Kerry Logistic Company Visit

Company Background

Kerry Logistics is a company that provide different logistic services. They include third party logistics, international freight forwarding, warehouse operations and supply chain solutions. The headquarter of Kerry Logistics located in Hong Kong. It also operates distribution network and hub in China and Asia region. Over 100 brands from different industries around the world employ Kerry logistics, including fashion & lifestyle, electronics & technology, food & beverage, FMCG, to industrial & material science, automotive, and pharmaceutical & healthcare. They aim to deliver products faster and more cost-effective by applying world-class assets, industry experts and award-winning IT systems and process.

Introduction of Kerry Logistics hub in Hong Kong

The employee explains the background of the distribution centre project. Their project operates in two floors in the building, which are the fourth floor and seven floors. The fourth floor mainly for retail products storing. The eleventh floor mainly for franchise products storing. The distribution centre is operating for three brands. For the retail industry, Kerry mainly serves the local market, but they serve the oversea market for franchises. Products transport to the distribution centre by three logistic models, which are by truck, by sea and by air.

Guide Tour

After we arrived Kerry Logistics Building, we went to a floor that have a hanging garden in the middle of the office. Then we went to visit the warehouse.

This is the inbound area. The first step that they do is sort by purchasing order when the products arrive. After that, they will do the scanning by cartons. Then they will do the inbound audit activities, which included 5 percent quantity check per purchasing order and check the price tag in the garments.

Then, they will do the demix receiving and put-away of products procedures. Demix means that classify the product, such as classify by size. After these procedures, the products would be put on the storage shelves.

Then we go to visit the outbound area. This is the product allocate shelves for each store. If the store log is full, the products would be deliver. There are three types of packing methods, which are piece pick, pick-to-store and full-carton pick. Piece pick means the worker will go the check the quantity needed by the handheld, and then pick the products and put the products to empty cartons. Piece pick productivity is relatively low, which is about 100 piece per hour. Pick-to-store means that the products are pick to meet the quantity required by each store. The productivity for pick-to-store is about 200 to 300 piece per hour. So the productivity is greatly increased by using pick-to-tore.

This electric truck is used to transfer products in the warehouse. No license is need to use the truck.

The cartons are group by divisions, such as men, women and babies. It helps the workers to do the packing because picking is picking by divisions.

Bar code and detail information about each product is shown clearly on the tag.

We also went to visit eleventh floor. This floor mainly serve for Netgear, which is a network equipment company in US. The warehouse separate to two parts - finish products logistics and return logistics. Finish products logistics is similar to normal logistic. But return logistic is more special in the warehouse. After received the return products, there is an area to test and repack the products. Apart from receiving and picking area, we also visit the relabeling area and testing area in the warehouse.

The hub is serving GAP, Banana Republic and Old Navy.

The screen near the office is showing all inbound and outbound data. It keeps updating every hour so the employees can know whether they meet the daily target.

Question and Answers

Q.How exactly does your “KerrierVISION” IT Platform work to enhance supply chain management?

KerrierVISION is key to monitor the transportation process. When we pick up the goods from center, the 3PL can enter data and updated data in system, until they transport to our warehouse. The client can check the record and data in the KerryVision. It will also transport to the final consumer, so they can also check the record in the system. That’s why it can help them to monitor its process and goods. Thus, the system helps to analysis the data and improve the time management.

Q.How does Kerry take advantage of advanced technologies (such as Internet of Things, wearable technology, etc.) to enhance accessibility and connectivity along the supply chains?

Kerry applied various technologies in supply chain, such as use Voice Picking system in warehouse for order picking and packing procedure. Worker can just use the Android phone and connect with headset and microphone. When it connected to warehouse management system, worker will receive picking command, such as where should they go and which goods they should pack. It can free their hand as they did not need paper and pen. They can pick and pack the goods more comfortably and easily.

Q.Kerry Logistics provides different supply chain solutions to clients from different industries such as fashion, F&B, automotive, etc. How does Kerry Logistics fulfil the wide variety of requirements with limited resources?

Kerry is one of largest company which servicing different kinds of clients, such as food & beverage, electronic plant and fashion lifestyle plant. It will separate their colleague into different segment groups which have expert experience for servicing different industries. They can use their expertise to service their clients more comprehensively as they can understand their clients and fulfill their specified requirements.

