logisym magazine - may 2015

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PRICE: US$15.00 MAY 2015 this issue q DEFINING WASTE IN THE WAREHOUSE ENVIRONMENT 24 q ASIA’S CONTRACT LOGISTICS ON THE MOVE 28 q USING TRADE DEALS FOR NON-MEMBERS 32 q MANAGING SUPPLY CHAINS PART 2 36 air | maritime | logistics | supply chain | e-commerce & technology | events | www.logisym.com THE OFFICIAL JOURNAL OF THE LOGISTICS & SUPPLY CHAIN MANAGEMENT SOCIETY main feature Managing Supply Chains and the Strategy Behind Them. Overcoming Challeges, Identifying Opportunities and Achieving Objectives.

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PRICE: US$15.00

MAY 2015

this issueq DEFINING WASTE IN THE WAREHOUSE ENVIRONMENT 24q ASIA’S CONTRACT LOGISTICS ON THE MOVE 28q USING TRADE DEALS FOR NON-MEMBERS 32q MANAGING SUPPLY CHAINS PART 2 36

air | maritime | logistics | supply chain | e-commerce & technology | events | www.logisym.com

THE OFFICIAL JOURNAL OF THE LOGISTICS & SUPPLY CHAIN MANAGEMENT SOCIETY

mainfeature

Managing Supply Chains and the Strategy Behind Them. Overcoming Challeges, Identifying Opportunities and Achieving Objectives.

cargo undivided

attenti n.”

Go ahead, challenge us.At Agility, we make it our business to pick-up as promised, ship as scheduled, track every move and deliver on time, every time. So we’re not only providing reliable solutions to deliver your freight, we’re managing every move down to the last detail.

...............................

© 2015 Agility Logistics AG

Agility is a leading logistics company with 22,000 employees taking care of our customers in more than 100 countries. Put your local office to the test - Email: [email protected]

“Give all my

www.agility.com

3LOGISYM MAGAZINE MAY 2015

features24 Defining Waste in the Warehouse

Environment28 Asia’s Contract Logistics Market on the

Move32 Using Trade Deals for Non-Members36 Managing Supply Chains Part 2

regular From the Editor 04 A Word From the President 06 Air News 08 Maritime News 10 Logistics News 12 Supply Chain News 20 e-Commerce and Technology News 24

242832

contents

36

cargo undivided

attenti n.”

Go ahead, challenge us.At Agility, we make it our business to pick-up as promised, ship as scheduled, track every move and deliver on time, every time. So we’re not only providing reliable solutions to deliver your freight, we’re managing every move down to the last detail.

...............................

© 2015 Agility Logistics AG

Agility is a leading logistics company with 22,000 employees taking care of our customers in more than 100 countries. Put your local office to the test - Email: [email protected]

“Give all my

www.agility.com

4 LOGISYM MAGAZINE MAY 2015

NGO THANH MINHExecutive Publisher

FRANK PAULPublisher PETER RAVENDeputy Publisher

JOE LOMBARDOEditor

ANH THUDigital Editor

CONTRIBUTORSDeborah ElmsCathy RobersonPetros N. ZenierisJoe Lombardo

FRANK PAULAdvertising

LUONG THACH ANHLayout

FAUZI LEEArt Director

NGUYEN THI THANHProduction Manager

GENERAL ENQUIRIESLogiSYM Magazine 50 Kallang Pudding Road, #06-06Golden Wheel Industrial BuildingSingapore 349326 Tel. +65 6746 2250Fax. +65 6746 2251 Email: [email protected] Website: www.logisym.com

COPYRIGHTAll material appearing in LogiSYM Magazine is copyright unless otherwise stated or it may rest with the provider of the supplied material. LogiSYM Magazine takes all care to ensure information is correct at time of printing, but the publisher accepts no responsibility or liability for the accuracy of any information contained in the text or advertisements. Views expressed are not necessarily endorsed by the publisher or editor.

from the editor

Dear Readers,

We would like to thank all our readers for the great feedback we have received to the publication of the first issue of The Magazine for Supply Chain Executives, the brand new industry journal, that brings you the latest developments in the logistics and supply chain industry. We are also pleased to have added another 100 new subscribers to the circulation list since the first launch. Should you know anyone who would like to receive a copy of the publication, simply send your request to [email protected]

This month we launch the 1st issue

of the Digital format of the magazine. It is expected to reach 80,000 subscribers, making LogiSYM one of the most widely distributed magazines of its kind. The content will follow the same structure of regular news updates, industry features and one-on-one interviews with leaders in the supply chain industry.

I am pleased to introduce new contributors to this issue. Industry experts who bring some very interesting insights to what is going on in the Asia Pacific Region. They bring views that will help us understand the impact of the changes in the supply chain dynamics.

There are 2 articles on China. A report features the evolution of Contract

Manufacturing and how India is gaining a bigger share in this space. And a report on the Complexity of the Logistics sector in China where operators and shippers need to continuously stay alert.

A focus on environmental concerns and the constant attention on the supply chain eco-footprint will have a regular space in our magazine. Last month we featured an article on Green Logistics in Asia highlighting the challenges & opportunities. This month we feature an article on Defining Waste in the Warehouse Environment – a reminder that there is always more that we and should do for the environment.

And we also have Part 2 of the regular Series on The Supply Chain Management Challenge which will feature – Understanding the Value of a Supply Chain Structure. Our mission is to bring a new dimension of information and knowledge to our readers, which will differentiate us from the many already existing publications. If you feel that you have something to share, do not hesitate to put pen to paper and send us your contribution. We hope that you enjoy reading the articles in this issue, as much as we have enjoyed putting it together for you.

Joe LombardoInternational Editor

on the way...

6 LOGISYM MAGAZINE MAY 2015

A Word From The President

Dear Readers,

Time flies. Over the last few weeks we have been receiving excellent feedback, input and ideas on how to improve on the first edition of the magazine and whilst “digesting” and working on these, I received a reminder that it would soon be time to send out our May edition.

Overall, given our diverse backgrounds, expertise, and geographic spread, the team has done an excellent job of getting the first edition of the magazine out to our readership in the Middle East and the Asia Pacific region. Success that we hope to build on.

The supply chain is the engine that drives, supports and enables any economy. Our industry therefore is always going though many disparate changes and is impacted by happenings around the globe. The recent developments (or lack thereof) of the Trans Pacific Partnership, equipment and drayage issues in North America, earthquakes in Nepal are just some of the topics that members have raised at LSCMS events and forums. How we deal with these issues is always interesting and oftentimes thought provoking. Sadly though, it seems that with the body of knowledge and the skills and expertise that exists, we do not seem to learn much from past experiences.

A Word from the President

Just yesterday, I was in a social setting where I was told that a past client is now looking at ‘new’ ways to handle reverse Logistics issues in India. This was a project that I worked on more than 10 years ago and it seems that this same client is now re-inventing the wheel and almost starting from scratch. Great if you are a consultant but not really encouraging to see if you are a supply chain professional.

At Logisym 2015, we had an excellent and in depth presentation on disaster Logistics but given everything we are reading about the supply chain issues, disaster recovery teams are facing in Nepal, it would seem that almost none or at least very little of the learnings we gained in the Tsunami’s, earthquakes and typhoons in the past decade has been retained, modified and used in Nepal.

Through our various conferences, events and this magazine in particular, we hope to re-inforce the body of knowledge that is already out there and available to professionals in our industry - whilst at the same time also being a platform for the promulgation of new ideas. If the message and information is readily available, chances are that more people will have access to and be able to use it.

This is an important role that publications like LogiSYM plays in our industry and it is only possible with your support. Thank you for making this idea of a magazine for the industry a reality and we hope to see this support continue to grow in the weeks and months ahead.

Raymon KrishnanPresident, The Logistics & Supply Chain Management Society

Raymon Krishnan

8 LOGISYM MAGAZINE MAY 2015

Under the terms of the new contract, dnata will handle cargo carried

onboard Virgin Australia’s daily flights to and from Sydney and Brisbane and Los Angeles, and the airline’s three flights a week connecting Sydney and Abu Dhabi. Virgin Atlantic is contracted to Virgin Australia and manages all of the airline’s long haul international cargo capacity.Virgin Atlantic Cargo’s team in Australia is relocating to dnata’s cargo terminal in Sydney as part of the deal. In 2014, Virgin Atlantic generated 18,000 tonnes of cargo for Virgin Australia, a

21% increase on the previous year, and this positive trend continued in the first quarter of 2015.Neil Vernon, Virgin Atlantic’s Vice President Sales International, said: “With the growth in business we are generating for Virgin Australia, as well as our own onforwarding traffic to and from Australia that connects with our network over Los Angeles, it is important that we ensure our customers receive the highest levels of service. dnata is an established and proven partner to Virgin Atlantic in the UK and we are confident they will meet

our high expectations in Australia. I would also like to take this opportunity to thank Qantas for all of their support in the past.”Daniela Marsilli, CEO, dnata Australia, said: “Virgin Atlantic is a key partner of dnata’s at many airports across our international network. We already support their operations in the UK, and Dubai, and I know we will exceed their expectations in Sydney, Melbourne and Brisbane. This contract is a vote of confidence in our teams’ ability to work efficiently and safely, across Australia and the world.”

Virgin Atlantic Cargo has awarded a cargo handing contract to dnata in Australia covering Sydney,Melbourne and Brisbane airports.

9LOGISYM MAGAZINE MAY 2015

Turkish Cargo strengthens its presence in Africa as well with the

launch of freighter services to Dakar.As one of the most prominent cargo airlines with its spectacular network growth, Turkish Cargo currently serves up to 43 destinations throughout Africa. While continues its expansion plans for Africa, it marked the 10th dedicated freighter service to the continent with the launch of weekly freighter services to Dakar as begin-ning from May 18th 2015.

These all-cargo flights will supplement the already substantial Cargo capacity currently available on the multiple passenger flights to the city as well. Turkish Cargo provides the most efficient connections to the leading production and commercial centers across the globe. Turkish Cargo serves to 268 destinations, including 51 freighter destinations, in 109 countries by its 10 freighters and the belly capacities of Turkish Airlines’ 264 passenger aircrafts.

By expanding to new destinations, Turkish Cargo brings its network and quality service to even more custom-ers, meeting the needs of its clients with a careful attention to detail that is part of all aspects of Turkish Airlines.

The 10th freighter destination of Turkish Cargo in Africa is Dakar (Senegal).

FLT NBR DAYS DEPARTURE ARRIVAL AIRCRAFT TYPE

TK 6323 1..... IST 07:10 12:05 LOS

TK 6323 1..... LOS 13:35 16:00 DKR A330F

TK 6323 1..... DKR 17:30 03:40 IST

Dakar freighter flight schedule:

* All times are LMT.

About Turkish Airlines:Established in 1933 with a fleet of five aircraft, Star Alliance member Turkish Airlines is a 4-star airline today with a fleet of 274 (passenger and cargo) aircraft flying to 268 destinations worldwide with 225 international and 43 domestic. According to Skytrax survey of 2014, Turkish Airlines was chosen “Europe’s Best Airline” for the fourth and “Best Airline in Southern Europe” for the sixth consecutive time. Having won in 2010 the world’s “Best Economy Catering Service” and in 2013 the world’s “Best Business Catering Service” awards, Turkish Airlines was this year awarded the world’s “Best Business Catering Service” and “Best Business Class Lounge Dining” prizes in the Skytrax survey. More information about Turkish Airlines can be found on www.turkishairlines.com.

