Company Visit: Kerry Logistics
Company Background
Kerry Logistics Network Limited is principally engaged in the integrated logistics and international freight forwarding businesses. The Company has more than 400 service locations throughout 35 countries and territories across Asia, Australia, Europe, and North and South America. It provides integrated logistics services, act as a third-party logistics service provider, for manufacturers, retailers and other customers worldwide. Its integrated logistics business is serving more than 40 of the world’s Top 100 brands across a various industries.
Its core competence is to provide customized supply chain solutions to multinational corporations, meeting their needs from sourcing, manufacturing to selling in Asia and across the globe, in which their services involve a wide range of logistics services, such as storage and value-added services, trucking and distribution, returns management, and warehousing, which involves the leasing of warehousing space in Hong Kong to customers. It also provides the majority of its international freight forwarding services intra-Asia and between Asia and Europe.
Unlike other logistics companies, Kerry Logistics is an asset-based organization which means they purchase their own logistics centre, truck fleet, container terminal and so on. This approach can raise their flexibility and apply strict control while complying with demand fluctuation and supporting long-term growth and future expansion.
In Hong Kong, Kerry Logistics operates 12 warehouses and logistics centres in total. Due to rapid increase of awareness of environmental sustainability, Kerry Logistics has put ideas into practices, they built PC3 – a green logistics architectural in Tai Po. This facility can block the heat effectively in order to reduce the indoor electricity used.
Apart from the three core business they provided, they offer a unique road transport solution to their customers: KART. According to Kerry Logistics website, KART is an extensive cross-border road transporting network that combined with the advantage of air freight and sea freight – faster speed with lower cost. It can effectively reduce the lead time and transportation cost.
Seven key routes between ASEAN and Mainland China
Visit
We visited Kerry Cargo Centre which located in Kwai Chung, is a 20 storey building for storage purpose. During the visit, we received a warm welcome from Kerry Logistics’ Hong Kong Director. He introduced us their operation process and core competency, especially the value-added services offered. To illustrate the process, he showed us some video clips about the project they are doing, including chocolate gift packaging, e-commerce management. Postponement is one of their special services that they assembly or change some components of the generic products based on the target selling countries. For example, the plug of electronics products and warranty associated with the package.
To fulfil the high satisfaction from their customers, Kerry Logistics sets up a high standard on inventory and transaction accuracy, inventory damage and on-time delivery. Therefore, Kerry Logistics are now providing various services to some big brand names, such as, Fendi, IBM, Apple Inc. and more.
Case Question
Q1 As you using Asia as company headquarter, what is your comment on the Asian Transportation market? For example, the development of e-commerce in China (Taboo)?
When it comes to B2C fulfillment, Kerry express (one of the team in Kerry Logistics) handled more than 2000 order per day in Hong Kong. The capacity of express services is not very powerful since the core services in Kerry Logistics are Integrated Logistics Service, Supply Chain Solutions and International Freight Forwarding, but they are now building up their capacity on express services.
In Taiwan, Kerry TJ Logistics is ranked 1st parcels delivery services provider, and they handled more than 200,000 parcels per day. Although Kerry Logistics are not compelling than some large integrators, like DHL, FedEx in ASEAN market, they are now building up the express platform gradually.
As the fare in China is relatively low, like 1kg cost 5 dollar from Shenzhen to Heilongjiang, the loss will occur easily. Kerry logistics are waiting a good timing to enhance their express services capacity in China because they believed that there is also a chance for the development.
Q2 Since your company is expert in warehousing management, how would you provide the premier value added services to the customer, like the services provided (labelling), as well as technologies used?
Kerry Logistics becomes one of the famous and successful logistics corporation that providing value-added services. They clearly understands what services can facilitate their customers in supply chain process. Therefore, apart from warehousing, they offer a variety of specific value added services to different industries which need their services. To retail industry, for example, they provide Garment-On-Hanger service, steaming or ironing service. To electronics and technology industry, they serves postponement, in-transit assembly, production scheduling and so on.
