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SATS LTD.: BUILDING CAPABILITIES FOR THE FUTURE

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Sarah L. Y. Cheah, Kritesh Patel, and Matthew Lim wrote this case solely to provide material for class discussion. The authors do
not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain
names and other identifying information to protect confidentiality.

This publication may not be transmitted, photocopied, digitized, or otherwise reproduced in any form or by any means without the
permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights
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University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) cases@ivey.ca; www.iveycases.com. Our goal is to publish

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materials of the highest quality; submit any errata to publishcases@ivey.ca. i1v2e5y5pubs

Copyright © 2021, National University of Singapore and Ivey Business School Foundation Version: 2021-05-10

On June 5, 2019, Khoo Seng Thiam, senior vice-president of SATS Ltd. (SATS), Asia’s leading provider
of food solutions and gateway services, was studying the 2019 Digital Carrier Connectivity report
published by the online freight booking platform Freightos.1 The report compared the digital maturity of
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the ocean cargo and air cargo industries and found that the ocean carriers generally matured more than their
air counterparts. As a crucial logistics industry, the air cargo industry transported over 35 per cent of the
global trade by value, accounting for only 1 per cent of the global volume in 2018.2 After the 2008 financial
crisis, demand for air cargo had normalized, and a steady annual growth of 4.9 per cent was forecast for the
next five years.3 However, the industry faced multiple headwinds. The growing influence of e-commerce
giants such as Amazon.com Inc. (Amazon) in the logistics industry coupled with the strong supply-chain
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expertise of vertical integrators such as DHL International GmbH (DHL), United Postal Services Inc., and
FedEx Corporation had intensified competition in the industry. Backed by strong financial power and
enabled by the latest digital technologies, these companies had disrupted the existing air cargo industry,
which was in dire need of digital transformation.

A leading player in the industry, SATS had always been ahead of its competition in identifying trends and
leveraging opportunities. Its pioneering development of the cargo management system COSYS Intelligent
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Solutions (COSYS) as early as 2010 was a testament to its strategic foresight capability, winning accolades
such as CIO magazine’s 2017 CIO 100 Award for its innovative utilization of information technology to
create and deliver business value.4 SATS was also awarded the title of “Best Air Cargo Terminal in Asia” at
the 2013 Asian Freight and Supply Chain Awards. In recognition of its innovative use of smart watches for
technical ramp operations, SATS had also emerged as the winner of the 2018 Ground Handling Conference
Innovator Competition, organized by the trade association of the world’s airlines, the International Air
Transport Association (IATA).5 However, the turbulent nature of the air cargo industry would not allow
SATS, or any other established terminal operator, to rest on its laurels. SATS had set its sights on two
initiatives to address industry challenges and leverage opportunities: cargo automation and digitalization.
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The first initiative would require SATS to invest in robotics and artificial intelligence (AI) 6 to fully automate
its cargo picking and packing operations in order to address the issue of an aging workforce while improving
operation efficiency. However, the development of robotics technology for the logistics sector was still in
its early stages, where the possible range of technological applications was wide, the risks of technology
obsolescence was moderate to high, and the demand for high-skilled labour to program, operate, service,
and maintain the robotics would pose new challenges. On the other hand, the second initiative would allow

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SATS to build on its prior experience with COSYS implementation to undertake digital transformation to

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sustain its competitive advantage. However, the initial capital investment to re-engineer and integrate
operation processes with digital technologies such as radio-frequency identification (RFID),7 the Internet
of things (IoT),8 and big data would be prohibitive, with a relatively long payback period.

While both initiatives seemed equally important and urgent for SATS to develop its capabilities for the

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future, Khoo knew that he had to prioritize SATS’s investment and resource allocation.

THE AIR CARGO INDUSTRY

Overview of the Air Cargo Value Chain

The air cargo value chain typically consisted of six major entities: shipper, freight forwarder, regulatory

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authority, ground handling agent, carrier, and consignee (see Exhibit 1). The shipper could be an individual
or institution that initiated the transport of the goods. At the origin end, the freight forwarder was the first
party of the logistics services in the supply chain, and its primary task was to contract with a cargo airline
company or carrier for air delivery of the consignment (i.e., a batch of goods destined for or delivered to
someone). After collecting the consignment from the shipper, the freight forwarder would deliver the
consignment to the airport ground handler, which would then load the consignment onto the airplane. At
the destination end, the airport ground handler would unload the consignment from the airplane, and the
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consignment would be picked up by a local freight forwarder to make the final-mile delivery to the
consignee. The freight forwarder’s responsibilities were limited to the land side of the logistics chain.

