International Logistics Hubs

• Lecture 6 topics covered international hubs, and how they affect intermodal transportation and logistics.

International Hubs

• Hubs are referenced at the country or provincial level.

• Singapore and Hong Kong are global logistics hubs.

• Malaysia is an ecommerce hub.

• Chongqing is an intermodal hub.

• Focusing on international hubs versus domestic hubs in this chapter.

• International hubs are part of the international logistics flow.

• International hubs act as warehouses and facilities in the supply chain, supporting transportation methods.

• Hubs enable different transportation methods:

  • 1 to 1
  • 1 to many
  • Many to 1
  • Many to many

1 to 1

• Defined as one supplier location to one consignee location.
• Can use different modes, including: Ocean FCL, Airfreight, Rail FCL, Road X-border, and Intermodal.

1 to many

• Destination deconsolidation center is an example.
• One supplier loads a Full Container Load (FCL).
• Ships to a deconsolidation center for breakbulk.
• Deconsolidation center then cross-docks into multiple box trucks to deliver to multiple destination warehouses.
• Scenarios can converge at the deconsolidation center to offer added efficiency in cross docking.

Many to 1

• Origin Consolidation Hubs are an example
• Multiple suppliers deliver cargo via truckloads to a consolidation center.
• Cargo is planned and consolidated into one or more FCLs to the same final destination warehouse.
• Ships as FCL to destination without container seal opened until arrival at the final destination.
• End-to-end (E2E) planning is required.
• Plan according to cargo ready dates (CRD), container loading requirements, and in-DC date.
• Activities at origin hub include cross-docking (short dwell) and storage (long dwell).

BLP (Bonded Logistics Park) in China

• BLPs are positioned as an international hub to consolidate cargo from China and overseas suppliers.
• Cargo is stored and redistributed to overseas markets upon final customer orders.
• Cargo is entitled to immediate VAT refund or bonded status when shipped into BLP from domestic or overseas suppliers.
• The BLP model differentiates from other international hubs in Hong Kong or Singapore because of China's large hinterland manufactured export cargo.
• Introduced to serve both international and domestic markets.
• One target is to attract international goods flow to build China's ocean freight hubs.
• Another is to improve logistics service for enterprises.
• BLPs are expected to serve the needs of multinational corporations for: Transshipment, Supply of products/materials/parts within and outside China, and International transit/distribution/procurement/entrepot trade.

BLP Establishment in China

• Established in many coastal cities of China -Dalian, Liaoning Province: Warehouse area of 153,000 sqm for electronics, garment, chemicals, machine & equipment parts. -Tianjin: Warehouse area of 250,000 & 900,000 sqm for electronics, cotton, vehicle, steel pipe, chemical, garment. -Qingdao, Shaodong Province: Warehouse area of 150,000 sqm for tyre, rubber, PP/PE, paper pulp, electronics. -Zhangjiagang, Jiangsu Province: Warehouse area of 250,000 sqm for chemical, garment. -Shanghai: Warehouse area of 700,000 & 329,000 sqm for various goods. -Ningbo, Zhejiang Province: Warehouse area of 240,000 sqm for electronics, garment, footwear, stationery, toys. -Fuzhou: Warehouse area of 50,000 sqm -Xiamen, Warehouse area of 28,000 & 250,000 sqm for wine, raw material (pulp, plastic), stone, electronics, shoes, garment, furniture. -Shenzhen, Guangdong Province: Warehouse area of 951,000 & 270,000 sqm for wine, toys, e-goods, garments, shoes, furniture, electronics.
• Waigaoqiao BLP in Shanghai covers 1.02 sq km -Established in April 2004 -Available warehouse space: 278,300 sqm -60 minutes drive to Hongqiao Airport -40 minutes to Pudong Airport -Major customers include HP, Acer, and Siemens -Deals in various verticals

MCC (Multi-Country Consolidation)

• An international mixing hub that consolidates goods from multiple countries to deliver efficiently to customers.
• Key aspects: cross-docking, short dwell times, optimized container utilization, and diversion of small cargo flow (LCL).