About Turkish Cargo: Turkish Airlines, which has operated its first international air cargo shipment in 1936, is a 4-star airline company operating flights to 268 destinations around the world by its fleet comprising of 274 aircrafts (airliners and freighters) at the present. The Company, which has been maintaining its cargo services and operations under the sub-brand Turkish Cargo since the beginning of the 2000s, stands as the internationally fastest-growing brand offering air cargo service to the highest number of countries around the world. Detailed information about Turkish Cargo is available on the website www.turkishcargo.com .

About Star Alliance:The Star Alliance network was established in 1997 as the first truly global airline

alliance to offer worldwide reach, recognition and seamless service to the international traveller. Its acceptance by the market has been recognized by numerous awards, including the Air Transport World Market Leadership Award and Best Airline Alliance by both Business Traveller Magazine and Skytrax. The member airlines are: Adria Airways, Aegean Airlines, Air Canada, Air China, Air India, Air New Zealand, ANA, Asiana Airlines, Austrian, Avianca, Brussels Airlines, Copa Airlines, Croatia Airlines, EGYPTAIR, Ethiopian Airlines, EVA Air, LOT Polish Airlines, Lufthansa, Scandinavian Airlines, Shenzhen Airlines, Singapore Airlines, South African Airways, SWISS, TAP Portugal, Turkish Airlines, THAI and United. The integration of Avianca Brasil is currently in progress. Overall, the Star Alliance network currently offers more than 18,500 daily flights to 1,316 airports

Turkish Airlines, Inc.Media Relations

Air

10 LOGISYM MAGAZINE MAY 2015

MaritimeIf improved schedule reliability is one of the desired benefits of container line alliances, the jury is still out on whether the latest two alliances have met that goal.

Research from SeaIntel shows that while schedule reliability was down overall across the industry during March, the performance of the individual alliances varied greatly across trade lanes and alliances.

The 2M alliance between Maersk Line, individually the top performer on the Asia-Europe trades, and MSC, which was often found in the lower end of rankings in these trades, ranked as the best performer in the total east-west schedule reliability, according to SeaIntel – but only just.2M’s 67.5% schedule reliability put it slightly ahead of the CKYHE alliance’s 65.8%. But the other newcomer, the Ocean 3 alliance of CMA CGM, UASC and CSCL, could only muster 61.1%, putting it just behind the G6 alliance at the bottom of the pack in March.Viewed over the period in which the two new alliances have been operating, however, the data gives a slightly different picture of performance. The performance of the 2M alliance fell by 11.8 percentage points from just under 80%, whereas the Ocean Three carriers leapt 5.9 percentage points from 55% reliability.SeaIntel says it is still too early to determine whether Ocean Three’s performance was hampered by start-up issues in January and will continue to improve, or if this is the level at which it can be expected to perform.On individual trade lanes the picture varied. Transpacific services to the west and east coasts of the US were best served by the G6 and CKYHE alliances, both of whose performance increased over the period from January to March. The 2M alliance again slipped over the period, again by more than 11 percentage points, down to 24.1%.The Ocean Three alliance, too, saw some improvement, but from a base level from

which it would be hard to get worse. None of its schedule transpacific services arrived on time in the January/February period, but one of its 46 vessel calls, or 2.2%, arrived on schedule in February/March.Early start-up issues and US west coast port congestion make it hard to draw any conclusions on Ocean Three’s performance, and reliability across all alliances on this trade lane was dire. The industry average for all carriers was only 40% of vessels arriving within a day of their scheduled arrival.On the Asia-Europe trade lane, the 2M alliance was the best performing across the whole period, although the CKYHE alliance snuck ahead by 0.5 percentage points at the end of March, according to SeaIntel.“Before Maersk Line entered the 2M alliance, their average performance in this trade lane was 96.7% from March 2014 to December 2014, and in January to March 2015 it has been 91.1%,” SeaIntel said.“For MSC, the comparison looks much better, as their performance on average used to be 61.5%, but rose to 91.1% like Maersk Line. So clearly MSC has gained a much higher performance by entering into partnership with Maersk Line, while Maersk Line has seen a small drop.”It was too soon to tell whether this decline is due to temporary start-up challenges or is the new normal for Maersk Line, SeaIntel added.

Container throughput at Hong Kong in April tumbled 11.7 per-cent year-over-year, the second month of double-digit declines, data from the government’s Port Development Council showed.

Hong Kong handled 1.7 million 20-foot containers during April, the 10th straight month the port has recorded falling throughput. In the first four months of the year, Hong Kong handled more than 600,000 fewer containers than during the same period last year, a decline of almost 9 percent

year-over-year.The Kwai Tsing container terminals had a throughput of 1.37 million TEUs during April, down 10.5 percent year over year. Mid-stream and river trade containers reached 330,000 TEUs, which was a sharp 16.5 percent drop, according to the Port Development Council.It is a disturbing trend for a port that not too long ago was the world’s busiest. Once the first choice of shippers in the Pearl River Delta as the exit point for direct exports, the port cargo is now more than 70 percent transshipment containers as neighbouring Shenzhen terminals are closer to the factories and cheaper.The Cosco-HIT joint venture with Hongkong International Terminals saw throughput slide 6.6 percent in April as it handled 10,000 fewer TEUs that during the same month last year.Shenzhen is also suffering from China’s slowing exports. Yantian International Container Terminals throughput was flat in April while Cosco Pacific’s PRD volumes fell 2.1 percent during the month.But the worry is that the sustained volume declines in Hong Kong reflect a structural change. The terminals’ 16.2 percent drop in March volumes was a negative percentage that hasn’t been seen in years. And with more than 70 percent of the containers passing through Hong Kong classed as transshipment cargo, the boxes are counted twice, making the drop in actual containers even more significant.This shift in the cargo mix from direct exports to transshipment is challenging the terminals’ ability to move huge numbers of containers around the port. Serving large shipping alliances requires thousands of inter-terminal moves to reposition containers, and the port cannot cope during peak times, resulting in chronic congestion.Container terminals have been asking the government to help in providing more yard space that will allow the port to increase its handling ability and improve port productivity, a critical factor in the servicing of the 18,000 TEU-plus vessels. These giant ships create surges

11LOGISYM MAGAZINE MAY 2015

Maritime

in volumes with every port call and place immense pressure on the terminals.The reaction from the Hong Kong government has been sedate, but despite the government sponsored studies, industry reports and consultancy papers, the port’s future is no clearer than it was 11 years ago when the first master plan was published.Last year, the Transport and Housing Bureau commissioned its “Study on the Strategic Development Plan for Hong Kong Port 2030”. Compiled by consultants BMT Asia-Pacific, it found that weak volumes would continue for many years, negating the need for a 10th terminal. The bureau said CT10 was “not viable financially or economically.”Still, it took more than 10 years for the government to reach that conclusion, during which time the need for additional container yard space at Hong Kong port has grown exponentially. Critical levels of congestion were experienced during the last quarter of 2014, challenges that the industry believes could be addressed through government action.The Hong Kong Container Terminal Operators’ Association (HKCTOA) raised the issue last year in a white paper, which urged the Hong Kong government to to create a Kwai Tsing Port Zone. HKCTOA chairman Jessie Chung said the needs of the port had evolved with the changing cargo mix.“There has been a long-term structural change in the throughput handled in the port of Hong Kong, with a lot higher volumes of barge traffic and transshipment between ocean going vessels, while the truck segment has been shrinking,” Chung said. “Our priority recommendation to the government is an optimal use of the existing land sites adjacent to the port areas capable of increasing container storage capacity and also constructing additional barge berths,” she said. The problems and most achievable solutions have been clearly identified and pressure is mounting on the Hong Kong government to do more than compile port studies. Decision-making, however, is not one of the government’s strong

points, even though logistics has long been considered one of the pillars of the city’s economy.

Neptune Orient Lines recorded an $11 million net loss in the first quarter as both revenue and container volumes carried by its liner division, APL, de-clined sharply, accompanied by falling revenue per box.

The group revenue dropped 13 percent compared to the first quarter of last year, reaching $1.98 billion in the three-month period, a result of freight rate erosion, planned capacity cuts and the impact of U.S. West Coast port congestion.Almost 40 percent of APL’s revenue exposure is on the trans-Pacific and the carrier was hit hard by the congestion that created huge bottlenecks and delays. The port complex of Los Angeles-Long Beach continues to deal with the aftermath months after labor unions and the terminals reached an agreement.“The goup’s container shipping business continued to operate in a challenging environment. Nonetheless, APL has reduced its losses through capacity management, and improved cost and operational efficiencies,” said NOL Group president and CEO Ng Yat Chung. “While congestion in the U.S, West Coast is easing, the liner industry continues to face persistent over-capacity and uncertain global economic prospects.”But it was in the container volume area where the biggest surprises lay. APL carried 118,000 fewer 40-foot containers in the first quarter compared to the same period in 2014. It was a stunning year-over-year decline of 15 percent.After a string of losses, the carrier has been focused heavily on cost savings and an indication of its success on that front was evident in the results, said APL president Kenneth Glenn.“APL eliminated unprofitable capacity for better yield in the first quarter of

2015. We extracted cost savings from lower bunker cost and through more efficient land and terminal operations as well as vessel and voyage operations. These efforts help mitigated the impact of lower volumes and freight rates that we saw in the first quarter,” Glenn said in a statement.He said APL would continue to improve profitability by managing capacity, network design and cargo selection. “Network design will help to reduce complexity in our business, lower slot cost and improve reliability; and better cargo selection will improve roundtrip profitability in our key trades.”NOL does not give the net profit of each of its units, but reported APL’s core earnings before income tax of $13 million, a huge improvement on the first quarter of last year when the carrier recorded a core EBIT loss of $82 million. Another example of the cost management is that the earnings improvement was achieved even with cost of sales per FEU falling 8 percent year-over-year.The group’s supply chain management business, APL Logistics, achieved a stable first quarter result, with revenue of $406 million and core EBIT of $18 almost the same as the first three months of last year. This came despite strong headwinds generated by a strong U.S. dollar, as most of the logistics unit’s business is transacted in non-U.S. dollar currencies.“Despite a challenging environment, APL Logistics maintained a high level of business activity in the first quarter of 2015,” said APL Logistics president Beat Simon. “We remain focused on seeking growth opportunities through the verticals of automotive, consumer, industrials and retail in high growth markets.”This could be one of the last times APL Logistics will be included in the financial results of the NOL Group. NOL shareholders approved the sale of APL Logistics to Kintetsu World Express on April 15 and subject to regulatory approval the sale will go through by mid-2015.

12 LOGISYM MAGAZINE MAY 2015

The Phil ipp ines c u r r e n t l y lags behind its regional

competitors in South East Asia in terms of its logistics performance. However, Ti’s latest report - Philippines Transport & Logistics 2015 – argues that if policy changes can be made that encourage inward investment by manufacturers, and if this is supported by more investment – especially from the private sector – in infrastructure, then contract logistics and forwarding demand will surge.“Ti believes that if the Philippines can overcome many of the infrastructure difficulties it currently endures at its ports and airports and, especially, on Luzon’s blocked highways, then it has every chance of becoming a major growth region for manufacturers to migrate towards,” said Michael King, Ti’s Head of Operations in Asia.“It boasts a fast growing economy and a thriving consumer market driven by its growing middle class, remittances and the off-shoring of back office functions by many knowledge and financial institutions. As such, by removing existing logistics performance issues and the many obstacles to doing business in the country, Ti believes it is well placed to become a growing market across the various logistics sectors.“A lot will depend on the determination of whichever candidate wins the looming Presidential elections to drive through policy reform.”