Located on the air side of the chain, the ground handling agent would provide warehouses to accept, handle,
prepare, and tag cargoes (including mail) upon their receipt from the freight forwarder at the origin end.
The ground handler would perform loading, unloading, sorting, and customs declaration of cargo entering
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and leaving airport and transit operations. It would work with the regulatory authorities to perform
screening and customs checks on the moving cargo.

Industry Dynamics in Singapore

By 2019, Singapore’s Changi Airport had been ranked the world’s best airport for seven consecutive years
by London-based research firm Skytrax.9 In 2018, Changi Airport moved 2.15 million metric tons of cargo
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and 65.63 million passengers.10 The ground handling services were provided by two key players⎯SATS
and Dnata Singapore Pte. Ltd. (Dnata Singapore). Established in 1972, SATS was a wholly owned
subsidiary of Singapore Airlines (SIA) before it was divested from SIA in 2009.11 Dnata Singapore, on the
other hand, was incorporated as Changi International Airport Services in 1977 and then fully acquired by
Dubai-based Dnata Group in 2007.12 By 2016, SATS dominated Singapore’s ground handling market with
approximately 80 per cent share at Changi Airport.13 It managed close to 45 million passengers and about
133,000 flights annually, while Dnata Singapore handled three million passengers and 40,000 flights.14 On
the state of competition, Mark Edwards, the former chief executive officer (CEO) of Dnata Singapore,
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remarked in 2016, “I am still struggling to understand the strategy of my competitor, which only seems to
be about cutting prices, even as costs continue to escalate amid headwinds and the manpower shortage.”15

For a full-service carrier, the turnaround cost of operating a 180-seater Boeing 737-800 involved cabin
cleaning, cargo and baggage handling, and refuelling. Such costs had been cut down to between SG$1,50016
and SG$1,600 in 2016 from about SG$2,000 a few years earlier.17 Beyond Singapore, competition between
SATS and Dnata Singapore remained intense in the global ground handling market. Since 2016, Dnata

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Singapore had made acquisitions of cargo terminal operators that enabled its entry into the United States,

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Canada, and Brazil.18 A sizable portion (68 per cent) of the company’s US$3.6 billion in revenue in 2018
was attributed to the progress of its international business. The growth Dnata Singapore achieved through
acquisition had shifted its strategic relationships with its airline customers.

For the past two decades, the duo had witnessed new players’ attempts to enter Singapore’s ground handling

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market. In 2005, the Switzerland-based ground handler Swissport International Ltd. entered the market but
found its local operation “not of sufficient size to ensure its sound profitability.”19 It went on to incur losses
of up to SG$50 million before exiting four years later.20 Attracted to the growing aviation market in
Singapore and Asia, US-headquartered ground handler Aircraft Service International Group (ASIG) arrived
in 2011 but only managed to secure its first airline contract with Jetstar Airways Pty. Ltd. in 2014. However,
ASIG ended the contract due to commercial disagreement before exiting in 2015.21 The president of Dnata
Singapore, Gary Chapman, attributed ASIG’s swift exit from the country to its wrong strategy of engaging
in a price war: “ASIG came thinking it could do the work for half the price. They got it completely wrong.

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It was crazy.”22 Chapman highlighted the knock-on effect that the flawed price war strategy had on the
expectations of airline customers: “It’s very easy to reduce prices, but very difficult to increase.”23

In the broad cargo industry, air cargo operators competed against their ocean cargo counterparts. As the
operational costs per kilogram of cargo was higher in the air cargo industry than in the ocean cargo industry,
shipments using the former were generally lighter and less bulky than those using the latter. Although air
freight was, on the whole, faster than ocean freight, it was significantly more expensive.24 For example, a
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US$195 ocean shipment could cost US$1,000 by air.25 Safety regulations were stricter and more extensive
for air cargo shipments than for ocean counterparts. For instance, multiple items that were prohibited on air
cargo delivery routes were permitted for ocean cargo, such as gases (e.g., lightbulbs) and magnetic
substances (e.g., speakers).26 There had been an increase in less-than-container-load cargo shipments by
ocean as opposed to full-container-load shipments by air, thereby enabling faster and cheaper ocean cargo
services to compete with air cargo services. Driving this trend was the upgrading of ships and canals, as
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well as improvements to ocean tracking.27

Air cargo operators’ customers were primarily made up of airline companies handling cargo deliveries.
Most airlines would enter into fixed contracts with air cargo terminal operators, while some would prefer
to perform cargo handling functions internally. One such example was the decision of Hong Kong–based
airline Cathay Pacific Airways Ltd. (Cathay Pacific), through its wholly owned subsidiary Cathay Pacific
Services Ltd., to design, construct, and operate the new air cargo terminal Cathay Pacific Cargo Terminal
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at Hong Kong International Airport, with air cargo throughput capacity of 2.6 million metric tons and a
common-use facility open to all airline customers. The HK$5.9 billion28 facility commenced in February
2013 and accounted for over 20 per cent of the Cathay Pacific’s revenue.29

