Company Visit: CPSL
Company Background
Cathay Pacific Services Limited (CPSL), a wholly owned subsidiary company of Cathay Pacific Airways. CPSL has been awarded a 20-year franchise by Airport Authority Hong Kong to design, build and operate the air cargo facility at Hong Kong International Airport– Cathay Pacific Cargo Terminal (CPCT).
CPCT, which began full operations in 2013, is one of the biggest and most sophisticated of its kind in the world. The terminal is a HK$5.9 billion infrastructure terminal with a designed annual throughput of 2.6 million tones. They provide best-in-class services with dedication and flexibility, sustaining the competitiveness of Hong Kong as the logistics hub of choice in Asia.
Company Visit
We are so lucky to visit CPSL, where the operations gave us a new insights!
Let watch together!
Appreciating the 1: 100 model of the cargo terminal is a good start! The model provides a terminal design and operations overview to us!
Control Room is the “Master mind” of the terminal! All CCTV are connected to this room, and it helps monitoring all of the cargo operations, like inbound, handling, and outbound.
Doing the security check before go into the cargo terminal ~
The cargo center is so grand! Pallet, forklift truck are the important tools to enhance the efficient.
Automate handling system (Materials Handling System) is the “Heart” of CPSL. It significant improved the cargo operations efficiency, such as the cargo movement, storage.
Using the handheld system to track and update the cargo information can smooth the operations and reduce errors.
Case Question
Q1 What is the maximum time that a cargo can stay within your terminal and warehouse in order to wait for the transshipment or delivery to be considered as JIT? How would you handle the unstable situation, such as delays at the air transport?
The cargo terminal of Cathay Pacific Services Limited (CPSL) is designed to handle all goods as just-in-time (JIT) goods. The average time to handle a good through the terminal is five hours. The whole cargo was designed to minimize handling and processing time. The terminal uses an automated system for transportation and has cargo lifts inside to transport the goods to the different floors of the terminal. Therefore, the maximum time a cargo can stay within the terminal in order to wait for transshipment is five hours. These five hours however have limitations. For example, large airlines such as Air Asia, air Hong kong, Cathay Pacific, Dragonair, Eva Air and Royal Brunei rented areas in the terminal to store their goods. These goods are exempt for the five-hour rule. In case of an unstable situation such as a delay at the air transport, CPSL is able to handle goods within three hours to at least cover a two-hour delay.
Q2 What aspect in your material handling system gives you a competitive advantage over your competitors (e.g. HACTL)? Do you think it is sustainable?
Since CPSL´s main competitors have an average handling time of approximately 8 hours, the fast handling gives a sustained competitive advantage to the logistic company, since other companies are not able to bear the huge upfront investment. These five hours of handling time can even be pushed down to three hours, if planes are delayed or their customers require this service for an additional cost. Moreover, CX goods for Cathay Pacific have a special and faster treatment to pass the competitive advantage on to CPSL´s parent company.
Q3 How can Cathay Pacific management deal with complaint raised by cockpit crew regarding aviation risk due to the increased workload and fatigue? What measures had been done in terms of various regards, such as staffing, manpower mobilization, operations, etc.
Cathay Pacific has always put flight safety as their first priority. For instance, Fatigue Risk Management System (FRMS), a so-called Bio-mathematical Fatigue Model, was developed to constantly monitor and manage the fatigue risk in a systematic way. FRMS also provides predictive information based on the data and evidence collected from cockpit crew. Measures and training will then be provided if the crew are classified in unacceptable fatigue level.
Cathay Pacific has been trying to increase the roster flexibility for cockpit crew. Besides, they not only managed to control the maximum working hours under Hong Kong Civil Aviation Department, but also to recruit more cockpit crew for reducing fatigue risk in aviation.
Q4 How do you compete with other logistics company like DHL, SF and FedEx?
To compete with other logistics companies, we installed the most advanced sophisticated material handling system in the world which costs HK1.4 billion. (Cathay Pacific Cargo, 2011) Information and inventory accuracy are seriously important in this industry, According to the article written by Angela Tam from Hong Kong Engineer, performance is improved with this automated and conveying system. To maintain the system reliability, the uninterrupted power supply provides static power in order to enable the function of the system in all circumstance.
