Global Logistics-Oct 2008

In tough economic times you can’t nickel-and-dime logistics process improvement. That, in itself, is a lesson for struggling retailers.

The United Kingdom arm of Woolworths, the original five-and-ten discount chain, knows this reality firsthand, and is making supply chain management and leadership top priorities as it looks to reverse its fortunes.

Beset by rampant stockouts and poor inventory control, two years ago Woolworths’ UK stores began tweaking their supply chain approach, improving customer fulfillment capabilities and integrating new SAP supply chain management technology to improve warehouse productivity.

The retailer returned to profitability last year, largely as a result of these improvements.

Still, increasing competition from supermarkets and other discount retailers, and a bleak earnings forecast, convinced Woolworths’ board to bring in new leadership to steer the company’s turnaround.

Steve Johnson joined Woolworths as its new CEO in September. As former head of Focus DIY, a do-it-yourself home furnishings retailer, he successfully realigned the company’s price proposition with an overhauled supply chain to grow sales, enhance margins, and reduce costs.

He plans to bring a similar nuts-and-bolts approach to restructuring Woolworths’ supply chain.

The company recently announced it would greatly streamline the enterprise; sell, sub-let, or bring partners in to manage its 120 largest stores; and otherwise return to the basics of retailing.

On-shelf availability at Woolworths has only been 74 percent, meaning that one in four products that should be on the shelves is not, Johnson observes.

To rectify inventory availability and improve branding identity with consumers, Johnson aims to reduce Woolworths’ product range by 25 percent and better differentiate and rationalize private-label items.

“The stores and customers are at the end of the line rather than the beginning of the thought process,” observes Johnson in outlining the company’s core problem. “We need a good dose of basic shop-keeping and attention to retail detail.”

A paper blowing in the wind, a bottle bobbing in the current, a container pinballing between global ports—all part of the obscure minutiae of everyday life.

If the British Broadcasting Corporation (BBC) has any sway, however, its Big Box project will publicize the not-so-subtle ebbs and flows of global trade and the importance of containerization to the masses.

In a landmark experiment and yearlong presentation that will be aired on television, in print, and online, the BBC is tracking a GPS-equipped 40-foot container as it bumps and floats its way around the world.

Inspired by economist Marc Levinson’s history of containerization, The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger, the BBC has partnered with the Container Shipping Information Service (CSIS) and its member partner, NYK Line, to handle logistics for the project.

The BBC-branded shipping container embarked on its voyage in September, leaving the port of Southampton, England, for a Scottish bottling plant, where it was loaded with whiskey bound for China.

During its journey, the container will crisscross the United States, Asia, the Middle East, Europe, and Africa, transporting a variety of consumer goods before returning to England.

The BBC’s goal is to highlight the importance of the container shipping industry, providing a live demonstration of how “the box” connects countries, markets, businesses, and people.

“As this specific container travels around the world, everyone can follow its adventures and start to understand how pivotal container shipping is to the globalized world and the global economy,” says Jeremy Nixon, European managing director of NYK Line.

Since Malcom McLean’s revolutionary idea took float more than a half century ago, containerized trade has redefined global commerce. Here are some facts to get you up to speed on the box that’s lifting your business.

• Standard container sizes measure 20 feet or 40 feet long, eight feet wide, and eight or eight and a half feet tall.
• Shipping containers come in a variety of types including: end-opening, side-opening, half heights, open-top, flatrack, reefer (refrigerated), liquid bulk (tank), and modular.
• An empty TEU container weighs approximately two tons.
• A standard container can hold 24,914 tin cans.
• Many containerships can comfortably carry more than 8,000 containers.
• In one year, a large containership will carry more than 200,000 containers.
• The equivalent of approximately 141 million loaded 20-foot containers moved across the world in 2007.

Traditional ocean and air routes between Europe and Asia now have competition from a Eurasian landbridge expected to reduce transport time and cost, coast to coast.

A container train carrying 50 containers of Fujiusu Siemens Computers’ (FSC) monitors and chassis recently embarked from Xiangtang, China on a 17-day, 6,000-mile journey to Hamburg, Germany via the Eurasian landbridge.

The train traveled through China and Mongolia, crossing the border to Russia near Irkutsk, and continued along the Trans-Siberian Railway route via Novosibirsk, Omsk, and Ekaterinburg to Moscow, then through Belarus and Poland to Hamburg.

