Kerry Logistic Visit

Q1. As Asia’s premier logistics solutions provider, what are the key factors to maintain your competitiveness among the large global dynamic environment?

As Asia’s premier logistics solutions provider, Kerry Logistics works in both the region, and the global market environment. They take the advantage of the uniqueness of the Asian market, especially that in China. Their expertise with a powerful network helps to boost their business in the global, regional and local level of market. Kerry Logistics continue to invest in their own assets like building own infrastructure and storage place, in order to minimize the effect of the volatile change of global economy and to provide reliable and flexible support for their business partners. Also, Kerry Logistics has teams with talented employees and professionals to handle the growing business and the changing global environment for confirmation of profitability of their business. Lastly, the advanced IT system KerrierVISION provides a good management over the supply chain to monitor and control the processes in order to have competitive advantages like cost over the other competitors around the world.

Q2. Recently, Kerry Logistic expanded its network in Vietnam by establishing joint venture with a leading express company called Tin Thanh Express, What are the major advantages of this strategic decision?

Familiar with the Market 

Kerry Logistic is not familiar with the business environment of Vietnam, such as the pricing of equipment and local ordinances, so that they choose to establish joint venture with a leading company. The laws in Vietnam are not well developed such as labor’s law and there are many regulations in doing business Vietnam, Kerry Logistic may sometimes face difficulties with some management issues such as the labor management. Also, there is culture different between Vietnam and Hong Kong, it is hard for a company to send their staff to manage the Vietnamese. Therefore, establishing joint venture can help Kerry Logistic to familiar with the environment and overcome the difficulties so that they can have further expansion in the future.

Build credibility in Vietnam

Besides, Kerry Logistic may not have the reputation in Vietnam. Find the right joint venture partner high local recognition and reputation, and Kerry Logistic can instantly raise the credibility of its own business in Vietnam. Moreover, it can start building acceptance, penetration and access within its target market. Joint venture helps attract more customers and improves Kerry Logistic coverage.

Cost Reduction

Most of the Investors often find poorly developed infrastructure, high start-up costs, arcane land acquisition and transfer regulations and procedures, and a shortage of skilled personnel in Vietnam. As a result, Kerry Logistic can establish joint venture with a recognized local company, they can save the cost in developing infrastructures and hiring skilled personnel. It is much easier to focus on service enhancement when the company needs not to worry so much about exceeding and impractical costs. 

Combined talents and resources

Joint venture allows Kerry Logistics and Tin Thanh Express to pool their financial strength, workforce, equipment resources, and bonding capacity, while sharing the risks involved in competing bigger or more complex projects. Having a joint venture partner that provides additional working capital can reduce the likelihood of cash shortfalls, facilitating successful project completion. Moreover, they can have a better underwriting risk, making them easier to obtain bonding at competitive rates.

Access to different markets

Kerry Logistics can broaden the company’s geographic reach. It has expanded the business into Mainland China and other countries in US. Vietnam is a potential country for developing its business. Since the labor cost and manufacturing cost are increasing, many industries have left China and gone to Vietnam. Therefore, the demand for logistics would increase. 

Q3. Compared with the UPS and FedEx, what are the distinctions between Kerry Logistics and these famous logistics companies in term of the competitive edge?

For UPS and FedEx, their strategies aim to maximize the return on asset. Therefore, they do not make large investment on infrastructure and facilities. Without own infrastructure and building facilities, they can earn higher return due to low expenditure on asset. However, Kerry Logistics is an asset-based organization. With own facilities and infrastructure, it can reduce the effect of the external environment on the cost, for instance, it can ignore the rent and price of the asset. Therefore, it can stabilize the price inflation of the property in recent years. Moreover, with own facilities and buildings, it will be more flexible to provide customized logistics service for the customers to satisfy their needs. Changing containers or other facilities to cater for the special need of the customers can be easily achieved. In addition, Kerry Logistics constructs a big network all over Asia especially Mainland China. The economic growth is extremely rapid in China which makes a great opportunity for Kerry Logistics to sustain its growth of business. It also develops infrastructure in some undeveloped countries such as Myanmar. As Kerry Logistics has been running its business over several decades in the Asia, it should have relatively sound reputation and competitive edge compared with other logistics organizations.