In Singapore, there were over 500 freight forwarding agents, ranging from small and medium-sized enterprises
to big multinational corporations such as Panalpina Welttransport Holding AG (Panalpina), Kuehne + Nagel
International AG, and CEVA Logistics.30 With a large number of players, the air freight forwarding sector was
highly competitive and saw frequent mergers and acquisitions (M&A).31 Despite the air cargo industry’s growth,
operators faced mounting pressure to digitalize to stay relevant within the industry.32
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Given the significance of air trade routes to economic growth, the public policy-makers of most cities
developed their aviation industry in an effort to attract international business trade and investment.
Singapore’s economic policy reflected its prioritization of the logistics and air cargo industry. In 2017,
Singapore’s Ministry of Trade and Industry announced the air transport industry transformation map, a
national blueprint to upgrade the capabilities of aviation companies through 2025 to boost productivity in

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the industry by 40 per cent.33 Ng Chee Meng, the second minister for transport, affirmed his intention to

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augment “smart” applications in the air transport industry to enhance industry’s competitiveness: “Systems
will talk more to each other, and more autonomous systems will support our work. We want to track every
piece of baggage, cargo and equipment moving across the airport in real time.”34

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CHALLENGES OF THE AIR CARGO INDUSTRY

During 2018, the global air cargo industry achieved growth of 3.5 per cent in cargo volume. 35 Estimates
from IATA forecast industry growth of 4.9 per cent over the next five years.36 Despite its growth, the
industry faced several challenges.

The air cargo industry was labour intensive for operations such as cargo handling and delivery. As the

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labour market faced acute shortages, rising demand for skilled labour had led to escalating labour costs.
This crisis was expected to worsen as global labour shortages of 85.2 million skilled workers were projected
by 2030 across all industries, resulting in potential lost revenue opportunities of US$8.452 trillion.37 If left
unchecked, such labour shortages could restrict the growth of the industry, potentially putting many players
out of business. In many developed countries, the challenge of labour shortages was exacerbated by falling
birth rates, which gave rise to an aging workforce.

With the increasing convenience of e-commerce, driven by advances in social media and electronic
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payment technologies, the air cargo industry saw rising customer expectations of the performance of air
cargo delivery service providers. Both consumers and businesses expected to receive goods faster, in a more
flexible and transparent manner, and at lower delivery prices.38 A study conducted by the National Retail
Federation found that 75 per cent of consumers surveyed demanded same-day delivery but were not willing
to pay for the service.39 The customer expected an e-commerce-like experience where services, information,
and transactions were made available online and in real time. It was apparent that the sector was under
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growing pressure to deliver quicker and better services at lower costs.

From terrorist attacks to geopolitical positioning, the air cargo industry was one of the industry’s most
vulnerable to safety and security risks.40 To address these risks, the governing bodies had heightened
measures to improve the safety and reliability of the industry. However, these measures came at an increase
in compliance costs that were partially borne by the logistics operators. The related security expenses, cargo
screening costs, training, and delayed transit times were estimated to exceed US$4 billion for the industry.41
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Compared to the ocean cargo industry, the air cargo industry was found to have lagged on three fronts
relating to digital connectivity: customer connectivity, online experience, and transformation.42 Customer
connectivity pertained to the ability of customers to be serviced on a suite of functions through digital
technology comprising documentation, shipment tracking, invoicing, and online payment. The online
experience would thus follow, focusing on creating a business-to-consumer kind of e-commerce experience
for customers. While the second dimension built on the first, it also included door-to-door delivery functions
and request-for-quotation forms. Finally, transformation referred to a top-down focus on improving
systems, processes, and cultures both internally and externally through business information technologies
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that could make the value chain more seamless. This digital lag of the air cargo industry resulted in a loss
of cost competitiveness to its ocean cargo rival. Major electronics companies such as Telefonaktiebolaget
LM Ericsson (commonly known as Ericsson) and Sony Corporation admitted to shifting their transport
operations from air to sea modes due to costs.43

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THE THREE CS

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To address the challenges in the air cargo industry, the existing players had responded in various ways. According
to the management consultancy firm McKinsey & Company, three trends were observed in the industry.44

First, there had been an increase in M&A among the incumbents. One example was DSV’s acquisition of Panalpina
to form DSV Panalpina A/S in 2019 for US$4.6 billion, the largest acquisition the industry had ever witnessed.45

