The past few years have shown that the best way to address the Philippines’ long-standing challenges is to look at its supply chains, and make sure they are at their best. Here’s a roadmap of sorts.

Written by Henrik Batallones

 

If you’re reading this, it’s likely you already understand how important supply chain is to pretty much everything.

What’s new in the past few years, however, is that you’re no longer the only one who has a grasp of that. There was a lot of talk of ensuring our supermarkets and drugstores are well-stocked with “essential goods” in the early weeks of lockdown. We relied on e-commerce firms to deliver our needs (and wants) as we stayed home to stem the spread of COVID-19, and got more familiar with the concepts of sorting stations and delivery lead times. The global “supply chain crisis” cutting across industries and impacting global markets provided some explanation as to why the things we bought were getting more expensive or harder to find. Now, as I write this, we are going through another string of events impacting our supply chains and, ultimately, the way we live: the rising cost of fuel, partially due to the war in Ukraine; extreme weather disruptions caused by climate change; rising inflation in many countries, including ours.

I am under no illusion that these problems can be solved quickly. A lot of things have happened before we reached this point, and it will take a while to untangle them. But it isn’t a stretch to say that part of addressing these challenges involves taking a good look at our supply chains, recognizing the roadblocks and bottlenecks that prevent them from moving smoothly, and devising solutions that solve these problems. The healthier our supply chains are, the better we can deliver our products to those who need it, whatever the circumstances may be. The healthier our supply chains are, the more value we can provide to our customers, partners and employees, contributing to the upliftment of their quality of life. The healthier our supply chains are, the better our economy can transform into one that is equitable, resilient and sustainable.

This is the ultimate vision which we at SCMAP have been working toward for the past few years. Of course, we are also working to make business better for our members—manufacturers, retailers, logistics providers and many others, all important planks of our supply chains—but in the end, better business for them should mean better lives for everyone. It goes beyond reaching wider markets and serving more customers. It means empowering families to pursue passions, chase opportunities and build a better life. This is what we hope to see as we continue engaging with stakeholders from both the public and private sectors, pursuing policy and regulatory reforms, as well as the exchange of insights and best practices.

Thankfully these efforts have intensified in the past few years, as the government finds itself with a much better grasp of the importance of supply chain not just to the economy, but to quality of life. Efforts by various stakeholders to stress supply chain’s role has led to some degree of joined-up thinking among government agencies, acknowledging the multidisciplinary nature of the profession, and the resulting multidisciplinary approach needed to solve its issues. In recent years the private sector found itself with a stronger voice, like the Logistics Services Philippines group convened by the Department of Trade and Industry, composed of several industry associations representing all facets of the logistics sector. All these meant that when the first lockdowns were announced in March 2020, all stakeholders were able to assert the need to keep the movement of goods unhampered, so access to essential items continues.

On the other hand, the government’s increased investment in infrastructure has borne fruit, with road and public transport projects designed to decongest the country’s major arteries opening, and even more being constructed. The renewed focus on rail in particular promises not just to open up access to the region, but provide an alternative means of moving cargo. Efforts to improve our sea and air connections also continue, although they were unfortunately delayed by the pandemic.

These are some of the pieces in place when a new government took its place on June 30. The other pieces are ones of uncertainty. COVID-19 may be in a more manageable state now than two years ago, but there remains no clear direction on how the country would deal with it moving forward. We remain particularly vulnerable to global shocks, whether it be geopolitical, like increasing energy costs, or natural, as seen in the stronger typhoons making their way to our country. Certain sectors remain unable to fully respond to these challenges, resulting in underperforming businesses struggling to become resilient and competitive.

Fortunately, Bongbong Marcos’ administration does not have to start from scratch, thanks to the combined initiatives of previous governments as well as the private sector, and the strengthened collaboration between both. Viewed from the perspective of the current government’s thrust towards being more self-sufficient, to better weather the storms caused by global disruptions, the role of developing supply chains becomes greater, not just to improve connectivity within and outside our borders, but to better empower our producers and manufacturers to grow their enterprises, reach wider markets and provide more value to their customers and partners.

 

 

An obvious way to address these supply chain issues is to invest in infrastructure, both to alleviate congestion in major urban areas, and provide alternative routes for both people and cargo.

Of course, infrastructure is a long-term game. For one, these projects do not just immediately materialize; they take years of studies and plans before a single brick is laid. It didn’t help that the country had historically low levels of investment in infrastructure, apart from flagship projects such as Metro Manila’s three metro rail lines, or the first parts of the Skyway. Only in recent years did we see an uptick, thanks to intensive planning efforts undertaken during the administration of Noynoy Aquino, and the aggressive development strategy when Rodrigo Duterte took over.

