The transition from freight consolidation to logistics(6)

The transition from freight consolidation to logistics

250

R.K.Cheungetal./JournalofTransportGeography11(2003)245–253

leasingsuchasActivityBasedCostingmighto er(see,forexample,Horngrenetal.(1996)).

AweaknessoftheCFSindustryisitsdependenceonforwarderstoprovidebusiness.Asintermediariesthemselves,forwardersarefacingpressuresonpro t-abilitythatforcesthemtochoseconsolidatorsbasedonpriceconsiderations.Theyareforcingadownwardpressureonprices,withoutanyconcomitantim-provementindeliveryschedulesthatcouldhelptheconsolidatorsbetterutilisetheirresources.Thustheconsolidatorsarebeingforcedtoreduceprices.ServicechargesinHongKongÕsconsolidationindustryhavebeendecliningsince1995,fromjustover$50HKto$35HKpercubicmeter(CBM)in1998.Thelowerchargesareperilouslyclosetoservicecostlevels.

TheresponsetoincreasedcompetitionintheCFSindustryhasbeentoreduceprices,therefore.Thesurveyrevealsthatthereisabeliefamongtherespondentsthatmanysmaller rmswillnolongerbeabletostayinbusinessbecauseofrisingcostsandfallingprices.Op-portunitiestocompetebyimprovingservicesisnotastrategytheindustryhaspursued,mainlybecauseofthepassivenatureoftherelationshipwiththecustomers,thevariabilityofthe owofgoods,andthedi culty(andunwillingness)ofapplyingITinresourceplanningandoperationsmanagement.3.3.Opportunitiesinlogistics

TheentiremarinetransportsectorofHongKongisfacingchallengesfromadjacentports.Thereisawide-spreadacceptancethattheindustrycannotcompeteinpricingandwillhavetomaintainitscompetitivead-vantagebyo eringhighvalue-addedlogisticsfunctions.TheCFSsectorisnoexception.Confrontingthedi -cultiesoutlinedinthispaper,individual rmsandtheCFSAssociationarecomingtoplaceagreatdealofhopethatbyaddingnewlogisticsfunctionstheycansurviveandprosperinthenewregionalenvironment.

Howrealisticarethesevisionsofthefuture?Whatlo-gisticsactivities,ifany,cantheCFSsectorberealisti-callyexpectedtoo er?Whatproblemsarelikelytobeencountered?Thesecomplexquestionsareaddressedinthefollowingparagraphs.

Inordertoprovidesomeanswerstothequestions,twoparallelsurveyswereundertaken.The rstwasanextensionoftheinitialquestionnaire,inwhichpartici-pantswereaskedtoidentifythekindsoflogisticsac-tivitiesthatwereconsideredmostsuitable,thepotentialcostsofprovidingtheseservices,andthemostsuitableproductsforlogisticsadoption.Follow-upinterviewswereheldwithallthecompaniesparticipatinginthesurveytoelaborateonsomeofthepositionsheldre-gardingthepotentialsforlogisticsadoptionintheCFS.Oneoftheauthorsspentatotalofthreemonthsstayinginthese rmsandtheirwarehousesforfurtherinfor-mationcollectionanddataveri cation.Asecond,lessstructured,surveythroughpersonalinterviewswasun-dertakenofeightmajorpotentiallogisticscustomersintheelectronics,garment,andretaildistributionindus-tries,aswellasgroupssuchastheHongKongLogisticsAssociationandtheHongKongShippersCouncil.InanopeninterviewformatwesoughttheopinionsoftheintervieweesonthetrendsinlogisticsinHongKong,theirviewsofthepotentialroleofCFS rmsinlogistics,andthespeci cobstaclesthatwerepresent.Theper-spectivesofthesepartieswereobtainedinordertoprovidearealitycheckonthepositionsofthemembersoftheCFSindustry.

SeveralattributesoftheCFSindustryareconsideredtoo erpotentialadvantagesforitsexpansionintolo-gistics.Theindustryhasexpertiseandexperienceinhandlingawiderangeofmerchandise,involvingamultitudeofparties,withspeedande ciency,despitevariableandshortleadtimes.Theindustrypossessesphysicalhandlingfacilitiesinvolvingloadingbays,storagecapacity,rackingsystems,trucks,communica-tionmedia,pallets,andanexperiencedworkforce.Theseelementswererecognisedassigni cantadvanta-gesbymanyofthepotentialusersof3PL.Shipperscon rmedaninterestinoutsourcingcostlyandlabour-intensivenon-corelogisticsoperationstothirdparties,butindicatedthattherewasawidedivergenceinspeci crequirementsfordi erentindustries.Forexampleaclothingcompanywouldrequireaclimate-controlledwarehouse,whereasanelectronicsshipperwouldde-mandstronginventorymanagement.

Identifyingwhichlogisticsservicescouldbeo eredbyCFScompaniesproducedsomedivergenceofopin-ion.CFSrespondentswerepresentedwithsevenlogis-ticsactivitiesandwereaskedtoratethemintermsoftheirappropriatenessforadoptionbyaCFScompany:qualitycontrol,re-packaging,simplemodi cation/assembly,palletisation,inventorycontrol,warehousemanagement,distributioncentre.CFSoperators

exhib-