Singaporean SMEs Part 2: On the ground

By Benjamin Cher December 8, 2015

SMEs still rely heavily on antiquated processes
Challenges include inertia and lack of information

THE Singapore Government, through agencies such as the Infocomm Development Authority of Singapore (IDA), has done its part in encouraging small and medium enterprises (SMEs) to undertake the digital transformation journey, as have trade associations and vendors.

In this, the second of three parts on SMEs and digital transformation, Digital News Asia (DNA) speaks to a trade association, a vendor and an SME, to uncover how the various policies and programmes have been translated on the ground.

READ ALSO: APAC businesses poised for major digital transformation: HDS CTO

Back to preschool

Preschools are often small, standalone operations. Preschool administration and management solutions provider LittleLives is acutely acquainted with how these SMEs operate and what challenges they face when operating without technology.

“Can you imagine how tough it is like to run a preschool without technology?” says LittleLives founder and chief executive officer Sun Ho.

There are the usual processes – registration, fees collection, taking attendance and so on – plus more serious issues like dealing with Early Childhood Development Agency (ECDA) licensing regulations.

What some preschool operators are doing in this digital age can shock and surprise people, according to Ho.

“Teachers are making portfolios for each student by hand, cutting up photos and pasting them.

“There was this one centre that signed up with us earlier this year – they had been using receipt books for everything.

“Because the receipts had to be serially numbered as required by ECDA, they had three teachers sharing that one receipt book, making parents unhappy as they had to wait for the receipt to be issued [in turn],” she says.

Reaching out to preschool operators has been tricky, according to Ho, “because the owner of the centre might not necessarily be involved in the daily operations of the preschool.”

About half of the 1,700 preschools in Singapore are standalone centres which face resources constraints.

“The operators know they have a problem – having teachers building each student’s portfolio or handwriting receipts for school fees is not the most efficient use of manpower,” she says.

And while management might recognise the efficiency technology can bring, adoption at the operational level is key. Organisational inertia can derail any new initiative or effort.

Singaporean SMEs Part 2: On the ground “We normally get good feedback from management, but as for the teachers, we realised that the leaders’ message to the centres matters a lot,” says Ho (pic).

“When the encouragement and support from the management is not there, the teachers on the ground will struggle with adopting technology, especially the older ones who have used the old ways for a long time,” she adds.

Vendors should be tapped to help SMEs overcome this challenge, she argues, with on-the-ground training to help teachers learn and understand how to use the system.

The biggest pushback she found was in operators which did not want to let parents into the system after implementation.

“Some operators do not want parents logging into the system … but frequent communications with parents means happy parents, and a longer waiting list for enrolment,” she declares, saying that there was a need to change this mindset.

“Customers are a lot closer than before – if they can’t contact you, they are going to complain on social media,” she adds. “Operators need to engage parents even more than before.”

Meanwhile, operators which turn down LittleLives’ solutions often cite budgetary constraints, despite recognising the ease and increased productivity technology will bring.

“If the operator is not eligible for a grant, it often will turn us down,” Ho says.

Influencing members

A trade association often acts as leader and voice of an industry, helping its members grow and overcome challenges.

The Singapore Contractors Association Limited (SCAL) is one such trade association, its mission being to help members keep in touch and adapt to economic and technology developments.

It has about 3,000 members, of which 85% are SMEs, according to its president Kenneth Loo. These SMEs face the challenge of retaining skilled and experienced foreign workers, which SCAL looked to technology to help address.

“The Foreign Construction Worker Directory System (FCWDS) was introduced and developed to alleviate this challenge for SMEs, by raising workforce quality and productivity,” Loo tells DNA in Singapore.

“SCAL came up with the FCWDS to make it easier for construction companies to search for and hire existing foreign construction workers who are nearing the end of their work-permit terms,” he says.

Introducing this platform was part of a push by SCAL for construction companies, especially SMEs, to pick up and adopt technology.

Loo argues that organisational inertia – especially at the top – has been preventing widespread adoption.

“In smaller companies, the training of employees is often insufficient and the attitude towards information technology as an enabler may not be valued as highly,” he says.

Singaporean SMEs Part 2: On the ground Beyond inertia, SMEs tend to shy away from something new, and are also often not as tech-savvy, according to Loo (pic).

“The challenge is to get over the initial fear, which can be done by communications and [creating an] awareness of what technology can do.

“As we progress as an industry and the nation moves towards smart technology, there is a need to embrace ICT and innovation for productivity and growth,” he says.

SCAL is looking to alleviate the fears their SME members might have via briefing sessions to better educate and raise awareness, according to Loo.

Meanwhile, the FCWDS platform has so far been well received by employers who recognise the value and benefits technology brings, Loo remarks.

