| What I Learned in China? |
Key to any logistics operation in China is to have the right national and
local governmental licenses. While you can have national authority to
operate in China for warehousing and road transportation, you must have
local licenses to bill and collect for services. DHL Supply Chain is a
wholly owned national operation with local business licenses in 19 major
cities. Specific hygiene licenses for food warehousing, co-packing and
transport are held in Shanghai, Beijing and Guangzhou. Regional road
transportation licenses are held for Beijing, Tianjin, Shanghai, Hefei and
Suzhou. Obtaining the necessary licenses in China is doable, but requires
working through tedious, bureaucratic challenges. Often you need to obtain
a local business license and then a second local license for transport or
special warehousing operations. Once issued, licenses are not transferable.
As a result, DHL’s corporate portfolio is lined with legacy Exel and Danzas
licenses. For its forwarding and express operations, it still has joint
venture operations.
To sum it up, having the right licenses is mandatory for operations in
China. Working with a logistics provider that understands the process and
already has operating licenses can speed market entry. DHL (Exel) started
in 1994 and leads wholly owned foreign enterprises in this threshold
capability.
Not surprisingly, DHL’s customer base includes dozens of major global
companies. Consumer, retail and healthcare customers include Tyco, Johnson
& Johnson, Abbott, Hershey’s, Unilever and Mars/Masterfoods. Automotive,
industrial and technology customers include Kodak, Lenovo, Nokia, Ford,
Samsung and Philips. Spare parts logistics customers are Hewlett-Packard,
Lexmark, Lenovo, Motorola and Fuji-Xerox.
For its automotive customers in China, DHL Supply Chain provides inbound
support to manufacturing and distribution parts services. Key customers are
Honda, Bosch, Changan, Ford-Changan, Volkswagen, and Peugeot.
Retail solutions reflect the specific needs of DHL Supply Chain customers.
These include some contract manufacturing and temperature controlled
operations in multi-client and company operations. Co-packing, tagging and
labeling are standard value-added services. Certain consumer retail
customers receive extended services. For example, in Beijing, DHL Supply
Chain sets up Starbucks’ stores and replenishes them when they are closed
during the graveyard shift.
For technology customers, DHL provides equipment checking and other
technical support services. Inbound manufacturing support functions are
done for Hewlett-Packard and Lenovo among others. DHL Supply Chain manages
service parts logistics and reverse logistics. A similar set of solutions
are differentiated for healthcare customers. As necessary, specialized
engineering assistance and temperature controlled responses are provided.
DHL Supply Chain’s solution sets are carried over to its Hong Kong, Macau
and Taiwan operations. Technology solutions are provided for over 20
customers in Hong Kong and Macau. The customer list expands to include Sun
Microsystems, Heidelberg, Manroland, Cisco and others. In Hong Kong, DHL
Supply Chain has 440 employees and 27 locations. DHL Supply Chain (Exel)
has been in Hong Kong since 1970. Retail and consumer goods customers are
also prevalent.
Operations in Taiwan are more limited with 150 employees in 18 locations.
Facilities are usually small. The majority of customers are concentrated in
the technology sector, although significant operations are conducted for
retail/consumer goods and automotive aftermarket customers.Within China, DHL Supply Chain supports its contract logistics operations
with an extensive domestic transportation network.The network connects the key Eastern China locations of Beijing, Wuhan,
Guangzhou and Shanghai from North to South. East-West routes run between
Shanghai and Wuhan and further on to Chengdu. There are regional
cross-docks in four key cities plus Tianjin. There are also 10 sub-regional
cross-docks. Kewill’s iTrans is the TMS (transportation management system).
DHL Supply Chain is able to do merge-in-transit and optimize its network of
800 cities. As an extension of this capability, supply chain network design
and facility location can be done.
In 2008, DHL Supply Chain handled 321,000 shipments totaling 75,000 tons in
its China network. Some transport is done on DHL equipment but most happens
on the vendor fleet. Chinese regulations are slanted in favor of single
owner and small trucking operations, which makes it uneconomical for a
company like DHL Supply Chain to try to run a large fleet. In cities like
Beijing, DHL Supply Chain conducts pickup-delivery operations using a
centralized dispatch.
Contract logistics IT capabilities revolve around Manhattan’s ILS.NET and
WMOS products for its WMS (warehouse management system) and the Kewill TMS
mentioned above. The Manhattan products have multi-language capability, EDI
(electronic data interchange) interfacing, central hosting and are RF (radio
frequency) enabled. It should be pointed out, however, that RF is used
sparingly in China as opposed to the U.S. and Europe. Most often, manual,
paper based receiving, putaway and tendering are standard. The consistent
argument is that the return on investment of RF systems in warehouses is
hard to justify. The software itself in China has all the capabilities one
would see in DHL Supply Chain (Exel) locations in the West.
For example, the WMOS 5001 software provides FEFO/FICO stock management,
ASNs (advance shipment notices), POs (purchase orders), serial number
tracking, cycle counts, batch control, label generalization and other
functions. Labor management, RFID and web visibility are available in a
support module.
The Kewill TMS has contract and tariff management, KPI (key performance
indicator) monitoring and planning functions. It provides bill, settlement
and other functionality. In short, it’s good for design and planning but
limited in some transportation execution pieces.
Richard Armstrong, November 9, 2009;Armstrong & Associates,Inc.
Key Personnel:
Michael Trinkus, Strategy Manager – Greater China
Victor Chong, Vice President Business Development – Greater China
Hudson Hua, General Manager Area Operations Contract Logistics