Ti’s market sizing analysis looks at each key logistics sector using three growth scenarios over 2013-20. The realisation of a scenario (low, medium or high) is dependent on the Philippines’ Logistics Performance Indicator reaching a certain threshold. Vast differences in growth rates are predicted when LPI scores differ.At the upper range of LPI improvement, we believe the size of the Philippines’ contract logistics market increase from €478m in 2013 to €1,412 by 2020. The latter sizing would represent a CAGR of 16.7% over 2013-2020. However, should its political leaders fail to pursue business-friendly reforms, instead this would see its CAGR over the period increase by 10.5% to total €962m.Many of the same drivers of contract logistics market expansion will determine growth rates for forwarding. Ti concludes that the total freight forwarding market can grow by a CAGR of 15.1% over 2013-2020 under our ‘high’ LPI increase scenario, but only by 9% under our ‘low’ forecast.“Ti believe that if the next Philippines’ government embraces policy change to address is current LPI performance, then it will become a major regional growth engine for both contract logistics and forwarding,” said King.“The trend could be further enhanced by the free trade options that will become possible as the ASEAN Economic Community takes shape and current trade and population movement restrictions are removed or reduced.

“All of this should boost economic growth and transport demand. But the Philippines will only see the benefits of this if it takes steps to improve trade flows.”

Philippines’ logistics market is set for surging growth if reform agenda is pushed throughThe Philippines is poised to become a major growth market for logistics service providers over the next year, according to a new report by Transport Intelligence. But this will only happen if its political rulers take steps to improve trade flows, not least by investing heavily in the archipelago’s outdated infrastructure.

Logistics

13LOGISYM MAGAZINE MAY 2015

Group President Bengt Ekstrand says bringing a specific senior management focus on Oil & Gas is a clear signal of GAC’s intent. “Our aim is to be more strategic, more active and more successful in this sector.”“Over the decades, GAC has built up a broad suite of assets and skills in Oil & Gas,” he adds. “With Hill’s appointment, we will expand our footprint and impact as a global provider to this dynamic and demanding industry.”Hill joined the GAC Group in 1984 and held marketing and business development roles in Kuwait and Dubai before serving as Regional Manager for Asia Pacific from 1995 to 2001. Before his appointment as Executive Group Vice President – Commercial in 2009, he was Group Vice President for Logistics Services. His former duties as Group Vice President – Commercial are being taken over by Christer Sjödoff, previously Group Vice President – Solutions. Sjödoff’s appointment brings his

accountability for Group IT and the eco-friendly underwater hull cleaning system HullWiper under Commercial. Sjödoff has more than 25 years of experience in shipping, logistics and marine and has been with the GAC Group since 1993. After holding management and operations posts in the Middle East and Asia, he served as Regional Director for Asia Pacific and the Indian Subcontinent for five years from 2002. In 2007, he was appointed Group Vice President – Solutions, to develop strategic partnerships to meet the needs of the international maritime community.Ekstrand says: “The position of Group Vice President – Commercial is a good fit with Sjödoff’s energy and entrepreneurial flair. With him at the helm, we shall bring together under a single umbrella all the essential tools we need to develop our business products and services to serve the changing needs of our customers.” Both appointments are effective from 1 May 2015.

Blue Dart Express, India’s leading air express and logistics services provider, reported its net earnings in fiscal year 2014-15, which ended March 31, remained relatively flat compared to the profit in the previous year, despite significant revenue growth.

0 Fiscal 2014-15 net profit was Rs. 126.84 crore (about $20 million), up from Rs. 124.4 crore ($19.5 million), Blue Dart said in a filing to the Bombay Stock Exchange.The company said its income from operations soared 17.3 percent year-over-year in fiscal 2014-15 to $356.15 million on a consolidated basis.“The macroeconomic situation in the last two to three years has not been encouraging to support growth. Despite an adverse external situation and challenges, the company has been able to deliver a reasonable performance, aided by our clear focus on the e-commerce vertical, although the core verticals have not shown much traction,” said Anil Khanna, managing director, in a written statement.Operating expenses for the full year totaled $328 million, up 16.7 percent from $281 million, the company said.In the last quarter, from January to March, the company made a net profit of $5.5 million, up 13 percent year-over-year from $4.8 million. Quarterly revenue increased 13.5 percent to $90 million.“We all have to work as one team to increase revenue, reduce cost and improve efficiency, productivity and service quality. We are an insanely customer centric and highly people focused company,” Khanna said.Blue Dart, part of the Deutsche Post DHL Group, currently has a fleet of five Boeing freighters, and covers nearly 34,500 locations in India. The company has warehouses at 72 locations across the country, as well as bonded warehouses at Ahmedabad, Bangalore, Chennai, Delhi, Mumbai, Kolkata and Hyderabad.

Group Management changes further sharpen GAC’s business focusDubai, 4 May 2015 – Global shipping, logistics and marine services company, GAC, is further strengthening its strategic focus on the worldwide energy sector with the appointment of William Hill as its Executive Group Vice President – Oil & Gas.

Logistics

14 LOGISYM MAGAZINE MAY 2015

Logistics

Global Executive Search and Corporate Advisory firm Logistics Executive Group is pleased to announce that

Chief Operating Officer Darryl Judd has been recognised as one of Asia’s top 50 influential leaders in Supply Chain & Logistics by SCM Logistics World . Mr Judd has 20 over years of executive experience in Aviation, Supply Chain and Logistics Transport Industry. He has held executive positions within the airline & aircraft leasing/charter industry, major logistics organizations and is regularly called upon to manage key human resources consulting projects, supporting business to drive

change, particularly around M&A activity and international executive management.The prestigious award recognises professionals and practitioners from the Supply Chain & Logistics sector who have shown strong commitment and contribution in pushing boundaries to help raise standards, expectations and the profile of their companies within the industry.Darryl has been a Director with Logistics Executive, leading from the front with his trademark enthusiasm and commitment since 2002. This award acknowledges his passion, innovation and contribution to the industry as a

whole Darryl is an outstanding industry professional and role model for our younger generation, he inspires and motivates those around him to scale new heights in personal growth” said Kim Winter, Global CEO for Logistics Executive Group.services.Situated to the southeast of the Indochinese peninsula and with a 3,200 km coastline, Vietnam depends heavily on sea freight transportation for its external trade.With commercial and manufacturing activities developing much in the south, the ports along the Mekong River Delta and in HCM City have traditionally been

Logistics Executive Group COO Darryl Judd recognised as one of Asia’s Top 50 Influential leaders in Supply Chain & Logistics.

15LOGISYM MAGAZINE MAY 2015

Logistics

Marking 10 years in Asia, Logistics Executive Group has announced the release of its 2015 South East Asia Salary Guide for Logistics & Supply Chain Industry.The annually released report is the industry’s most comprehensive salary guide covering ASEAN’s five critical growth markets of Singapore, Thailand, Vietnam, Malaysia and Indonesia.“We thank our clients and the market place as this report has been compiled with their goodwill, covering a breadth of salary bands, positions and geographicalterritories in South East Asia. The analysis in this report, which covers Singapore, Thailand, Vietnam, Malaysia and Indonesia, comes from in-depth interviews with our clients, our annual EMS survey and statistical reference to our global databases” commented Carmel Perales, General Manager South East Asia.The release of the South East Asia salary guide comes hot on the heels of the India report which was released early in April and shows similar trends in upward salarypressures. The salary guide found that remuneration across the Asia-Pacific has increased on average by 6-7 percent with the highest increases being noticed in supply chain, trade compliance, sales and marketing related roles and supply chain planning activities.“Much of ASEAN continues to enjoy low unemployment and rising job vacancy

rates. We expect that the shortage of talent across the supply chain will continue for the best part of 2015 and early 2016 said Ms. Perales. “Ensuring employees remain loyal, proactive and engaged is an important factor, which cannot be overlooked, if employers wish to achieve a return on the investment they make in offering employees skill based training programs and in developing ‘home-grown’ talent”. “Employee engagement and skill development is still the most vital link to successful organisations retaining staff” said Mr Darryl Judd, Group Chief Operating Officer for Logistics Executive Group. He went on to say, “providing an emotional connection between employees and their organisation leads to improved performance (both individually and company), increased productivity, better staff retention, improved customer service and greater staff loyalty”.Acknowledging the need for hiring to be linked to career development as anemployee evolves the career within an organisation, Logistics Executive Grouprecently launched its world-class training platform, Logistics Academy.Logistics Academy brings together some of the industry leading education bodies such as CSCMP, Australian Logistics Academy, Chartered Institute of Transport and Logistics Singapore, Swiss Management Centre and LSCMS, providing logistics professionals with

an extensive range of pathway learning programs on one singletechnology platform.“Developing talent from within is still one the best way to retain staff and keep a competitive edge and feedback from our students and employers on their experience inside the Logistics Academy portal has been extremely positive” commented Mr Judd. He added “We’re finding that more and more organisations are drawing on Logistics Academy’s extensive range of programs from the CSCMP quick courses to accredited certification programs, degree qualifications and supply chain MBA’s as part of a holistic approach when developing their existing teams ormapping out career plans as part their hiring of new staff”.In summary, salary indicators are indicative of robust growth seen in the SEA region in 2015. The challenge for leaders in the region is to build on this success by creating improving on the skills and aptitudes of their workforce in order to stay competitive with their global counterparts in Supply Chain and Logistics across the board.

The report can be downloaded fromhttp://www.logisticsexecutive.com/news_and_insights/media_and_articles

Logistics Executive Group releases the 2015 South East Asia Salary Guide for Logistics & Supply Chain Industry.

16 LOGISYM MAGAZINE MAY 2015

Describing it as a “still-challenging market environment” for its Global Forwarding, Freight division,

reported revenues increased by 7.6% to €3.8 billion, although adjusted for currency effects, revenue increased by just 2.7%. In contrast, the division’s operating profit experienced a sharp decline to €17 million in the first quarter, down almost two-thirds compared with the €49 million achieved in the first quarter of 2014.DHL said this was due to “on-going margin pressure in the overall market, as well as direct and indirect costs related to the transformation programme. In the wake of the weak development, the new management of the division will intensively focus on improving the operating performance.“In parallel, the results from the countries that have piloted the transformation programme, as well as the impact of the worldwide organizational alignment implemented as part of the transformation, will be reviewed in detail. Based on this review, the future implementation approach will be defined,” DHL said.

This “new management of the division” comes following the decision late last month to part company with the division’s former CEO, Roger Crook, who “stepped down with immediate affect, for personal reasons”. Although the company declined to give any further explanation for his departure, the poor performance by the group’s freight forwarding division in the run-up to his exit suggest that his departure was more likely to have been for business reasons than personal reasons.Pending the appointment of replacement for Crook, Deutsche Post DHL Group CEO Frank Appel has taken on the responsibilities in a dual role, although for the operational management of the DHL Global Forwarding business, Renato Chiavi, has been named interim CEO, while Amadou Diallo remains CEO Freight, responsible for the group’s Road and Rail Transport services. Chiavi previously led the Ocean and Air Freight business of DHL Danzas between 1995 and 2006.Looking at the performance of the Global Forwarding business unit, revenue grew by 10.7 % to €2.791

billion, although excluding positive currency effects of €170 million, the increase was 4%. Gross profit, meanwhile, improved by 2.4 % to €587 million, although no figure was given for adjusted gross profit.DHL said air freight margins continued to be low compared with historical averages. “In light of the falling oil price, major customers engaged in aggressive competitive tendering in the second half of the prior year,” it said.“Moreover, a number of new products were introduced to the consumer goods market. This caused transport capacity utilisation and rates to increase on the very busy routes from Asia.” Air freight revenue in the first quarter of 2015 grew by 11.9 %, while gross profit increased by just 0.5 %.It said the 2.3 % rise in ocean freight volumes was “mainly a result of new business gains in the second half of 2014.” It continued: “Asia remains the largest growth engine. As in previous years, a short-term volume increase was again experienced just before the beginning of the Chinese New Year holiday. Ocean carriers continue to

A weak performance by DHL’s Global Forwarding, Freight division weighed upon otherwise solid first-quarter results published recently by Deutsche Post DHL, with the world’s largest postal, forwarding, and logistics group announcing it will review the reorganisation that is already underway within its forwarding business.

