Issue: Jul 2005


Logistics gives the competitive edge



Logistics plays an increasingly important role in the business activities of shipping lines like Mitsui OSK Lines (MOL). Masahiro Tanabe, general manager of the logistics business division talks to Automotive Purchasing News about the trends.

Logistics plays an increasingly important role in the business activities of shipping lines like Mitsui OSK Lines (MOL). Masahiro Tanabe, general manager of the logistics business division talks to Automotive Purchasing News about the trends.

Automotive Purchasing News (APN): Can we start with a definition of logistics?
The concept of "physical distribution" started with simply transporting goods from point A to point B. Nowadays, however, we recognize that logistics means more than that, and it has become a key strategic element, helping companies gain a competitive edge in every aspect of their business, from manufacturing to sales.
Each company has its own strategies in sales and production. There's no advantage in having the same strategies as others. So the strategies vary depending on company's business activities, and logistics is a part of these corporate strategies.
APN: Define strategy.
Originally, the word "strategy" is derived from strategos, meaning "general" in ancient Greek. In other words, it refers to "what the leader thinks". From that perspective, logistics refers to strategies of today's business leaders to ensure success.
APN: How does MOL logistics fit into this picture?
MOL's logistics business helps customers of MOL and the MOL Group create the optimum logistics solutions in line with their sales or production strategies.
Examples include Ocean Consolidation Business (OCB) - a consolidation service at loading ports, say in China, on behalf of U.S. buyers, and Vendor Managed Inventory (VMI) - destination-side inventory control on behalf of vendors (sellers).
Thirty-five group companies under the control of the logistics business division offer a wide variety of services. Our division's strategic planning group carefully directs all group companies to ensure the appropriate allocation of our strengths, and the network management group assists them through our consolidated management.
In effect, the role of the logistics business division is like that of a control tower, or the quarterback of a football team, to maximize the power of the MOL Group.
APN: What is the extent of MOL's logistics network?
Consolidated revenue of MOL's logistics segment is as much as 50 billion yen (with 18 consolidated companies), and the total revenue of the 35 main group companies is about 110 billion yen (FY2002, from April 1, 2002 to March 31, 2003.)
We have 14 companies under the "MOL Logistics" logo, and many other companies that serve specific customers in specific areas.
Our network in Japan includes companies such as: MOL Logistics (Japan), Co., Ltd., Japan Express Co., Ltd (Yokohama), Japan Express Co., Ltd (Kobe), International Container Transport Co., Ltd., and the MOL Osaka Nanko Physical Distribution Center Co., Ltd.
These companies are part of an immense MOL Group network with more than 2,500 employees in 162 Group companies (excluding agencies) in 53 countries.
APN: What areas have you focused on recently?
We have developed a business platform generally called "buyer's consolidation." With this system, consolidator working on behalf of a buyer, or a major retailer in the U.S./Europe, like Wal-Mart, consolidates goods from multiple vendors in Shanghai, Hong Kong, or wherever at hub ports and loads them into container(s) bound for their final destination.
We call this service the "Ocean Consolidation Business" (OCB).
Let me explain some more details. A U.S. retailer buys products from 10 small vendors in South China. Cargo control would be very inefficient if each vendor transports its own 10m3 cargo individually. If "someone" arranges two 40-foot containers for cargo of 100m3 (10m3 x 10 vendors) at a loading port, transport costs are greatly reduced and cargo control is much easier. MOL is that "someone," serving as a consolidator.
The key word of this service is "IT". We developed the Starlink system for OCB service to help customers trace cargo from its order to the delivery by not only container units but also stock keeping unit (SKU) (the minimum unit in cargo). Since the service is developed on a real-time, Web-enabled, and EDI basis, customers can access it anytime and anywhere.
MOL plans to combine supply chain management (SCM) and vendor managed inventory (VMI) with the OCB system to offer highly sophisticated logistics services integrating shipment, transport, inventory, and delivery.
APN: China is in the spotlight. What are MOL's logistics strategies for the Chinese market?
MOL has aggressively promoted its logistics business in China. The core is Shanghai Huajia International Freight Forwarding Co., Ltd. [commonly known as MOL Logistics (China)]. It has offices in Tianjin, Qingdao, Suzhou, Hangzhou and Shenzhen as well as the Shanghai head office and Beijing branch, with a staff of more than 120. It also plans to open three new offices this year and another six by 2006, so we can offer our customers total coverage of the Chinese market.
MOL Logistics (China) is the only forwarding company in China with a shipping company as its parent company, which has its own Class-A sea and air forwarder license and all other licenses related to logistics: NVOCC, customs broker, trucking, CAAC A class air, and bonded warehousing. It can offer one-stop shopping for all those services.
Another company in our network, Shanghai Longfei International Logistics Co., Ltd. is a J/V forwarding company officially approved by the Ministry of Commerce. It has gained many loyal customers for its services, mainly focusing on Japan-China trade.
MOL Logistics (H.K.) Ltd. offers various logistics in Hong Kong and the South China, consulting and coordination services, operating a modern logistics warehouse in Shatin district and a bonded warehouse in the Yantian port, the largest port in South China. MOL Logistics (H.K.) received its Class A certificate - the highest level - from the Technology Asset Protection Association (TAPA), the international security safety standards organization. This reflects their commitment to safety, the foundation of our service.
By fully utilizing those services, MOL Logistics (H.K.) has been expanding its service capabilities to meet customer needs in new areas, such as operational management and support for the entire logistics operations of a Japanese company's factory warehouse in Suzhou, and consultation on domestic logistics in China.
APN: Tell us more about "market-in."
The "market-in" approach comes from customers' individual logistics needs. It's not based on the idea that we need to have a complete infrastructure - trucks/warehouses and so on. We would like to share customers' concerns and problems first, so we can create more effective solutions. With the right mixture of human resources, our network and IT, we can meet a continually expanding range of logistics needs.
We are part of "the world's largest, highest-quality, unique ocean transportation group company with a full range of services." MOL can meet any customer's transport needs, whether it's containerized cargo, car carrier, and natural resources/energy transportation. And we're committed to enhancing our logistics business, which in turn boosts the competitiveness of MOL's containership and car carrier business. Our policy is to aggressively expand businesses through collaboration with the Virtual Liner Company (VLC) network spreading all over the world, and strategic response to customer needs.
What's the future of MOL's logistics business?
We focus on "solving customers' problems" rather than using space in warehouses/trucks. That way, we can supply tools whenever they're needed, like warehouses, truck, and container depots. We think human resources, our network, and IT are indispensable to our service to help customers succeed.
First of all, human resources; To promote globalization, it's vital to hire local employees who are knowledgeable about our business and have their own local network. We already have local senior staff in Hong Kong and the United States, and we're hiring some in Europe as well.
Secondly, our network allows us to offer high value-added one-stop services such as consolidation and air and ocean forwarding, under the "MOL Logistics" brand. We will continue to enhance our network in China as well as in Eastern Europe in the future.
Finally, IT; we offer Starlink, with advanced systems that can be customized for client needs, and we are planning to develop a customized interface with the warehouse management system (WMS).


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