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Second, a digital wave was imminent on the freight forwarding industry’s horizon, as the disruption caused
by three groups of new players was placing increasing pressure on traditional players to adopt digital
technologies. The first group involved digital forwarding specialists (e.g., the software-as-a-service
company Fleetmatics Group PLC) offering solutions for one or two elements of the value chain and
providing airline operators with information on vehicle location, mileage, and other relevant metrics. The
second group comprised digital forwarders, such as Amazon, offering as wide a range of logistics services

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as traditional forwarders but with better customer experience and at a relatively lower cost. The third group
consisted of airlines building their own digital channels, to serve customers directly rather than relying on
traditional freight forwarders to reserve space on flights (e.g., Brussels Airlines Cargo developing cargo
slot booking application with its digital partner BRUcloud).46

Third, the air cargo industry players were expected to embrace digital transformation in front- to back-end processes
to reduce internal costs and enhance customer experiences. All surviving forwarders would be more digitalized by
2025, while those lagging behind on digitalization and collaboration were expected to struggle and decline.47
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According to Khoo, these trends of the air cargo industry could be summarized by three Cs. The first C
would represent the competition heating up between traditional operators and the new digital forwarders.
The second C would capture the consolidation of the existing industry players through M&A. The
imperative of collaboration among the air cargo industry players across the value chain would be expressed
by the third C. Khoo was confident in SATS’s market positioning:
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Because of our unique position in the market, a very neutral position, we [SATS] are not competing
with the freight forwarders, and we are not competing with the airlines. In fact, we are either a service
provider to the entire community, or we are the key enabler to the community. We can help to build
a platform that is collaborative in nature, and everyone can run on it and play in a fair playing field.48

To address industry challenges and leverage opportunities, SATS chose to focus on cargo automation and
digitalization initiatives.
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SATS’S INITATIVES

Automating Cargo Operations

In 2014, the Civil Aviation Authority of Singapore (CAAS) launched the Aviation Challenge, with the
objective of developing innovative solutions to automate labour-intensive processes in airport operations.
Its second iteration called for contestants to propose solutions for labour-intensive cargo handling
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operations through automation in breaking down and building up cargo pallets and containers. Singapore-
based system integrator Singapore Technologies Dynamics Pte. Ltd. (ST Dynamics) and TUM Create Ltd.
Singapore (TUM Create)⎯a partnership between the Technical University of Munich, in Germany, and
the Nanyang Technological University, in Singapore⎯were two of the challenge’s finalists, presenting the
world’s first AI-enabled robotic solutions that could scan, build, and break down non-standardized cargo
in the palletization process.49 The two finalists were awarded SG$4 million in funding to develop their

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prototypes, which were expected to reduce workers’ loads by 30 per cent and to improve storage space

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efficiency by 4 per cent.50 The promising potential of the finalists’ robotic solutions caught the attention of
SATS. Having envisioned that the future air cargo industry would harness the power of AI, computer vision,
IoT, and robotics to enhance its productivity, SATS had worked closely with CAAS to actively provide
industry requirements for the Aviation Challenge, as well as to evaluate and review the participants’
proposed solutions for the challenge. Khoo remarked,

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Just imagine that in five years, 10 years, 15 years from now, where are you going to find people?
This is dealing with the labour workforce for the longer-term planning . . . as we progress,
automation and efficiency become a lifeline for any organization. So, TUM Create is another work
in progress, knowing that the future is going to be as such. It’s about what we need to do to start
preparing for right now, so that we will be able to deal with various scenarios in the future.51

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Building COSYS

In 2010, SATS launched a cargo terminal management system, COSYS, jointly developed with New Delhi–
based NIIT Technologies Ltd.52 With access to real-time and accurate information for tracking cargo
movement, SATS’s partners could improve their operational efficiency.53 By 2019, SATS extended the
availability of COSYS to its joint ventures in Asian countries such as China, Taiwan, and Bangladesh, as
well as its strategic partners in South American countries such as Brazil. As more partners utilized the
information system, they became contributors to its network of information, creating positive network
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effects for present and future corporate users. The success of COSYS was evident in the accolades that
SATS had received. As Khoo reflected, “Owing to its innovation in the digital front, SATS was felicitated
with a CIO 100 Award from IDG’s [International Data Group’s] CIO [chief information officer] in 2017.
This award honoured the top 100 organizations around the world that used information technology
innovatively to create and deliver business value.”54
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To address the increasing need for digital connectivity among the players of the air cargo value chain, SATS
was contemplating the integration of COSYS with cloud-based technology to reach out to new users.

BUILDING CAPABILITIES FOR THE FUTURE

As SATS formulated its strategic plans, it knew it would be imperative to continue building capabilities for
the future, particularly in the active adoption of robotics and AI in cargo automation for managing a diverse
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and aging workforce, as well as in IoT and big data in cargo operation for digital transformation.

