HIT Visit

Q1&Q7. The future of Hong Kong port industry has been badly predicted since the rapidly growing of mainland’s port industry. How does the company face the threats and turn those threats into great opportunities? What are the future strategies for HIT to fight against the aggressive competitors in China’s coastal cities, like Shanghai ports?

In the past, Hong Kong has held the position of being the only modern, fully developed deep-water harbor between Singapore and Shanghai, making it the focal point of all maritime trading activities in Southern China. Today, there is serious and increasing competition from other ports in Southern China, namely Shekou, Chiwan and especially Yantian. These ports are largely managed and/or partially owned by Hong Kong-based terminal operating companies and the expertise is in place, therefore, to enable their fast development. Whilst Hong Kong’s container traffic increased at an average of 6.6 per cent per annum from 1995 to 1999, container traffic in the port of Shanghai increased by an average 80.2 per cent per annum over the same period (Hong Kong Port and Maritime Board, 2010). The growth in throughput of the ports of Shanghai and Hong Kong is shown in the following table. Although HIT faces the competition from mainland’s port industry, there is still an increasing trend for the port industry. 

Table 1 container throughput in the ports of Hong Kong and Shanghai 2000-2010 (‘000 TEUs)

	2000	2001	2002	2003	2004	2005	2006	2007	2008	2009	2010
Yantian				15	106	354	638	1350	1580	2000
Shekou	4	51	67	87	90	90	214	463	574	720
Chiwan	45	50	59	90	90	214	463	574	477
Shanghai port	49	101	126	181	261	542	1002	2120	2631	3994	5076
Hong Kong	6160	7970	9200	11050	12550	13460	14390	14580	16210	18100	18000

Source: Ocean Shipping Consultants (2010), Containerization International (2011)

Co-operation of Hong Kong and Yantian port strengthen the shipping line

In order to fight against the aggressive competitors in China’s coastal cities, co-operation strategies to counter shipping lines’ increasing bargaining power and fierce intra- port and inter-port competition among other concerns. Hong Kong and Yantian generate a positive effect on each other’s container throughput. Based on ‘co- opetition’ which was suggested by Brandenbuger and Nalebuff to show that those engaged in the same or similar market should collaborate to compete as a win-win strategy, rather than a win-lose one. It indicated that Hong Kong and Yantian as a co-opetitve alliance can strengthen both partners against outsiders even as it may weaken one partner against the other. Therefore, this strategy from regional perspective as there are benefits from economies of scale. HIT can take advantages of the information, infrastructure and port management resources already available.

High shipping line connection around the world

HIT has high shipping line connectivity remains, but Shenzhen may catch up quickly. For the America and Europe related trades, there are 61 and 58 calls per week respectively at Shenzhen as compared with 59 and 63 calls in Hong Kong. On this basis, Shenzhen’s shipping line connectivity for the key trades may catch up with HIT’s in the near future, though HIT still has much higher connectivity for Asia and other routes. Currently, most long-haul vessels call both Hong Kong and Shenzhen ports. But the concern is that if the high cost of using HIT continues, shipping lines could add more services at Shenzhen and decrease their presence at HIT. At this point, HIT’s remaining intangible cost advantages may be swamped by the greater shipping line connectivity offered by the Shenzhen ports. This is a key determinant of port choice, not just for South China import/export cargo but also for transshipment competitiveness. Therefore, HIT and Shanghai port would not have direct competition.

Opportunity in re-exports from Mainland China

An analysis of Hong Kong’s trade figures shows that it is the 10th largest exporter in the world (Economist, 2009). The main reason for this is its proximity to Mainland China. In terms of inward port cargo, Mainland China accounts for nearly three times more than Taiwan. In terms of outward port cargo, Mainland China also accounts for three times more than the other developed countries, such as USA. In fact, around 90% of Hong Kong’s exports are actually re-exports, around 60% originated in Mainland China. Hong Kong is the most important entrepot for Mainland China. About 37% of Mainland China’s foreign trade is handled via Hong Kong, comprising products sourced in, and destined for, Mainland China. According to Mainland China’s customs statistics, Hong Kong ranked as its third largest trading partner, accounting for 11% of its total trade in 2009. Therefore, the development of Mainland China brings much demand to the company.