Q3 What has Kerry logistics done to overcome the challenges of ever-increasing labor and fuel costs?
The increasing labor cost is a serious problem in various industry and company, in particular, the logistic industry. People in Hong Kong commonly think that the job in logistic company is a hard job, therefore, the youngster or some graduate students are not willing to join in logistics industry. For the result of labor shortage in the industry, the company needs to raise the salary to attract the employee. The increasing labor cost is hardly to avoid, the only way to overcome the issue is to increase the productivities.
The logistic company relies on truck to deliver the goods. Therefore, the price of fuel will affect the operating expense seriously. According to the director of Kerry Logistic, he said that the fuel price in Hong Kong is much cheaper than the years before, so they can keep the operating expense as low as possible. In fact, Price Board showed that the price of fuel for Hong Kong from 7 Dec 2015 to 14 Mar 2016. The average value for Hong Kong during that period was 14.02 Hong Kong Dollar with a minimum of 13.74 Hong Kong Dollar on 15 Feb 2016 and a maximum of 14.39 Hong Kong Dollar on 07-Dec-2015.(Globalpetrolpricescom, 2016)
Reference:
Globalpetrolpricescom. (2016). Globalpetrolpricescom. Retrieved 3 April, 2016, from:
http://www.globalpetrolprices.com/Hong-Kong/gasoline_prices/
Q4 What kinds of special-care products still not included in logistics service currently?
Currently, Kerry Logistics operated a warehouse for storing dangerous goods in Kowloon Bay. They even have advanced explosion-proof cargo lift and sunken-type chamber for handling and storing dangerous good (exclude class I goods). However, until now, they are not providing third party logistic in explosives, munitions or firework since it is not allowed in their service license. Also, as explosive goods are Class I dangerous goods, it is very strict to get a government license for storing or transporting explosive goods. Additionally, transporting dangerous items need to devote extra attention for Kerry Logistic. It affects corporate image if Kerry Logistic fails to safely deliver customers’ products. The demand for explosive goods are too small in Hong Kong that discourages Kerry Logistics to invest in this kind of logistic service. Therefore, Kerry Logistic does not really want to involve in this industry.
Reference:
Kerry Logistics Network Limited. (2012). Kerry dangerous goods warehouse: Kowloon Bay.
Retrieved from: http://www.kerrylogistics.com/tch/OUR_EXPERTISE/IntegratedLogistics/W
arehousingDistribution/wdhk/images/Kerry%20D.G.%20Warehouse%20Kowloon%20Bay
_Dec2012.pdf
Q5 What is your core business in the future?
Kerry Logistic will focus on delivering pharmaceutical and healthcare service in the future as there is a huge potential growth in this industry. Providing expediency and safety services are what they aim at. They are now providing medical logistics solutions like delivering sensitive medical devices, health supplement, blood serum etc. As the pharmacy industry has really strict requirement and regulation regarding transportation, Kerry Logistic needs to maintain high safety standard when providing logistic solutions. “Complete Cold Chain Integrity” is a management that provides optimal temperature for every pharmaceutical product in a supply chain. Currently, Kerry Logistic is providing door-to-door distribution to its client while controlling humidity and storage environment using TAPA and GSP/GDP-certified warehouses. Moreover, providing value-added services like sorting, labelling, sample fulfilment are what attracts its customers. Kerry Logistic will put more effort on pharmacy industry so as to capture the new market demand on healthcare needs.
Reference:
Kerry Logistics Network Limited. (2012). Pharmaceutical and healthcare. Retrieved from:
http://www.kerrylogistics.com/eng/OUR_EXPERTISE/IndustrySolutions/pharmaceuhealth
/pharmaceuhealth.jsp
Q6 How do you determine the location of office in order to achieve an efficient network?
