ISSUE 2 2011


FAR EAST


35


The eyes of the world may have been on the Japan earthquake, but the Far East is a big place and business life continues much as normal in most parts of the region. Traffic from and – increasingly – to China continues to grow, unaffected either by Mother Nature or the world economic situation.


Still no slow-down in Asian expansion Coverage is the key to success in China


Keeping garages supplied in as vast and diverse a territory as China is not for the faint-hearted. The challenges go far beyond mere geography, although the sheer size and scale of the country are daunting enough.


logistics provider covers it entirely. Even the bigger Chinese players have control of no more than two or three prefectures.” Unipart has a number of bonded and non-bonded facilities in China including one in Suzhou (together


Asian countries, this will drastically reduce the total amount of stock in the supply chain, says Williams. However, there is a second good reason for having the bonded facility in China.


“Compliance for imports into China itself is quite fluid, and importing into a bonded facility means that you can deal with any issues with specific consignments there, without having the whole container blocked in the port.” The government has introduced


Unipart an operation to keep


has been running Jaguar-


Landrover dealers supplied with spare parts in China since 2008/09, headquartered in Suzhou, about 70km outside Shanghai. The country is not just an important market in its own right, but is becoming strategically important to the whole of Unipart’s Asian operation, explains, general manager Unipart Asia, Carl Williams. However, it also a very different environment to his last posting, in Japan, he explains. “China is an immense market with massive challenges. Not only are distances immense, but no one


with a non-bonded warehouse), another in Beijing and will shortly open another in Guangzhou. It imports most product into China in 40’ sea containers with airfreight filling in any gaps.


But as well as serving China, the Suzhou bonded warehouse is being developed as a facility that will ultimately act as a hub for the whole of the Asia-Pacific region. It already serves as a transhipment point for South Korea but ultimately Japan and even Australia will be hubbed via China, Williams explains.


With China only a matter of a few days away from the other


a China Compulsory Certification (CCC) scheme for manufactured products before being exported to or sold in the country. The concept is still developing and interpretation can according to region or even which customs officer is dealing with it. There are also many discussions about HS (harmonised system) code classifications which, given that Unipart has around 30,000 different product codes, has been quite a lengthy process. As a relatively seasoned exporter to China, the company now has 90-95% of its range agreed but this could be a daunting task for anyone new to the market. Unipart itself also has to go through


the HS classification


process every time it has a new product line, and sometimes the information Chinese customs ask for is quite detailed – even sometimes to the extent of sparking technical department concerns over intellectual property rights.


A bonded warehouse, while it


does carry the restraint of operating under customs supervision, is the best way of


dealing with this


uncertainty, Williams believes. Once products have been allowed to enter the country, Unipart faces the problem of getting them to dealers in often far-flung parts of China. Regular stocks can be replenished using regular less-than-truckload road services, taking anything from a day or so to reach locations in the Shanghai area to as much as 11-13 days to get to some of the further- flung locations in the west of the country.


Uniquely, Unipart employs carpenters in its warehouse to encase components in wooden packing after they have been received by sea to prepare them for the rigours of the journey up- country. With frequent handovers of consignments between different road operators, and sometimes fairly basic roads and trucks, the relatively small expense of casing it up – often using the wood from the pallet – is small compared with that of replacing a part that has been damaged in transit. Tote boxes and roll cages cannot really be used on any large scale, both because of the limitations of some of the vehicles used – especially in the more remote regions – and the sheer difficulty of getting them back again.


GPS tracking is of only limited use, mainly because many of the operators do not have the


equipment. Often, it is a matter of waiting for the driver to send a text before finding out where a consignment is.


Rail is the other alternative distribution mode. Unipart considered and rejected it a few years ago but will reassess it again shortly. The rail network has been developing quickly and it might be an alternative.


For more urgent parts (known


as ‘vehicle off road’ or VoR in the trade) Unipart uses a slightly costlier express option using mostly airfreight which can hit around 75% of the country next day if orders are made by 3pm the day before. Local Chinese operators are favoured, says Williams. “We actually find that some of the domestic carriers have better networks than the international operators, even though they may not have the same quality of shipment reporting.” But given China’s climatic extremes, including floods, snow and ice, getting shipments to every corner of this huge country can often be difficult.