Cargo Automation with Robotics and AI for Managing an Aging Workforce

Like many other developed countries, Singapore faced the challenges of an aging workforce. In 2016, there
were about 4.7 citizens of working age (between the ages of 20 and 64) for every older adult (over the age
of 64); this was a steep decline from 6.3 citizens of working age per older adult in 2006.55 The demographic
shift in Singapore had led to labour shortages and wage increases.56 While automation in the logistics sector
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was a relatively new trend, it had already become a norm in the manufacturing industries, where robots
were deployed to work alongside human workers to improve efficiency. One of the first industries to
spearhead automation was the automotive industry, which accounted for half of the world’s industrial
robots, achieving a 16 per cent increase in vehicle production since 2010.57

In recent years, the air cargo industry had seen some of the most labour-intensive functions partially
automated. For example, in 2016, DHL built close to 100 automated parcel-sortation bases across Germany

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to reduce manual handling and sorting by human personnel. Many other important functions such as

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delivery, warehousing, loading, and unloading had yet to be automated, giving transportation and
warehousing the third-highest automation potential of any sector.58 By 2014, Amazon spent US$775 million
on installing robots made by Kiva Systems across 13 fulfillment centres to automate picking and packing
processes at large warehouses.59 The deployment allowed Amazon to cut operating costs by 20 per cent,
reduce cycle times by 45 to 60 minutes, and free up inventory space by 50 per cent, translating into cost

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savings of US$22 million per fulfillment centre.60 Apart from robotics and automated systems, other
technologies such as AI were reported as critical for the logistics industry.61 The global mobile logistics
robot market was forecast to reach US$11,269.1 million by 2025, registering a compound annual growth
rate of 21.2 per cent from 2018 to 2025.62

As one of the leading providers of air cargo handling services, SATS had an excellent track record in
technological integration. At the Changi Airfreight Centre, SATS operated six cargo terminals, with a floor
space of 150,000 square metres and annual capacity of 2.2 million metric tons.63 To add to its capabilities,

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in 2017, it inaugurated the SATS eCommerce AirHub—a SG$21 million 6,000-square-metre fully
automated airside mail sortation facility co-funded with CAAS—to improve productivity by increasing (a)
the mailbag processing capacity from 500 mails an hour to over 1,800 mails an hour and (b) processing
speed by 50 per cent. 64 Building on this capability, SATS could invest in robotics and AI to fully automate
its cargo picking and packing operations in collaboration with TUM Create or ST Dynamics to address the
issue of an aging workforce while improving operational efficiency.
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However, the development of robotics technology for the logistics sector was still in its early stages, where
the range of possible technological applications was wide (e.g., pick-and-place robots, autonomous vehicles,
drones), and the risk of technology obsolescence was moderate to high. It would therefore be crucial to identify
the right robotics technology and the right processes to automate for long-term commercial viability. As
robotics solutions with AI software programs required regular software updates and hardware maintenance,
the required skills would have to be procured externally from a limited pool of vendors and at relatively high
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costs.65 While automation could curb the need for low-skilled labour, it would also bring about the demand
for high-skilled labour to program, operate, service, and maintain the robotics.66

Cargo Operation with IoT and Big Data for Digital Transformation

New technologies such as big data, machine learning, and IoT could help companies digitalize to improve
operational efficiency and enhance customer experience.67 Digital technologies would enable firms to
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capture critical data about consumer behaviours, leading to better forecast capacity in response to changing
consumer preferences and thereby presenting opportunities to build long-term customer relationships.68 Up
to 5 per cent return on sales could be achieved for firms that were able to make creative use of their existing
data and embed analytics in their daily functions.69 The use of digital platform and mobile connected devices
combined with IoT in the cargo warehouse would make the booking, tracking, and monitoring of shipments
easier and more accurate.70 The use of RFID in warehouses was gaining momentum at pallet- or item-level
tagging. Once tagged with an RFID unit, the cargo could be tracked not only within the warehouse but also
end-to-end through the entire supply chain.71 Such technologies would help satisfy customer demand for
greater shipment visibility.
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Digitalization was expected to address the connectivity issue of the air cargo industry by improving the
industry’s competitiveness over its ocean cargo counterpart. Its implementation could tackle safety and
security concerns across the industry by automating the cargo screening and tracking processes, thereby
reducing cycle time and compliance costs.72 Significant improvement in performance was forecast for
companies that adopted digitalization to reduce operational costs by 3.2 per cent over five years.73 For
example, Brussels Airport launched the BRUcloud initiative in 2016 to bring the region’s transport players

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together onto a common data cloud to share real-time shipment data so as to facilitate seamless shipment

