Hub Location Recommendation

Prepared by: Anak Agung Kompiyang Ratih Maldini

Globalization has change the business flow of all companies around the world.
Nowadays, most of businesses try to bring their product to any part of the world. This action is
taken by most business actors since they can boost the sales and increase the company’s profit,
reduce the market risk of failure since the market is diversified, getting financial assistance
from the government, and able to expand the life of the mature product (Bloch, 2018).
However, there are several risks of exporting or bringing the product to the customer despite
the huge benefit of exporting. Those risk including the different preferences of customer
demand, the competitors, higher cost due to shipment (transportation), and foreign exchange
currency risk (Invest Northern Ireland, 2018). Among these risks, the risk from transportation
or shipment is one of the risk that significantly influence the success of exporting product. If
one region having a sudden high demand, the company should build the main hub around this
region to reduce the risk in shipment or transportation. Further, the location of the hub also
should be analysing to guarantee the success of exporting through reducing the risk in logistic
transportation. Therefore, this report is prepared to give the manager recommendation about
strategic location for the upcoming hub placement. This report will divide into three sections.
The first section will justify the hub country based on efficiency of the clearance process
(customs) and quality of trade and transport (infrastructure), the second section will justify the
country based on ease of arranging shipment (international shipment) and logistic competence,
the third section will be discussing the hub location based on tracking, tracing, and timeliness
of the transportation, at the end, the recommended country is analysed in general based on
Logistic Performances Index (LPI) score.
The first part that will be considered in determining the best country as the hub of
transporting product in South East Asia region is the efficiency of clearance process and the
quality of transport. In this analysis, the top three countries in Southeast Asia that have the
highest score for the efficiency of clearance process (in sequence) are Singapore, Malaysia,
and Thailand. Singapore has the highest score by 4.18 out of 5 for clearance process that
considers the predictability, speed, simplicity from control agencies such as customs (The
World Bank, 2016). This high level of clearance process in Singapore is supported by a fact
that Singapore applied a customs regulation that is strong so the customs procedure can quickly
adapt with the dynamic business world (Singapore Customs, n.d.). The security and
infrastructure of the customs in Singapore are also well maintained. For the second rank and
third rank for the efficiency of clearance process is Malaysia and Thailand which scored 3.17
and 3.11 respectively. The score of Malaysia and Thailand is lower than Singapore because the
security system in Malaysia is not as strong as Singapore. Recently, Malaysia customs
experience huge losses due to fake receipts (The Straights Times, 2017). For the quality of
trade and transport, these three countries still become the top three countries that have the best
quality of trade and transport. In specific, Singapore has score 4.20/5.00, Malaysia has scored
by 3.45, and Thailand has scored by 3.12. A high quality of trade and transport is determined
through the infrastructure availability such as railroads, ports, information technology, and
roads. The ports in Singapore has a strategic location in which it has make Singapore have the
largest ports around the world (Hiteshk, 2015). Moreover, the airport of Singapore also has
many connections and international standardized (Lam & Ramakrishnan, 2017). Thus,
Singapore has been now as the best-developed country in Southeast Asia region and even
ranked as the number one city which has the best city infrastructure including transportation
(The Business Times, 2017). The availability of infrastructure in Singapore is cannot be
separated from the government's desire to promote Singapore economy through foreign
investors (Yeoh, Wong, & Kwan, 2003). Therefore, Singapore is excelled in clearance process
and the quality of the infrastructure.
The second part that will be considered in determining the hub location is Southeast
Asia are ease of arranging shipment and logistics competence. Based on The World Bank
(2016), the top three countries in Southeast Asia that has the easiest shipment arrangement are
Singapore, Malaysia, and Thailand. Singapore is scored by 3.96/5.00, Malaysia scored by 3.48,
and Thailand scored by 3.37. In this category, the ease of arranging shipment is considered by
the competitive price. In term of logistic competence, these three countries become the top
three countries that have the highest score. In sequences, Singapore, Malaysia, and Thailand
has scored by 4.09, 3.34, and 3.14 out of scale 5. In this calculation, the competence of the
