Mainland can deliver the goods for transport sector

THE RELOCATION of manufacturing industries to the mainland and other low-cost production centres in Asia has fostered the rapid growth of the region's logistics and express delivery sector. Hong Kong is ideally placed to benefit from this shift, but new competitors and changing trade patterns are posing new challenges. Chek Lap Kok airport handled the world's largest volume of international air cargo last year, with a throughput of 3.04 million tonnes, according to Invest Hong Kong. In the same period, the city's container terminals shifted 22.4 million teu (20-foot equivalent units), making Hong Kong the second-busiest container port in the world after Singapore. Despite these impressive figures, there is no guarantee that the city will continue to be the preferred distribution hub for the region. 'Hong Kong's relative position among the world's busiest ports is declining, even if the total volume of cargo shipped has not actually decreased,' said Michael Choy, shipping and compliance manager at the publicly listed USI Group, a major producer of garments for several leading brands. 'Singapore offers very competitive port and transport handling charges and, closer home, both sea and air facilities in the mainland are rapidly expanding and improving operations,' he said. Mainland logistics companies such as Sinotrans and bigger international players are upgrading their networks and introducing faster international links. Therefore, logistics professionals in Hong Kong have to find new ways to capitalise on their expertise and add value to all aspects of the supply chain, from production to final delivery. 'Hong Kong's principal advantage is experienced professionals, at all levels, who are able to provide a smoothly running and reliable logistics service,' Mr Choy said. He believes other potential distribution centres have a shortage of capable people. Meeting the needs of major customers involves running operations with a high degree of complexity. It can mean receiving and consolidating goods from different factories, making quality checks, bar coding and packaging, tracking consignment status and arranging shipment in line with instructions given by overseas retailers. All this needs co-ordination with warehouses, trucking companies, airlines, shipping lines, and customs and trade authorities. Ivan Poon, general manager of DHL Express Hong Kong, said global sourcing and production had added a new dimension to the industry. 'Increasingly, customers are looking to us to manage the varied aspects of their supply chain operations,' he said. Supply chain management enhances competitiveness, reduces costs and improves the flow of information. DHL, for example, offers an advanced 'track and trace' tool that gives customers up-to-the-minute status of their cargo. That makes planning easier and allows orders to be accelerated or held back. DHL has also set up a spare-parts management centre to let clients outsource their warehousing operations. Using this service, companies can get parts delivered to their customers in 45 minutes and save considerable money by not operating their own storage facilities. With the industry focused on providing value-added solutions, customer service and operations personnel are especially in demand. An international outlook, a proactive attitude, and fluency in English and Putonghua are important. Sectors that need logistics professionals include textiles and garments, electronics, technology and toys. In each of these sectors, production cycles are becoming shorter, and lower time-to-market can, therefore, be a major competitive advantage. Not surprisingly, the mainland is the most important engine of growth for Hong Kong-based logistics companies. Manufacturing in the Pearl River Delta drives demand and will continue to shape services in the foreseeable future. Mainland factories spend up to US$270 billion a year on logistics, inventory management and transport. But only about threeper cent of this goes on third-party logistics providers, according to a Hong Kong Trade Development Council report. As the market develops, this percentage should increase - especially since the Closer Economic Partnership Arrangement (Cepa) gives Hong Kong companies preferred access to the mainland market in logistics, transport, freight forwarding and warehousing services. Since China's WTO commitments do not specifically cover logistics and maritime transport services, operators in Hong Kong should have a comparative advantage. However, multinationals such as DHL will still enjoy certain benefits. 'We see our role as a trade facilitator, fostering economic development by enhancing the efficiency of cargo movement,' Mr Poon said. 'Initiatives such as Cepa that minimise obstacles to trade and cross-border business activities have a positive impact on the logistics industry.