HIT (7 April 2014)

Hongkong International Terminals (HIT) is a member of HPH Trust, the world's first container port business trust listed in Singapore. HIT is also a part of HPH's global network of port and logistics operations, and continues to have access to services and resources enjoyed by companies within the HPH Group.

Situated in the Kwai Tsing container port area of Hong Kong - one of the busiest container ports in the world - HIT operates twelve berths at Terminals 4, 6, 7 and 9 and another two through its joint venture with COSCO Pacific Limited at Terminal 8 (East). HIT and COSCO-HIT handle over 50 per cent of Kwai Tsing's container port traffic.

Established in 1969, HIT has continuously set the industry benchmarks for productivity, efficiency and value-added services. Using modern management techniques, state-of-the-art computer systems and award winning IT applications, HIT has become the centre of excellence for the group, Hutchison Port Holdings. 

1. As compared with other container terminals in Pearl River Delta (PRD) like Yantian International Container Terminals, HIT does not closely link to railway. Do you consider it as a disadvantage? Why or why not?

   Although HIT does not closely link to railway, it is not a disadvantage. The geographical location of Hong Kong harbor already have a benefit. There is a natural deep water harbor in Hong Kong that can be berthed by huge ships. Some harbor in other countries are not available to large ship. This natural benefit could allow Hong Kong to become the main hub in world trading. Moreover, the customs declaration system in Hong Kong is convenient which could facilitate the logistic business also. Without railway, there are still many opportunities for the business of HIT.

2. Recent years the cargo throughput in Southern China region such as Shenzhen port keeps on increasing. Would this bring threats to port development in Hong Kong? How do the container port operators like HIT deals with the fierce competition to maintain its leading position?

     Although the export amount of some China container port operators are much larger than those in Hong Kong, the target market of them are different from Hong Kong. In Hong Kong, over 70 percent of export are indirect export with 30 percent direct export. On the contrary, the business of Shenzhen container port, for example, operates with 70 percent direct export with 30 percent indirect export. Therefore, the target markets are different and are not totally compete fiercely against Hong Kong. 

Furthermore, HIT is focused in continuously improving the efficiency. Even though, the area of Hong Kong container port is comparatively much smaller than that of China, the exporter still can handle large amount with cargo in a efficient way.

3.      Last year, labour dispute adversely impacted HIT’s corporate image and brought a huge financial loss to HIT. What are the procedures and policies for HIT to prevent labour strike in order to maintain normal operation of HIT and harmonious employer-employee relationship?  

HIT mainly have 3 policies for improving the relationship between employer and employee.

1. HIT always improving the facilities of labors. For example, in the recent year, they increase the number of toilets and the lounges of labor a lot. They also refurbished the lounge of labor.

2. HIT have a remote operation system. That's mean some of the labor no need to work on the goods yard, they only need to control the crane or other heavy machineries in a indoor site, which improving their working environment a lot.

3.HIT always increase the communication between worker and employer. They offer many briefings to both their employee and sub-contract workers.

4.      What contingency plans for the extreme situation of bad weather just like black rain extreme weather last Sunday?

Before the bad weather such as signal number 8 is hoisted, HIT will stop the empty cargoes transaction and the cargoes will be leashed with thick ropes. Also, HIT will inform ship company that container ship cannot be parked.
After the signal number 8 is hoisted, there is instruction that all staffs except emergency staffs must go to buildings until typhoon signal is off. HIT keep close contact with Hong Kong Observation to get latest weather information. 

5.      To run such a huge container port, we know that HIT have applied lots IT system such as Next Generation Terminal Management System (nGen), Operations Monitoring System(OMS), Radio Data System(RDS) etc. In order to well-organize it among those systems, which systems that your company value most that your company is proud of it?

Among those IT systems applying in HIT, nGen is the main system for HIT. nGen is a system invented by HIT and has been making a difference for customers since 2005. nGen controls the entire scope of terminal operations, including ship and yard planning, gate operations, and vessel operations; plus overall operations monitoring, equipment utilisation, productivity, and costs optimisation. By using nGen, HIT has highly improved its efficiency.