Choosing China as a regional hub will have advantages, although Asia is a very diverse market and there may not be quite as much commonality between the Jaguar Landrover parts market as might be supposed. For a start, some countries


like Japan and


Australia drive on the left, others on the right. Another issue is that while the manufacturer has been exporting to some countries like


Japan for 25 years, in others like China the vehicle ‘population’ profile is much younger, so the parts needed in different countries may be quite different.


China does have the advantage of low labour costs for unstuffing and restuffing of containers although wages have been shooting up very rapidly of late. Costs also depend on exchange rate policy – China has been coming under some pressure to allow its currency, the renminbi, to appreciate. Labour costs are lower in the west of China, but a transhipment operation must by its nature be located on near the eastern seaboard. There are


also some hidden


costs that can increase China’s apparently low labour rates. For example, few employees drive to work, so shuttle buses have to be laid on which not only increases costs but also means that shifts cannot be as flexible. Employers in China are also expected to provide more in the way of social services than in some other countries. On the other hand, Chinese workers are willing and able to work long hours.


It has also been necessary to adapt the ‘Unipart Way’ – much of it derived from Toyota and Honda’s experience in Japan - for Chinese employees whose previous experience might have been working for one of the giant Chinese state-owned corporations who take a much more ‘top down’ approach.


Freight industry escapes the worst of the quake


The recent earthquake and tsunami that devastated Japan earlier in March does not appear to have had much direct effect on the freight industry. While there was damage to port and airport installations in the Tokyo area from the quake, there has not been too much disruption to shipping and air services, most operators and forwarders reported. “There has been some damage to installations in the Tokyo and Narita areas, but nothing catastrophic,” reported Asok Kumar at DB Schenker. The worst hit regions, such as Sendai, were in fact well away from Japan’s main air and sea hubs. But


indirect effects could


include power outages and, particularly in the case of air freight, the need to prioritise aid and rebuilding material over regular commercial cargo. Mitsui O.S.K. Lines (MOL) reported that neither the quake itself nor the resultant tsunami had seemed to cause any significant maritime accidents involving its vessels – apart from a grounded kaolin tanker. MOL is donating ¥50 million to help support and rescue victims of the quake and the line’s executives and employees have organized a charity donation program within the MOL Group of companies, the proceeds of which will be donated to organizations that are working


to support victims and rebuild their cities.


At the request of the Japanese government, four ferries belonging to group company MOL Ferry helped to transport members of the Japan Self-Defense


Forces to rescue


operations in northeast Japan. CMA CGM Group has set up an Emergency and Communication Response Team to monitor the situation and keep in close contact with teams in Japan and ensure business continuity. All employees of CMA CGM offices on site were reported safe and none of the Group’s ships were affected.


CMA CGM also offered a number of containers to the


French Ministry of Foreign


Affairs, Médecins Sans Frontières and the World Food Program (WFP) of the United Nations to deliver aid to Japan.


Japanese-owned NYK Line said on 21 March that all its Japan base ports, except Sendai and Hachinohe ports, were operating normally and that repairs to its Tokyo container terminal had been completed.


Maersk Line reported as early as 15 March that services to Japan


were more-or-less


back to normal apart from congestion in the ports of Tokyo and Yokohama. Services to and from Sendai, Hachinohe, and Onahama have been suspended. Japan-based shipping firm K


Line is donating JPY50million to the Japanese Red Cross Society and will also establish a fund- raising scheme. It added that it was also studying


support


measures for the disaster stricken area, using its skills as a shipping organisation, to help residents return to normal life as soon as possible. K Line is carrying relief supplies free on its containerships to the stricken region, subject to certain conditions. It includes non-commercial aid cargo under full control by The International Red


Cross, Governmental


Organisations and non profit and non governmental organisations. Wallenius Willhelmsen Logistics


reported on 16 March that all its employees in Japan had been accounted for and that none were injured. There had been no damage to WWL vessels, and offices in Tokyo and Nagoya are open and operational.


There


have been few delays of vessels so far, and most ports remained open although the situation is fluid and changes were possible with little or no notice.


Shipping lines are though keeping a wary eye on radiation levels.


Hamburg Sud cancelled a call on 30 March to avoid having a ship trapped in Tokyo by the weather, in the event that radiation levels did rise to unacceptable levels


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