Also, the material handling system is linked with the flight schedule. All the data, such as departure time, quantity, will be saved and sent back to the system simultaneously. Due to this updated system, the response rate increases which prompt a growth of efficiency in the terminal.
To ensure there is no fault occurred in the system, more than 400 CCTV cameras will capture image spontaneously in order to make sure smooth operation carried out. If there is unexpected system turn down, operators can reset the system immediately. (Angela, n.d.)
Reference:
Angela, T. (n.d.). The art of cargo handling on the fly. Hong Kong Engineer. Retrieved from:
http://www.hkengineer.org.hk/program/home/articlelist.php?cat=cover&volid=170
Cathay Pacific Cargo. (2011). Ceremony Marks Topping Out of New Cathay Pacific Cargo Terminal,
Special-Livery Freighter Unveiled [Press Release]. Retrieved from:
http://www.cathaypacificcargo.com/AboutCathayPacificCargo/NewsUpdates/N5rews/tabid/23
4/NewsID/20111117001/Type/N/Detail/T/language/en-US/Default.aspx
Q5 How do you expand your business if the third runway project successfully launched?
According to the interview conducted by Air Cargo Week (2015), the CPSL chief executive officer, Kelvin Ko mentioned, the third runway project can keep the connection from Hong Kong to places all over the world since the competition of airport from South Korea and Singapore are expanding quickly. Although CPSL has not announced any specific plan according to the third runway launching, they already foreseen the needs of freighter services in 2011. To cope with rapid increase of the demand of freighter services, CPSL had ordered eight Boeing 777-200Fs with doubled capacity for delivery and will be brought into service in the coming future. (Cathay Pacific Cargo, 2015)
Reference:
Cathay Pacific Cargo. (2015). CATHAY PACIFIC CARGO. Retrieved from:
http://downloads.cathaypacific.com/cx/press/cxw/CX_Cargo_Factsheet.pdf
Q6 As we know that your company built a new air cargo terminal in 2008, what is your future plan for the extension of growth?
Kelvin Ko stated in Air Cargo Week interview, the growth of demand and new opportunity from their external customers may increase significantly. (Justin, 2015) Therefore, constructing a new building in order to reduce the tension and increase the working space for the future use.
Reference:
Justin, B. (2015). CPSL continues expansion into 2015. AIR CARGO WEEK. Retrieved from
http://www.aircargoweek.com/cpsl-continues-expansion-2015/
Q7 Since the CP’s terminal operates 24 hours per day, what information system deploys in handling cargo management?
CPSL has a real-time monitoring system, which enables them to constantly updates all activities and oversee every shipment within the cargo terminal. Staff could collect the data and information by scanning barcodes on the floor using a micro handheld machine. The handheld machine will display the information regarding the container, cooltainer, pallet or car rack. Employees could check whether the goods are located at the designated location. In addition, those information will immediately be sent to the integrated Terminal Control Centre. Therefore, all container can be traced in the cargo terminal.
Q8 Does CP have any sustainable development in order to reduce cost and achieve the environmental protection in the supply chain? If yes, what are they?
Sustainable development is one of the key values for doing business in CPSL (Cathay Pacific Service Limited, 2016). The consideration of environmental, social and economic factors are the ground of their decision making, and those of the considerations also applied to their suppliers.
In view of the environmental development, CPSL evaluates the environmental impact on their operations, and makes sure that the impact is being managed. Recycling the packing materials, like the adhesive tape and using the chilled-ceiling air-conditioning system are the good illustration of the environmental protection. Besides, the suppliers of CPSL need to code with their “Supply Chain Sustainability Code of Conduct” (Cathay Pacific Service Limited, 2015). For example, the supplier should minimize any types of waste, such as energy, and make sure that the air emissions as well as the waste water are well managed in the operations.
Providing a safety and healthy working environment to the stakeholders, like employee, customers is one of the consideration of social impact because the working environment of air cargo is relatively complex, where it is easy to find an accident occurring Reducing the accidents not only can smooth the productions, it can also reduce the cost of tackling accident event in long term.