Learning Reflection

After visited HIT, we have learnt how to apply the high technology into logistic system such as nGen etc. Also HIT also is a important terminal in Hong Kong. We have traveled around the terminals and saw the different between the traditional and new technology. HIT is improving the working condition so as to improve the labor welfare.

source:
http://www.eurobrandsindia.com/blog/2010/04/04/market-entry-india-part-iii-exporting-to-india/
http://www.federalreserve.gov/pubs/ifdp/2005/831/ifdp831.htm
http://www.hit.com.hk/en/Innovation/Improving-Efficiency.html
http://hk.next.nextmedia.com/article/1231/17075618

Q1. Background information of 7-11

Seven-Eleven Japan Co., Ltd. (7-11) is an international brand that spreads more than 10 counties and owns more than fifty-thousand chain stores. You can browse the huge network below.

7-11 found on November 20, 1973. Up to early 2013, it has recruited more 6,000 employees. 7-Eleven, Inc. , SEVEN-ELEVEN(HAWAII), INC. , SEVEN-ELEVEN(BEIJING)CO.,LTD. , SEVEN-ELEVEN(CHINA) INVESTMENT CO., LTD. , SEVEN-ELEVEN(CHENGDU) CO., LTD. and Seven-Meal Service Co.,Ltd. are the major subsidiaries of 7-11.

Although 7-11 is an international brand, it associated with various styles and became localized to provide different kinds of services and products vary country by country. Say in Hong Kong, the size of 7-11 store seems smaller than that of Japan. However, it would provide products favorable to HongKongers, just like the fish meat shaomai, barbecued pork buns and some contonese restaurant’s style lunchboxes.

On the other hand, we can see some different products are offered in Shanghai.

The own brand drinks for 7-11.

The below products are found in Japan.

In fact, 7-11 applies the competitive strategy to provide a high-availability of diverse products with reasonable price and quality. To take advantages of high market share, 7-11 engaged to open convenirnt stores with high density. These convenient stores are combined with both the own and franchisee stores.

source:
http://www.sej.co.jp/company/en/g_stores.html

http://www.7-11.com.tw/shanghai/page02.htm
http://www.sej.co.jp/index.html

Q1. Find out more about the company background of FedEx

FedEx provides customers and businesses worldwide with a broad portfolio of transportation, e-commerce and business services. FedEx offers integrated business applications through operating companies competing collectively and managed collaboratively, under the respected FedEx brand. Consistently ranked among the world's most admired and trusted employers, FedEx inspires its more than 300,000 employees to remain absolutely, positively focused on safety, the highest ethical and professional standards and the needs of their customers and communities.

1. Business model

- Government-to-Business (G2B)

- Business-to-Business (B2B)

         E.g. DELL, CISCO

- Business-to-Consumer (B2C)

FedEx’s intranet included more than 60 Websites, created for its end users and in some cases by its end users.

       - Consumer-to-Consumer (C2C)

2. Competitors

The four leading companies in the international courier business were DHL, FedEx, UPS and TNT. Between them they held more than 90 per cent of the worldwide market. 

- UPS

UPS was founded in 1907 and headquartered in U.S. with larger market share in Europe and a larger share of its revenues comes from Europe. UPS is running with the B2C E-commerce market and lead in residential delivery services. UPS's primary business is the time-definite delivery of packages and documents worldwide. In recent years, UPS has extended its service portfolio to include less than truckload transportation (primarily in the U.S.) and supply chain services. UPS reports its operations in three segments: U.S. Domestic Package operations, International Package operations, and Supply Chain & Freight operations.

- DHL

In 1993, DHL announced a four-year US$1.25 billion worldwide capital spending programme aimed at investing in handling systems, automation, facilities and computer technology. DHL dominated the UK market and is the main competitor in the airfreight market which competing overnight delivery service.

- TNT

The headquarters of TNT is in Netherlands. TNT launched a Web Collection facility on the Internet and the world’s first global Price Checker service on its Website that allowed customers to calculate the price of spending a consignment from one place to another anywhere in the world. Besides, TNT launched QuickShipper and the express industry’s first dedicated customer extranet, Customised Services environment.