And even then, we have yet to fully realize the impacts of these projects. Some of the new highways proposed over the years have already opened, but the full network in Luzon is still under development. Construction on new rail lines serving Metro Manila and surrounding provinces are still ongoing. There’s also the fact that investment has historically been focused on Metro Manila and its surroundings, with some parts of the country barely getting a look-in.

Of course, these new infrastructure projects would go leaps and bounds in keeping our supply chains moving. But the solution does not lie purely in new road and rail networks—although the renewed focus on rail is a welcome development, as it could offer a more reliable means of transporting cargo, provided such services are offered. Perhaps one problem is in how we approach the country’s need for infrastructure: we tend to focus solely on flagship projects, the ones that are awe-inspiring and easy to sell through a press release and a photo-op. If the goal is to facilitate movement of both people and cargo, then investment should go beyond new road projects. All modes of transport should be considered.

Take bike lanes. The pandemic saw major cities hastily integrate them into major thoroughfares, anticipating an increase in small-scale mobility due to restrictions in movement. Almost three years in, these bike lanes still feel like they are shoehorned into our roads, eating into lanes for cars and serving neither biker or motorist properly.

Our sidewalks also remain an afterthought, despite the fact that many commuters walk for part of their journeys, using their feet to go to major transport hubs. Even in major business areas they remain unevenly paved, sometimes obstructed, and are difficult to use in inclement weather.

Investment in infrastructure should consider every form of mobility, no matter how small it is. Our dreams of walkable cities like Singapore, for example, do not lie in elevated walkways, but in better sidewalks. Same with biking. What’s the use of encouraging Filipinos to ride with two wheels if the only places they can (reasonably) safely do so are upscale business areas like Bonifacio Global City, where biking policies are better observed?

The government’s new National Transport Policy prioritizes small-scale mobility options alongside mass transit modes like buses and trains. This should be backed up with a comprehensive program of making our stress pedestrian- and biker-friendly, although I understand it will be a difficult undertaking considering the number of residents and establishments authorities will have to deal with. But if successful, this would encourage Filipinos to take transport methods other than cars, especially for short trips. For us in the supply chain sector, this would mean less congestion, not to mention easier trips for our last mile providers, especially those who make their deliveries on foot—no longer an uncommon sight in the past couple of years.

These efforts should not just focus on major cities and thoroughfares. One bottleneck in our supply chain networks is the varying states of provincial and municipal roads. I hope that the convergence projects between the Department of Public Works and Highways and other government agencies—designed essentially to provide national funding to local roads designated to be of particular importance to business, tourism or national defense—continue. The implementation of the Mandanas ruling, which provides local governments with a larger share of national tax revenue, could also lead to greater investment in local transport infrastructure.

Efforts on strengthening inter-island connectivity have also intensified, with seaports and airports across the country being constructed or redeveloped. (There is also talk of inter-island bridges but, let’s be realistic here—these projects will be expensive and may end up being white elephants.) Even here, however, there are some challenges. There are concerns that as contracts are awarded to commercial port operators, fees are sure to go up. While some may justify these increases by pointing towards new equipment that increase productivity levels, port users may argue that these new technologies are not compatible with their operations and add costs with little to show for. Now, modernizing our ports is always a worthwhile endeavor, but these efforts should always be done in close consultation with stakeholders who will actually use the facilities. We cannot escape any increase in costs, but if we feel these are worthwhile, justifiable and transparently calculated, we will embrace it.

Developing our airports is also a worthwhile endeavor, especially for parts of the country whose facilities are outdated, but in one particular case it seems politics gets in the way of clarity. The country’s primary gateway, the Ninoy Aquino International Airport in Pasay, is definitely operating over capacity and lags behind that of our neighbors, but between the redevelopment of Clark International Airport as a secondary gateway serving northern Luzon, proposals to build new airports in Bulacan and Sangley Point, and the debate over whether to rehabilitate or close NAIA altogether, there is no clear direction for the future of air transport in the Philippine capital. And don’t get me started on whether to rename the current airport due to… disagreements with history.

Finally, it is also time to revisit proposals to separate the regulatory and commercial functions of our major transport regulatory agencies, to remove conflicts of interest and allow for the development of safer and more competitive sea and air networks. A new proposal to “decouple” the regulatory and commercial functions of the Philippine Ports Authority is making its way through Congress as I write this, and it is something we at SCMAP support. It is disappointing that President Marcos vetoed a law enacting the Philippine Transportation Safety Board, citing its overlap with current regulators. Better to have a new agency with a focused and all-encompassing mandate, particularly when it comes to transport safety, rather than have them split across various agencies.