Q.How does Kerry Logistics use tracking and tracing system to provide real-time service to customers? Are there any tailored-made systems for specific customers and/or high-end products?

Kerry has Proof of Delivery (POD) system, when Kerry delivery goods to final customers, it will have android phone to recording where are we transporting our goods. When the goods leave warehouse, it will record data manually to update in the system. Then the driver or delivery man will call the final customer and ask them to record the receiving process. So, our customer can track the goods via the system to see the delivery stage.  

Q.Apart from adopting environmental friendly designs in office, what other practices do Kerry Logistics has deployed in promoting sustainability?

Kerry use LED lighting for in house operation. Apart from this, Kerry got a certificate for proofing the structure of building with environmental friendly, which means we used LED lighting and use environmental friendly material. In addition, Kerry have some range of water collection facilities inside the warehouse. Also, the trucks they used for delivering goods are preferred to use electronic rather than oil fuel.  

Q.What kinds of unique value-added service do Kerry logistics provide to its customers?

Kerry has Return merchandise authorization process (RMA) and some checking for clients. Also, they would fulfil some client’s special request. For example, it was used to help Godiva to pack and unpacking gift set during valentine day and Christmas day and then delivery to their store.

Q.How do Kerry logistics expand new customer base?

Kerry have professional sale team which response to continuously explore business in Hong Kong or overseas. Also, Kerry has integrated logistic part and the international freight forwarding part. So, there are different customer base between IFF part and IL part. So, the sale team would try to use cross selling strategy. For example, they would ask the client from IFF part whether they are interested to use the IL service.

Q.How did Kerry manage to keep its operation smoothly when Kerry had to redesign its warehouse layout to cater the implementation of the robotic butler system in its P3C facility? Is it always the case that automation brings positive impact towards the company?

Kerry has team of PME to plan how to allocate goods and service. They will work with not only PME team but also the warehouse staff. As the warehouse staff have many experience in dealing with the good demand size like the season fluctuation, they have more knowledge to implement the robotic butler system.  

While in the planning process, Kerry will develop some emergency plans. Under certain circumstances, it will plan some guideline for the employee to follow. So, it can solve some problems more easily with more detail planning.

Q.What are the competitive advantages of Kerry Logistics in logistics industry?

As Kerry has been established over 30 years, it has many different expertise from years. Kerry has accumulated a lot of knowledge and history. The old staff can help to training the new staff based on their experience; while the new staff would bring new ideas into company. Also, Kerry has sufficient support to employee. It will provide some training for all worker so that they can master new technology.

Also, Kerry can enjoy economic of scale. It can make use of some warehouse and many manpower. When the different client has a different peak season, it can allocate a different resource from the different warehouse and then it can support each other more easily.

Q.How Kerry Logistics adopts green technology in the warehouse operation and transportation?

The answer is same as question 5.

HIT Group Company Visit

Company Background

Hong Kong International Terminals Limited (HIT) was established in 1969, operated in Kwai Tsing Container Terminals. HIT is one of the world’s busiest container ports and owns 12 berths at 4 Terminals. HIT has been using advanced IT systems, equipment, and modern management techniques to improve productivity and efficiency of the operation.  HIT has expanded in the Pearl River Delta to develop its cost-effectiveness and efficiency port and logistics network, so that HIT can create an integrated supply chain network with a full set of logistics value-added services.

Introduction by HIT's Representative

The representative came from Human Resource Team and she was responsible for introducing her company to our class during the visit. Firstly, she introduced HIT’s infrastructure, history and future development in Hong Kong.

She mentioned that Hong Kong was regarded as a free container port, which meant containers could enter in or out without inspection by customs offices. This can save a lot of time and cost. Besides, she started to introduce more about HIT’s infrastructure and facilities. About twelve berths at Terminals 4, 6, 7 and 9 are operated by HIT. Equipped with the latest quay cranes capable of handling 24-across container vessels.

Next, she showed a timeline of the comprehensive development history of HIT from the establishment of HIT to the present. For the most significant development of HIT was the Yantian International Container Terminals in Shenzhen. The container throughput has reached 123 million, even more than Hong Kong. In the future, HIT plans to build a strong relationship with other oversea terminals.

Secondly, it came to Q&A session and finally led us to walk around the container port.

