the economic downslide of the past year and the effect it has had
on trade, it would then be a matter of only the very toughest business
strategy that would emerge victorious. For a lot of companies with
smaller operations in cargo transportation, it has been a merge-or-bust
year as the hunt for innovative cargo sources continues.
not only using
them for managing parts of the supply chain like warehousing and
distribution, but their services are now extending to warehouse
management, spare parts supply, service parts logistics, repair
and exchange, inventory management, all the way to the all-important
as winners in the field are global transportation and logistics
operations which have transcended their original core businesses
as integrators to more sophisticated, third and fourth party
logistics and supply chain management providers. Speaking
to some of the top express transportation companies in the
field, namely FedEx, UPS, TNT and DHL, it now emerges that
the shift from third party to fourth party logistics has
been not so gradual in the past year or so. How they have
kept a step ahead and achieved great strides in forging
global logistics set-ups have been a matter of being driven
by customer needs during difficult economic times.
Today, the integrators like to be thought of as express
transportation, logistics and supply chain management companies.
Their customers are
Olijve, Director of Corporate Accounts of TNT Express
Worldwide (HK) Ltd... in an economic downturn. SCM makes
a big difference in a company
outsourcing their logistics are now calling on these 3PLs to become
lead logistics providers, not just simply managing the supply
chain but subcontracting other 3PLs to handle individual areas
of the supply chain. Individually, the integrators have been buying
up companies that would give them the logistics capabilities to
serve their customers. UPS Logistics acquired Fritz last year
to help them move heavyweight cargo by ocean and air.
Logistics, our logistics arm, also has a subsidiary called SPL
(Service Parts Logistics) which focuses on giving large multinational
technology companies the ability to get parts to their customers
within four hours, anywhere in the world. They have created strategic
stocking points around the world so that when the computer, say,
of a HP customer in India breaks down, SPl can dispatch the part
and someone to work on it immediately. We can do that better,
faster and more efficiently than HP can do themselves," explains
Matt McGee, Vice President of Marketing for UPS Asia Pacific Region,
who directs marketing, electronic commerce, advertising and public
relations activities for the region which spans the area as far
north as Japan, and Greater China, to the Indian subcontinent,
South-East Asia and as far south as Australia and New Zealand.
by the Dutch postal office, helps clients set up warehousing operations
all over Asia. "We have no 'hub in the region. We go where
our customers operate. We are more flexible that way. In Jakarta,
the Philippines, Singapore, Hong Kong, China or in Malaysia, we
can help customers set up warehousing and logistics. We are also
a transportation provider, and when our customers make decisions
in the logistics field, it's all related to inventory management,
to transportation policy, and basically, where they want to keep
their product. Those three decisions have a great impact on customer
service," explains Hans Olijve, Director of Corporate Accounts
of TNT Express Worldwide (HK) Ltd.
instance, for one of the largest mobile phone manufacturers in
the world, we operate about 20 depots in Indonesia and Taiwan,
and about 30 small depots in Japan. Our customers need to react
to their customers within a certain amount of time and this cannot
be done by simply coming out of, say, Singapore to Taiwan. The
company needs to be close to their customers. The depots are for
replacement parts and they need to send it in two or three hours,
so you need to have a small buffer stock location within the vicinity.
We also build together with our customers infrastructure or facilities
of various sizes, which could range from 50 to 100 sqm or 200sqm,
depending on the need, but all of these are linked back to a regional
logistics centre which can be either in Singapore or in Hong Kong."
Farrell, DHL's Logistics Infrastructure Manager within the
Global Customer Logistics Group, based in Singapore, calls
their express distribution and logistics, the "advantage
solutions". Their services cover finished goods, spare
parts, planned production, goods samples, financial services,
repair exchange, test services, strategic inventory management,
direct express inventory and return repair inventory. "The
advantage solution for finished goods can be described as
the movement of product from the manufacturer to distributor
direct to the end customer or consumer as fast as possible
without being held in a warehouse at any point," explains
Farrell. Cisco Systems and Sun Microsystems as two customer
who are leading the service parts "revolution"
and are key customers of DHL Asia.