References:
Cathay Pacific Service Limited (2016). Sustainable development. Retrieved March 23, 2016 from
http://www.cpsl.com.hk/About-CPSL/Sustainable-development
Cathay Pacific Service Limited (2015). Cathay Pacific Service Limited Supply Chain Sustainability
Code of Conduct. Retrieved March 23, 2016 from
http://www.cpsl.com.hk/Portals/0/CPSL%20Supply%20Chain%20Sustainability%20Code%20
of%20Conduct.pdf
Q9 Can you explain what ‘Just-in-Time’ operational concept is? What are the benefits for the stakeholders?
‘Just-in-time” is a concept in which the materials and services will be delivered in the accurate timing so that they can be sent out to each stage of the process just as they are required. Since the items are transferred in accurate timing, it provides a faster response and reduces a lot of waste, such as the waiting time. However, this operations demanded a highly coordinated system.
In order to build up a “Come-and-Go” Processing Cargo Terminal (Seamless cargo operations) and achieve the goal of Just-in-time, advanced technology is used in CPSL. For example, the Materials Handling System (MHS) integrated the cargo information and significantly improve the efficiency of handling (Cathay Pacific Service Limited, 2016). Besides, the control center in CPSL will monitor the real-time cargo operations in different zone, like the dedicated zone for fast transshipment so that the error is reduced. The improved cargo operations efficiency and response time or transshipment time (ideal in 2 hours) are the key advantages of JIT in CPSL. From the customer perspective, they can obtain more flexibility or even revenue since the lead time is significantly reduced. For instance, the faster lead time helps improving the replenishment cycle and prevents stock out.
Reference:
Cathay Pacific Service Limited (2016). Key features. Retrieved March 23, 2016 from:
http://www.cpsl.com.hk/Our-terminal/Key-features
Q10 What are the future development plans/ new technology for your cargo operations?
CPSL is always ahead in committing to sustainable development in its cargo centre. They are the first cargo terminal that installed the chilled-ceiling air-conditioning systems. While the heat generated by the air-conditioning can be recycled for heating up water supply. The energy consumption had dramatically drop by 40% after installing the system. Beside, CPSL has been striving for a more effective operation by installing advanced technology. No wonder the fully automated Container Handling System (CHS) and Bulk Handling System (BHS) have significantly reduced manual error in storing and handling materials. The Materials Handling also helps regenerating energy from the movement of its components. Apart from physical technologies, CPSL has initiated a mobile application which provide a platform for more interaction between CPSL and its customers. Customers could also grasp the latest information and track their shipment using the app. With these kinds of technologies, CPSL could maintain its effective operation while going further with its ambition towards sustainability.
Reference:
Cathay Pacific Service Limited. (2016). Sustainable development. Retrieved from:
http://www.cpsl.com.hk/About-CPSL/Sustainable-development
Cathay Pacific Service Limited. (2016). Key features. Retrieved from:
http://www.cpsl.com.hk/Our-Terminal/Key-Features
Reflection
Cathay Pacific Service Limited operates air cargo facility in Hong Kong – Cathay Pacific Cargo Terminal at Hong Kong International Airport. Being a well-organizaed infrastructure terminal, it is supported by sophisticated system and skilled workers. During the visit, we realized that how system play an important role in the operation management and how they manage the whole process in the terminal.
To ensure the operation undergo smoothly, they are using various systems to maintain the stability and accuracy: Material Handling System (MHS), Bulk Handling System (BHS) and Just-in-time system. Material Handling System is used to ensure efficient terminal operation. Bulking Handling System linked with the Examination Hall of the Hong Kong Customs and Excise Department to assist the Government inspection. For just-in-time system, it ensures smooth information flow and accurate inventory level. Cathay Pacific Service Limited are now adopting an advanced system version to increase the response rate so that the information of the inbound and outbound inventory will be saved simultaneously and directed to the server. Moreover, the JIT system are linked with the booking system. If there is any flight delay problem, they system will search the flight which is leaving soon so that they can do the unloading process immediately.
Due to the limited space in the terminal, they set the time standard to ensure the whole loading process, including packing, checking, will be finished within three to five hours so that the goods can be delivered to the destination on time.
In conclusion, Cathay Pacific Service Limited is dedicated to facilitate the customer experience with advanced systems and brilliant operation management.