3. Customers

- General public

- Government

- Company (from large to small scale)

 4.  Service and products offering

FedEx combined the functions of materials management and physical distribution which concerned with inbound as well as outbound material flow, within companies as well as the movement of finished goods from dock-to-dock.

 a) Transportation

1.      Physical transportation (no matter document, small package or heavy freight to send)

2.      Coordination and control of storage

3.      Control the movement of parts and finish goods

b) Logistics (valued-added activities)

1. Order processing
2. Distribution centre operations
3. Inventory control
4. Purchasing
5. Production and customer and sales services (E.g. pack the shipments by using FedEx packaging, schedule the pickup, tracking the shipments)

Source: http://about.van.fedex.com/company-information

http://images.fedex.com/downloads/newcustomer/hk_english/serviceguide.pdf

Q2. List out the benefits of a virtual supply chain

1. Definition of Virtual supply Chain (VSC)

It is the Linkage of information and cash flow. Virtual means the connection of chain or network via electronic link, and it represents an organizational structure, which facilitates efficient and effective flows of both physical goods and information in the supply chain management. 

2. Systems

FedEx improve the virtual supply chain through different systems and technologies, the benefit bring form those systems and technologies are as follow:

a. Power ship programed
Power ship programed improve the efficiency and proprietary online services.It also provides some additional services, for example, storing of frequently used address, label printing, online package pick up request

b. Customers Operations, Service, Master on-line system, COSMOS
It has placing bar code (point of pick-up). The system also manage on-time information to different stakeholders, for instance, vehicle, people, package, routes and the others. It also can integrated information flow of shipped goods and transportation mode. These systems can improve the delivery cycle efficiency, shorten the cycle time and evaluating customer service levels.

c. EDI

EDI can build up one-to-one relationship with their customers. It will follow the points of raw materials and Provide management services, such as, order processing and related distribution. Interconnect and distribute information to all roles in supply chain linking to other parties in supply chain to improve the sources and procurement strategy. Improving, tightening and synchronizing inventory out of the system can squeeze the time so that can increases in customer loyalty and in customers. And also can raise the barriers to entry for competitors.

d. Global Operations Command Centre
It Provides efficient gathering & dissemination of real-time data and predict with greater accuracy the amount of inbound traffic. It prioritizes the hundreds of variables. It provides current & accurate information so as to reduce failure in the business.

3. Benefits

a. Costs reduction 
The cost to customers of using FedEx in 1999 was lower than it was 25 years ago. In 1999, they handled 60 million transactions per day, and saved FedEx the cost of 200,000 customer service employees. They had a virtual relationship with suppliers and the companies so that it can reduce administrative costs, payroll costs and switch to companies-(fixed cost) that provide low labor costs and a quality product. Also the resources and assets among the system suppliers will be contributed jointly under the direction of a supply chain captain and a coordinating team.

b. Speed up
It speeds up the product flows through the supply chain as they send new designs to suppliers and suppliers send these parts to the assembly companies. Finally, ship the finished products to distributors’ worldwide so that can reduce time required from the initial design, to production and then distribution and allow resources to be treated as commodities that can be lent, borrowed or traded. They can thus be flexibly consolidated, apportioned and allocated.

c. Diversity of suppliers
VSC allows a company to search for and use a wider range of suppliers. Although geography may separate them, they can still communicate electronically. It can benefit the company because more multiple suppliers means you can avoid emergencies in your supply chain and the more suppliers are available. It can high the flexibility.

Q3. Discuss the role of IT in FedEx’s Business Strategy

IT facilitate the globalization of business which could provide advantages to customers in the international market. The role could be considered as internal, external and global aspects.

For internal

1.      IT creates more business opportunities in Logistics Management

With the integration of internet and intranet system, company could redefine themselves to re-engineering the supply-chains and associate with e-tailing and business-to-business e-commerce. For instance, information sharing between departments in company or between organizations could enhance efficiency and reduce costs. Also, it enabled company to integrate with customer supply-chains which could improve customer services.

2.      Provide real-time information

FedEx has a Global Operations Command Centre which is a worldwide central nervous system of FedEx’s. It enabled the company to provide efficient gathering and dissemination of real-time data. When new information was entered to the system by FedEx or customer via the Net, related database was updated instantly and automatically with 24-hour, seven-day operation. With system, FedEx could further differentiate itself by generating high operational efficiency and provide excellent customer services.

