Logistics is one of the pillars of Hong Kong's economy. But facing fierce competition from China and international players, local logistics players are looking for a new edge. Managing supply chains becomes ever more critical.

With cheaper port services and expanding freight destinations, China is overtaking Hong Kong in handling cargo export and distribution. At the same time, international forwarders like FedEx, DHL and UPS are expanding their regional businesses by leveraging their global networks, advanced technologies and customized services to handle end-to-end supply chain processes.

This is according to Professor CJ Tan, interim CEO of Logistics and Supply China Management Enabling Technology R&D (LSCM) Centre at Hong Kong University. "In this region, the tremendous development in industrial expansion and economic growth impose insurmountable demands for logistics services," said Tan. "It is a challenge as well as an opportunity to the local logistics business."

"Hong Kong is losing its edge in handling cargo," said Wilson Lee, head of information technology at Kerry Logistics. "Like many local logistics providers, we are seeing that as our major challenge."

As one of the first third-party logistics (3PL) service providers in Hong Kong, Lee noted the company traditionally focused on the handling of goods. While the cargo handling business is shrinking in Hong Kong, Kerry Logistics has been expanding rapidly in China to capture the growing volume of mainland business. Meanwhile, the company is riding on its experience in the industry to re-position itself from handling cargo delivery to managing supply chain operations.

This new position means Kerry Logistics aims to be the 3PL that provides outsourced logistics management services, which includes managing various logistics suppliers, monitoring their performance, providing consulting services or even transforming their supply chain processes.

"There's a huge opportunity in the supply chain management services. Since many multinational corporations have reached saturation point in optimizing the manufacturing process, the next step will be to optimize the delivery process," said Lee. "To optimize the process as an outsourced logistics provider, we rely heavily on IT."

IT brings visibility

"Since we like to manage our client's supply chain operation, having visibility in every single step of the supply chain process is important," said Lee. "Only when we are able to inform our clients [as thoroughly as] their own logistic department will we be able to gain their trust and business."

Kerry Logistics has developed a strategy named Kerry Vision, which aims to bring visibility in three major areas: pipeline, cost and event management. Pipeline visibility means the ability to track and locate the cargo throughout the supply chain-a 3PL should also able to identify the logistic cost down to the per-item level.

"It's easy to identify the logistic cost of a pallet of goods, like jeans, from one destination to the other," he explained. "But to compare the logistics cost of a pair of jeans delivered to shop A with one [going] to shop B, is very difficult."

Throughout the supply chain, delays or hiccups are common. A 3PL should also be able to indicate and alert the impact of the entire supply chain process when an unexpected event occurs. For example, when freight is delayed, a 3PL must be able to identify the impact on the warehouse storage cost or the truck delivery schedule.

"There's always a domino effect in the entire supply chain operation, when delay in a single step can cause a significant impact to the entire process," Lee said.

As part of the Kerry Vision initiative, Lee said his company is currently developing a new application architecture to allow its systems to obtain information from other logistics providers on behalf of its clients. "Currently, we need to do a lot of coding in the application," he said. "But the new architecture will work like a web service and allow our system to better integrate with different logistic providers and obtain information more easily and quickly."