6. Pilipinas Shell Petroleum
7. PLDT
8. Caltex (Phils.)
9. Nestle Phils.
10. Globe Telecom
11. Smart Communications
12. San Miguel Corp.
13. Philippine Airlines
14. Mercury Drug Corp.
15. Panasonic Mobile Communications

How did players from the maritime industry fare? Here are the figures for the domestic shipping lines, international cargo handlers and PPA.

Company Rank Revenue PM Net Income PM

The figures for ICTSI, ATI and PPA are typical revenue and profit figures for these three. For PPA, figures such as the above are the basis for its pride in being self sufficient and not having to rely on the national government for any funding. However, it is the profit orientation that overshadows any direction towards service and efficiency. The PPA revenues and profits mainly come from the PPA shares in cargo handling fees for both international and domestic cargoes. Where ICTSI and ATI go, so goes PPA. Where PPA goes, so go ICTSI and ATI.

The WG&A financial results, compared with the other domestic shipping lines, are the basis for the arrogance exhibited by its recent two-page ad, which said: "An ancient Chinese general once said To defeat competition, you must …" on one-whole page, and continued on the second page "use overwhelming force". This is another manifestation of what I discussed in previous columns, their direction to dominate the industry and even establish a monopoly.

Annual rate increase

The domestic shipping lines have filed for their "annual shipping rate increase" at year end, this time a 9% increase on October 15 and 4.5% in January. In response DMAP has filed a complaint with MARINA.

With new MARINA Administrator at the helm, expectations are high at DMAP that this will be a different MARINA.

On the same subject, the Consumer Complaints Center, Inc. through its President Vicente Gambito, has also filed a letter of complaint with the MARINA, alleging that the simultaneous filing of rate adjustments by the PLSA is a direct violation of RA 9295,which is the Domestic Shipping Development Act of 2004.

RA 9295 itself will be the subject of a hearing at the MARINA Board room on November 2, 2004. The implementing rules and regulations will be discussed. What an inconvenient schedule, esp. for those who will be going to the provinces.

DMAP Year-end

On Nov. 16 DMAP will hold its last general membership meeting for 2004. During this GMM, DMAP will elect its Board of Directors and Officers for year 2005. At this time, three Directors out of the current Board are almost sure to be replaced.

DMAP's customary last activity for the year will be the annual Christmas fellowship. This will be on Dec. 3, 2004. The theme is White Christmas and attire is anything white.

Basic Warehousing Seminar Re-scheduled

DMAP's Basic Warehousing Seminar has been reset from Nov. 18-19 to Nov. 25-26. It will be held at the Astoria Plaza, in Pasig City. The seminar is conducted for DMAP by SSSR Consultants.
Target participants are:

• Warehousing staff requiring basic training, trainees, new staff, or older staff requiring a refresher

• Non-warehousing staff in related and interface functions (distribution, transport, shipping, inventory management, purchasing, production, accounting, engineering, QC, etc.)

• Managers requiring a basic understanding of warehousing and trends

Seminar topics & speakers

• Introduction to logistics and warehousing

• Nature and characteristics of a warehouse

• Warehouse procedures, Safety, GMP, 5-S

• Warehouse layout guidelines, performance measures

• Materials handling

• Basics of bar coding

• Warehouse visit & workshop

• Warehousing trends & developments

Speakers will be Malou Santos (J&J Consultant), Norman Adriano (WG&A), Larry Go (Auto ID Phils.) and myself.

Address inquiries and comments to Ed Sanchez at tel. 671-8670, fax 671-4793, cell 0918-914-1689, or email dmap@i-manila.com.ph. Those interested in DMAP training and other activities are requested to send their e-mail addresses.

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Yearend update

As the year draws to a close, DMAP prepares for its activities for the year-end.

On Nov. 10 DMAP will hold its last general membership meeting for 2004. During this GMM, DMAP will elect its Board of Directors and Officers for year 2005. The Directors and Officers have a term of one year.

DMAP's customary last activity for the year will be the annual Christmas fellowship. This will be on Dec. 3, 2004. The theme is White Christmas and attire is anything white.

On the education front, DMAP will be holding a Basic Warehousing Seminar before year-end. This is the re-schedule of the BWS originally set for July but postponed because of speaker schedule problems.

