The development roadmap of a purchaser, as described by Frank, starts from the operational level, goes to the tactical level, and finally reaches the highest – strategic level. Frank believes that good purchasers are top negotiators, and long term and total cost thinkers, who understand their business and customers’ needs, and who can manage supplier relationships, select the best suppliers and speak the “languages” in fields such as legal, finance, engineering, marketing, etc. 

Everyone in the procurement teams has his or her specific training requirements in the annual purchasing training matrix. A series of training programs have been conducted by corporate purchasing, HR, other related functions and external experts in the topics of purchasing, logistics, legal, technical knowledge, communication, marketing, finance, leadership, etc.

Bekaert Engineering Company manufactures the equipments for the group. In 2006, there was no dedicated sourcing team in Bekaert Engineering. Due to the high workload for the equipment business in 2006 and 2007, the purchasing department in Bekaert Engineering had limited resources to source more local parts. A large amount of spare parts still needed to be imported from Belgium headquarters, wasting a lot of time, energy and money.

In order to expedite the spare parts localization, central purchasing and Bekaert Engineering purchasing department set up a joint team in November 2006. The team identified the top priority spare parts, grouped the list and assigned each group an owner. Then they made a plan and divided the project into seven steps in order to monitor the progress being made. A monthly project meeting was arranged within the team to review the status and action plans. The team also invited the equipment maintenance managers of the plants to join the project to better understand the real needs of the internal customers.

The project team identified a great opportunity: more than 6000 imported items could be localized and significant cost savings could be realized.  In June 2007, the project team had completed 12 groups of parts localization covering 200 parts with cost savings of 90,000 Euros. The project is still continuing. The Project team is exploring new parts for localization based on the spend analysis of spare parts consumption from Bekaert plants in China.

Through people development, cost saving projects, enhanced communication, and SAP system and process improvement, Bekaert China central purchasing has achieved great success. The cost savings for the first quarter of 2007 reached 2.78 million Euros.

As to the future development plan, as Frank mentioned, the people factor is the number one driver. He wants to build up a strong and lasting central purchasing organization and develop purchasing people’s competence in Bekaert China. The central purchasing team will continue to speed up the cost saving projects with out-of-the-box thinking. They have already completed the Contract Management System in SAP for general purchasing in Bekaert China, and they will develop the Supplier Management System for central purchasing suppliers.

Nowadays, people want things “faster, faster and faster”, and “cheaper, cheaper and cheaper”. To make it simpler, shouldn't “faster and cheaper” be our focus in the procurement sector?

Shanghai’s logistics infrastructure development and growth are trailed by the less tangible means of IT implementation, paperwork and safety. How these components develop will determine the industry’s future.

When it comes to logistics development, Shanghai’s infrastructure is impressive. What awes business people and visitors alike is not only the size of construction, but also the speed with which much of it has risen. The city that is primed to be China’s commercial flagship – and desires to be a hub for Asia Pacific – boasts two airports, two shipping ports, three train stations, dozens of designated industrial zones and a vast network of highways linking them together. All that has come into being during the last decade or so, and each aspect is still being made bigger, better or both.

Yet, beyond the concrete, steel and glass constructions, the existing logistics system in Shanghai and throughout China is still immature, say industry operators. Many cite factors that have not been fully realised or utilised by the logistics market as a whole or by official policies. These factors range from IT systems implementation to personnel management to safety – the ‘intangible’ factors.

Even if they are not as visually impressive as the Yangshan Port, these elements are equally essential to the efficiency of logistics operations. In fact, with added efficiencies created by, for example, freight management software or streamlined processing, businesses will achieve higher capacities and revenues, and, ultimately, the economy could experience additional, and higher-quality, growth.

In logistics terms, Shanghai is certainly no Hong Kong or Singapore. But, as it strives determinedly to reach their level of operations, it is suffering from its own growing pains – reaching a point where the ‘hard infrastructure’ is largely in place, but waiting for the ‘soft’ components to catch up. For now, the overall logistics system works, but most would agree that it doesn’t work well enough – yet.

One immediate area for improvement is the city’s port system. “To sharpen the competitiveness of the Shanghai port, we must greatly improve its software, meaning its functions as an international shipping hub, with support services in finance, insurance, maritime arbitration and other areas,” says Xu Peixing, Director of the Shanghai Port Administrative Bureau, speaking at a September maritime forum in Shanghai.

Shanghai is expected to handle 21 million 20-foot containers and 500 million tonnes of marine cargo this year – up from last year’s 443 million. The city’s port operator, Shanghai International Port Group, and regulators are working to offer tax rebates for exporters, to create opportunities for foreign firms to invest in port services, and to facilitate capital settlements offshore.

While many of those efforts would move Shanghai towards becoming an international-standard port, much of its current traffic remains regional or just domestic trade. Therefore, the operations of, for example, trucking services, 3PLs and freight forwarders will also require a similar scale of upgrading.