The group reported market-share losses in both its air and ocean freight businesses, with the company’s ocean freight volumes rising by just 2.3% in the first three months, while air freight volumes remained flat, at approximately the prior-year level (+0.3%).

Logistics

17LOGISYM MAGAZINE MAY 2015

control capacity effectively.”Ocean freight revenue grew by 12.2 % in the reporting period, but gross profit fell by 11.6 % “due to increased price competition”.Meanwhile, the division’s industrial project business saw weaker performance compared with the prior-year quarter, with its gross profit declining by 7.7 % compared with the first quarter of the previous year.Commenting on the performance of the division, CFO Larry Rosen said: “Our Global Forwarding, Freight division registered a weak performance in the first quarter against the backdrop of its ongoing, complex transformation. Despite the fact that the overall market environment is still challenging, we are naturally not satisfied with this development.“The new management team will therefore be strongly focusing on improving the operating performance of the business. At the same time, there will be a thorough review of the transformation programme, in particular looking at the results from the pilot countries and the impact of the organizational alignment. This will allow us to carefully map out the right implementation approach and decide on our next steps.”Revenue in the group’s Supply Chain division increased by 12.4% in the first quarter of the year to EUR 3.9 billion (2014: EUR 3.5 billion). Adjusted for currency effects, revenues rose by 0.8% over the prior-year period.The division was able to conclude new business contracts with a volume of EUR 260 million (annualized), particularly in the Automotive, Consumer and Life Science & Healthcare sectors. EBIT declined to EUR 53 million in the first quarter (2014: EUR 85 million).Planned, non-recurring costs for the Supply Chain optimization program were chiefly responsible for the decrease. The division intends to take advantage of the optimization program to increase margins to 4% to 5% by 2020 through further standardization, greater efficiency and improved

utilization of economies of scale.Meanwhile, the group’s Express division significantly increased both revenue and earnings in the first three months of the year. Revenue climbed by 12.5% in the first quarter to EUR 3.2 billion (2014: EUR 2.9 billion). Adjusted for currency effects, the increase amounted to 2.3%, held back by lower fuel surcharges. The main driver of the sustained positive trend in the Express division was further strong growth in the time-definite international (TDI) business, where first-quarter volumes rose by 7.1% compared with the prior-year period.The division performed even better with respect to operating profit: EBIT rose by 20.3% to EUR 332 million (2014: EUR 276 million). This again demonstrates the positive effects of volume growth. The EBIT margin increased to 10.2% in the first quarter compared with the prior-year figure of 9.6%.“To continue leveraging the division’s strong position, Express will continue to invest in its global aviation and hub network,” DHL said.And revenue in the group’s Post - eCommerce - Parcel division increased by 3.6% in the first quarter to EUR 4.1 billion (2014: EUR 4.0 billion). EUR 1.5 billion of that figure was attributable to the eCommerce - Parcel business, which continued to register dynamic growth to achieve an improvement of 13.7% over the prior year.The increase, including positive currency effects, reflects revenue growth of 25.8% in eCommerce, 12.1% in Parcel Germany and 4.8% in Parcel Europe.“This positive trend demonstrates that Deutsche Post DHL Group continues to benefit from its successful positioning in the high-growth e-commerce, parcel market. Innovations such as parcel boxes for apartment buildings and the recently piloted car drop delivery service continue to advance the Group’s leading position in the market,” the company said.In contrast to eCommerce - Parcel, revenue in the Post business decreased

by 1.7% in the first quarter to EUR 2.6 billion, once again illustrating the impact of structural change as the mail market shrinks. Operating profit in the PeP division rose by 0.8% to EUR 399 million (2014: EUR 396 million). This reflects the higher revenues in eCommerce - Parcel, which were partially offset, however, by lower Post volumes, higher staff and purchased goods and services costs as well as expenses especially related to the international expansion of the Parcel business. The Deutsche Post DHL Group as a whole further increased revenue in the first quarter of 2015. Revenue grew by 8.8% over the prior-year quarter to EUR 14.8 billion (2014: EUR 13.6 billion). Adjusted for positive currency effects, revenue also grew, with improvements in all four divisions contributing to an organic increase of 2.1%.It said this development reflected sustained growth in revenues and volumes in the international express business as well as in the German parcel business. The Group’s operating profit slightly decreased by 1.0% in the first quarter to EUR 720 million, primarily due to the weak performance registered by the Global Forwarding, Freight business and planned, non-recurring restructuring costs in the Supply Chain division.“We saw a moderate start to the year, as we expected,” said Frank Appel, CEO of Deutsche Post DHL Group. “Our strategy, aimed at growth in e-commerce and the emerging markets, in particular, is progressing.“At the same time, as we transition from Strategy 2015 to our new Strategy 2020, we are now consciously undertaking a number of specific measures. These measures will allow us to build a strong base to bring our strategic priorities forward. We are investing significantly to ensure that our four divisions are optimally positioned, even though this is having a temporary impact on our performance, as we previously discussed. Our overarching focus today is on the sustainable, profitable growth of our business.”

Logistics

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The Stifel Logistics Confidence Index for May indicated some improvements from April’s

decline. In particular, the six-month outlook appears bright as air freight gained 2.8 points to 63.4 and sea freight increased 2.1 points to 62.9.Overall, the total index increased 1.1 points to 57.4. Even though this is

down 0.6 points from one year ago, it is still 6.7 points higher than May 2013.Air freight continues to lead the optimism for both the six-month outlook as well as for the present. Sea freight however, remains troublesome for the present and while some ports have settled labour

issues, other issues such as the rise of the mega-vessel and larger shipping alliances are straining port operations. Congestion is a big problem for many ports and perhaps air freight is currently benefiting from the misfortune of ports.

Outlook looking bright for freight forwardersby Cathy Roberson

Logistics

The Perfect Logistics Disaster

After a series of massive earthquakes, as many as 300,000 people were at risk in late May as Nepal entered its monsoon season, according to one senior UN official.There was a lack of food, equipment, porters, funds and shelter to enable those most at risk to be helped.While working in Nepal earlier in the crisis, I realized the severity of the logistics shortfall and how this might play out when the rains made reaching vulnerable people and moving aid around

this Himalayan country more difficult. I also interviewed Suman Khadka, an extraordinary 19-year old who has taken it upon himself to feed and shelter the 586 families in his home village of Palchok in the Sindhupalchowk region.Working with a number of local and international volunteers all paying their own expenses, we have helped Suman help his village start erecting shelters And we have sent lorry loads of rice and medicine with trained practitioners.But more is needed - at the end of May, Palchok had not received any help from the UN or any government despite the road being open since 28 April, just three

days after the first huge quake.

I will be leading a third trip to Palchok on 5 June to help buy more food and shelter so Suman can help his village.

If you would like to help read more about Suman or the unfolding tragedy in Nepal please click here

http://www.gofundme.com/suman_storyOr here..https://www.facebook.com/sumansstory

- Michael King

19LOGISYM MAGAZINE MAY 2015

Air Freight

For the present, favourable currency rates probably helped boost the Europe to Asia and Europe to US trade lanes both noting big gains from April, up 7.0 and 3.0 points respectively (58.2 and 62.7). The only declining trade lane for the month was recorded for Asia to Europe, down 2.0 points to 52.6. The US to Europe lane was up 0.7 points to 48.1 to complete the trade lane list. This marks the second month in a row for contraction along the US to Europe lane, most likely due to the strong US dollar.By trade lane the outlook is positive for all, with Asia to Europe gaining the most points, 3.5 from the previous month to 67.1. Europe to US gained 3.0 points to 63.8 while Europe to Asia increased 2.5 points to 64.7 and US to Europe up 1.6 points to 56.7.

Sea Freight

The present situation for sea freight noted a worrisome decline of 2.6 points to 47.7. This is the first time since October 2013 that the present sea freight sub-index fell below the 50-level. Furthermore, three of the four trade lanes we track are currently below this 50-level, which means contraction. For the tradelanes Europe to Asia and US to Europe, this marks the second consecutive month of contraction. While the Europe to Asia lane actually noted a slight increase, 0.2 points to 47.6, the US to Europe lane declined even further, 5.0 points to 41.5. Meanwhile, Asia to Europe slipped below the 50-level for the first time since October 2013. It fell 4.7 points to 48.9. Europe to US remained the only lane above the 50-level but also declined, 0.9 points to 52.0.The six-month outlook was a bit more positive with all lanes noting gains. Europe to Asia noted the biggest gain at 3.0 points to 66.2 followed by Europe to US, up 2.7 points to 65.7. Asia to Europe was up 1.9 points to 64.0 and finally US to Europe increased 0.7 points to 4.7. For all lanes, the six-month outlook for sea freight was up 2.1 points to 62.9.

StifelLogisitcs Confidence Index: Total

Stifel Logistics Confidence Index: Air Freight

Stifel Logistics Confidence Index: Sea Freight

Logistics

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Thousands of logistics entrepreneurs are struggling with a serious shortage of employees since a rapid

increase of services demands, the Vietnam Logistics Institute (VNLI) has said.About 300,000 business entrepreneurs are involved in logistics services, providing jobs for nearly 1.5 million labourers across the country, of whom 40 per cent are from HCM City.However, these employees could only meet 40 per cent of the sector’s demand in Vietnam, so the country was facing a serious shortage of workers in the next three years, the institute has reported.In the next three years, those companies providing logistics services would need more than 18,000 workers, while other firms that provide their own logistics services would need more than a million more employees, it said earlier this week.A lack of vocational training and information was hindering the employment process for the sector, experts warned.Dr Le Van Bay, a logistics lecturer, said education and training in colleges and

universities had ignored the sector so only a few students studied logistics.Bay said the HCM City University of Transport and the Vietnam Maritime University had opened logistics faculties, but they faced increasing obstacles to improve the quality of training due to a lack of experienced lecturers.The logistics service industry in Vietnam has seen impressive progress in both speed and quantity, despite a shortage of capital, equipment and infrastructure.However, most logistics companies in Vietnam say they lack highly qualified staff.A logistics employer from HCM City complained his company was struggling to expand due to a shortage of high-skilled workers.He said most experienced logistic workers preferred part-time work, while new graduates were not qualified for the positions due to a lack of soft skills, including communication and foreign languages.A recent survey by a HCM City development research institute said 53.3 per cent of logistics companies in the city faced a shortage of high-skilled workers.About 30 per cent of those companies

complained they had to re-train their employees and only 6.7 per cent were satisfied with their labourers’ qualifications.Fast growingWhile the Vietnamese logistics sector is only in the early stages of development, demand for such services is growing fast, a development spurred by the country’s continued inflow of foreign direct investment (FDI).Following Vietnam’s 2007 World Trade Organisation accession, the country’s FDI level has been rising steadily.Accounting for more than half of the total accrued FDI, investment in manufacturing in particular has been driving the country’s demand for international transport and logistics services.Situated to the southeast of the Indochinese peninsula and with a 3,200 km coastline, Vietnam depends heavily on sea freight transportation for its external trade.With commercial and manufacturing activities developing much in the south, the ports along the Mekong River Delta and in HCM City have traditionally been the mainstay of Vietnam’s transport and logistics industries.

