International Logistics Hubs

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Questions and Answers

Compare and contrast origin and deconsolidation hubs, detailing how they cater to different logistical needs within the supply chain.

Origin hubs consolidate goods from multiple suppliers for efficient shipping, while deconsolidation hubs break down bulk shipments for distribution to multiple consignees. Origin hubs optimize outbound logistics, deconsolidation hubs optimize inbound distribution.

Analyze how the establishment of a Bonded Logistics Park (BLP) in China can streamline international trade operations for businesses, considering VAT and customs procedures.

A BLP in China enables businesses to consolidate cargo from various suppliers, defer VAT payments until goods are sold, and streamline customs procedures, reducing lead times and improving cash flow.

Discuss the benefits and risks involved in utilizing a Multi-Country Consolidation (MCC) hub in Taiwan, focusing on its impact on cost efficiency and market expansion.

Benefits of an MCC hub include cost savings from optimized container utilization and support for market expansion by efficiently distributing goods to smaller markets. Risks involve potential complexities in managing inventory and compliance across multiple countries.

Explain how the selection of a Regional Distribution Center (RDC) location can be influenced by Free Trade Agreements (FTAs) and the impact this has on overall supply chain efficiency.

<p>FTAs can influence RDC location by offering tariff reductions or exemptions, which lower import duties and improve competitiveness. Selecting an RDC within an FTA region can significantly reduce costs and enhance market access.</p> Signup and view all the answers

Illustrate how implementing a ‘Many to Many’ hub model can optimize Less than Container Load (LCL) shipments in a complex international supply chain network.

<p>A 'Many to Many' hub consolidates LCL shipments from multiple suppliers and distributes them to various consignees, creating economies of scale and reducing transportation costs. This model is effective by minimizing the need for direct shipments between numerous origins and destinations.</p> Signup and view all the answers

Flashcards

What are International Hubs?

A facility or location that serves as a central point for coordinating and streamlining the flow of goods in a supply chain, supporting various transportation methods. Hubs can be at the country or provincial level.

Many to One

Cargo from many suppliers is delivered to a central consolidation center, then loaded into a full container (FCL) and shipped to its final destination. The container seal remains unopened until it reaches the final destination warehouse.

What is a Bonded Logistics Park (BLP)?

A bonded logistics park in China that consolidates cargo from Chinese and overseas suppliers to be stored and redistributed to overseas markets upon final customer orders.

Multi-Country Consolidation Hub (MCC)

Goods from several countries are mixed into one, optimizing container utilization. These hubs are often involved in cross-docking, optimizing how full containers are utilized, and manage the flow of small cargo volume.

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Regional Distribution Center (RDC)

A distribution center that maintains an inventory, provides value-added services and optimizes the utilization of containers. It also manages small cargo flows by leveraging multiple transportation methods (LCL, Air and Road).

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Study Notes

International Hubs

Hubs have different meanings based on context
At the country or provincial level, hubs can refer to global logistics or ecommerce centers
Focus is on international hubs as facilities within the international logistics flow
This discussion contrasts international hubs with domestic ones

International Hub Locations

International hubs can be found at various points in the supply chain
These include:
- Origin Hubs
- GDC, RDC and MCC Hubs
- Decon Centres
- Domestic Hubs and Warehouses

Hub Enabled Transportation Methods

Hubs facilitate different transportation models:
- 1 to 1
- 1 to many
- Many to 1
- Many to many

1 to 1 Transportation

One supplier location ships directly to one consignee location
Involves various modes like Ocean FCL, Airfreight, Rail FCL, and Road X-border
It can also use Intermodal

1 to Many Transportation

Focus on destination deconsolidation centers
One supplier loads a Full Container Load (FCL)
The FCL ships to a decon center for breakbulk
Cargo is then cross-docked into multiple box trucks for delivery to multiple destination warehouses
Multiple "1 to many" flows converging at the decon center adds efficiency through cross-docking

Many to 1 Transportation

Origin consolidation hubs consolidate cargo from multiple suppliers
Suppliers deliver cargo by truckloads to a consol center
Cargo is planned and consolidated into an FCL destined for the same final destination warehouse, without opening the container until final destination
E2E planning is required
Activities at origin hub include cross-docking (short dwell) and storage (long dwell)

Bonded Logistics Park (BLP) in China

Positions itself as an international hub
Aims to consolidate cargo from Chinese and overseas suppliers
Stores and redistributes cargo to overseas markets based on final customer orders
Cargo entering BLPs receives immediate VAT refunds or is bonded
China's BLP is differentiated from HK or Singapore

BLP Goals and Locations

Chinese government aims to attract international goods flows
Goal is to build China's international ocean freight hubs
BLPs serve the logistics needs of multinational corporations
They handle transshipment, supply of products, and international trade activities
BLPs are established in coastal cities of China, including:
- Dayaowan (Dalian)
- Tianjin & Dongjian
- Qianwan (Qingdao)
- Zhangjiagang
- WGQ & Yangshan (Shanghai)
- Guangzhou & Nansha
- Fuzhou
- Xiangyu & Haicang (Xiamen)
- Yantian & Qianhaiwan (Shenzhen)

Waigaoqiao BLP in Shanghai

A 1.02 sq KM space allocated
Established in April 2004
Offers 278,300 sqm of warehouse space
Key areas are 40-60 minutes from airports
Major customers: HP, Acer, SIEMENS
Various major verticals

Many to Many Transportation

Involves multi-country consolidation (MCC) through an international mixing hub
Many suppliers and consignees are in the network with small volumes from each supplier
Cargo is shipped "many-to-many" instead of holding it at the CFS
Direct ocean from origin to destination post is possible
Transloading at a transhipment hub for re-mixing is also facilitated

Case study: MCC in Taiwan

A US brand uses MCC in Taiwan for cost-efficient distribution to smaller and new sales countries
The brand manufactures apparel, footwear, and sport equipment
Origins include China, Vietnam, Indonesia, India, and Thailand
It extends to the rest of the Americas
Mixing Hub in Kaohsiung since 2010 supports the customer's expansion

Regional Distribution Centre (RDC)

Involves inventory holding, value-added services and longer dwell times
Offers optimized container utilization and diverting of small cargo flow (LCL/Air/Road)

RDC used by audio equipment company in Shenzhen

Used by American company manufacturing audio equipment
Aims to have better inventory management
Improves distribution strategy
Intends to centralize VAS at origin for cost efficiencies

Impact of Hubs on Transportation Management

Origin hubs/BLPs/MCCs reduce LCL/LTL
Such hubs enable buyers to buy small order sizes
This avoids high transport costs due to consolidation
RDCs/GDCs leverage multi-mode transportation
Instead of long haul air you can pull from regional hub using ocean
Ability to deploy most appropriate transport method depending on inventory needs

Considerations for RDC Location

Choosing a location for a Regional Distribution Center (RDC) is vital
Free Trade Agreements (FTA) play a key role in influencing the decision
Singapore is more attractive
It is part of the ASEAN & ASEAN+1 FTA, offering potential tax benefits

FTA and Hub Choice

FTA savings impact the hub and transport choice
Transportation department needs trade compliance input
The goal is a holistic logistics strategy
Depending on the incoterm, the shipper/consignee may or may not gain the import duty savings
Adding the seller or buyer increases decision complexity