Global Logistics—December 2010
China Full of Beans
China’s consuming population continues to expand without pause, as demand for American Joe is now competing with a long-standing cultural mainstay —green tea.
Starbucks has inked a deal with the Chinese provincial government of Yunnan to set up its first coffee bean farm. The Seattle chain is partnering with local growers —hiring and training them to improve yields and profits —to serve a booming number of coffee drinkers while developing a supply chain strategy to secure quality beans amid increasing global competition.
China’s coffee consumption is growing at a considerable clip. Domestic sales are expected to reach $3.6 billion by 2011, up from $2.4 billion in 2006, according to Euromonitor International. Starbucks currently operates 400 stores in mainland China and plans to open 1,000 more as the country closes in on becoming the U.S. company’s second-largest global market.
Concerns also are mounting about the quality and sustainability of coffee bean production in Latin America, the cash crop’s historical stronghold. China and other potential “growing” markets in Asia are quickly stirring interest and could eventually shift the global coffee supply chain in a big way.
Starbucks’ new plans follow its much-publicized operational realignment in the United States. After years of trying to diversify its brand portfolio beyond coffee, and facing stiff competition from Dunkin’ Donuts and McDonald’s, it appears the company is getting back to its roots while expanding its core business into emerging markets.
Dubai Flies High
Global logistics businesses are looking to expand existing operations in Dubai and elsewhere around the United Arab Emirates as development of the region’s first aerotropolis continues to progress. At build out, the airfreight hub will consist of six components: Dubai Logistics City, Dubai Exhibition City, Dubai Aviation City, DWC-Al Maktoum International Airport, Commercial City, and Residential City.
The logistics sector favorably perceives growth potential in the UAE, according to new research presented at a recent Dubai World Central symposium. In a survey of 200 delegates, including Kuehne + Nagel, Panalpina, and FedEx, 81 percent report they are likely or very likely to expand logistics operations and invest in Dubai in the next 12 months. More telling, 83 percent of respondents say they are satisfied or very satisfied with the logistics environment in Dubai.
The Dubai government has set an aggressive deadline to make the UAE a regional hub for logistics by 2015. Already, more than 80 leading international companies have committed to establishing a base in the aerotropolis, with growing interest from a number of multinational companies as well.
CN Accelerates Auto Imports
Canadian National (CN), Canada’s largest freight railroad, has prioritized supply chain improvement to reduce dwell times by 25 percent for European import vehicles handled at its Autoport Terminal in Halifax, Nova Scotia.
The Autoport facility— one of the largest import vehicle processing facilities in North America— receives vehicles from ocean-going vessels and transfers them to railcars for distribution through its inland network.
Beginning in spring 2010, the railroad conducted a comprehensive review of supply chain processes to scale port dwell times and adopt a transit time approach from ship discharge to dealer delivery via its 10 major automotive facilities in Canada. The effort has enabled CN and its automotive customers to bring vehicles to market more quickly and economically.
UK, France Counter Terrorism
Following the recent failed terrorist plot to ferry bombs on U.S.-bound airplanes, British and French officials have banned the shipment of all unaccompanied air cargo originating from Yemen.
The notice further restricts the movement of people and cargo from Yemen. Direct airfreight and passenger links between Yemen and the United Kingdom and the United States were severed in January 2010 after the Dec. 25, 2009 attack on a Detroit-bound jet.
France’s civil aviation authority reports that the suspension is a temporary measure pending consultation with other European transport ministries— raising the possibility that other countries will follow suit.
Elsewhere, in the Middle East, authorities have begun manually inspecting all packages being sent abroad or brought in country aboard cargo planes, especially those coming from Yemen. Yemeni officials say they, too, are tightening security measures at airports, where modern scanning equipment has been recently installed.[ ]
Marks & Spencer Tailors Supply Chain
British retailer Marks & Spencer will accelerate a 2020 plan to make its supply chain more efficient by targeting $280 million in savings —instead of an initial estimate of $240 million —by 2015.
Marks & Spencer’s first wave of enhancements includes consolidating a network of 110 regional warehouses into a more centralized distribution footprint. A one-million-square-foot “super” warehouse opened in Bradford in May 2010 as 30 smaller facilities closed during the past year.
The retailer also plans to reduce its dependency on full-service vendors (FSVs), enabling more corporate control of its inbound supply chain. FSVs transport, store, and deliver goods for Marks & Spencer, while the retailer transports, stores, and delivers goods for direct vendors.
Currently, FSVs account for 43 percent of the retailer’s clothing and home goods supply base, while direct vendors make up the remaining 57 percent. Moving forward, Marks & Spencer plans to gain more control over transportation from suppliers, with a goal of sourcing 65 percent of its inventory from direct vendors by 2015.