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tracking across the value chain.74 Luc Jacobs, the CEO of DHL Global Forwarding, commented, “We firmly
believe that an increasing transparency and reliability will decrease the overall supply chain costs in the
future. We support initiatives as the community platform BRUcloud, to support the industry in creating
innovative tools to improve the logistic chain.”75

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The industry had seen an increasing number of legacy players collaborate with new emerging technology
start-ups to add digital capabilities within their ranks.76 For instance, Lufthansa Cargo AG acquired the
Portland-based digital logistics firm Fleet Logistics in 2018 to provide an online freight marketplace to
connect businesses to freight forwarders and other shipping service providers.77 By enabling businesses to
send requests, gather quotes, and review and compare freight services on its fleet marketplace, the company
aimed to enhance the freight booking experience by improving shipping transparency and standardization.
By adopting digital capabilities in early stages, the air freight industry could save between US$30 billion
and US$50 billion in operation costs over the next decade.78

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As more companies started to invest in the digital transformation of their supply chain and logistics
operations, industry spending on connected logistics solutions was forecast to grow to US$20 billion by
2020 (see Exhibit 2). On average, the logistics sector allocated almost 5 per cent of its annual revenue to
developing their digital operations, comparable to the weighted average of investment across all industries,
which stood at 5 per cent.79 According to consulting firm PwC, first movers in digital investment were far
more likely to achieve both revenue gains of more than 30 per cent and cost reduction of more than 30 per
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cent at the same time.80

With its prior experience with COSYS implementation, SATS would be well positioned to undertake digital
transformation to sustain its competitive advantage. COSYS had enabled SATS to drive collaboration
among not only its partners in the domestic market but also the overseas markets including Indonesia,
China, and India. The success of the COSYS platform would enable SATS to develop a more advanced
cloud-based cargo management system, COSYS+, to augment real-time cargo visibility along SATS’s
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digital corridors in the Asia-Pacific region.

However, the initial capital investment to re-engineer and integrate operation processes with RFID, IoT,
and big data would be high, with a relatively long payback period. On average, it would take over five years
for a firm to gain a healthy return on investment in digital technologies.81 To fully reap the benefits of digital
transformation, it would be critical for SATS to build strong capabilities in digital technologies to ensure
the design, development, and maintenance of a robust but agile cloud-based system that would enable the
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advanced digitalization and integration of the horizontal value chain with customers, suppliers, and other
value-chain partners.82 As digital systems could be vulnerable to security and privacy threats, SATS would
also need to build its cybersecurity capability to protect and harden its systems against intrusion from
hackers, terrorists, cybercriminals, mischief-makers, and others who wished to inflict damages.

MOVING FORWARD

By embarking on robotics and AI in cargo automation, SATS would be poised to tackle the challenges
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presented by an aging workforce and rising labour costs. On the other hand, the call for digital transformation
with IoT and big data in cargo operation would merit immediate attention. While both initiatives seemed
equally compelling for building capabilities for the future, Khoo knew that he had to prioritize investment and
resource allocation. Should SATS invest in the design, development, and maintenance of robotics and AI
systems to fully automate its cargo picking and packing operations in collaboration with TUM Create or ST
Dynamics? Or should the company focus on the design, development, and maintenance of IoT and big data
systems to expand the functions of COSYS+ to fully integrate its air cargo value chain?

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EXHIBIT 1: AIR CARGO INDUSTRY VALUE CHAIN

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Source: Created by the authors based on “Paperless Air Cargo and Logistics Solution to Boost Productivity across Supply
Chain,” Civil Aviation Authority of Singapore, accessed May 31, 2019, www.caas.gov.sg/about-
caas/newsroom/Detail/paperless-air-cargo-and-logistics-solutions-to-boost-productivity-across-supply-chain/.

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EXHIBIT 2: GROWING EXPENDITURE ON IOT-BASED SOLUTION IN THE LOGISTICS SECTOR

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Note: IoT = Internet of things
Source: Created by the authors based on Andrew Meola, “How AI and IoT Devices Will Revolutionize Supply Chain Logistics
and Management,” Business Insider, January 14, 2020, accessed July 30, 2020, www.businessinsider.com/internet-of-things-
logistics-supply-chain-management-2016-10/?IR=T.
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ENDNOTES