Labour shortages hold back Vietnam’s logistics industry

Supply Chain

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Large-scale mergers and acquisitions in the global transportation and logistics industry posted year-over-year

increases in value and number during the first quarter of 2015, PwC US reported.In the first quarter of 2015, there were 54 announced transactions worth $50 million or more, for a total value of $27.2 billion. Those numbers compared with 44 transactions worth $17.7 billion in first quarter of 2014, and 62 deals worth $21.6 million in the fourth quarter of last year.Transactions of more than $1 billion accounted for almost 55 percent of the total deal value for the quarter, PwC reported in Intersections, the firm’s quarterly analysis of global deal activity.Five $1 billion-plus deals in the first quarter totaled $14.9 billion and were largely driven by acquirers from Asia and Oceania. As a result of the substantially larger deals being done, average deal value increased by 46

percent over the fourth quarter of 2014. “The transportation and logistics industry got off to a strong start in the first quarter this year as deal value and volume continued its steady climb back from recent historic lows,” said Jonathan Kletzel, U.S. transportation and logistics leader at PwC.“The financial marketplace is booming with overall M&A at record levels and surging capital markets, which may make this a favorable time for transportation executives to consider acquisitions. The strong dollar making acquisitions cheaper for U.S. acquirers looking to invest in targets abroad, continued recovery by advanced economies and low global fuel costs are all good indications that the environment may be ripe for transportation M&A in the year ahead.” PwC said Asia and Oceania accounted for the majority of deal value and volume in the first quarter. Driven by activity involving China, Australia, Japan and Singapore totaling $13.5 billion,

the region accounted for more than 90 percent of total value of mergers and acquisitions of more than $1 billion.Reversing a recent trend, cross-border transactions gained significant momentum in the first quarter, accounting for almost 43 percent of all deals. Most of these involved acquirers from advanced nations. Most cross-border activity was driven by strategic acquirers looking to improve geographic reach and increase long-term growth, PwC said. “While trucking deals dipped slightly in the first quarter, we expect them to remain an area of focus for the industry given the highly fragmented nature in that mode of transportation and the prevalence of smaller players that are ripe for consolidation as bolt-on acquisitions,” Kletzel said. “As the industry seeks greater efficiency, and large to medium-sized companies look for growth rates higher than can be achieved through strategic means, these smaller companies may be prime targets for the larger players.”

Global logistics industry sees rise in mergers, acquisitions

Some shippers accepted the challenge and hit the ground running on April 1, 2013. Others adopted a wait and see approach, and are slowly and somewhat painfully realising that the change is here to stay and they must comply.Rather surprisingly, some have buried their head in the sand. This latter group must either be hoping that Singapore Customs are sleeping on the job (which they most definitely are not), or that somehow their broken customs arrangements are magically going to fix themselves. Either way they’ll be disappointed.Insanity: doing the same thing over and over again and expecting different

results. - Albert EinsteinMany shippers who are proving Einstein’s famous idiom time and time again will have already had friendly reminders, warning letters or fines from Singapore Customs. Nevertheless we still hear of far too many cases where the forwarder is charged with making a customs declaration, but the documents only arrive after the shipment has departed.The message to these shippers is very simple: you can outsource the responsibility, but the accountability rests with you. If your idea of compliance is handing a pile of documents to your declarant when the container is on the way to the port then you should not be

surprised if and when your shipments are held up for inspection, or even rejected.There is still hope, however. We are seeing a rising tide of shippers approach us for solutions, and we regularly deploy robust and reliable customs compliance regimes on a single-broker basis, which place the shipper in the driving seat, and the costs under control.By creating a single compliance environment (all forwarders, all modes, all declaration types, all in one place), TNETS delivers to your business the customs process control, the trade reporting and analysis, and global trade advice you need to keep your business flowing.

Singapore Customs introduced Advance Export Declaration (AED) on April 1st 2013, with full enforcement from October 1st 2014, and the ramifications continue to be felt. The 18 month transition period was intended to give shippers and forwarders time to reconfigure processes, adopt new systems, and align with supply chain partners. Not all businesses took advantage of this concession.

Supply Chain

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Exports to China grew to 44 million litres in the past year, valued at $193 million, with bulk exports increasing 77

percent to 5 million litres while bottled exports experienced record growth, up 15 percent to 39 million litres, according to data released by the Australian Grape and Wine Authority (AGWA).“There are a number of factors that have contributed to the growth we’ve seen in the last 12 months,” said AGWA Chief Executive Andreas Clark. “Certainly, the depreciating dollar has an effect but we’re also reaping benefits from the commencement of the Japanese free trade agreement, a rebound in the Chinese market from their austerity measures and improved economic conditions in two of our biggest export markets, the U.S. and the U.K.”China remains the No. 1 destination for premium Australian wines, with bottled exports above $6 per litre increasing 12 percent year-over-year to 7 million litres. But the lower priced segment was also booming and rose by 25 percent compared to the last fiscal year to 24 million litres.“‘Some of the strongest growth is seen

in the premium price segments,” Clark said. “While the above A$7.50 ($6) price segment accounts for just 5 percent of total export volume, the value share is considerably higher at 27 percent.”Asia continues to be a key driver of growth with more than half of exports in the $6-plus per liter segment shipped to Asian markets, rising 13 percent compared to the previous year, with the average value of exports to Asia standing at $15 per liter. Clark said the biggest Asian market was still China but Japan also recorded strong growth, as did emerging Asian markets such as Thailand, Malaysia, Taiwan and the Philippines.Exports to Japan grew 20 percent to a record 11 million litres as exporters made the most of the Japan-Australia Economic Partnership Agreement (JAEPA). Under JAEPA, the first of the bottled wine tariff cuts came in to effect on Jan 15 and the second cut was implemented on April 1, reducing the tariff to 11.3 percent, down from 15 percent. The tariff on bottled wine will be eliminated entirely within seven years while the tariff on bulk wines was immediately reduced to zero. This

zero percent tariff on bulk wine was reflected in the growth of its exports to Japan in the first three months of the calendar year, up 414 percent compared to the same period in 2014.All the Asian markets experienced double-digit growth in the last 12 months up to the end of March. Thailand was up 47 percent to a record 3.6 million litres valued at $11 million, Malaysia had record volume up 10 percent to 3.2 million litres and value up 25 percent to $30 million, Taiwan was up 33 percent to 1.7 million litres while value grew 66 percent to $12 million, and the Philippines exports were up 22 percent to 1.2 million litres, growing in value by 19 percent to $4.4 million.

Australia’s wine exports to China rose 20 percent in the 12 months ending March as China continued to shrug off austerity measures imposed in 2013 as part of Beijing’s corruption crackdown.

The loss narrowed to $9 million from $10 million in the first three months of 2014 as revenue shrank 9 percent

year-over-year to $683 million largely because of exchange rate movements.Damco “is on the same level as last year,” Maersk CEO Nils Andersen said as he announced that the Danish shipping and energy group’s first-quarter net profit grew to $1.6 billion from $1.2 billion, helped by a share sale and a sharply lower tax bill.Damco remained the group’s worst performing business, with the rate of return on invested capital deteriorating to a negative 11.2 percent in the quarter from 9.3 percent a year ago while the group’s overall figure improved to 13.8 percent from 10 percent. The company’s loss of market share accelerated in the quarter, with ocean

freight volume dipping by 2 percent and air freight traffic collapsing by 19 percent. The supply chain management business bucked the trend with volumes rising 6 percent. Damco’s ocean and air cargo figures are in sharp contrast to its leading rivals who increased their volumes in the first quarter. Panalpina’s ocean traffic grew 5.1 percent, and air freight traffic edged 0.6 percent higher. Kuehne + Nagel’s ocean traffic shrank by 0.7 percent as it put profit ahead of volume and air freight traffic grew 6 percent. Deutsche Post DHL increased ocean shipments by 2.3 percent and air cargo, 2.3 percent. Ceva’s ocean and air traffic grew 5 percent and 5.2 percent, respectively.Damco’s negative figures followed a 6 percent drop in ocean traffic in 2014, when the market grew by around 4 to

5 percent, and a 16 percent dive in air freight in a market that expanded by 3 to 4 percent.Andersen said Damco expects to make progress in cutting costs through the rest of the year, but it also needs to increase volumes.The focus in 2015 will remain on driving commercial competitiveness and capturing targeted productivity improvements “through a number of ongoing select initiatives,” the company said.A return to profit likely would place Damco among Maersk’s potential divestments as it focuses on four core businesses — container shipping, port terminals, oil production and exploration and drilling — according to industry analysts.

Damco’s reduced first-quarter loss came at a price as the Maersk Group’s ‘Supply Chain’ unit ceded more market share to its rivals.

24 LOGISYM MAGAZINE MAY 2015

“The ability to electronically exchange air waybills, house bills and status messages enables our customers to further automate and streamline processes, meet expanding carrier electronic communications requirements, increase visibility and improve performance. Customers benefit from simple and fast activation on Descartes’ GLN from CDM Software Solutions’ e-Commerce friendly software platform,” said Darrell Ortiz, CEO and founder of CDM. “Descartes’ GLN also provides our users with connectivity to air carriers around the globe to help them meet IATA’s electronic air waybill (e-AWB) initiative. Developed in collaboration with stakeholders across the air cargo industry, e-AWB aims to eliminate the majority of paper-based air waybills by 2016.”Descartes’ GLN is an industry leading solution for multimodal, inter-

CDM Software Adopts Descartes’ Global Logistics Network(TM) to Offer Comprehensive Air Cargo Connectivity and Messaging Services

Escartes Systems Group (Nasdaq:DSGX) (TSX:DSG), the global leader in uniting logistics-intensive businesses in commerce, announced that CDM Software Solutions, a provider of cloud-based operations and asset

tracking software for freight forwarders, export packers, exporters and other logistics services providers, is using Descartes’ Global Logistics Network (GLN) to provide its customers comprehensive air cargo connectivity and messaging services.

enterprise electronic data exchange. CDM is able to seamlessly connect its customers to the GLN and offer them value-added services to:

* standardize and automate air cargo and freight management operations;* provide real-time shipment status monitoring;* improve service by transmitting accurate and timely tracking updates to customers;* meet global trade requirements;* reduce transportation costs by minimizing carrier charges for security and documentation services; and* participate in key air cargo industry initiatives, including eFreight and Cargo2000.