Selecting a right location of office are essential to operate effectively for Kerry Logistic. Normally, the office is located closely to their logistic centre. For example, Kerry Logistics’ Global Head Office is located in Kwai Chung, where it is the same location for Kerry Logistics Cargo Centre. The location of office needs to be synergistic with distribution centre or cargo centre. The closer they get, the better their communication will be. Besides, the cost should be considered when determining locations of office. Since it needs a huge space for office or cargo centre, Kerry Logistic would like own a low priced building. For example, Kwai Chung has plenty of relative low priced industrial buildings that meet Kerry Logistics’ needs. Moreover, the reason why Kerry Logistic decided to headquarter in Hong Kong is that Hong Kong provide quicker access to pacific region with sophisticated container terminal and international airport. While providing timely and reliable logistic service are always at Kerry Logistics’s first priority.
Q7 What perspectives would you consider when you offer tailor-made supply chain solutions for your customers?
Kerry logistics offers integrated logistics services to solve customer’s supply chain problems. In integrated logistics, all the solution are tailor-made specifically to their customers because the system they use are entirely different to each other. There are three things they need to consider. First, the cost budget. Because Kerry Logistics are professional in this industry, customers would like to reduce operation cost while adapting their services. Sec3ond, the system. The linkage of the system must be well-developed and well-connected. Last, to provide the best solution, they will design supply chain solution from their customer perspectives. Bases on different industries or customers, they will have various approaches on supply chain management.
Q8 How do you allocate inventories to different warehouses?
Kerry Logistics owned 12 warehouses in Hong Kong. The major warehouse and distribution centre are separately located in Fanling, Tsuen Wan, Sha Tin, Chai Wan and Kwai Chung etc. Kerry Logistics will arrange inventory in different locations based on customers' preference. At the same time, Kerry Logistics will help customer design the layout of warehouse so that it utilizes the warehouse spaces and improve inventory in/outbound flow. Customers will select a warehouse where it is close to their physical store. Since shorter distribution distance reduces the transportation cost as well as the product lead time.
Q9 There are lots of cargoes movements in warehouses every day. How would you ensure they can be delivered on time? How do you plan the delivery schedules?
Kerry Logistics serves and delivers the goods to the customers in different places. Moreover, on-time delivery is emphasized to fulfil customers’ need. Hong Kong, city with a complex transportation, is a bit difficult to ensure the transportation can be on time, also, some accidents will happen suddenly. To solve this problem, they have innovated the system to monitor and estimate the transportation process and time needed. While the customer enquire about the time required the good can be delivered to the store, the company can reply the estimated time to them immediately.
Once the accident happens, they will schedule the backup truck to take the goods, then send it to the target location. The transportation accuracy and plans are well maintained in Kerry Logistics.
Q10 What are your competitive advantages over your competitors in transportation market, such as DHL, FedEx, S.F. Express?
Different from the integrator (express companies), Kerry Logistics is the integrated logistics services provider, and they are providing value-added services, like labelling, packaging in warehouse to their customer rather than the express services only. Besides, the services provided from Kerry are tailor-made with the customers, and it is different to the express companies on it the customers need to adapt to the developed system or standard. Hence, they are not competing with the integrator (express companies) directly, and the tailor-made’ value-added service is one of the competitive advantages in Kerry Logistics.
Reflection
The trucks with Kerry Logistics logged are all round us. However, the express services, like B2C fulfilment is not the core business in Kerry Logistics. The company visit gave us a good opportunity to understand the different between Forwarders and Integrated Logistics Providers. In addition to the express services, Kerry logistics, the Integrated Logistics Providers are providing the value-added services (VAS) to their business clients (B2B fulfilment), like labelling, packaging. One of the value-added services, called Postponement, which transfer the standard products to fulfil local customers’ need, also brought us new insights on VAS. Besides, Kerry is helping their clients to manage the inventories and store replenishment, such as Gap. Those of the services because a good example for us to know more the operations in 3PL company.
Apart from the services provided, we got some ideas of Modern Logistics. Different from the past, Integrated Logistics Providers are now emphasizing the application of system and computer technologies. They will also develop the system together with their clients and smallness the information flow of in supply chain. For example, KerrierVISION is the IT systems using in Kerry Logistics.
We got a lot of insights on the operations of 3PL Company, and both of the experiences are important to our understanding on Logistics and Supply Chain Management.