Farrell, DHL's Logistics Infrastructure Manager calls
their express distribution and logistics, the "advantage
core competency of network and express distribution is moving
parcels by express facility. Based on this competence, we developed
logistics solutions tailored to market demand. We started developing
Express Logistics Centres in Asia Pacific, including Tokyo and
Sydney. There are now a total of nine ELCs globally for DHL. Products
are stored in the ELC so that they can be easily moved around
Asia, the greater China market, Japan, Southeast Asia," says
Farrell. These ELCs are linked to the DHL global network, thus
giving them the advantage of overnight delivery service when required.
has Express Logistics Centres Bahrain, Sydney, Brussels,
Cincinnati, Johannesburg, Miami and Singapore - forming
a global network to cater for logistics needs of regional
and global customers. Recently, the ELC in Tsuen Wan, Hong
Kong was expanded to 58,000sqft. The ELC is now capable
of handling over 600,000 shipments per year, is equipped
with state-of-the-art inventory management system, online
computer technology, comprehensive security systems and
temperature control capability.
Worldwide Express Logistics Centre in Tsuen Wan can
handle over 600,000 shipments per year. It is one of
9 logistics centres around the world
FedEx, which includes for example, ground delivery service and overnight
express in the US market.
ability to link up with their global express network is
the edge that these companies have over other logistics
providers. Dennice Wilson, Vice President of FedEx Asia
Pacific's Supply Chain Solutions, says: "We have 11
Logistics Distribution Centers served with 22 facilities.
There are multiple facilities in Tokyo, two in Seoul, 22
all over Asia. These provide order management, order processing,
management reporting, kitting, delivery within a certain
number of hours for certain parts, handle finished goods,
cross docking, merging, and so forth."
These centres are in turn linked to whole FedEx network
of distribution centres in North and South America, and
Europe, through the FedEx flight network. Then, there are
the five operating
Wilson, VP of FedEx Asia PacificOs Supply Chain Solutions...Asia
is key and critical to the supply chain in terms of
origin, i.e., product sourcing
the ability to link our customers to services required by the
type of product they have. Some products require urgency, some
get into inventory because they are lower-cost and the inventory
carrying costs are lower. So we match any model that our customer
requires depending on what their product is," says Wilson.
Meanwhile, UPS is positioning itself in Asia to effectively carry
out what it calls the "flow of commerce", i.e., the
flow of goods, flow of information, and the flow of funds. Recently
opened was UPS House, at Changi South in Singapore. The S$38mn,
280,766sqft facility houses UPS Asia Pacific headquarters, UPS
Singapore office and operations centre, and UPS Logistics Group's
Asia Pacific office and accompanying three-storey finished goods
warehouse and service parts centre. UPS believes that bringing
together the various business units will improve customer service
by more effectively utilising resources, increasing productivity
and making the operation more efficient.
UPS is also
getting ready to open its intra-Asia hub in the Philippines' former
Clark Air Force Base on April 1st. There will be 30 flights a
week operating from the hub, serving Shanghai, Beijing, Seoul,
Tokyo, Taipei, Singapore, with services to Penang and Bangkok
as well as connections to UPS global network.
For this reason,
it has been reported that UPS has a lot riding on the successful
outcome of talks between Hong Kong aviation authorities and US
Department of Transportation officials. The talks center on the
opening up of Hong Kong's fifth-freedom flights of an additional
10 to US carriers. Cathay Pacific Airways has also urged the US
Government to expedite its consideration of a pro-competition
codeshare deal with its oneworld partner, American Airlines, that
would give Cathay greater exposure to the US domestic market.
Cathay said the item has been under deliberation for the past
three years. Talks resumed February 27 but as of the second week
of March, no announcement had been made on results. Hong Kong
has been urged to liberalize its aviation market or else risk
competition from its Asian neighbours.
Hong Kong Air Cargo Terminals Ltd, which handles over 85% of cargo
throughput at Hong Kong International Airport, reported a 9% reduction
in cargo handled in 2001 over 2000. Imports from other Asian countries
fell by 10.3%, from Europe by 4% and from the US by 12.9%, in
2001. HACTL's Director of Marketing and Customer Service, said
that the company is pushing hard to implement intermodal transport
and IT initiatives to facilitate logistics integration with the
Pearl River Delta.
is, since that's
not their core competency, they would
have to look for companies that can provide that to them. This is
why UPS has created all these solutions and why we are in Asia because
we want to be able to work with them so that they can compete worldwide,"
said UPS's Matt McGee.
Asia, there's a tremendous amount of knowledge and a tremendous
amount of desire to be up-to-speed with trends in technology.
