The UPS Logistics Group will open up more offices and warehouses in China to meet the growing demand from mainland customers. UPS Country Manager (Hong Kong and China) Terence Tsang said the group, which opened a representative office in Beijing last month, has set up a 10,000- square-foot warehouse for its customers through an agent in Shanghai. 'The need is growing as we continuously receive inquiries from our customers,' he said, adding that the company was opening up a spare-parts depot in Shanghai as well. Last year, UPS invested US$3.4 trillion on suppy chain management worldwide. The company sees opportunities throughout the order cycle, in goods flow, information flow and funds flow. Mr Tsang said the recent ac quisition of forwarder and logistics provider Fritz & Co would help the group grow not only in China, but in Asia as well. Fritz & Co, which will operate independently, will act as the group's logistics arm in Asia. Mr Tsang said demand for service parts logistics was growing, and would provide a substantial part of the group's revenue. He said that the company only had to keep between 10 and 20 pieces per spare part to meet the spare part requirements of customers, topping up the inventory as spares were supplied to the customers. Furthermore, parts could be stored in smaller warehouses without having to maintain big warehouses that were two to four hours' journey from customers. More suppliers are now outsourcing their logistics operations to reduce costs, and are meeting their customers' demand through just-in-time deliveries managed by logistics service providers, such as the UPS Logistics Group. In Hong Kong, the group has an 80,000-square-foot facility at the Asia Terminals (ATL) centre which serves the whole of Hong Kong. As demand rapidly rises, the group is planning to increase the ATL capacity by another 30 to 40 per cent. 'However, the location of the additional capacity will depend on customer needs. And if the need arises, the group will lease a space nearer to the customer,' Mr Tsang said. Hong Kong is a good place to manage supply chain management because of its free port status and efficient services backed by a predictable customs service. Mr Tsang said the only disadvantage in Hong Kong is its high land cost. If the SAR wants to position itself as an international logistics hub, costs would have to come down. Another major challenge to the Hong Kong logistics industry is insufficient skilled logistics manpower because of inadequate training. Although the Government was attempting to remedy the situation, it would be some time before the shortage could be remedied, Mr Tsang said. Hong Kong Science and Technology and the Polytechnic University are already providing courses in logistics. Asked about China's Customs services, Mr Tsang said there were still complications that led to delays in cargo clearance. Once China entered the World Trade Organisation, the mainland would become more competitive, he said. However, as the mainland cannot become a free port, Hong Kong will continue to enjoy strong business growth because of its long-established free port status. Hong Kong presently has sufficient quality warehouse space, but if demand continues to grow, as it has recently, there will be a shortage in the not-too-distant future, according to Mr Tsang.