“We’re pleased to partner with technology providers, like CDM Software, to augment their air cargo

connectivity capabilities to better serve customers,” said Scott Sangster, Vice President, Global Logistics Network at Descartes. “Today, the electronic movement of data between logistics parties can be as important as the physical movement of cargo itself. Using air cargo connectivity solutions, such as the GLN, enables more reliable planning and delivery of air cargo.”About CDM Software SolutionsCDM Software Solutions, Inc. was founded in 1988 to provide fast, efficient, user friendly software products, services and support for the international trade community, specifically freight forwarding, NVOCC, export packers, importers and exporters. CDM Software Solutions, Inc. is an U.S. Customs CERTIFIED Software Application Provider and IBM Business Partner, Descartes, Inttra and GT Nexus Partner that thrives to provide the most comprehensive and efficient cloud based software solutions to the international trade community. CDM Software Solutions, Inc. provides software solutions for Air Freight (Import, Export and Domestic), Air Freight Consolidation, Ocean Freight (Import and Export), Ocean Freight Consolidation, Truck/Inland Freight, Rail Freight, Export Packing, Global Asset Tracking with GPS, Logistics and Customer and Carrier e-Commerce (EDI/XML).CDM Software Solutions’ Global Compliance Module provides a comprehensive, cloud-based certified software solution for shipments departing and arriving to the United States, European Union, Canada, Japan, Singapore and China. CDM Software Solutions, Inc. is headquartered in Houston, Texas with sales offices in Chicago, Hong Kong and Singapore. Learn more at www.cdmsoft.com.About DescartesDescartes (TSX:DSG) (Nasdaq:DSGX) is the global leader in providing on-demand, software-as-a-service solutions focused on improving the productivity, performance and security of logistics-intensive businesses.

Technology

25LOGISYM MAGAZINE MAY 2015

Descartes has over 200,000 connected parties using its cloud based services. Customers use our modular, software-as-a-service solutions to route, schedule, track and measure delivery resources; plan, allocate and execute shipments; rate, audit and pay transportation invoices; access global trade data; file customs and security documents for imports and exports; and complete numerous other logistics processes by participating in the world’s largest, collaborative multimodal logistics community. Our headquarters are in Waterloo, Ontario, Canada and we have offices and partners around the world. Learn more at www.descartes.com.This release contains forward-looking information within the meaning of applicable securities laws (“forward-looking statements”) that relate to Descartes’ solution offering and

potential benefits derived therefrom; and other matters. Such forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, performance or achievements to differ materially from the anticipated results, performance or achievements or developments expressed or implied by such forward-looking statements. Such factors include, but are not limited to, the factors and assumptions discussed in the section entitled, “Certain Factors That May Affect Future Results” in documents filed with the Securities and Exchange Commission, the Ontario Securities Commission and other securities commissions across Canada including Descartes most recently filed management’s discussion and analysis. If any such risks actually occur, they could materially adversely

affect our business, financial condition or results of operations. In that case, the trading price of our common shares could decline, perhaps materially. Readers are cautioned not to place undue reliance upon any such forward-looking statements, which speak only as of the date made. Forward-looking statements are provided for the purpose of providing information about management’s current expectations and plans relating to the future. Readers are cautioned that such information may not be appropriate for other purposes. We do not undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any change in our expectations or any change in events, conditions or circumstances on which any such statement is based, except as required by law.

Technology

26 LOGISYM MAGAZINE MAY 2015

Defining Waste in the Warehouse Environment

Petros N. Zenieris

Solutions - Success:The vital pair in any business activities, which will ensure continuity and

progression of dealings in the market place.

Petros N. Zenieris, is a Singapore-based management consultant and trainer; ACTA certified.He established The Business Criterion in 2010 and provides consulting & training services to SMEs and Entrepreneurs in Singapore & within the S.E. Asian Region.

His professional career covers over 25 years accumulated management experience from Europe, W. Africa (Ghana & Nigeria) and Asia (China, Singapore and Malaysia). Petros currently designs his own seminars & workshops for Customer Services, Supply Chain Management (Warehousing-Inventory) as well as for selective Marketing topics (i.e. Competitors’ Analysis). His seminars & workshops have been conducted in Singapore, Malaysia, Dubai, Bangkok, Shanghai & Manila.His articles have been published in The

Straits Times newspaper and business magazines such as “Today’s Manager” of Singapore Institute of Management (SIM), “Entrepreneur’s Digest” of Singapore Association of SMEs (ASME) & LOG Dubai - Middle East, a Logistics & Supply Chain magazine. He conducts workshops & seminars with the Singapore Malay and the Indian Chamber of Commerce & Industry (SMCCI) & (SICCI) as well as with the MDIS.He is also an associate lecturer of STEi Institute of Singapore for the Diploma & Advanced Diploma in Logistics & Supply Chain Management.

DEFINING WASTE IN THE WAREHOUSE ENVIRONMENT

It has been described that the correct application of the Lean process in the warehouse

environment will not only ensure the optimisation of the three very important elements in any warehouse such as space, equipment and personnel, but it will also provide the needed assistance for achieving warehouse excellence by the continued elimination of the waste. An essential component in the application of Lean Process towards the warehouse excellence would be the ability to identify ways for the continuous elimination of the waste, which will lead to the improvement of the entire warehouse operation.

DEFINE WASTE:It could be defined as:* any activity that does not add value to the product,* any material or resource

beyond what the customer requires and is willing to pay for,* any material (finished, semi-finished or raw & packing) which unnecessarily occupies vital space in the warehouse.We usually identify two types of waste:1. Visible waste - these are items we can easily see, monitor and identify.2. (i.e. wrong, rejected or damaged goods) in any warehouse,3. Hidden waste - these are things we cannot easily see, monitor or identify immediately and at a glance in the warehouse operation.In most cases hidden wastes may be more significant and costly elements for the optimum operation in the warehouse environment.According to Taiichi Ohno (the father of the Toyota Production System) (Ohno -

1978) there are seven types of hidden wastes, as per below picture.Although these seven hidden wastes were initially aimed, designed, established and applied in the manufacturing environment, they could easily be applied to other essential areas as well such as in the warehouse operational environment.

27LOGISYM MAGAZINE MAY 2015

1. OVERPRODUCTION

It occurs when more than needed products are produced or produced earlier than they are required.Overproduction ties up money and warehouse space, as excess stock produced has to be kept in the warehouse and it could remain unsold for longer periods of time (which could lead to having close to expiring date stock!).Produce only what the customer wants and when they want it. (JIT) - Just In Time approach.

2. INVENTORY

It refers to finished and semi-finished goods or raw & packing materials. Any kind of stock with additional quantity than it is needed for a smooth progress from production to distribution to sales to the customer.Excess stock kept in the warehouse could easily create other types of wastes; as such stock might require peoples’ extra time & effort to move it around, to count it and to keep it in good and saleable condition. It could also occupy vital space in the warehouse for other products that are actually needed by customers. Do not hold “comfort stocks”, those that do not add value to your business.Stocks can easily go obsolete due to age related deterioration, change in design or fashion, new trends, preferences etc.

3. WAITING

It refers to instances where people are waiting for a work cycle to be completed before a new one is to commence. • People are waiting for pallets to place products on,• Products are waiting to be transferred to a pallet or to be moved away,• Bulk stacking or palletised stock to be re-arranged before new stock can be placed on it. Waiting is a productivity killer

and represents a major source of aggravation among customers in any warehouse operation.If some waiting is unavoidable, use the time to do some 5S work. Do Not Just Sit Around! - Utilise Effectively & Efficiently Your Time…

4. MOTION

It refers to all unnecessary movements of people during any warehouse operation. Most times it is confused with the waste of transportation. • During delivering or supplying times,• Work which involves lots of stretching or climbing on a bulk stack of products,• Unnecessary movements in trying to locate equipment (forklifts,

hand pallet trucks etc) left by other people in non-designated areas. Minimise fatigue by arranging people and their respective tools & equipment around the work station in such way so as to minimise unnecessary motion.

5. TRANSPORTATION

It refers to the unnecessary movement of materials, products and information within an operation.• Unnecessary distance between products’ release for loading or unloading and documentation point(s). • Collection of print outs or copies of invoice(s) from different offices.• Vehicles’ parking lots placed far from the unloading or loading bay.

Defining Waste in the Warehouse Environment

28 LOGISYM MAGAZINE MAY 2015

Defining Waste in the Warehouse Environment

6. RE-WORK

It refers to activities representing a duplication or replication of a process. Incorrectly packaged goods, damaged products, wrong invoicing, wrong stocks’ documentation etc. (i.e. half empty sealed cartons at the end of a batch production, individual containers containing less than the described volume etc)Preparing and loading a customer’s order with wrong products would lead to stock returns, hence it would involve a re-work.

7. OVER-PROCESSING

It refers to a warehouse process beyond any necessary standards.• A long chain of labourers passing or stocking products in the warehouse. • Doing activities in a complicated rather than a more simple way.• Moving a pallet with the hand pallet truck for some distance and then handing it over to a forklift for further transportation within the warehouse area.More recently in 2009, Bodek established and defined the eighth waste and called it

“Under-utilised talent of workers”. Liker in 2004 used a similar phrase such as “Unused employee creativity”. A great number of sources, mostly in the USA have now established the eighth waste and have labelled this as the “Unused human potential”.

8. UNUSED HUMAN POTENTIAL

It refers to the unused employees’ minds and creativity. In other words it refers to the under-utilisation of peoples’ skills and expertise.Determine how you could better involve your people in the warehouse continuous improvement process and how you could possibly make best use of their valuable time in your effort to provide excellent results.

CONCLUSION:

All seven or eight (as per your preference) wastes mentioned above represent a real threat to your optimum & successful warehouse operation if proper care is not applied.A careful and systematic application of Lean Process and especially the correct identification and elimination of all wastes from your warehouse environment will ultimately provide the needed solution for your long-term optimum operation. Over the period of years, it has been observed that more companies (SMEs and MNCs) have adopted the Lean Process and the application of the seven wastes in their warehouse operation and by doing so they have achieved significant long-term results.It has been said and it is worth mentioning again that in any warehouse operation there are two distinct options for the team to choose from;• Either organise your warehouse in a lean and well functioning way, which will lead you to better managing your space, equipment and personnel and generate more profits for the company, • or ignore the above and just generate more waste…

30 LOGISYM MAGAZINE MAY 2015

Asia’s Contract Logistics Market on the Move

Still, China and the rest of Asia-Pacific continue to see an increasing demand for logistics activity. In fact, the region is the second largest

contract logistics market in the world with an estimated 32% of the total market share. By 2018, its share is forecasted to increase even more and will surpass Europe to become the largest contract logistics market.An interesting finding from Ti’s report indicates that China’s accounted for over 57% of Asia-Pacific’s growth followed by India with 11.4% and Japan with almost 6%. By 2018, China is estimated to represent almost 41% of the region’s total contract logistics market.While much of the activity is centered in these countries, supply chain networks are spreading into other parts of the region such as Vietnam, Indonesia, and Malaysia, all noting double-digit growth, and creating a unique intra-Asia supply chain network.As China’s economy moves away from one of dependent on exports, some migration in manufacturing has moved into neighboring countries. Such examples include Microsoft’s Nokia unit which moved its manufacturing from China to Vietnam and also some Chinese manufacturers are outsourcing some of its production to near-by countries as well.As a result, logistics providers are expanding services into such countries as Vietnam, Indonesia and Malaysia to address these needs but in addition providers are also moving further into China to participate in not only the growing intra-Asia network but also to address China’s growing domestic needs.In 2013, UPS became the first global express delivery company to be wholly-owned in Vietnam. Since then

other providers have moved into this Southeast Asian country. Also in 2013, DHL Supply Chain announced plans to invest €10 million to expand and build new facilities by 2015. Since then, numerous logistics providers have expanded and/or opened new offices in Vietnam including Logwin, Yusen Logistics, Dachser, CEVA, Rhenus, DB Schenker and just recently US-based C.H. Robinson.Malaysia and Indonesia have also seen an increase in logistics providers moving into these two countries as well. Logistics activity includes Menlo Logistics and CEVA expanded warehousing solutions in Malaysia and Kerry Logistics and Puninar Logistics establishing a joint venture in Indonesia.As logistics providers move into various countries to support specific needs within those countries, solutions to connect these countries’ supply chains with each other are also on the rise. Among the growing solutions includes NYK’s expansion of its sea freight service linking Japan, Thailand and Vietnam. The company plans to use three of its 2,700 TEU containerships for this service. On the air side, DHL launchedan intra–Asia express air freight service to connect Thailand, Vietnam and Hong Kong, through Bangkok, Hanoi and Hong Kong respectively. In addition, in late 2014, DB Schenker introducedits ‘Asia Landbridge’ which offers road freight transport across the entire Asian region including China and the ASEAN countries of Singapore, Malaysia, Thailand, Myanmar, Cambodia, Vietnam and Laos.As Asia’s supply chain networks grow and connect, China remains a hub of activity. Its shift from an export-dependent economy appears to be a difficult one but logistics providers

Cathy Robertson

Asia’s Contract Logistics Market on the Move

Based on Ti’s latest report, Global

Contract Logistics, the global contract

logistics market increased 5.4% in 2014. The market was one in which saw considerable

economic improvement in

the US and Europe but one of slowing

economic activity in China.