logistic is measured through the service of transport operators, customs brokers, and others.
The service of Singapore that above other countries due to the government action that
encourages the involvement of private sectors. The private sectors help the country to have
large shipment volume and better service (Lam & Ramakrishnan, 2017). Not only that, some
private and public sectors are also integrated in which it has made the challenges in shipment
can be tackled together and not burden the government only. Although there are many
businesses that open their hub in Singapore in which it means competitor, the company can
consider Malaysia as the second option. Malaysia also has a good logistic competency while
Malaysia only lack of participation from other industries and the absence of national
benchmark for logistic services which make the service level in logistic is not equal (Bakara &
Jaafar, 2016). Thus, Singapore is the main recommendation and Malaysia the second option in
term of shipment arrangement and logistic competency.
The third part that can be used to consider the quality of a country as the main hub is
tracking and tracing and timeliness. This criterion is important to determine the best country as
the main hub as these 2 factors relate to the process of shipment. According to The World Bank
(2016), the top three country that has the highest score for tracking and tracing in Southeast
Asia are Singapore, Malaysia, and Thailand. In numbers, Singapore get the highest score for
this criteria as Singapore scored 4.05/5.00, Malaysia has 3.46, and Thailand has 3.20. On the
other side, the top three countries in Southeast Asia for criteria of timeliness that expected to
be arrived at destination on time also hold by Singapore, Malaysia, and Thailand. Singapore
has the highest score by 4.40, Malaysia has the score by 3.65, and Thailand 3.56. This criterion
becomes the highest score of each country compared to other previous criteria that have been
mention. Malaysia can have lower score in these 2 criteria as Malaysia faces certain problem
such as lack of skilled labour, unsophisticated technology in logistic system, and lack of follow
up action which makes the tracking and tracing and the timeliness of Malaysia lower than
Singapore which has sophisticated system (Ali, Jaafar, & Mohamad, 2008). Thailand also
experiencing the same challenges as Malaysia such as do not own sophisticated logistic system
and cannot deal with high frequency due to logistic system unlike Singapore (Limcharoen,
Jangkrajarng, Wisittipanich, & Ramingwong, 2017). These two challenges have brought
Thailand to have a lower score in term of tracking and tracing and timeliness. Therefore,
Singapore is the best country for this criteria due to a good logistics system that can handle
high frequency and sophisticated technology system.
Based on above criteria, it is clear that the winner is Singapore. It is also supported by
Logistic Performance Index (LPI) of Singapore who places as the 5th ranked logistic best
performer around the world. Meanwhile, Malaysia on the rank 32nd and Thailand place the
45th places. This overall ranked is gained after considering the 6 criteria mention in this paper.
Singapore can perform better than any other countries in Southeast Asia as Singapore are
supported by the government, the infrastructure that is always upgraded to meet the market,
and the strategic location of Singapore which can reach any region in Southeast Asia (Lam &
Ramakrishnan, 2017). Singapore has the best location for the hub as Singapore is the gate to
the East and West in which these 2 region is important in trade path (Today News, 2017). Not
to mention the good security that own by Singapore has lead foreign investor to build a hub in
this country. Therefore, the good country recommendation to the manager to build the main
hub is Singapore.
In conclusion, Singapore is excel in term of efficiency of clearance process and the quality
of transport as this country have the best infrastructure within Southeast Asia region including
the port and the airports' path. Further, in term of ease of arranging shipment competitive price
and logistic competence, Singapore also excel since the government of Singapore is supportive
and private sector also engages to support the logistic system. In term of tracking and tracing
and timeliness, Singapore also awarded as the best performer as Singapore has a sophisticated
logistics system that integrated with advanced technology and the ability to handle high
frequency of shipment. The last, these 6 criteria has delivered Singapore to have the highest
ranked in Southeast Asia for the logistic performer (rank 5th globally) compare to Malaysia
and Thailand. Malaysia and Thailand ranked come up after Singapore respectively due to
challenges in technological, labor, and logistics system. Thus, Singapore as the main place for
the next hub is recommended to the manager of the company.

References
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