 

 

That thought brings us to the other major component of any approach to addressing our supply chain issues: policy and regulation. In some cases current policies are no longer at pace with actual demands on our supply chains; in others, policies overlap, are in conflict with each other, or are not synchronized. While these regulations have good intentions, viewed with a macro lens it leads to logistical bottlenecks, more delays and increased costs. Take the number coding system in Metro Manila. Most cities have window hours, but some cities don’t. Or, take truck bans; window hours depend on which part of Metro Manila you’re in, and if you’re just outside of it, the regulations may be different, too.

A common complaint, particularly among truckers, is the inconsistent and overlapping regulations between provinces, cities and towns. This was of particular concern during the early months of the pandemic, when local governments imposed different entry requirements even for logistics frontliners supposedly protected by national lockdown rules and the principle of “unhampered movement of goods”. While local governments rightfully can impose their own regulations within their jurisdiction, we should recognize that the goods Filipinos rely on do not exist in a vacuum: it will most definitely come from a production facility or warehouse in another town or province, and will have to travel by land, sea or air to reach their preferred store, if not their doorstep. Hampering this movement would lead to delays, increased costs, and the possibility of lost business.

Stakeholders from government and business have long talked of the need to harmonize rules and regulations, especially those that pertain to day-to-day matters like traffic. Perhaps a formal mechanism is needed to make sure this really does happen, and that any new local rules imposed follow the spirit of continuous movement of goods, which should be a national priority. At the very least, start in Metro Manila and surrounding provinces, where truck ban regulations can be disruptive and confusing for truckers just looking to finish their trips.

The need for harmonization also extends to regulatory requirements needed to facilitate the movement of goods. The Anti-Red Tape Authority has thankfully taken the baton on this, ensuring that local governments and agencies only ask for necessary documents and, ideally, recognizing submissions made to one entity as valid for others. A lot of work is needed to fully realize this, however, particularly the efficient roll-out of e-government tools (including the training of personnel) and the designing of processes that will be intuitive for both those applying for permits and those issuing them.

Addressing policies and regulations impacting supply chain would provide much-needed “quick wins” for the government in addressing these long-standing concerns. But then, it can be a difficult ask, too, considering the long discussions that often precede it—between stakeholders, between government agencies, and in some cases between legislators. I remember a proposed joint memorandum order that was being put in place before the pandemic, seeking to address issues on shipping rates. Discussion took months but amounted to nothing, despite the best intentions of everybody involved. Thankfully it now lives on as a proposed law, currently making its way through Congress.

Apart from immediate gains, implementing policy and regulatory reforms would allow businesses, both long-established and up-and-coming ones, to focus on better providing value to their customers and partners. This includes ensuring an environment that develops the right talent, fosters innovation, and lowers barriers to entry. Admittedly this covers a lot of ground, from recent amendments to foreign investment laws to policies such as the Common Tower Policy which should promote better connectivity across the country. While on the surface they are not directly connected to the role of supply chain in moving goods and people, these policies should lead to more competitive businesses driving higher consumption, which then drives more business for the logistics sector. Again, look at the e-commerce boom in the country. It’s definitely a product of policies that allowed for new players to come in and address the evolving needs of Filipino customers.

And since we’re on the topic of policy, it’s past time that we revisited our COVID-19 regulations, especially now that we have successfully rolled out the vaccine to most Filipinos. There was talk of an “endemic” policy at the beginning of the year, but since then we have remained in some sort of status, still requiring face masks in most places—even outdoors!—while most of our neighbors have embraced the so-called “new normal”. While our day-to-day lives have been pretty much like how they were before, current regulations are still hampering our supply chains, thanks to entry requirements, mobility restrictions, and overall uncertainty holding back efforts to plan and forecast. If we are confident we’re past the worst, why aren’t we telling everyone that we can (somewhat) go back to normal now? At this rate, wearing masks becomes a begrudging obligation rather than a personal responsibility to others. It’s not the message we want to send.

 

 

Eight years ago, when I took over as editor-in-chief of this magazine, I wrote that “supply chain is everywhere”—that what used to be the concern of logistics professionals is now more visible to everyone else, particularly as it affects what we are able to buy for our families (or ourselves) and how it impacts our quality of life.

The intervening years have driven this point further: the pandemic, the stronger presence of e-commerce in our lives, even our embrace of Korean culture, to cite a specific example. Filipinos have an even better understanding of how the movement of goods impacts what they cook for dinner, or whether they can get the life-saving medicine they need on time, or whether they can buy the Ready to Summer version of Viviz’s Summer Vibe album. You have posts on social media talking about, say, an oversupply of carrots from northern Luzon not finding customers and being thrown away instead. You have the “community pantry” movement springing up in 2020, connecting individuals who have more than enough to those who don’t. The importance of connections—of maintaining them and making sure they don’t break—has been stressed further.