31LOGISYM MAGAZINE MAY 2015

continue to invest more in this country and the way in which providers are now investing appears to be changing to meet the shift away from export dependence. Earlier this year, UTi Worldwide and Changjiu Logistics Co., an independent automotive logistics company in China, formed a strategic partnership. The partnership was established to serve the logistics requirements of global automotive original equipment manufacturers and suppliers in the automotive market in China. In addition, CEVA announced it had expanded its relationship with BP Zhuhai Chemical Company Limited (BPZ), a chemical company formed in a joint venture between the BP, a global oil company, and Zhuhai Port in China. Since 2002, CEVA has managed The BP Zhuhai warehouse.Japan’s contract logistics market is the second largest and perhaps the most mature in Asia. Representing almost 28% of the region’s logistics market share, its growth was slow at 1.9% in 2014. The country has faced economic problems for several years and has witnessed much of its manufacturing leave the country in search of lower cost locations. Also, the effects of the 2011 earthquake and tsunami are still impacting economic decisions.As a result, Japan has looked to connect its supply chain to other Asian countries and to other countries such as Mexico and the US where much of its automotive industry has established facilities.Among the recent logistics activity in Japan includes a joint venture between Pantos Logistics and Seino Transportation, a Japanese ground transportation company, to expand its international small parcel delivery business. SP EXPRESS Co., Ltd., is expected to be fully operational in Japan by the end of April 2015 and will be responsible for the import, customs clearance and delivery of small parcels shipped from China to Japan. Also, Lufthansa Cargo AG and All Nippon Airways (ANA), a Japanese airline, have entered a strategic air cargo joint

venture on routes between Japan and Europe.But what is perhaps most interesting concerning the Japanese contract logistics market is the fact that two of its providers, Japan Post and Kintetsu Worldwide Express have made significant acquisitions this year by acquiring Toll and APL Logistics respectively. These acquisitions appear to indicate the beginning of consolidation in the global logistics market and indeed we

have seen additional acquisitions in the European market following these two announcements with FedEx announcing its intentions to acquire TNT Express and XPO Logistics’ acquisition of French-based Norbert Dentressangle. Who’s next is anyone’s guess. India’s contract logistics market is the third largest one in Asia-Pacific and representing 8.2% of the region’s total contract logistics market. For 2014,

2014 Global Contract Logistics Market - €177,631m

2014 Asia-Pacific Contract Logistics Market - €56,879m

Asia’s Contract Logistics Market on the Move

32 LOGISYM MAGAZINE MAY 2015

Asia’s Contract Logistics Market on the Move

India experienced strong growth in its contract logistics market growing an estimated 13.8%. Logistics costs remain high in this country as infrastructure continues to be a huge concern. Government initiatives are introduced on a regular basis but the actual output from these initiatives continues to be lacking. Still, such industries as automotive and retail are experiencing demands for logistics services.Menlo Logistics expanded its automotive logistics operations in the country as it opened a 3,846 square meter after–sales spare parts facility in Dharuhera, near New Delhi in Haryana state. Another logistics provider expanding its solutions in India is APL Logistics. It, along with its joint venture partner,

VASCOR, introduced AutoLinxSM, a rail–based finished vehicle logistics solution. AutoLinxSM runs fortnightly services between the Indian cities of Chennai and New Delhi. As demand grows more destinations are expected to be added and the service´s frequency increased.Retail, perhaps more specific, B2C e-commerce, is gaining strength in India. Many e-commerce companies such as Flipkart and Snapdeal have invested in logistics services such as fulfillment and last-mile delivery. In addition, Deutsche Post DHLannounced in 2014 that it had chosen India to pilot its e-commerce business model for the Asia Pacific region. Its plans included investing more than €100m in the country over the next two years

to create an efficient infrastructure. Also, through its subsidiary, Blue Dart Express Ltd, DHL’s business unit, DHL eCommerce, would develop fulfilment centres, as well as options for delivery and payment. About 15 e-fulfilment centers are anticipated to be built to facilitate e-commerce business in metro areas including New Delhi, Bangalore and Mumbai. The global contract logistics landscape is changing rapidly to meet the shifting needs of business and consumers. Domestic and regional demand are on the rise in Asia but at the same time global consolidation efforts within the logistics market appear to be underway which will further change the Asia-Pacific contract logistics landscape.

33LOGISYM MAGAZINE MAY 2015

Managing Supply Chain

IF  YOUR  BUSINESS  -­‐  experiences  customs  delays,  or  -­‐  has  been  fined  for  late  filing  of  exports,  or  -­‐  spends  Cme  compiling  customs  reports,  or    -­‐  uses  a  bonded  warehouse  or  a  GST  suspension  scheme,  or  -­‐  wishes  to  take  advantage  of  Free  Trade  Agreements,  or  -­‐  needs  to  cut  down  on  Cme  or  money  spent  on  customs,  or  -­‐  just  wants  to  do  customs  beKer.  

FOR  CUSTOMS  CLEARANCE    AT  THE  SPEED  YOUR  BUSINESS  DEMANDS  

IT’S  TIME  YOU  TALKED  TO  

www.tnets.com.sg  

34 LOGISYM MAGAZINE MAY 2015

Deborah Elms

Because they are producing products out of Vietnam and Malaysia, I asked about whether the firm has been

following the Trans-Pacific Partnership (TPP) negotiations. Both countries are members of the TPP and many of the company’s final consumers can be found in other TPP members like Singapore and Japan.“No. We are a European company, so we didn’t think we could use the TPP.”This is actually a common answer, but it is not necessarily true. Many firms can take advantage of the TPP’s benefits, regardless of the location of company incorporation.Rather than worry about the ownership structure of the company, firms need to consider whether they “substantially transform” products in TPP members or deliver services or hold physical investments in member countries. This is not unique to the TPP, as the same thing holds true for other trade agreements like the ASEAN Economic Community (AEC), bilateral deals, and future regional agreements.Admittedly, this can be complicated, but the potential benefits to firms from getting this right can be significant. Other companies can also get cheaper supplies and inputs from using agreements like the TPP. Consumers in member countries can receive a greater variety of products at different price points as well.

Go back to the European firm. The factories in Vietnam and Malaysia make extensive or even exclusive use of raw materials sourced domestically. These inputs are then used to create the company’s final products. Trade agreements come with rules (Rules of Origin or ROOs) that are designed to keep non-member firms from taking advantage of the preferences granted by the deal. After all, if a non-member could simply trans-ship items through a member and get better benefits, the purpose of the trade deal would be lost for member country firms. Companies cannot just engage in simple repackaging, minor assembly, break down bulk shipments into smaller quantities or add several items together in a package to make a different item, to gain access to the agreement either. Instead, items must be substantially transformed in a member country to qualify under the rules for preferences.Here is where life can get complicated. Each trade agreement has different rules for what constitutes substantial transformation. The two main rules are value content (VC) and change in tariff heading or tariff classification (CTH or CTC). For most ASEAN agreements, governments have used regional value content (RVC) rules. This requires a certain percentage of the final good

Using Trade Deals for Non-Members

I met recently with a European company. Their firm has an extensive global footprint, including factories in Vietnam, Malaysia, Thailand and Indonesia.

Using trade Deals for Non-Members

35LOGISYM MAGAZINE MAY 2015

to be made with content (materials and labor) from member countries. Generally, the percentage is set at 40% or greater. In other words, what matters is not whether or not the company is registered in Holland or Bangladesh, but whether the final good contains at least 40% content sourced from within ASEAN. The final item has to be shipped to a member country. A firm cannot create products with ASEAN content for shipment under ASEAN preferences back into Holland or Bangladesh, since these preferences (benefits like lower

tariffs) only apply within member states.A second method of qualifying for preferences involves a change in tariff heading. Again, this can be slightly complicated, but put simply if the raw materials and other components or inputs are considered one type of product and end up being exported into other member countries with an entirely different tariff heading, the product can qualify for benefits even if the value content is not above 40%.As an example, consider the production of beer. If the agreement allows the use of CTC or CTH rules, the raw materials

of water and hops and so forth are transformed into a different product—beer. Since water, hops and other items are classified differently than beer, the product can be eligible for benefits under the trade agreement.It does not matter whether the company producing beer is headquartered in the country of production. What matters is the location of the factory (in a member country), the ingredient sourcing for RVC or transformation in tariff heading rules, and the final destination of the products (for sale in a member country).What sounds relatively simple can

Using trade Deals for Non-Members

36 LOGISYM MAGAZINE MAY 2015

be unnecessarily complicated at the outset, of course, as firms have to comb through agreements to see what rules apply for which products into which markets. For example, even CTC rules can vary as officials may select different levels of aggregation in tariff headings (2, 4 or 6 digit level changes in tariff classifications are required). For the European firm I was meeting, however, no matter how the rules are calculated, production with nearly 100% local content combined with final products that should qualify under CTC rules no matter how such tariff rules are calculated, the company ought to have no problems taking advantage of the TPP once it is signed and enters into force. Hence the company ought to be taking an active interest in, and planning ahead for, the entry into force of the TPP. Despite being a

European company in registration and brands, the local factory production from Malaysia and Vietnam should be eligible for the lower tariff rates coming in the TPP. In the sector for this firm, these benefits—particularly tariff reductions from current levels—should be substantial as well, since this industry faces substantial tariff obstacles in most countries in the region.

Deborah ELMSis Executive Director of the Asian Trade Centre in Singapore. The Asian Trade Centre works with governments and companies to design better trade policies for the region.

She is also a senior fellow in the Singapore Ministry of Trade and Industry’s Trade Academy. Previously, she was head of the

Temasek Foundation Centre for Trade & Negotiations (TFCTN) and senior fellowof international political economy at the S. Rajaratnam School of International Studies at Nanyang Technological University, Singapore. Her current research involves the Trans-Pacific Partnership (TPP) negotiations, the Regional Comprehensive Economic Partnership (RCEP), the ASEAN Economic Community (AEC), and global value chains. She has provided consulting on a range of trade issues to governments including the United Arab Emirates, Sri Lanka, Cambodia, Taiwan, and Singapore. Dr. Elms received a PhD in political science from the University of Washington, a MA in international relations from the University of Southern California, and bachelor’s degrees from Boston University.