Amongst the positive feedback SCAL got when the platform was launched was that the technology would provide members with access to skilled workers, rather than them having to constantly spend time and money to send their workers for re-training, he says.

“As the platform is still newly launched, we expect some time would be needed for the construction industry to familiarise itself with FCWDS, and for construction companies to adopt this technology,” he adds.

To date, 118 companies have registered their interest in the platform, with 120 participants attending the first briefing session, according to Loo.

This is an inevitable digital transformation that SMEs in construction would have to make as technology becomes more pervasive, he argues.

“We cannot shy away from digital technology, which will help to increase our productivity,” he says.

“It’s just a matter of time – there are 60-year-old site supervisors using smartphones now, so it should not be a barrier,” he quips.

Swapping to a digital core

Serial Systems Ltd, a component distributor listed on the Singapore Exchange, is one SME that believes in technology. Its executive chairman and chief executive officer Derek Goh argues that transformation is an important process in the lifecycle of any growing organisation.

“We are in a digital age defined by change, and it is important to act and constantly adapt,” he tells DNA via email.

“If we do not make small, daily improvements to our business operations, we will have a challenging time in the future,” he adds.

Serial Systems’ digital transformation journey began in 2010 with the introduction of a platform to manage inter-company transactions with suppliers and customers, according to Goh.

“We digitised order-processing from the traditional fax and email to near real-time electronic transmissions,” he says.

“We also introduced a Warehouse Management System in all our warehouses to track the movement of inventory via barcode scanning,” he adds.

The cultural barrier of holding on to the old ways can derail any organisational change, and Goh is well aware of that.

“From the beginning, we knew that the transformation of our day-to-day business operations would take time, effort and willpower.

“People are naturally resistant to change, even if it is positive, and the implementation of this new system on an organisational level would not be easy,” he says.

However, the need to improve processes and reduce errors has to win out, or the benefits of such technology will never be enjoyed.

“There was initial resistance to the introduction of a mobile scanner to the warehouse workflow as scanning and barcoding created more work in certain processes than the old method,” Goh says.

“Today, the warehouse management system is a critical system that we depend on daily, as human errors in warehouse operations were greatly reduced, helping us to ensure accurate and timely delivery to our customers,” he adds.

In 2013, Serial Systems rolled out inhouse-developed software to analyse customer demand and match it with supply requests to suppliers. This software crunches the numbers based on customers’ shipment history, inventory levels, and orders forecast.

“This has increased workflow efficiency and optimised inventory,” Goh says.

“This predictive approach has simplified decision-making and processes, resulting in the company’s inventory turnover days being reduced from 41 days in 2012 to 30 days in 2013,” he adds.

Serial Systems’ 30-day turnover outperforms the industry average which stands at 60 days, he claims.

Managing its people and culture has led Serial Systems to where it is today, according to Goh, reiterating that small improvements can lead to significant payoffs in the long run.

“In Serial, we adopt a constant progressive innovation process where we take baby steps to roll out changes,” he says.

“We use an agile project management methodology, which includes the iteration of our innovation and the gathering of constant feedback from the operations, followed by the fine-tuning of our systems and processes further,” he adds.

These initiatives were helped along by the Productivity and Innovation Credit (PIC) scheme, according to Goh.

The Singapore Government introduced the PIC scheme to encourage productivity and innovation activities. Businesses can enjoy up to 400% tax deductions and allowances.

“We embarked on our initiatives to improve our internal efficiency and innovate on e-commerce with the help of the PIC scheme,” Goh says.

“We were able to acquire IT equipment and invest in external projects to speed up the rate of technology adoption,” he adds.

The digital transformation journey for Serial System is far from over, says Goh, who believes that innovation and transformation are more than just about a single step.

“It is an evolutionary process that we must constantly develop, further and further,” he says.

“Our next step is to further enhance our inhouse system for internal forecasting to analyse customers based on transaction history, credit lines and potential profitability,” he adds.

Currently, Serial Systems engages about 60% of its supplier base on an electronic data interchange (EDI), up from 30% in 2012. Goh hopes to accelerate adoption of EDI among suppliers to 100% and begin extending it to their customers.

An EDI allows companies to transfer data from one computer system to another via standardised message formatting, requiring no human intervention.

“Going forward, we have also been actively studying ways to increase centralised purchasing, and building up an asset management team to execute decisions as well as to achieve economies of scale from bulk purchasing,” says Goh.

“This centralised function will also optimise the utilisation of [our] seven warehouses, intra-company logistics, and inventory-planning across the group,” he adds.

Serial Systems has also moved into the finished products segment, and is looking to e-commerce to distribute such products, according to Goh.

“In the near future, we aim to roll out a flexible and scalable e-commerce platform for the distribution of our finished consumer lifestyle products,” he adds.

Singaporean SMEs and digital transformation:

Part 1: The government’s guiding hand

Part 3: The view up there