K&N branches out to offer clients full range of services
The Chinese government's plan to cool its overheating economy in the coming months has been seen as a positive development by the logistics industry.
'Even if the rate of growth is cut to around 7 per cent, that still represents steady expansion and can be considered very healthy,' said Andy Weber, Asia Pacific managing director of freight forwarder and logistics provider Kuehne & Nagel (K&N).
'A slight slowing will also give a chance for infrastructure to catch up so that future cargo volumes can be handled more efficiently.'
In line with this, K&N is planning further investment in the mainland. It is seeking a suitable location in Shanghai for a new logistics centre to complement a warehouse for vendor-managed inventory operating in the Waigaoqiao free trade zone. Similar expansion in other key cities will follow.
'We are not in the property business so we will rent premises,' said Mr Weber. 'As the cycles of the supply chain in China are fast, this will also provide more flexibility.'
Seven new offices will be set up in China over the next two years, extending the company's reach from coastal areas to provinces further inland. By then, each office will be able to offer the fullest range of logistics services from basic air and sea freight to distribution, customs clearance and consolidation.
'We will provide end-to-end services from China to anywhere in the world and vice versa,' Mr Weber said. 'Everything will be under our own control and not dependent on agents or third-party involvement. This will allow us to offer clients seamless management of the whole supply chain.'
This strategy ties in closely with key trends in the industry overall. Globalisation has led many manufacturers and retailers to form partnerships only with logistics companies that can provide genuine worldwide services and advanced IT support.
'The trend is towards integrated logistics concepts and global process management and these areas are now the major focus,' Mr Weber said.
A Class A forwarder's licence, recently obtained by K&N under the Closer Economic Partnership Arrangement (Cepa), will facilitate such developments. It was awarded in March initially for Shanghai but its terms will allow other offices to convert from representative to branch office status after 12 months.
'Cepa helped us become the first global logistics provider to be awarded the Class A licence,' said Mr Weber. 'Once the paper work was completed, it was a speedy process. An alternative application under World Trade Organisation guidelines would not have been approved before late 2005.'
This has provided a number of clear advantages. Exactly the same services can now be offered in China as in Hong Kong or internationally. There is scope to get more involved in local warehousing, delivery and customs clearance. Also, invoices can now be issued and revenue collected in yuan.
Once operating costs are covered, profits will be reinvested in future development projects.
Other knock-on benefits from Cepa are also expected since any increase in overall trade will fuel demand for logistics services.
Mr Weber said the Hong Kong government should set up a structured training programme leading to a recognised logistics qualification so that companies could make the most of these opportunities.
'Hong Kong has the hardware and hub facilities but needs to go beyond that and create more logistics specialists who can add value,' he said.
'Commercial diplomas are available in many disciplines but so far there is no officially accredited training course for office staff in the logistics field. A government-backed school for logistics would help the industry and also give young people a broad-based theoretical and practical knowledge of the whole sector.'
