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Wed, Oct 6, 2010
The Straits Times

It pays to be hung up on quality service

By Francis Chan, Jonathan Kwok, and Dhruv Velloor

In the second of a six-part, fortnightly series sponsored by enterprise development agency Spring Singapore, Francis Chan, Jonathan Kwok and Dhruv Velloor look at how local logistics firms can become world beaters.

WHAT does the trendy world of street fashion have to do with the forklifts and heavy trucks of the logistics industry?

Plenty, it seems, for Mr Benjamin Koh, 42, and his staff at Addicon Logistics Management.

For the past eight years, the firm has been transporting clothes made in low- cost production centres in Asia to markets in Singapore, Europe and the United States.

This niche field has been bringing in the bucks for Addicon, which has seen double-digit revenue growth every year for the past eight years, except for last year, when the recession dragged sales down by almost 30 per cent.

Still, revenue of $15 million in a recession year - down from $19 million in 2008 - is nothing to sniff at. And Addicon remained profitable throughout the downturn, said Mr Koh.

Key to its success has been a method of doing business that is markedly different from most other local logistics firms'.

"Most logistics firms have a very traditional view of the business, and they see their job as simply moving goods from point A to point B, and providing warehouse services along the way," he said.

Addicon, on the other hand, conducts quality control checks, and steams and hangs the clothes up in specially designed containers before shipping them from their country of origin - such as China, Cambodia, Indonesia or India.

Retailers, such as those in Europe and the US, trust the company's quality controls, paying the factories for the stocks once the firm gives the go-ahead.

Because the clothes are hung up when they are transported, they can be sent direct to retail stores - such as Europe's C&A chain - once they arrive in the destination country.

Mr Koh said he focuses on low- and mid-end clothes because these segments generate higher volumes - and more business for him - compared with more luxury brands.

"And because we provide extra services like steaming and quality control, this really sets us apart from other logistics operators," he added.

Not that Mr Koh is content just to sit on his hands. He says he must "constantly innovate" in the logistics business.

"If we don't change, the costs will rise over time, and the margins will fall, and in the end we will die. We must always find new ways to do our business."

Already, Addicon is providing logistics services for customers other than its core ones in fashion. Four years ago, the firm started transporting medical and safety equipment, for instance.

Mr Koh has in place a host of other ambitious plans to take his firm further, and grow its financial performance. He expects turnover this year to reach $20 million - back to roughly pre-crisis levels - and to hit $30 million next year. The overarching aim is to get revenues to $100 million in five years' time.

One strategy is to reach out more to retailers here. Though Singapore already provides the bulk of Addicon's turnover, Mr Koh said "there are still a lot of smaller retailers in Singapore we can target".

He is working with enterprise development agency Spring Singapore and JTC Corp to find land to build a fashion logistics hub, to be run by Addicon.

This hub, set to cost Addicon $15 million to $20 million and expected to be up and running within two years, will help to bring small retailers on board, he said.

Such retailers, which Mr Koh said currently run small-scale operations in shipping clothes from overseas, stand to save 30 to 40 per cent of logistics costs as Addicon enjoys economies of scale.

He has also started providing logistics services for the lucrative commodities business. Mr Koh said he has close ties with the Cambodian government, having worked with it from years ago to help export its manufactured garments. Thus, he is starting to transport rice from Cambodia to the rest of Asia, as well as palm oil from Malaysia to some partners in Germany.

"Commodities are shipped in large volumes, just like clothes. They help our volumes and complement my traditional business," said Mr Koh.

To put all these plans into action, he recently increased his workforce by 15 to 20 per cent, and now has a headcount of 100. Funds for expansion have been provided by a venture capitalist who recently came on board.

The investor, 35-year-old Stanley Lee, is impressed by Addicon staff, saying: "People in the company are working with a high level of passion and expertise, and there is a good mix of old and young staff."

Mr Lee is confident of Mr Koh's leadership of the firm, saying he is "aggressive in looking for opportunities to expand and put the business on a higher level".

He added that Mr Koh is dependable, delivering what he promises to customers and often going one to two steps beyond.

Mr Koh remains confident despite the many competitors occupying the logistics space. He said that most smaller Singapore players do not offer the value-added services that he does - such as the steaming of clothes before shipping.

"But we are flexible and modify our services to fit our customers' needs. That is the advantage of being a small and medium-sized enterprise," he said.

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