Efficiency and reliability of Terminal operation

The container port of Hong Kong is famous for its efficiency, effective management
and organization. To cite evidence, the quay crane movement of 28-40 moves per
crane per hour is respectable record in any terminal in the world. Although HIT has invested billions of Hong Kong dollars in technology development in the past, the company still continuously improves its existing system and facilities in order to lower the bottleneck in border-crossing caused by the increased throughput rate.

As high transit time is another obstacle for the rapid flow of goods and containers to
and from the mainland. There is often significant congestion at the border, with a lot of lorries waiting up to four to five hours, and as a result, time cost is much higher for
shippers. Delays to cross border freight movements are another key concern for shippers.
Therefore, HIT has a need to strengthen its system and facilities to deal with the increased throughput rate and fight with the competitors.

Q2. HIT is required to manage 5 container terminals, 14 ship berths and 9 barge berths and a number of machines. How can it manage to allocate the resource in an efficient and effective way for the shipment and container movement? 

  

HIT have developed lots of advanced technology and policy to streamline the operations. These help optimize the resources between different parts of the terminal. nGen, Next Generation Terminal Management System, controls the entire scope of terminal operations from ship and yard planning, gate operations, vessel operations and interactions, yard configuration and performance, overall operations monitoring, equipment utilization, productivity to costs optimization. With nGen, HIT is well positioned to meet increasing throughput and productivity requirements into the next decade and beyond.

The Tractor Appointment System is HIT's innovative scheduling system for collecting inbound, loaded containers. The appointment system is a key part of HIT's gate automation process. It also works in tandem with HIT's Terminal Management System that ensures containers are efficiently stacked in the yard. Containers ready for collection are always at the top of the stack, making pick-up quick and easy. HIT's pioneering Tractor Appointment System enhances cost efficiency and customer service, ensuring rapid turnaround for both ships and tractors.

Operations Monitoring System helps HIT staff visualize information on terminal operations and container stacking through a graphic representation. Overviews cover the entire container yard down to details of an individual container. The system can predict yard congestion so operators can take pre-emptive action.

Ship Planning System delivers optimal sequences for discharging and loading vessels, ensuring ship stability and efficient operations. Computers hold a library of every vessel berthing at the terminal. The system generates pier-side instructions to yard operators.

Radio Data System uses radio channels and remote terminals to provide detailed information on yard operations and container movements. RDS acts as the eyes and ears to the main computer system nGen. Terminals include computers mounted in the cabins of each Rubber-Tyred Gantry Crane and hand-held computers carried by operators and supervisors in the yards and on the quayside.

Container yard activities are planned, coordinated and monitored automatically. HIT reduces the time vessels spend at berth, saves tractor turnaround time in the terminal, and provides flexibility in handling customers' special requirements. The computer system maintains detailed information on each container and provides a variety of enquiry, reporting and analysis facilities to assist in management of container inventory. A special feature of the system is a yard map that contains the exact location of all containers in the terminal at any one time.

The computer simulations are helping to ensure that any new practices, systems or technology are properly integrated and optimized. HIT's container terminal simulation focuses on five key areas: equipment handling rates, vessel operating rates, tractor turnaround times, yard grounding characteristics, and resource utilization levels. 3D Animation is also used to enhance understanding and visualization of complex container port operations.

MOVINS stands for movement instruction. With the implementation of this electronic platform, the resources involved in pre-plan operations are notably reduced and lead time for stowage plans are shortened. Furthermore, it allows shipping lines to receive updated outbound planning information from terminals much earlier for stowage verification. The MOVINS stowage instruction transmits information on loading, discharging, shifting and re-stowing activities between the terminal operators and shipping lines electronically. The implementation of this platform allows both shipping lines and terminals to react much faster to the rapidly-changing and complex operational environment.

Knowledge Management applications cover terminal and crane design, capacity planning, work procedures, terminal and corporate systems, shipping line requirements and even contractual and regulatory issues. The web-based environment of Knowledge Management for increased team collaboration is helping to improve competitiveness, accelerate innovation, reduce costs and integrate new businesses. It has enabled the aggregation and dissemination of information throughout HIT. Sharing knowledge throughout the company help people work more productively. By pooling individual knowledge assets in a central repository, HIT has created a key knowledge resource. The HIT Knowledge Portal is a virtual workplace for discussion and resource sharing on any project or business requirement and interaction on-line.

