K Mart Corp's plan to restructure its logistics organisation and distribution network should greatly benefit shipping lines and logistics providers. Joseph Collins, K Mart Corp's senior vice-president, logistics and vendor administration, said in Hong Kong: 'K Mart will double its product sourcing from China within the next two years.' Asia, which contributed 11 per cent of group turnover, was expected to record 'very significant improvements' in gross margins this year, he said. Mr Collins said K Mart recently had a summit meeting with suppliers, shipping lines and consolidation companies in Hong Kong seeking ways to restructure its logistics organisation and distribution network. Their suggestions enabled the group to create a supply chain logistics infrastructure to enhance K Mart's merchandise flow and replenishment capabilities, he said. The meeting was also aimed at reducing K Mart's cycle time by 50 per cent, import logistics costs by 30 per cent and improvement in initial purchase cost of goods by 10 per cent. K Mart's total sales in the first quarter were US$7.58 billion, a 1.8 per cent rise from $7.44 billion for the first quarter in 1995. The retailer, which is listed on the New York, Pacific and Chicago stock exchanges, recorded $38 million losses in the first quarter, compared with a $109 million loss in the previous corresponding period. K Mart, which had been going through difficult times, expects significant turnaround both in terms of retail sales and profitability in the second half of the year. The group, which has 2,159 K Mart and 167 Builders Square outlets in the US plus 134 stores internationally, is restructuring its finance with major banks and hopes to soon secure $3.7 billion. A percentage would be used as capital for improvement of current operations, Mr Collins said. Regarding the threat of US trade sanctions against Chinese goods, Robert Larson, managing director of K Mart Far East, said the company was looking at the targeted items but did not have a dollar amount or percentage of business that might be affected. 'But it will certainly have an effect on domestic imports,' he said, adding that he hoped both countries would get the issues resolved. Mr Larson said over the next six months the company would decide to ship products directly from China to the US where practical. 'Some products have already been shipped directly over the last six months,' he said. K Mart was not going to stop using Hong Kong port, which handled about 35 to 45 per cent of K Mart's total goods exported from Asia to the US last year. Mr Collins said once there was sufficient equipment and sailings from China, a greater part of the supply chain could move to the mainland. 'Whether it is Hong Kong, Yantian or Taiwan, we will impose the just-in-time delivery,' he said. 'You have to have seamless co-ordination in the whole supply chain as there are lots of people competing in this trade.' K Mart is to roll out a new section in its US stores called the Pantry. It will comprise fast-moving consumable items and dry grocery items.