The transition from freight consolidation to logistics(8)

The transition from freight consolidation to logistics

252R.K.Cheungetal./JournalofTransportGeography11(2003)245–253

industryatoppriorityintheHongKongeconomicre-form.‘‘WithHongKongÕsexcellenttransportationfa-cilitiesandthePRDÕshighproductivitytogetherwecandevelopintoalogisticshubtolinktheMainlandwiththeworld’’,hesaid.Thegovernmentpolicyistocanpromotethedevelopmentofaninter-modalsystemandconsiderothersupportingfacilitiestospeedupthe owofgoodsandinformationsuchthattheprovisionofintegratedserviceswillalsostrengthenHongKongÕscompetitiveadvantageasasupply-chainbase.

ThissurveyofCFScompaniesinHongKonghasindicatedaparadox.Whilethereappeartobegrowingdemandsfromcustomersforlogisticsservicesandwhiletheconsolidationindustryappearstobewellplacedtoo ersuchservices,thereisagreatdealofuncertaintyamongmanyofthecompaniesastohowtheymayex-ploitthepotentialdemand.TheuncertaintyisbasedinpartonthepresentcharacteroftheCFSindustry.Therelationshipswiththeircustomersarepassive,reactingtoordersplacedbyforwarders,andwithoutanydirectdealingswithshippers.Operationsandmanagementareexperienced-based,engaginglimitedstrategicplanning.Most rmsdonothaveexpertiseinInformationTech-nology(IT).Withthedeclineinpro tmarginsfromexistingoperations,manysmaller rmsareunabletoinvestinIT,eveniftheywantto.

Overthenextfewyearsitwillbeimperativefortheindustrytomakethetransitiontologistics.Thesurvivalofthecompanies,andthewidertransformationofthetransportindustryinHongKongitselfmaketheadoptionoflogisticsessential.Thiswillrequireasub-stantialreadjustmentandwillinvolveseveralinterde-pendentconsiderations.Thetransformationwillnotbeeasy.Abasicproblemisthelackofunderstandingofwhatlogisticsis.Some rmshavecreatedlogisticsde-partmentsbyrenamingformershippingdepartmentsandusingthesameemployeesandmanagers.Thisre- ectsthebelief,mentionedearlier,thatlogisticsactivi-tiescouldbecarriedoninslackperiodsinordertomaximiseresourceutilisation.Itseemsprudentfor rmstoaddlogisticsservices,byestablishingseparatede-partmentsratherthanaddingalogisticsfunctiontoanexistingsection.Thisdepartmentwillrequiremuchri-cherITservicesthanotherCFSoperations,which,inthecaseofmostcompanies,willrequirehiringoutsideexpertise.Thishasthepotentialtocreateinternalten-sionswithin rms,sinceithasalwaysbeentheirpracticetopromotepersonnelbasedonexperience,andtech-nologicallysophisticated,butexperience-limited,out-sidersmaynotsitwellwithexistingpersonnel.Resourceutilisationbetweendepartmentsisanotherpotentialpointofcon ict,especiallygiventheuneventemporal owofbusinessintheCFSsector.Theseareissuesthatseniormanagementmustanticipateandaddress.

Withthemoresophisticatedinformationrequire-mentsandspecialisedhandlingneedsoflogisticsovertraditionalconsolidation,itappearstobeprudentforcompaniesventuringintologisticstospecialiseincertainproductlines.Therequirementsofelectronics,garment,food,chemicals,andappliances,thebusinessesidenti- edaso eringthehighestpotentialsforlogisticsoper-ationsinHongKong,di ergreatly.Thedi erencesaremanifestintheirphysicalrequirementsforstorageandhandling,andinthedemandsofsuppliersandcustom-ers.Itwouldbeunwisefor rmstobelievethatitcouldprovideacceptablelevelsoflogisticsserviceamongabroadspectrumofproducts.Buildingupknowledgeofanarrowrangeofgoodswillallow rmstomoreeasilyo erincreasinglysophisticatedlogisticsservices,in-cludinginventorycontrolanddistributionmanagement.Afurtherissuerelatestotherelationshipswithcus-tomers.Itisclearfromtheinterviewsthatthedemandfor3PLisgrowingasmanufacturersseektodivestthemselvesofmanylabour-intensiveandnon-corelo-gisticsfunctions.Forwardersmightappearbestposi-tionedtotakeadvantageoftheopportunitiesbecausetheyareinterposedbetweentheshippersandtheCFSwarehouse rms.Thus,theywouldappeartobethebarrierstoCFS rmstakingadvantageoftheoppor-tunities.Someforwardersarealreadypositioningthemselvesas3PLproviders,especiallythelargeinter-nationalairforwardingcompanies.Othersinthemarinesector,however,arelesswellplaced,becauseofthenatureoftheirbusinessasintermediaries,withnoex-perienceinphysicalhandlingofcargoes.HeretheCFS rmshaveadistinctadvantage,sincetheypossessphysicalresources,anditwouldnotbeaslargeastepforthemtoprovidelowerlevellogisticsservicessuchasqualitycontrol,samplingandre-packaging.Asothershavesuggested,thewarehousingindustryo ersmorepotentialforlogisticsthanforwarding(KPMG,1995).Intheearlystagesofthelogisticstransformation,CFS rmsmightprefertojoinwithforwarderswithwhomtheyenjoyasolidrelationshipinanalliancetoprovidelogisticsservicestoshippers.ThisstrategymightbetheoneparticularlyusefulforthesmallerCFS rmswithlimitedresourceswhomightnotwanttoexposethem-selvestoomuch,atleastintheearlydays.Itisworthnotingthatnosuchallianceshaveyetdeveloped.

One nalobservationisthatifthelargerarethosewhohavethegreatestpotentialtoextendthemselvesintologisticsserviceproviders,thismayrequirealoca-tionaladjustment.ThetwoCFSbuildings,despitetheexcellenceoftheirlocationsadjacenttothecontainerterminals,aretooexpensiveandlimitedinspacefornon-CFSfunctions.Securingalternativesitesawayfromtheport,suchasoccursinotherportcities,willnotbeeasy,however.Sitesthatcouldprovidebothaccessibilitytotheterminalsandrampsforcontainer-truckareveryscarceinHongKong.ThefurtheroutthefacilitiesarelocatedwithinHongKong,thegreaterthatplacesthematadisadvantagecomparedwiththesitesinShenzhen