Investment in logistics pays off

by Cindy Chan

Stephen Ip, secretary general, Hong Kong Logistics Association

The concept of logistics came to prominence in Hong Kong in 1999 when transport and forwarding companies, in particular, started to branch out and provide a more comprehensive range of services, according to Stephen Ip, secretary general of the Hong Kong Logistics Association (HKLA).

The concept of logistics came to prominence in Hong Kong in 1999 when transport and forwarding companies, in particular, started to branch out and provide a more comprehensive range of services, according to Stephen Ip, secretary general of the Hong Kong Logistics Association (HKLA).

Traditionally, many manufacturers used to handle all their own storage and transport-related activities but this proved to be neither cost-effective nor the best use of resources, so outsourcing to logistics professionals is now preferred. Making it possible, warehousing and freight transportation companies have, step by step, transformed themselves into full-scale logistics providers capable of offering expanded services, with something for every link in the supply chain.

While, today, the logistics industry in Hong Kong may be comparatively mature, there is still plenty of room for development. "We have only completed two thirds of the journey," says Mr Ip.

He also believes the more tightly-defined concept of supply chain management will catch on further as both buyers and suppliers come to see its advantages. It relies on the existence of a close working relationship between the two, with the logistics company managing the flow of goods and information, and also tracking order progress, performing quality control and affixing barcodes, if requested to do so. Mr Ip sees obvious benefits for all sides if experts handle these services.

"We must make use of our advantages - our port, airport, banking system and the whole logistics system," he says, adding that, "Hong Kong has long been a successful air and sea freight hub and is well-positioned to become the key supply chain base in Asia for international cargoes."

Going forward

Certain challenges have been identified: some costs must be reduced, overall efficiency enhanced by using electronic platforms, customs clearance speeded up and co-ordination and co-operation within the Pearl River Delta (PRD) strengthened. Such initiatives will attract more cargoes to Hong Kong and provide a strong basis for longer-term growth.

With the economy picking up, greater demand for logistics services is forecast. Mr Ip predicts that air and sea freight volumes and courier services will maintain the steady progress of the last few years. Double-digit growth is confidently foreseen for each of these sectors in 2004 though much inevitably depends on continued economic expansion in the mainland market. Other areas like trucking and warehousing are fiercely competitive but the level of demand should remain stable.

Higher entry standards

Increasing demand for logistics services means more job opportunities and one of the HKLA's roles is to assist companies with recruitment. "Before SARS, recruitment was sluggish and we were asked to handle only a few cases a month," says Mr Ip, "but in the first quarter of 2004, things have definitely picked up and companies are keen to hire." Vacancies are being advertised for junior and experienced staff with 10 percent more positions expected to be filled this year.

Work experience is a clear advantage but candidates new to the industry will still find openings as companies start to increase headcounts. According to Mr Ip, the entry standards set by employers are getting progressively higher and more companies now prefer applicants for middle-management positions to hold a diploma or even a degree in logistics management.

Locally available professional examinations in logistics are usually conducted by professional bodies in the US or UK, but the HKLA will introduce the China Logistician Certification Examination in 2004. This qualification was developed last year by the China Federation of Logistics and Purchasing and will be of great assistance to Hong Kong logisticians who intend to work in the China logistics market. Mr Ip points out that applications can be made for assistance with fees by the Small and Medium-sized Enterprises (SMEs) Training Fund and the Continuing Education Fund to encourage the pursuit of these qualifications.


There are several industry trends that Mr Ip is watching closely. E-logistics, with its greater emphasis on high-speed data links, has experienced some ups and downs as SMEs and suppliers have been reluctant to invest heavily in upgrading their own computer systems. This may change soon as the government signals its support for the move away from document-based trading to exclusively electronic filing and for fully compatible systems to link companies, banks and relevant government departments.

On-going investment in information technology will be vital for logistics companies intent on keeping pace with the competition. Overseas buyers have come to expect real-time updates on cargo status and the chance to issue revised shipping instructions if consignments are to be held back or advanced. The next step may well be to develop Radio Frequencies Identification (RFID) Technologies for logistics companies. It is forecast that RFID technologies will become a standard industry requirement in the coming years for distribution and warehousing planning and management, so logistics companies should consider planning an investment strategy.

With a skilled workforce and the proximity of the manufacturing base in South China, Mr Ip sees a bright future for the local logistics industry, but acknowledges it also depends on providing high-quality services at the most competitive rates. "With the government willing to support logistics and the industry becoming more professional, steady growth can be expected in the next two years," he concludes.

Taken from Career Times 26 March 2004
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