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1
Freightos, 2019 Digital Carrier Connectivity, February 2019, accessed April 2 2019, www.freightos.com/wp-
content/uploads/2019/02/2019%20Freightos%20Digital%20Carrier%20Connectivity%20Report.pdf.
2
Boeing, World Air Cargo Forecast: 2018–2037, 2018, accessed April 2 2019,
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report/assets/pdfs/2018_WACF.pdf.
3
IATA, “Forecasting Air-Freight Demand March 2018,” March 2018, accessed April 2 2019,

rP
www.iata.org/contentassets/dfe1378309804ee4bc111ce306df51ba/forecasting-air-freight-demand.pdf.
4
“SATS Unveils New Technology Innovation Centre to Enhance Services and Improve Productivity,” press release, SATS
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5
Vicky Karantzavelou, “Singapore-Based SATS Ltd Wins IATA’s 2018 Ground Handling Innovator Competition Award,”
TravelDailyNews Asia & Pacific, May 10, 2018, accessed April 2, 2019, www.traveldailynews.asia/singapore-based-sats-ltd-
wins-iatas-2018-ground-handling-in.
6
AI was the simulation of human thinking processes by machines or computer systems through learning, reasoning, and
self-correcting.

yo
7
Digital data encoded in RFID tags placed on objects could be captured by a remote reader over radio waves to track the
identification and movement of the tagged objects.
8
IoT referred to a network of Internet-connected physical items, buildings, vehicles, and other objects embedded with sensors
and software applications that could collect data without any human intervention.
9
Karamjit Kaur, “Changi Is World’s Best Airport for 7th Year Running,” Straits Times, March 28, 2019, accessed April 2, 2019,
www.straitstimes.com/singapore/transport/changi-is-worlds-best-airport-for-7th-year-running.
10
“Traffic Statistics,” Changi Airport Group, accessed June 5, 2019, www.changiairport.com/corporate/our-expertise/air-
hub/traffic-statistics.html.
11
Nisha Ramchandani, “SIA CEO Defends Divestment of SATS,” Business Times, May 16, 2009, accessed April 2, 2019,
op
http://eresources.nlb.gov.sg/newspapers/Digitised/Article/biztimes20090516-1.2.6.6.
12
Theodore Koumelis, “DNATA Raises SIN$140 Million for CIAS Acquisition,” TravelDailyNews Asia & Pacific, October 26,
2007, accessed April 2, 2019, www.traveldailynews.asia/dnata-raises-sin140-million-for-cias-acquisition.
13
Rumi Hardasmalani, “Price War between Ground Handlers Benefiting Airlines at Changi Airport,” Today, July 3, 2016,
accessed April 2, 2019, www.todayonline.com/business/changi-airports-ground-handling-duopoly-price-war.
14
Ibid.
15
Ibid.
16
SG$ = SGD = Singapore dollar; US$1 = SG$1.3661 on June 5, 2019.
17
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Hardasmalani, op. cit.

18
Alexander Pieri, “Dnata Exec Pulls Back the Curtain on Company’s Success Story and Outlines Global Strategy,” Aviation Business
Middle East, October 4, 2018, accessed April 2, 2019, www.aviationbusinessme.com/17624-reinforcing-the-foundation.
19
Hardasmalani, op. cit.
20
Hardasmalani, op. cit.
21
Ibid.
22
Karamjit Kaur, “Dnata in No Hurry to Expand in Tough Market,” Straits Times, May 17, 2016, accessed April 2, 2019,
www.straitstimes.com/business/companies-markets/dnata-in-no-hurry-to-expand-in-tough-market.
23
Kaur, “Dnata in No Hurry to Expand in Tough Market,” op. cit.
24
“Shipping Air or Ocean Freight,” Freightos, accessed April 2, 2019, www.freightos.com/freight-resources/air-freight-vs-
No

ocean-freight-making-the-decision/.
25
Ibid.
26
Ibid.
27
Ibid.
28
HK$ = HKD = Hong Kong dollar; US$1 = HK$ 7.8410 on June 5, 2019.
29
“Cathay Pacific Cargo,” Cathay Pacific Cargo, accessed April 2, 2019, www.cathaypacificcargo.com/en-
us/aboutcathaypacificcargo.aspx.
30
“Get to Know the Logistics Laws in Singapore,” SciVee, November 20, 2017, accessed April 2, 2019, www.scivee.tv/get-to-
know-the-logistics-laws-in-singapore/.
31
Keith Wallis, “‘Booming’ Logistics M&A Shows No Signs of Slowing,” JOC.com, July 30, 2019, accessed July 30, 2020,
www.joc.com/international-logistics/%E2%80%98booming%E2%80%99-logistics-ma-shows-no-signs-
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slowing_20190730.html.
32
Manuel Bäuml and Ludwig Hausmann, “Air-Freight Forwarders Move Forward into a Digital Future,” McKinsey & Company,
February 15, 2018, accessed April 2, 2019, www.mckinsey.com/industries/travel-transport-and-logistics/our-insights/air-
freight-forwarders-move-forward-into-a-digital-future.
33
“Industry Profile,” Enterprise Singapore, accessed April 2, 2019, www.enterprisesg.gov.sg/industries/type/air-
transport/industry-profile.
34
Ng Chee Meng, “Speech by Mr Ng Chee Meng” (speech, Aviation Community Reception 2017, April 20, 2017), accessed April 2,
2019, www.mti.gov.sg/-/media/MTI/ITM/Trade-Connectivity/Air-Transport/Speech-by-2M-for-Aviation-Community-Reception-2017.pdf.
35
IATA Cargo Strategy (IATA, February 2018).