They just haven't towed the line yet. But there's this thing
called "globalisation" that's happening and that
is going to force everyone else to catch up. And when it
pushes through in Asia, it's going to happen at absolutely
lightspeed. Everything in Asia usually starts a little later
than most, but when it goes it just goes! Think about cellphones,
the explosion in cellphones. And that is what's going to
happen in supply chain management and logistics. If Asian
companies want to compete against global multinationals,
they have to become as efficient as their competitors, which
means creating very efficient
supply chains. And the truth
McGee, VP of Marketing for UPS Asia Pacific...the real
issue is what does the customer want- multiple solutions
or just a single solution
issue is what does the customer want-whether it's multiple solutions
or just a single solution. One example is a garment industry customer
we have in Hong Kong. It has its own in-house technology people,
own computer programmers and they build their own programmes. All
they need is a company who may dependably and reliably pick up their
parcels and move them to the UK everyday. They already have their
technology and in-house logistics capability, but they don't have
the transport capability, and pick-up and delivery solutions,"
technology is built on an open platform, that enables us to migrate
and integrate our technology into existing technologies. For UPS,
it's all about listening to the customers needs and then saying
'Look, we have these solutions. If you want them, we can set them
up for you."
Global Account Management
For TNT, Global
Account Management comprises four mainlines, namely Automotive
& Industrial with customers such as ABB, Johnson Controls,
Rockwell Automation, etc;
Mitsubishi Peugeot, Volvo, Daimler Chrysler, General Motors, etc;
Roche, Metronic, Phillips Medical, GE Medical, Siemens Medical,
IC & Electronics
including semiconductors, computers-Phillips, Siemens, Sony, Nokia,
Ericsson, Motorola, Nortel, Alcatel, CISCO, etc.
business is booming, logistics or supply chain management is of
less importance, and it's just taken for granted that it's there
because you need to get the goods out as soon as possible anyway.
But in an economic downturn, supply chain management is one of
the last economic frontiers where you can make a big difference
for the company," says TNT's Hans Olijve.
this is what's happening now in Asia. A lot of companies
are now looking at how they can streamline their supply
chain operations because it has a direct impact on the bottom
line of the company. For instance, I know of a company with
300 people for logistics, and 13 depots in China. It is
not their core business but this is simply the way the business
expanded. They are not used to sourcing their supply chain
impression of UPS Asia hub in Clark Field in the
Philippines, to open April 1
companies from the US and Europe with production facilities in
Asia are focusing on streamlining their operations and supply
chain management. They want to work together with companies that
understand their organisation and most of the time it's companies
like us because we know them and they know us from Europe or from
our operations in the US. We understand how they work and they
can tap into our resources." In 2000, TNT bought the logistics
company of CSX.
look at sourcing today, most of the world's product sourcing is
done in Asia," says FedEx's Wilson. "This part of the
world is key and critical to the supply chain in terms of origin
as the source of products. At FedEx, we see ourselves in the beginning
of the supply chain with our Asia network. For example, for Motorola
which has five plants in Asia, we handle the transport of all
of their semiconductor chips into the US, Canada and Mexico for
Compaq, we do a build-to-delivery process where we basically do
a customer direct ship. So instead of taking a PC and moving it
into the US and storing it in a warehouse, we have the ability
to move it from its origin-where it's manufactured-as a full shipment
and then break up the shipment at the port of entry and distribute
it directly to the customer. It cuts many days off the cycle,"
that this is basically the service FedEx gives the customer: to
help improve cost structures by providing them models which cut
down their inventory. In many cases, the amount of carrying costs
of inventory is much higher than the cost of express transportation.
"FedEx has been doing logistics and supply chain management
for years. Basically, we look at cost structures and then the
best way for the product to hit the marketplace. And so what has
been happening is that people are now realizing how important
basic product movement is to the overall business-comparing the
actual physical movement to inventory carrying costs."
research that shows that industry experts now believe that for
every $1 spent on the transportation express mode, companies save
about $1.50 in inventory and warehousing costs. Depending on the
product, a company can save a lot of money and get their product
to the marketplace quickly.
shown that over a 20-year time frame, from 1980 to 1999, logistics
and transportation advancements in industry have reduced business
inventory by US$4.6 trillion. Typically, inventory costs make
up 30 to 40% of the cost of the finished product. By reducing
inventory costs and improving supply chain management efficiency,
there is even a greater chance to improve on those economies.