Q4. How should the HK-based logistics company like Kerry to face the changing market environment?

  

First of all, the rental price of land is increasing vigorously in Hong Kong and China. Kerry Logistics react this by applying asset based policy, which is definitely a competitive advantage. The competitors in the market usually apply few assets policy, which to achieve high return per assets. Kerry Logistics has bought some lands in Hong Kong, which is to build warehouses, for example, Tai Po, Kwai Chung. This can help Kerry Logistics avoid the rise of rental cost increases its operating cost. In addition, they find the operating cost of warehouse in coastal cities is increasing. They turn to build warehouses in the inner cities, like Chongqing. Wages and other costs are lower.

Secondly, the business in Hong Kong may decline when there is economic downturn. Also, Kerry Logistics observe the opportunity in China and other Asian countries. Therefore, they are keen on develop their market in Asia. They have a slogan, “Asia Specialist, China Focus, Global Network”, which can show their core value of business, building network in Hong Kong. By exploring their market in new countries, this can help them avoid the economic downturn in one of countries. During the talk, the speaker told us they have explored new market in Myanmar by using the method of Joint Venture. Kerry Logistics has long history of doing Asia business, so it is relatively easy to enter into this special country, which have different political environment. They would use different methods to enter into new market, such as Joint Venture, Merger and Acquisition. Kerry Logistics is very flexible to adapt to different business environment. 

Last but not least, there are many logistics companies in Hong Kong, with both small and large structure. The competition becomes more vigorous. The customer expectation also becomes higher. Kerry Logistics does well to become more professional in niche markets including Food & Beverage, Fashion & Lifestyle. This could help them build up competitive advantages to better fulfill the needs of customers and win over other competitors. For example, they have built a PC3 warehouse in Tai Po. The meaning of PC3 is “Product customization and consolidation centre”. It especially serves the high fashion brands, like LV and Marks & Spencer. Those high fashion brands put high concern on their environmentally friendly image. Therefore, their requirements are higher, so that warehouse required being built greener by adding water recycle system, roof-top garden, etc.  

Q5. From your website, we noticed that ISO Tank Solutions have been becoming increasingly popular. With increasing fuel prices and environmental awareness, how does Kerry respond to these types of market trends?

Kerry Logistics has developed and operated an environmental management system to prevent pollution, preserve natural resources, and adhere to environmental regulations and laws.

The environmental management system includes:

•  Use of Solar Energy

The company has installed photovoltaic cells on the building to convert light into electricity using the photoelectric effect to support the operations of the company.

•  Use of Windmill

The company has installed windmill to convert the energy of wind into energy to support the company.

•  Water Recycling System

The company has set up a water recycling system to remove solids and certain impurities from sewage for non-potable use in the company.

•  Roof Garden

There is a roof garden on the building to reduce the overall heat absorption of the building which then reduces energy consumption.

•  Policy adhered by Employees and Contractors

1. Continually and effectively improving our environmental performance
2. Complying with and surpassing standards required by all applicable environmental regulations
3. Fulfilling all environmental requirements prescribed by the company
4. Promoting sound environmental policies and practices within the company
5. Setting and reviewing environmental objectives
6. Conserving resources and maximizing energy efficiency
7. Minimizing waste wherever practicable
8. Reusing or recycling waste where appropriate and regulating the treatment and disposal of residual waste
9. Reducing and preventing pollution where possible
10. Minimizing vehicular emission of pollutants
11. Minimizing adverse environmental impacts of asset decommissioning and disposal
12. Enhancing environmental awareness of colleagues and subcontractors
13. Advocating good environmental practices on both departmental and individual levels
14. Effectively communicating our environmental performance to stakeholders