Put simply, the ways are there, but the means of transporting goods from, say, Shanghai to Chengdu is still far removed from an optimal efficiency level. Logistics professionals list a variety of issues, the most common of which relate to HR, industry regulations and, generally, processes.

Marco Leporati, Shanghai-based Director of Savino Del Bene, the Italy-based freight forwarder, places HR issues at the top of his list. “There are few personnel with international-oriented skills,” he says. Ian O’Connell, CEO of Grand Cyber, sees HR as an issue particularly in warehousing and transportation. “To find someone with a more sophisticated expertise is very difficult,” he says. Grand Cyber is a Shanghai-based independent consulting company focusing on logistics and supply chain.

O’Connell also notes that licensing can be a “complex process” due to the country’s decentralised regulations. “It’s different everywhere you go,” he says. “The regulations in the last few years have improved,” says Leporati, “but the problem is the difference between the declaration and implementation of rules.” He refers, in particular, to taxation and business registrations.

Yvonne Lim, BDP International’s Regional Manager, Sales & Marketing, North China, would like to see “more specific regulations, keeping in step with global transportation and logistics regulations and also safety material handling.”

Andy Weber, Managing Director of Kuehne + Nagel (Asia Pacific) Management, places particular emphasis on innovation in products and processes – and on IT investment. “The deployment of state-of-the-art information technology for the visualisation of complex logistics processes is increasingly important,” he says.

For Weber and others in the industry, the ‘intangible’ components are the key to not only forming the links in the logistics network, but also making the network run more smoothly.

Large foreign retailers like Wal-Mart have not been able to gain a foothold in China the way they have in other large markets, such as Europe and the United States, because of operational inefficiencies here. In talking about Wal-Mart and its recent rumoured purchase of a major retail chain in China, The New York Times says: “It has had high costs in China because systems for purchasing, transportation and distribution are clogged and complicated in a country that is still largely inefficient and without a strong national highway grid.”

IT solutions relating to logistics were among the highlighted components at the Transport Logistics 2006 exhibition held in September at the Shanghai New International Expo Centre. “Logistics is high-tech,” says Manfred Boes, President of the International Federation of Freight Forwarders Associations (FIATA), who spoke at the trade show.

“The continuous demand for more modern means of transport, for the control of complete and complex process chains and for the management of suppliers requires state-of-the-art communications and IT tools,” Boes adds.

“IT and technology are essential for visibility and also for management of customer information,” says Lim of U.S.-based BDP. “It will not only bridge the gap between the service provider and the customer, it can also be a warehouse of information which the customer can tap into to improve their overall growth.”
BDP’s services run from supply chain consulting to inventory control, and help clients manage everything from transportation issues to customs declaration and clearance. IT helps the company link with clients and its network of offices in 113 countries worldwide, while it also helps, says Lim, “to work with crucial industry partners like shippers, airlines and trucking services – without forgetting the most important linkage with customs in various parts of the world.”

Customs issues in China also top the list for Joe Li, but, for the general manager of Aprile Asia Ltd., they relate primarily to customs clearance and declaration. The Italy-based logistics company, with a Hong Kong branch and offices in Shanghai and Shenzhen, handles air and sea transport for overseas manufacturers of consumer goods and computer components. “It’s a pretty good system, but the process still takes a long time.”

Another challenge of operating in China is the basic issue of communication. In an industry that is about the movement of goods, information is crucial, says Li, “but the Internet speed is too slow, and we’re often disconnected.”

For Kuehne + Nagel, IT solutions drive productivity within the company, while “widening the range of products offered to the customer at more competitive rates,” says Weber. “With IT, we are able to improve the management of the whole supply chain. To a certain extent, growth has been driven by IT.”
The Switzerland-based integrated logistics company has been expanding its contract logistics services since acquiring U.S.-based USCO Logisitics in 2001, gaining access to that sector in the United States. Kuehne + Nagel operates in more than 100 countries, and, in China, it received a Class A license two and a half years ago to provide international forwarding and contract logistics. It employs about 2,000 people in 21 cities in China.

To manage a complex network of operations, it also employs a variety of IT tools, such as Order Management System (OMS), Material Management System (MMS), Container Management System, all of which help customers monitor purchase orders throughout the supply chain. These programmes fall under KN Login, the company’s own standardised IT solutions through which, says Weber, “the customer can efficiently manage the delivery of goods and the product offers full door-to-door supply chain transparency.”

For large-scale logistics companies, implementing IT to manage operations is practically crucial, and they also have the capacity, whether financial or technical, to build such solutions into their business. Such technology used to communicate with customers, process data and monitor the supply chain, helps to add value to what they offer to the customers. Logistics, after all, is a service industry.