Q3. What are the advantages and disadvantages of shifting from the terminal-operations focus to the customer-services focus?

Terminal operations focuses on controlling the movement and storage of various types of cargo in and around the terminal or port, making better use of the resources to plan the workload, and get the real time information which allows for more timely and cost-effective decision making, and efficiently monitoring the flow of products in, out and around the terminal by using some technologies such as Electronic Data Interchange (EDI) processing and Radio Frequency Identification (RFID).

Its aim to provide a set of computerized procedures to manage cargo, machines and people within the terminal so as to efficiently and effectively manage the terminal operation. Customer service focuses on doing a series of activities to enhance the level of customer satisfaction. It is important because customer service experience can change the entire perception a customer has of the organization.

Q4. Recently, an outsourcing transportation company (San Bo 三寶) has shut down which aroused controversy on the outsourcing. How will HIT monitor the financial state of outsourcing companies?

An outsourcing transportation company (San Bo) which is appointed by Hong Kong International Terminal (HIT) has suddenly shutdown recently, the person in charge also disappeared. Nearly 70 employees did not get their wages and severance payment.

In order to solve the problem, HIT issued a statement that provide a lump sum of $10000 for each affected employees who employed to provide service to Hong Kong International Terminal for over six months. Also, HIT tries to help the employees to find other working positions in the other companies in that industry. In this case, HIT worked with this problem closely and actively cooperated with the Labour Department and other related departments. HIT shows its responsibility and quick responds to this sudden case.

In order to prevent this problem in the future, HIT should improve the risk management for outsourcing and monitoring system. Outsourcing is about taking risks. Managing supply chain risks is an important factor of Supply Chain Management (SCM) and the requirement to include more risk management tools and approaches. Therefore, the development of failure detection systems to reduce risks is able to ensure the expected supply chain performance levels.

Q5 & Q6. In light of the poor air quality in Beijing affecting flights into and out of the city, is HIT concerned of the environmental impact the continued operations of terminal will have on Hong Kong’s air quality and other environmental impacts? How does your company maintain the balance of the society responsibility and its revenue? What is the most effective environmentally friendly measure of HIT to stand out from others in the logistics industry? What is the most effective environmentally friendly measure of HIT to stand out from others in the logistics industry?

HIT has already committed itself to protect the environment and resources years ago. They have three essential company policies including Pollution Prevention, Continuous Monitoring and Sustainable Development. “HIT Environmental Steering Committee” is the core team who work together to execute long term environmental protection.

To maintain up-to-date information about green issues, HIT interacts regularly with stakeholders such as External Audit, Environmental Protection Department, Contractors and Suppliers for sharing and reporting. For example, in middle June 2012, HIT has recommended the use of lithium-ion battery for hybrid car carrier/vessels. Such battery is charged with solar power generation system while at sea, and then consumes the battery charged at berth. This totally reduces the consumption of diesel power. Now, its hybrid vehicle system is under research and EURO III engine equipped vehicle will be the new standard of their new vehicle.

Apart from air pollution, HIT also focuses on setting up Washing Bay and Petrol Filling Station surrounded with independent drainage system to underground oil interceptor. These measures can be an effective water protection.

HIT is a terminal operator which consumes high percentage of harmful energy before. Due to the cost problem, similar companies in this industry in Hong Kong or Pearl River Delta may face a serious decision whether bear responsibility to improve environment or not. HIT begins the protection from its plants. It has conducted a series of investigation and pilot project to determine the feasibility of converting RTGC’s fuel from diesel to main electricity as a substitute for powering RTGCs.

If HIT succeeds replacing these machines, a benefit of 70% on fuel and 80% on maintenance cost, black smoke, and noise pollution can be saved. HIT considers that the benefit to environment is invaluable even the cost payback of the above project for HIT would be in three to four years. Not only is its proactive social responsibility, but Electrification may create a certain competitive advantage and potential market for HIT too.

Last but not least, its environmentally friendly technology can definitely help motivate another port operator, HPH, to follow what HIP has done. The awareness of environmental protection can then be spread rapidly among industries.