Adding value to logistics

by Ella Lee

Raymond Law, managing director, BALtrans Logistics Ltd

Third party logistics companies now offer a host of services which go far beyond the traditional role of the freight forwarder

Unlike a traditional freight forwarder, a logistics company today can provide services which stretch the whole way along the supply chain. These can include anything from procurement and warehousing to inventory management, order fulfillment and distribution. The competitive edge for any logistics company therefore comes from offering the widest array of value-added services and acting as a genuine one-stop shop.

For basic cargo transportation and delivery, many options are available. By sea, air, rail or truck, goods can be consolidated and forwarded as full container loads or LCL (less than container load) and this flexibility is as essential for small and medium-sized businesses as for multinationals, says Raymond Law, managing director of BALtrans Logistics Ltd.

As one of the largest Hong Kong-based logistics groups, BALtrans offers a comprehensive range of freight forwarding services. To meet demand, it also provides door-to-door delivery, facilitates customs clearance and arranges back-up services like inland trucking which all generate additional revenue for the company.

In recent years, Mr Law says, buyer's consolidation and loading for individual stores have become increasingly important add-ons. They are required by major retail chains and department stores, such as Wal-Mart in the US, which usually centralise the sourcing of products but must arrange distribution for sale at numerous outlets.

In such cases, suppliers are given instructions for all completed goods to be delivered to a logistics company for sorting and segregation, re-packing, and final distribution in the correct quantities, colours and sizes to match orders placed by individual stores across the country. The whole process is highly automated, supported by electronic updates on cargo status, and may also include procurement, quality control and inventory management.

Third party logistics

Previously, importers might have handled their own warehousing and redistribution but, to save costs, many have decided to outsource the work and have turned to independent specialists, referred to as third party logistics companies.

Within the supply chain industry, airlines and shipping carriers are regarded as second parties and they too are diversifying to provide more value-added services in delivery and distribution. In addition, consultancy services in planning and project management are growing, under the name of fourth party logistics and illustrate the modern scope and complexity of the business.

Even in the area of warehousing, it is easy to see how logistics concepts are bringing a new degree of specialisation. There are, for example, air-conditioned warehouses and those for dangerous goods with state-of-the-art security systems. Warehouse designs have also become more sophisticated. "They may feature different layouts, with racking, temperature and humidity control and computerised monitoring systems for storing goods of different sizes and types in the minimum space," notes Mr Law.

As companies cut costs by outsourcing, they are also looking to reduce stocks and enhance performance with just-in-time delivery. Precise inventory management therefore becomes vital. It requires advanced management systems at origin and destination to process up-to-the-minute cargo data, tracking every status change from receival to packing, bar coding, loading and final distribution.

IT counts

Good logistics management depends on information technology. Systems must be fast, reliable and supported by an efficient network that allows electronic data interchange around the world.

The BALtrans system runs 24 hours a day and holds data on all operational activities. There are links to airlines and terminal operators to upload confirmed shipment and customs pre-clearance details. Customers can log on to make bookings and later track and trace their shipments every step of the way via the Internet.

According to Mr Law, logistics management needs an ever more skilled and professional workforce to oversee these developments. "As services become more specialised, we need to recruit operations staff with knowledge and experience in the industry and in handling special cargoes like wine and valuable goods," he says.

In general, operations, sales and marketing and customer service represent the three main areas of opportunity for job seekers in the logistics field. "It may take five to ten years to advance to a management position but that is shorter than in other logistics related companies such as airlines or ocean carriers," Mr Law advises.

Encouraging signs

As the logistics industry has evolved to become one of the "four pillars" of the local economy, more formal training - from certificate to university degree level - has been made available. While qualifications help, employers traditionally look for something extra and regard on-the-job training and continuous learning as equally useful. Mr Law believes a candidate's attitude is the most important thing. "A person must be diligent, cooperative and sincere in their work," he says.

The industry continues to grow in Hong Kong. As one measure, total throughput of shipping containers in 2003 reached 20.4 million TEUs (twenty foot equivalent units), up 6.8 percent from the previous year. Mr Law expects even better in 2004 with the recovering economy and predicts steady gains. He is, however, closely watching the development of other ports in mainland China, especially Chiwan, Shekou and Yantian where growth is more robust.

"Hong Kong has the advantage of being a free port," he says, "but mainland ports are offering comparable services and their throughput is growing faster." As a result, Mr Law thinks Hong Kong should aim at building up regional trade, complementing rather than competing with her mainland counterparts.

Taken from Career Times 26 March 2004
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