Using trade Deals for Non-Members

Joe Lombardo

Understanding the Value of a Supply Chain

Structure

Introduction

In Part 1 of this series, you may recall how we discussed some of the common challenges attributed to managing supply chains effectively. We have recognised, that a key factor for dysfunctional supply chains, is themisalignment between the business strategy. The level of adequate and competent execution capabilities in the organisation, as another contributing factor that was identified in part 1.Managing the corrective actions in such situations, will involve a structured review process of the organisation, the vision and mission statements and the management approach to driving company wide integrated programs. This is a major process andwould undoubtedly create a high degree of disruption to the organisation. It will also present management with a formidable challenge and requires decisive leadership in the organisation to initiate and sustain such a programs. Whilst one might feel that this sounds so familiar, they will be hearted to know, that their company or circumstances, are not alone in facing such issues. Surprisingly there are many organisations that fail to embrace the knowledge and science of managing supply chains. This is also manifested in the HR statistics of how few companies haveinvested in supply chain competencies and strategic

management education and training in a consistent manner across the whole organisation.By cherry picking and applying snippets of supply chain practises,one does not really harness the full supply chain methodologies, thatare able to integratethe supply execution capabilitiesto the business strategy. In this part of the series, we will examine the value of deployinga supply chain structure into the business model, irrespective of size, market sector or the goods or services involved. Most business leaders are very familiar with business strategies, business models, product strategy, marketing strategies, investmentstrategy and many other strategies relevant to the business functions. But these strategies, campaigns, product launches and the like, are plans on what and when to do something that will bring revenue and profit to the Enterprise. But what about the how ?

The Business Strategy

What is crucial to achieving the goals ofthe business strategies, is the implementation and execution of the strategic plans.The various strategies need to be executed in a coherent and synchronised manner or will be ineffective in their deployment. The more the strategies, and the increased business complexity, the more critical will be the timing, methodology and accuracy of the execution model.Managing the execution processes of a company business strategy, and sustaining the business model, would suggest the need of an overall “super” strategy to make it all happen. This would seen quite evident, but it is not always clear on how it would be done and who would be responsible for theexecutions of this activities. This is in fact the 1ststep to appreciate the Value of a Supply Chain function

38 LOGISYM MAGAZINE MAY 2015

Managing Supply Chains Part 2

within an organisation, aclearly defined and structured system to enable the execution of the business strategies and model. In the illustration below, is illustrated a traditional business structure, in the classical chain of command. The introduction of a supply chain function would seem quite easy to bring it into organisation, which could be a dedicated supply chain function working with all the other functions – as show below. This approach would be easy to implement and create the path of least resistance, disruption and cost. A solution that many in the organisation would well subscribe to, as it involves minimal change to their departments, authority and responsibilities. But before too long, managing sucha structure would prove to be very difficult, yield low results and eventually collapse. It will fail because the only change made, was to create a new horizontal functional layer into the existing organisation, and give it the name of supply chain. The expectation that the existing vertical organisation would follow the directives and coordination of this new function, is a dream and not sustainable.Note: All the charts are designed for illustration of the point of principle and are not intended to represent the optimum supply chain model or structure.

What is a Supply Chain ?

At this point, we should pause to reflect on the definition and components of what makes up a supply chain and then to appreciate how it becomes relevant to an Enterprise.There are many interpretation and definitions of what is a supply chain. Some imagine it to be a complicated methodology where you need tohave highly skilled and intellectual graduates to understand it and work it. Whilst others confuse or interchange terminologies, to make simple things sound more sophisticated than what

they really are. The simple and unambiguous definition of a supply chain, can be described as,A series of tightly interconnected & related processes that form the backbone of an Enterprises’ capabilities to transform and deliver its revenue generating goods and servicesto its Customers.To illustrate this fundamental definition, let us consider atypical business model. It starts, with a Customer order, and ends with a Customer delivery, and in between we have an internal process of transformation. In chart below we show this business model, as having 3 major blocks in the company business cycle. As this model is fundamental to understanding the basics of the supply chain management, we must focus all the company activities that revolve around the 3 major blocks of a company’s businesscycle. When one can visualiseacompany business cycle, modelledin this manner, it will be clearer to see how the business strategy, can be effectively executed. Creating a logical structure around the company business cycle,will enable all the organisational functions to better identify their roles in the model. The processes and mechanisms to connect the 3 major blocks of the business

cycle, becomes the supply chain execution model. Having set-up the fundamentals of the supply chain model,each of the major blocks will have a clear visibility of where and how their operational functions are linked and contributeto the overall supply chain. By re-focussing the company vertical functions in this manner, we are now able to better definethe processes,monitor the effectiveness and measure performance of the supply chain.

Connecting the key points of the business model

Put very simply, the supply chain is the “Blood Line” that connects in a structured manner,the activities of all the relevantfunctions of an Enterprise in coherent and interconnected flows. However, these supply flows, do not happen by chance, nor work on their own in isolation. But they are driven by vital stimuli to sustain the overall performance.It is the synchronised coherence to the business strategy that creates the positive supply chain flows. The business functions in the supply chain, are the basic enablers and will provide the operating capabilities to execute the business strategy.

39LOGISYM MAGAZINE APRIL 2015

Managing Supply Chains Part 2

In the chart below we show the revised Enterprise chart, where we put at the centre, the business cycle and the supply chain execution model. Wethen connect the execution model to the vertical functional organisation and to the business model, that supports the business strategy.If the enablers are aligned, balanced and driven by a competent leadership in all functions, it will bethis momentum that will lead to an effective and successful execution of the business strategy.An effective supply chain structure should not be complicated nor mysterious in its design and operation. The value of the supply chain should include all the elements relevant to the business model, scalable in its deployment, agile to adapt to changes in the business and operating conditions, whilst able to consistently deliver the required supply chain performance targets relevant to the business strategy.Note: The charts contained in this series, are designed for illustration of the points of principle and are not intended to represent the optimum supply chain model or

structurefor any specific company or industryComplicated organisation charts, elaborate job titles and strange job positions,that have evolved over time, sometimes also due to legacy reasons, often confuse and distort the real supply chain functions. When reviewing a supply chain structure, it would be very productive, to discard all the elaborate organisation charts, job titles and thepeculiar job positions andimagine what the organisation could be if we applied the basics that we described above. This approach will facilitate and engage the management and key decision makers,in a complete re-think of a relevant functional organisation. Anorganisational focus,must be made on the core functions, that are relevant and mandatory to create the necessary capabilities to deliver the results. These are the resources and competencies that should be embedded into the organisation, that can create the capabilities necessary to achieve the Enterprise’s deliverables. In Part 4 of this series, we will discuss in more detail optimising people and competencies in supply chain organisations.

The value and benefit from a structured supply chain function.

Understanding and using the business cycle &supply chain model overview, we are now able to developa more effective organisation and functional sub-organisations This would synchronisebetter the existing resources and remove the non-contributing elements from core supply chain activities. A structured approach also enables a better alignment of relevant resources and will also reduce operating costs and improve overall profitability. The cost reductions that we expect from this process, will be the elimination of overlapping activities, wastages in time & effort but also create a leaner more responsive organisation able to adapt to changes in market conditions. This will enable the management to identify the critical processeswithin each contributing function, which can be defined, measured andcontrolled. The result would give a more visible supply chain model, with performance indicators in a coherent structure.It is the collective optimised KPI results of each business block, that gives the comprehensive visibility of the overall company performance. Part 6 of this series will be dedicated to Performance Management of the supply chain where we will expand the above discussion points further.In part 3 of this series, we will be looking at Building and Sustaining an Enterprise Supply Chain Model. This will be relevant to all companies, large and small, mature and growing, as the business models are never static, and so are supply chain continuously evolving. It is crucial that refreshing the supply chain effectiveness can only be derived by sustaining the necessary capabilities, that are relevant to delivering the Enterprise’s goals.

40 LOGISYM MAGAZINE MAY 2015

Managing Supply Chains Part 2

42 LOGISYM MAGAZINE MAY 2015

June SUPPLY CHAIN LOGISTICS PROFESSIONAL NETWORKINGJUNE 11TH, 2015 (6.00PM – 8.00PM)HONG [email protected]

SCM LOGISTICS WORLD 2015JUNE 23-25TH 2015SINGAPOREwww.terrapinn.com/scm

PROCURECON ASIA 2015JUNE 23 – 25TH 2015SINGAPOREprocureconasia.wbresearch.com

13TH ASEAN PORTS AND SHIPPING 2015JUNE 24 - 25 2015JAKARTA, INDONESIAwww.transportevents.com/ForthcomingEventsdetails.aspx?EventID=EVE116

MODERN WAREHOUSE OPTIMISATION AND PERFORMANCE MANAGEMENTJUNE 11 – 12TH 2015 MELBOURNE, AUSTRALIA

August

CHINA PHARMACEUTICAL SUPPLY CHAIN MANAGEMENT SUMMIT 2015AUGUST 20-21, 2015SHANGHAI, CHINAwww.bmapglobal.com/pscm2015

SUPPLY CHAIN LOGISTICS PROFESSIONAL NETWORKINGAUGUST 20TH, 2015 (6.00PM – 8.00PM)HONG [email protected]

16TH QUEENSLAND SUPPLY CHAIN AND LOGISTICS CONFERENCEAUGUST 20-21ST, 2015Brisbane, Australiawww.qldscc.com

September FIATA WORLD CONGRESSSEPTEMBER 8-13TH 2015TAIPEI, TAIWANwww.fiata2015.org

6TH GLOBAL SUPPLY CHAIN ‘THOUGHT LEADERSHIP’ SUMMITSEPTEMBER 29TH-30TH 2015ATHENS, GREECEwww.2015gscs.com

CSCMP’S 2015 ANNUAL CONFERENCE SEPTEMBER 27-30TH, 2015SAN DIEGO, USAwww.cscmp.org/annual-conference

October

GLCS LOGISYM MALAYSIA 2015OCTOBER 7-8TH 2015KUALA LUMPURwww.glcs.logisym.com

INDONESIA TRANSPORT SUPPLY CHAIN & LOGISTICSOCTOBER 7 – 9TH 2015JAKARTA, INDONESIAwww.transport-supplychain-logistics.co.id

INTER AIRPORT EUROPE 2015OCTOBER 6 – 9TH, 2015MUNICH, GERMANYwww.interairport.com/europe

CHINA INTERNATIONAL LOGISTICS AND TRANSPORTATION FAIR 2015OCTOBER 14-16TH, 2015SHENZHEN, CHINAwww.scmfair.com/en

SUPPLY CHAIN LOGISTICS PROFESSIONAL NETWORKINGOCTOBER 15TH 2015 (6.00PM – 8.00PM)HONG [email protected]

November SUPPLY CHAIN LOGISTICS PROFESSIONAL NETWORKINGNOVEMBER 17TH 2015 (6.00PM – 8.00PM)HONG [email protected]

BIOPHARMA INDIA CONVENTION 2015NOVEMBER 3-4TH 2015MUMBAI, INDIAwww.terrapinn.com/conference/bio-pharma-india

ASIAN LOGISTICS AND MARITIME CONFERENCENOVEMBER 17-18TH 2015HONG KONGwww.almc.hk/en

POWER LOGISTICS ASIA 2015NOVEMBER 18-19TH 2015SINGAPOREwww.powerlogisticsasia.com

Schaefer Systems International Pte LtdP: 65/6863 0168 · [email protected] · www.ssi-schaefer.com

Increasing Warehouse Efficiency with the Right Warehouse Equipment

Businesses that require highly efficient distribution centres need precise logistics processes in order to optimise costs and ensure seamless goods flow. With our wide range of ingenious automated warehouse storage, transport and order picking systems, your warehouse can achieve compress storage together with maximum productivity and optimum material flow. From consulting services, steel construction, control technology through to in-house IT and software development, we are committed to deliver the best solution to make your processes more efficient.

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