In Hamburg, the 50 containers were forwarded in two directions: the monitors continued by train to FSC’s European DC in Worms, Germany; and the chassis were delivered direct to a plant in Augsburg that manufactures PCs and servers.

Most freight moving between Asia and Europe is handled by ship and plane, with only two percent of international freight moving by rail. Comparatively ocean transit takes 30 to 35 days, and while air freight is considerably faster, it also costs more.

Shipping IT products by rail is more flexible and 25-percent cheaper than air, says Heribert Goggerle, FSC’s senior vice president of supply operations.

Germany-based DB Schenker spearheaded the express rail link by partnering with Russian Railways RZD and the Chinese Railways to manage the move.

With the success of FSC’s inaugural transit and increasing demand for ocean and air alternatives, DB Schenker plans to launch a Trans-Eurasia Express service, a weekly connection between China and Germany, with departures in both countries.

The company anticipates the new service will be particularly suitable for the following trade segments:

• Long-haul freight inside China.
• Freight that has to be transported quickly but less expensively than air freight, such as electronics and mechanical and plant engineering project cargo.
• Freight that is carried on the Eurasian landbridge as an alternative to air and ocean freight to remedy bottlenecks and delivery instability.
• For global shippers, the Trans-Eurasia Express is an important step toward linking logistics networks between the European Union, Russia, and China. Already, 18 high-capacity transshipment terminals are under construction in China to link the new inland industrial regions with the rail corridor by 2010.

Consequently, emerging manufacturing and consumer markets throughout Asia and Europe will have greater modal connectivity, providing further incentive for global enterprises to locate operations in these areas.

Research In Motion (RIM) is on the move overseas. The Ontario, Canada-based company, famous for its BlackBerry smartphone, plans to set up manufacturing and logistics operations in India to tap into the country’s growing and outwardly mobile consumer base.

“Along with China and Brazil, India is a strategic growth market for the company,” says RIM Co-Chief Executive Officer Jim Balsillie. “India is the most exciting and fastest-growing mobile market, and RIM is absolutely committed to making India-specific phones,” he says.

RIM has thus far hooked up with five Indian carriers to launch its Blackberry solutions. In the Asia-Pacific region alone, the company has connections with 39 carriers in 18 markets.

The news comes after Indian authorities threatened to embargo BlackBerry use earlier this year over security concerns with the device’s encrypted system.

After a meeting between government officials and representatives from the wireless industry, India decided to let the encrypted BlackBerry system continue operating, thereby paving the way for RIM’s penetration into the market.

Though the manufacturer has yet to disclose specific details about the size or scale of its proposed investment plan, Balsillie believes India has a dynamic workforce capable of meeting the demands of the local market by manufacturing less-expensive devices.

RIM introduced its BlackBerry messaging service and software in India in 2004 through a partnership with mobile service provider Airtel.

Express Urgency

As testament to the rapid growth of intra-Asia and Asia-Europe trade, the penetration of U.S. interests in the region, and demand for time-sensitive delivery services, global expediters continue to ramp up investments in China.

DHL recently completed a $110- million expansion of its Central Asia Hub (CAH)—five years ahead of schedule. The facility, located at the Hong Kong International Airport, is the first large-scale automated express hub in the Asia Pacific.

Expected to process 40 million shipments this year, the CAH can handle 75,000 pieces per hour, a 114-percent increase over its previous throughput.

To capitalize on the influx of express cargo handling capabilities, the Chinese government aims to support further development by improving the airport’s links to nearby markets, with plans to add a third runway and increase runway capacity in the near future.

The completion of DHL’s CAH facility follows UPS’ decision to relocate its intra-Asia air hub from the former Clark Air Force Base in the Philippines to Shenzhen Airport in southern China earlier this year.

The new $180-million Shenzhen hub, expected to be operational by 2010, will initially be able to process up to 18,000 pieces per hour, with capacity to expand to 36,000 pieces per hour.

UPS also plans to establish a UPS International Air Hub at Pudong International Airport in Shanghai. Due to open in November, this facility will connect China to UPS’s global air network, including U.S. and European destinations. The new Shenzhen hub will connect all major Asian points.