In what now seems to be an annual year-end activity, DMAP will be carefully planning its moves vs. the "annual shipping rate increase". Shipping lines again have filed for increases - 9% on October 15 and 4.5% in January. DMAP has filed a complaint with MARINA and will have to carefully assess its further actions.

New activities and challenges for this year-end include:

• Start of the DMAP-DLSU Supply Chain module on Oct. 16

• DMAP participation in Agrilink / Foodlink 2004 this month

• Discussion of measures to take against the huge increases of NLEX toll fees.

• Discussion of the implications of the record price of crude oil, now exceeding $54 per barrel, and ow to cope with its immediate and long-term effects.

The DMAP-DLSU supply chain classes will be held at the La Salle Green Hills campus of the Graduate School of Business. First day of class is October 16 for the 10 students who have enrolled so far.

Teaching module 1 will be ex-DMAP President Ike Castillo.

DMAP's participation in Agrilink/ Foodlink 2004 will be its first time. Focus of this year's conference is transport.

The Basic Warehousing Seminar is scheduled for Nov. 18-19, 2004 at the Astoria Plaza, in Pasig City
Target participants are:

• Warehousing staff requiring basic training, trainees, new staff, or older staff requiring a refresher

• Non-warehousing staff in related and interface functions (distribution, transport, shipping, inventory management, purchasing, production, accounting, engineering, QC, etc.)

• Managers requiring basic understanding of warehousing and trends

Seminar topics & speakers

• Introduction to logistics and warehousing

• Nature and characteristics of a warehouse

• Warehouse procedures, Safety, GMP, 5-S

• Warehouse layout guidelines, performance measures

• Materials handling

• Basics of bar coding

• Warehouse visit & workshop

• Warehousing trends & developments

Speakers will be Malou Santos (J&J Consultant), Norman Adriano (WG&A), Larry Go (Auto ID Phils.) and myself.

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Escalating Costs

This year's logistics conference held on Sept. 16-17, was quite successful, judging from the overall evaluation made by both parti-cipants and sponsors.

Nevertheless there were still the usual complaints, although these seemed to be fewer. From the participants, incomplete handouts was again the major complaint. There is really nothing DMAP can do about speakers who do not give copies of their handout materials.

One of the irritants for DMAP in conference sub-activities has always been obtaining the handouts on time. There are always speakers that do not like to give handouts, and there are those who give their handouts very late, even during the conference itself.

For the sponsors, a chief complaint has always been the ingress conditions, specifically the time, which they find inconvenient. A suggestion to have the ingress on the day before would result in a situation where everybody loses. DMAP might have to pay extra for this "empty booths" day, or the hotel would lose income on this day. The sponsors themselves might have to assign people to keep an eye on their exhibit.

Perhaps a major reason for the success of the conference this year is the speakers' lineup. This year there was only one foreigner speaker. Before, foreigners tended to comprise half of the speakers.

Over the years it has been shown that Filipino audiences have consistently preferred Filipino speakers to foreigners. At least one participant made this specific comment this year. This preference can be attributed to:

1. The diction of foreigners, whether Caucasian or Asian, is often faster and more difficult to understand.
2. Participants can identify better with the content of Filipino speakers' talks as they are closer to home.

As such, DMAP's annual logistics conference is a bargain, costing a mere P10,000 (P8,000 for DMAP member companies). In contrast, seminars/conferences in other Southeast Asian sites typically charge US$1,000 or higher. Some of these Southeast Asian seminars make use of Filipino speakers also.

Meanwhile, we wish to mention the upcoming 2004 CLM Conference and the Agrilink/Foodlink 2004 this October. By the way, in keeping up with the times, the CLM (Council of Logistics Management) has recently been renamed the CSCMP, or the Council of Supply Chain Management Professionals.
On the logistics front, cargo owners are faced with further increases in logistics costs, as fuel prices continued to rise. This obviously affects all modes of transportation. In sea transport, another round of freight rate increases is facing cargo owners. Some shipping lines have already given notice of their intention to increase rates.

Over at the NLEX, Manila North Tollways Corp. is peddling what it calls "a world-class expressway" to justify the large increases in toll fees. MNTC is making use of some politicians and some columnists to tone down the anger of affected transport providers and cargo owners, and the motoring public.

To be directly affected by the huge toll fee increases are vegetable shipments from the Cordilleras to Metro Manila, and shipments of consumer goods from Metro Manila to Central and Northern Luzon.