Companies re-look business models amid gloomy economic outlook

March 21, 201610:06 am518 views

Productivity growth in the Republic has been slowing in recent years, especially in certain sectors such as accommodation and food services and business services.

The compounded annual growth rate of productivity, measured by the real value-added per actual hour worked, was 2.7 per cent from 2009 to 2015, but it was 1.3 per cent from 2010 to 2015.

In 2015, some sectors like accommodation and food services registered a negative 0.2 per cent, while business services fared even worse with a negative 1.4 per cent growth in productivity.

Mr Francis Tan, an economist at United Overseas Bank, said Singapore’s productivity growth has been stagnant since about 2010 or 2011, in line with slower growth globally.

“If you look at the economic growth of Singapore on a yearly basis, since 2011, the growth rate has been smaller and smaller,” he said, adding that the average productivity growth from 2010 to 2014 was “near zero”.

Chief Executive Officer of the Employment and Employability Institute, Gilbert Tan, said the only way labour-intensive businesses can survive is to think of innovative and different business models.


Amid the gloomy economic outlook, companies in some sectors are doing exactly that to keep their heads above water.

At Idaten Udon, there are no waiters or waitresses in sight. Customers choose their main courses and place their orders at one counter, then proceed to pick up their orders and make payment at other counters. After they finish their meals, they are encouraged to return their trays at a collection point.

Mr Eddie Tang, Chief Executive Officer of RE&S Enterprises, said one of the biggest areas of productivity gains from having a self-service restaurant like Idaten is in manpower deployment.

“We don’t need service staff to serve customers or service staff to clear dishes, as in a dine-in environment,” he said.

At full-service restaurants managed by the Japanese restaurant group, 15 staff members are working at any given time, but a self-service restaurant like Idaten can have only six.

Mr Gilbert Tan said such self-service restaurants have been becoming more popular, which he thought was mainly driven by the tight labour market. However, he added that there was a “spectrum” of service productivity between fast food and high-end fine dining.

“Within that spectrum, I believe every single Food & Beverage (F&B) operator can choose different types of innovation, different types of productivity initiatives to help them provide that level of service productivity.”

The menus at F&B outlets are one factor that affect the viability of self-service concepts, said Mr Tang.

Food that is easier to prepare and can be easily packed for customers to take away are more suitable for such a model, whereas set meals comprising a variety of items are more challenging, he said.

Mr Francis Tan added that he did not believe self-service concepts would take over the entire F&B industry.

“There will be those that are in the middle and the full-fledged restaurants … The self-service ones are probably at the lower price point because of the savings, because of the lower manpower costs.”


The negative productivity growth in business services, including security companies, prompted Executive Director of Concorde Security Alan Chua to take a hard look at his business model.

Mr Chua, whose company employs about 50 security guards, has invested more than S$1 million in technological upgrades. These include a remote surveillance and control system in a customised vehicle, which is used for security services at night.

A specialised security vehicle from which security guards can monitor buildings at night. (Photo: Concorde Security)

The vehicle is usually parked near the buildings monitored, and guards stationed inside can survey the premises of the buildings through screens linked to CCTV cameras. The computer system sounds an alarm if there are intruders, and the guards can be on site within 10 to 15 minutes.

From 11pm to 7am, three guards man the system in the vehicle. The shift of eight hours is shorter than the 12-hour shifts of physical security guards, and the system serves a cluster of buildings in the same area so building owners do not need to hire guards for individual premises.

According to Mr Chua, not every building needs to have physical guards. “Foreign experts have stated that and I agree with the foreign experts that 90 per cent of the time, the security guards are on a stand-by basis so they’re waiting for things to attend to. So with this concept,” he said.

“For example, there is a guard standing by at every building for things to happen. We might as well pull out the standing guards and put into a common platform like our vehicle. That means in this case, one person is standing by for multiple buildings, and it’s like a time-sharing basis. So that will be a more effective utilisation of men.”

Mr Chua said he was also prepared if there are simultaneous incidents across many buildings in the same cluster.

Although he said chances of this happening are slim, he explained that he had backup teams who could be on site in half an hour, and a team of officers monitor the situation from the firm’s control room at their 24-hour headquarters in Ang Mo Kio.

By June this year, the company will monitor 50 locations from its fleet of specialised vehicles. Luzerne Building in Bendemeer was the first to sign up for this service in early 2015.

It used to employ six guards, but now has two guards on duty in the day and a team of three officers in the specialised vehicle. They take care of the security of the building as well as six other buildings in the vicinity.

“Now, with all the screens in the building, showing the building, more sections of the building can be monitored in one go. If you have only guards, they only can be in one place at one time,” its chairman Steven Lek said.

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