I’d now like to revisit what I said eight years ago. Supply chain is not just everywhere. Supply chain is everything. At the most basic level, it is physically delivering goods (and people) to where they are needed to be. But the impact of that goes beyond the physical transaction. When they work, supply chains uplift lives, accelerate businesses and grow the economy. It allows those connected to them to realize their full potential, whether it be by being paid fairly for their work, or allowing them to pursue their passions, or ensuring they provide enough (and perhaps more) for their loved ones.

As such, we can look at some of the country’s long-term challenges through a supply chain lens, and have a better understanding of how they can be addressed. Take agriculture. For decades the sector has lagged behind, with farmers choosing to give up their professions and perhaps sell their land to real estate developers. More houses or office space, sure, but it also means less capacity to grow our own food, which leaves us at the mercy of external suppliers and global shocks. A solution often trotted out to address these concerns is the construction of farm-to-market roads: it appeals to those who want to see tangible progress, but efforts should go beyond that. How can our farmers better deliver their produce to their customers, which usually are beyond the local market? Apart from investment in road infrastructure, we talk of investment in the cold chain sector, which should address concerns over the quality and safety of products once they leave the farm. But how do we encourage the construction of such facilities closer to the farms? How do we address the high cost of electricity, which is often cited as a deterrent to investment in this sector?

Take our health infrastructure. The rollout of COVID-19 vaccines, with their specific storage requirements, has highlighted the need for more facilities across the country that can stockpile essential drugs rather than relying on shipments from more central locations like Manila. Are relevant government agencies empowered to build such facilities? Can they get the right expertise to help operate them? How about the right equipment to ensure supply chains are not broken? Are these stakeholders able to tap local logistics providers in a way that is beneficial to both? Say, are these service providers paid on time, allowing them to be better equipped to respond to urgent requirements?

My work with the assistance workstream of the Pilipinas Kontra Gutom multi-sectoral movement also opened my eyes to the key role of supply chain in ensuring the resilience of our towns and cities when calamities strike. I remember one issue that emerged in the immediate aftermath of typhoon Yolanda was the challenges of bringing life-saving relief to eastern Visayas, as shipments congested the nearest ports, adding to bottlenecks already caused by typhoon-related destruction. One of our ideas was to utilize retailers as a “forward stock” location for these relief goods. Perhaps it’s something government agencies can embrace as they revisit disaster response plans.

I also remember the Department of Social Welfare and Development establishing a logistics system allowing for standardized packing and better distribution of relief goods. While they only have two facilities, they hope to expand this to better serve communities when they need help the most. I hope the government considers expanding the agency’s capacity and capability to allow it to not just serve far-flung areas, but to serve as a central point for relief operations mounted by the private sector.

Our supply chains also play a role in other facets of developing our country in the coming years. Take the stronger thrust towards more sustainable enterprises. The building blocks of the “circular economy” depend heavily on the ability of our supply chains to move between points, apart from encouraging people to be more discerning when it comes to what they buy and how they dispose of (well, ideally, recycle) their waste.

Now, I’ve talked a lot about how the government can keep our supply chains moving, but they’re not the only ones who can do something about it. Stakeholders in the private sector have an important role to play, of course. We have some harmonizing to do, for instance: take loading times for malls and other retail establishments, which also contribute to congestion and delivery delays. Why can’t we go 24/7 instead? Or, why can’t manufacturers agree to co-loading instead of insisting on deploying their own vehicles, which aren’t fully loaded, to the same destinations? Yes, competition concerns make this tricky to navigate, but the idea has been floating around for years, and it’s always worth revisiting and trying out.

The private sector can also take the lead in other fronts. We cannot develop our supply chains if we do not make it worth our employees’ while. We should compensate them properly, ensure their safety, provide opportunities for career advancement, and utilize technologies to augment the profession’s more thankless tasks. The supply chain profession is unique in that it cuts through age, gender, social class and location; thus, developing it into a rewarding one would mean the right capacity and capability that will allow us to keep our goods moving and provide value to our partners and customers better.

Just imagine: you get the products you need within a reasonable time frame, and within reasonable costs. What you thought would be difficult to buy would be easy to get, because shipping times—whether it be from the provinces or from outside the country—would be shorter. Imagine not having to worry whether there will be enough vegetables at your nearest grocery, or medicines at your nearest drugstore. Imagine being able to satisfy your cravings when they strike. Imagine being able to do that many times over, making businesses more profitable, elevating our economy, improving our quality of life. The Philippines, unhampered.

It all starts with keeping our supply chains moving. Now that more people understand how important it is, we have to make sure they stay that way, by working on it for as long as we can.


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