“The forwarders – and I’m talking about the small- and mid-size forwarders – are not investing sufficiently in IT systems and software programmes,” says Nol van Fenema, Publisher and Editor of Payload Asia, a regional air freight publication based in Singapore. “That investment is coming, but it takes money.”
To similarly add value in their services, smaller companies find it just as important to utilise their software infrastructure to a maximum extent. Collyer Logistics – an integrated group of logistics companies based in Germany, India, Hong Kong and Shanghai (including 7 branches throughout China) – has been using off-the-shelf software to manage primarily financial aspects of its business. 

Off-the-shelf software, says Andy Russell, Collyer’s Shanghai-based Managing Director, provides basic, yet limited, functions for the company’s operations. “Such software works fine if your company fits their system,” says Russell, of IT solutions providers in general, “but it becomes troublesome if you want their system to fit your company.”

Ryder Logistics (Shanghai), a subsidiary of the American transport company, uses IT to help clients manage warehouse inventory and transportation systems and facilitate data exchange. “IT also plays a key role in implementing our clients’ business strategy, processes and operation,” says Christopher Woodward, the company’s Vice President and Managing Director, Greater China. For Collyer, which acts as the handling agent in Asia for smaller NVOCCs, “communication and information flow are integral to our business,” says Russell.

Netherlands-based Pon Logistics Solutions is engaged in the logistics flow, but focuses on the physical movement of goods. Officially registered in Shanghai since March this year, Pon sells and services materials handling equipment – its forklifts, industrial doors, docklevelers and warehouse racking equipment can add value to and boost the efficiency of a logistics operator, says Toon Nouwens, the Managing Director in Shanghai.

Pon has tapped a niche market within China’s logistics industry, and that market remains “very price-conscious.” Some companies will rather opt for cheap manpower over machinery. “Modern companies cannot do without proper materials handling equipment,” says Nouwens, adding that “we’re selling for the long-run,” during which the overall efficiency of moving and storing goods can be achieved.

Cyber Global, the logistics consulting company, helps clients – for example, in 3PL, consumer goods manufacturing or logistics investment – identify the appropriate software in the market. “A lot of the time, it’s what software to choose,” says CEO O’Connell. At times, says van Fenema, of Payload Asia, “The problem is that there’s too much choice. There’s no jack-of-all-trades systems software.”

In fact, companies are moving towards web-based applications to facilitate client communication and information management. Collyer, for example, expects to go online by mid-2007 allowing its 160 partner agents worldwide to access information from a web browser.

In fact, the International Air Transport Association (IATA) launched the e-freight and e-booking project in 2004 to help link airlines and ground forwarders. Van Fenema, of Payload Asia, who finds the development “very interesting and very challenging,” says, “What it simply means is that it’s trying to get away from the tonnes of paper that is being used still today, and do everything electronically.”

Van Fenema estimates that one shipment requires 30 pieces of paper before it can be delivered, and, if there are 100 shipments a week, then it not only becomes a cumbersome process, but also creates waste. Paper used in processing shipments every year could fill 39 747-400 freighters, according to IATA.

Where the work of people can be replaced, or at least supplemented, by technology is in ensuring the safety in various aspects of logistics. Operators, including Ryder and Geodis, employ GPS systems in the transport of goods and CCTV surveillance systems in warehousing, in addition to Electronic Data Interchange, or EDI solutions, which ensures data security in transfers of real-time information to customers. But, ultimately, insurance for all cargo in transport or storage “is a must,” says Woodward.

There are also several industry initiatives that businesses follow in order to provide optimal security, and to allay customers’ concerns. BDP, for example, is certified in the Operation Safe Commerce (OSC), an effort developed after 9/11 to heighten cargo security, and the Trade Support Network (TSN), begun by the U.S. Customs.

The Technology Asset Protection Association (TAPA) offers certification in maintaining security standards in storage and distribution of high-value goods. The Customs-Trade Partnership Against Terrorism (C-TPAT) is another U.S.-led security initiative protecting cargo flow. Several large-scale companies are now certified for both TAPA and C-TPAT.

As important as safety and security measures may be, it is still the quality of service provided that wins over logistics customers, whether in China or elsewhere. Ultimately, it comes down to personalised and dedicated people and processes.

What smaller companies like Collyer may lack in scale for sufficient technological investment, they compensate with their human workforce. “Small is beautiful,” says Russell, who believes that logistics companies are growing and consolidating at the same pace as the industry’s shipping lines. With the imaginative use of technology, he says, “we are able to give employees more time to talk to clients, rather than just permit them to handle more volume.”

“Improvement is expected but, in a service industry like logistics, IT should only be used as a tool and not as a replacement for personalised customer service. IT will only get easier to use with greater visibility,” says BDP’s Lim. “But it will still take 14 days for the physical cargo to move from Shanghai to Los Angeles regardless of how quick you can get the information or how accurate the information is. So, in other words, IT is only a tool for all service related industries. It is critical to have for higher visibility and better information flow.”

“[Logistics] is a matter that goes far beyond transportation from A to B,” says Boes of FIATA. “It is a matter of system solutions, be it for the automotive sector, the electronic industry or for supermarkets and department stores and consumer goods manufacturers.”