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36
IATA, “Forecasting Air-Freight Demand March 2018,” March 2018, accessed April 2 2019,
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37
Korn Ferry, Future of Work: The Global Talent Crunch, 2018, accessed April 2 2019,
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38
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39
“NFR Study Says More Online Shoppers Want Free Shipping,” press release, National Retail Federation, January 15, 2019,

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40
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41
John J. Coyle, Robert Novack, Brian Gibson, Edward Bardi, “Chapter 11: Global Transportation Execution,” in
Transportation: A Supply Chain Perspective (Mason, OH: South-Western Cengage Learning, 2010), 380.
42
Freightos, Digital Carrier Benchmarking 2019, February 2019, accessed March 15, 2021,
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43
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44
Bäuml and Hausmann, op. cit.
45
DSV to Buy Panalpina in US$4.6B European Logistics Deal,” Business Times, April 2, 2019, accessed April 2, 2019,
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46
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47
Ng, op. cit.
48
Khoo Seng Thiam, interview with authors, April 1, 2019.
49
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op
50
Ibid.
51
Khoo, op. cit.
52
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53
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54
Khoo, op. cit.; SATS Ltd., op. cit.
55
Timothy Ho, “Singapore’s Ageing Population: The Financial Implications of Our Country Growing Old,” Dollar and Sense,
tC

February 6, 2018, accessed May 10, 2019, https://dollarsandsense.sg/singapores-ageing-population-financial-implications-

country-growing-old/.
56
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57
Kagan Pittman, “The Automotive Sector Buys Half of All Industrial Robots,” Engineering.com, March 24, 2016, accessed
May 10, 2019, www.engineering.com/story/the-automotive-sector-buys-half-of-all-industrial-robots; Ashutosh Dekhne, Greg
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Company, April 24, 2019, accessed May 10, 2019, www.mckinsey.com/industries/travel-transport-and-logistics/our-
insights/automation-in-logistics-big-opportunity-bigger-uncertainty; “Warehousing, the Rise of It, Automation, and Now…
No

Robotics,” Logistics Bureau, March 15, 2018, accessed May 10, 2019, www.logisticsbureau.com/warehousing-the-rise-of-it-
and-the-sort-of-rise-of-automation/.
58
Dekhne, Greg Hastings, John Murnane, and Florian Neuhau, op. cit.
59
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60
Kim, op. cit.
61
IATA, The Air Cargo Facility of the Future, March 2019, accessed May 10, 2019,
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62
Rahul Kumar and Divyanshi Tewari, Mobile Logistics Robot Market by Industry Vertical and Function: Global Opportunity
Analysis and Industry Forecast, 2017 – 2025, February 2019.
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64
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65
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66
Ibid.
67
Bäuml and Hausmann, op. cit.
68
Line Hartvig Müller, Andrea Peyracchia, and Vik Sohoni, “Using Rapid Process Digitization to Transform the Customer
Experience,” McKinsey & Company, March 3, 2016, accessed April 2, 2019, www.mckinsey.com/business-
functions/operations/our-insights/using-rapid-process-digitization-to-transform-the-customer-experience.

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69
Travis Fagan, Ryan Gavin, Steve Reis, and Maria Valdivieso, “Advanced Analytics Can Drive the Next Wave of Growth for
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70
IATA, The Cargo Facility of the Future, March 2019, accessed April 2, 2019,
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71
DHL, “Internet of Things in Logistics,” 2015, accessed May 30, 2019,

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75
Ibid.

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76
Ludwig Hausmann, Matthieu Pélissié du Rausas, and Mathieu Weber, “Air Freight 2025: Agility, Speed, and Partnerships,”
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logistics/our-insights/air-freight-2025-agility-speed-and-partnerships.
77
Malia Spencer, “Portland Logistics Startup Lands $10M, Big-Name Backer,” Portland Business Journal, January 24, 2018,
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78
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79
Khalid Kark, Anjali Shaikh, and Caroline Brown, “Technology Budgets: From Value Preservation to Value Creation,” CIO
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80
PwC, Global Industry 4.0 Survey: Building the Digital Enterprise, op. cit.
81
Ibid.
82
Ibid.
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