For external

1.      Enhance relationships with customers

With IT, relationship between FedEx and customers could be enhanced by increasing the customers’ loyalty and switching cost. PowerShip System is a technology to provide add-value services. It provides additional services to the customers such as storing of frequently used addresses, label printing, on-line package pick-up requests or package tracking. These activities highly improve the efficiency and control for on-line services. Electronic data interchange (EDI) would be another useful technology. It helps to build one-to-one relationships with their customers. More benefits are matching supply to demand without wastage, providing management services and one-point access for customers. All these services could improve the customer relationship.

For Global Market

1.      Provide new service

FedEx Home Delivery is a new services which arose by the use of IT. The services could facilitate business-to-consumer e-tailing. Customers around the world could place order and raise requests online. Also, order checking number are given to customers to check parcel situation online easily by themselves. Moreover, customers could also receive an electronic signature receipt through the internet.

2. Expand the market

After acquiring Calibers system, market could be expanded by forming five subsidiary companies.

3. Allow global sourcing

IT allow global sourcing and choose alternatives parties in the global market. It lower the costs a lots.

Q4. Discuss the virtual integration of the supply chains without ownership

I.            The definition of virtual integration of the supply chains without ownership:

ü   Standardizes the system for the whole supply chain

ü   Eliminate the boundaries in the supply chain among the suppliers, manufactures and customers

ü   Seamless the Supply Chain

ü   Improving, tightening and synchronizing the various parts of supply chain

II.          The Technological systems & Applications:

III.        Benefits from the virtual integration of supply chains without ownership

1.          Ability to interconnect and distribute information to all the players in a supply-chain

Ø   Differentiate FedEx’s products & service

2.          Outsourcing the supply chain management function from FedEx

Ø   More partnership arrangement

Ø   Help partner to redefine sources and procurement strategies

Ø   Link other parties in the supply chain

Ø   Become FedEx core business

3.          Raise barriers to the entry for competitors

Ø   Increase customer loyalty and customers’ switching costs

4.          Control the movement of goods:

Ø   A product movement planner scheduled the order

Ø   more efficient and convenient

5.          Information:

Ø   Automatically up-date

Ø   real time, more accurate (e.g. movement of trucks & aircraft, inbound traffic, weather patterns

Ø   gathering and disseminating real-time data

Q5. What are the factors that put pressure on FedEx to consolidate its operations, while remaining customer-focused?

Rising fuel prices

Rising fuel price had severely impacted upon the Company’s net income. Cost of fuel charges large proportion of the variable cost of transportation. It affects the operating income a lot. According to the Annual report of FedEx, the average fuel cost per gallon kept rising from 2010 to 2012. Fuel expense increased 19% during 2012 primarily due to price increases. 

It put pressure on the Company to re-think its business strategy.

You can also check the most current price at this website:

http://www.GasBuddy.com/gb_retail_price_chart.aspx?city1=USA%20Average&city2=&city3=&crude=n&tme=96&units=us

The Internet Market and e-Tailing

The Internet changed the basis for competition for most businesses. 

Its low cost and high diversity of applications made it appealing and accessible. The expectations of its customers, the size of the company was of no significance. 

The impact of the Internet on FedEx was twofold. Firstly, it opened up opportunities in logistics management for FedEx as businesses were using the Internet to re-engineer their supply-chains. So long as customers were satisfied, it really did not matter whether the goods were warehoused or not, whether the goods came directly from a factory in some distant location or whether the goods had been made to order. 

Intensive Competition

The industry was loaded with companies, local and global, that provided a myriad of transportation services to a wide range of businesses. Although FedEx pioneered the Web-based package-tracking system, such systems became the industry norm rather than a competitive advantage.

Minimizing duplication of work &Customer Confusion

FedEx was trying to promote five different subsidiary companies with completely unrelated names and business logos under the FDX banner through distinctly separate sales and customer service teams. By consolidation, information could be shared across the business units and hence minimize  the duplication of work and better serve customers.

Reflection

Internet and IT systems did help FedEx to integrate the customer services and supply chain activities. The case study keep our awareness of the importance of IT systems and how it could contribute to a company's operations. Other than that, integrate the supply chain not only help to cut down the cost but also help to enhance customer satisfaction