Case Study for MCC

• A leading US brand deploys MCC in Taiwan for cost-effective distribution to smaller & new sales countries.
• The company is a global fashion sportswear brand shipping apparel, footwear, and sports equipment from China, Vietnam, Indonesia, India, and Thailand.
• The challenge was how to extend the brand to the rest of the Americas, shipping small volumes from origins at high logistic costs.
• To solve this, deployed a mixing hub in Kaohsiung since 2010.
• Enabled flexible and efficient support for expansion in new geographies.
• Achieved at least 10% cost savings against the conventional direct LCL model.

RDC (Regional Distribution Centre)

• Key aspects: Inventory holding, value-added services, longer dwell times, optimize container utilization, and divert small cargo flow (LCL/Air/Road).

Case Study for Regional Distribution Centre

• An audio equipment company in Shenzhen for Asia distribution uses a RDC for distribution.
• The company is a US$3.7 billion American manufacturer of audio and infotainment equipment.
• Faces rapidly increasing volume, requiring better inventory management and distribution strategy
• Needed a central point for VAS origin for cost efficiencies.
• By deployed a centre @ Shenzhen, and offers services like Warehousing and inventory management / First-mile trucking /inbound customs-brokerage /Value Added Service like labeling and packaging
• Improved visibility and control, as well as cost and timely delivery.

Development of International Hubs in Asia

• Taipei has good regulations but faces poor trade agreements. A good hub if large volume moves to and from the China market.
• Thailand has a good location but faces difficult regulations and poor FTA documentation handling.
• Singapore has advanced regulations, strong FTA, and Int. connectivity, good for high-value goods.
• Malaysia lower operation costs, can use as retail hub
• Hong Kong has Advanced regulations, close to GC, Poor FTA, int. connectivity, for high-value goods.

Many to Many

• Many suppliers deliver cargo to the origin consol center.
• Load into FCL
• Ship to destination decon center for breakbulk and cross-docks into box trucks
• Deliver to many consignees in the same destination country
• Happens when there are many suppliers and consignees in the network, and the volume from each supplier is very small.
• Is more time-saving compared to keeping goods at CFS

General application of hubs

Key Purpose of Hubs

• Cost efficiency -Reduce cost of shipping small quantity -Improve container loadability
• Flexibility in the supply chain -Add options to fulfill supply -Holding cargo at the origin or GDC/RDC, gives flexibility to buyers to divert cargo to alternative countries when demand pattern changes -Ability to support shipments to new countries or franchisees / distributors -De-risk

Potential Trade-offs

• More touchpoints mean re-handling of cargo, which may cause damage or pilferage.
• Longer transit time.
• Risk losing visibility if integration is lacking at the hub.

Impact on Transportation Management

• Origin hub / BLP / MCC reduces LCL/LTL and increases FCL.
• Allows buyers to buy small order sizes and avoids super high transport costs.
• RDC/GDC leverages multi-mode transportation, and use of ocean liners.
• Deploys appropriate transport based on urgency

FTA impact

• Important to include FTA in choice, since location is important

Document flow of FTA doc across origin-hub-destination

   1-  Registered manufacturers submit cost statements (to
        prove that Rules of Origin (ROO) is met) to apply for the PCO
   2- Receive the PCO, along with HBL and Commercial Invoice (CI)
    3-If a customer does not have a legal
         entity in the hub country, the LSP can act as exporter of
          records,  on behalf of the customer.
      -  If customers have legal presence their documents will be filed.
   4- Submit B2B PCO to apply for FTA tariff savings

Rules and required Documents must include

 -Original PCO from first exporting party
  -Exporters commercial invoice
  -Bill of Lading (BL) for first leg shipment
  -Working sheet for partial consignment.

FTA Savings & their impact

• Can impact the choice of hubs. -How cargo is transported.
• Transportation department -Needs to work with the trade compliance department to gain a holistic view on the logistics strategy
• Shipper or consignee may or may not be the -party that gain from the import duty savings