Guide Tour

We first came to the exhibition room of HIT. A big demonstration screen showed HIT's name and logo. A staff with HIT staff card came out and self-introduce herself. She came from Human Resouces Team and she would guide our visit for the visit. She firstly introduced the background information of HIT. HIT was a member of HTH Trust and regarded as the largest international container port in Hong Kong. 

At this moment, the screen showed a timeline of HIT history. The staff explained what happened at each year and pointed out some significant event of HIT, like HIT handled its 100 millionth TEU in 2006 and developed Yantian International Container Terminals in Shenzhen since 2009. 

In this picture, it showed that the general information of the Ports Yantian. The total area of Ports Yantian is 373 HA, the berth length is 8212 metre and the deep alongside is 14 to 17.6 metre. 

Yantian International Container Terminals (YICT) is a natural deep-water port and the leading gateway serving import and export container traffic generated by its immediate cargo hinterlands. 

After that, we came in front of a model that displayed the complete container terminal. The staff continue described the basic facilities and route of the terminal. 

Here was an earth model showed the old pictures of the terminal. 

Next Generation Terminal Management System (nGen)  controls the entire scope of terminal operations, including ship and yard planning, gate operations, and vessel operations; plus overall operations monitoring, equipment utilisation, productivity, and costs optimisation.

The Operations Monitoring System (OMS) helps operators visualise terminal operations and container stacking information. Graphic overviews cover the entire container yard down to the details of an individual container, and this predicts yard congestion so that operators can take pre-emptive action.

There are a lot of containers at the port. 

Container ship carried the hugr amount of cargo and was waiting to unload on the port. 

The container-lifter was ready to lift the cargo. 

The container truck was used to carry the containers. Finally, we ended this visit.

HIT has introduced a lot of new technologies in its operations to improve efficiency and customer satisfaction. How does HIT help its front-line staff adapt to these new practices?

In order to help front-line staffs adapting the new practices due to introducing new technologies in daily operation, HIT provides job training to the staff for them to familiar with new practices. Since on job training is conducted at the job site, this will also minimize the influences to the productivity.

Moreover, there is a remote operation system in HIT. This system can help to provide a better working environment and at the same time provide help to the front-line staff if they need.

Question and Answers

Q. How far is it until HIT reaches its freight handling capacity and is there any consequent plan in response to this issue?

The capacity of freight handling in HIT is almost full. So, HIT should improve the inventory management to maximize the use of capacity.  For example, it developed a demand strategy to calculate the  expected demand more accurately.

Apart from controlling the inventory, HIT fighting for more space and land from the government for containing more containers.

Q. There are many ports located in Mainland China and some of them such as Shanghai, Dalian and Qingdao contain superior geographic advantages. How can HIT overcome the challenges brought by main ports in the mainland?

HIT, the port in Hong Kong, usually acts as an intermediate destination of the shipment. After combining small shipments into a large one or dividing the large shipment at the other end, the shipment will then be transferred to another destination.

Although it is cheaper to handle the containers in the mainland, there are still some characteristics of HIT which make the company remains competitive. The most important one is the free trade policy of Hong Kong. Most of the containers are not required to perform random checking while arriving Hong Kong unless HIT receiving notification from the Customs, suspecting the shipment is violating the law. With the aid of high productivity of HIT, the ports in Hong Kong is known as the world’s leading “catch-up port”, where time lost on the route is assured to be made-up at the facilities. This enviable reputation can help HIT overcome some of the challenges brought by the mainland. ​

Q. HIT has introduced a lot of new technologies in its operations to improve efficiency and customer satisfaction. How does HIT help its front-line staff adapt to these new practices?

HIT used the Next Generation Terminal Management System(nGen) to increase their operations efficiency. 40% harbours in the global are using this system. nGen can control the entire scope of terminal operations, including ship and yard planning, gate operations and vessel operations.

For adapting these new technologies, HIT will provide a set of on-site training for staff to improve their capability of using these softwares. With using these new technologies, the controllers are allowed remote operation in operation centre. It can improve the working condition.  

Q. What are your competitive advantages over your competitors in the logistic industry?

The major competitive advantage of HIT over the competitors in the logistic industry is the infrastructure and technology introduced to the operation. HIT has already been using an eProcurement system and an eFinance system for back-office automation. Moreover, using the nGen operation system, developed by HIT in-house, to run its fleet of automatic stacking carriers and quay cranes will also increase both efficiency and productivity at the port.

In terms of customer service, the commercial team of HIT will also provide extra help on request by the customer. For example, HIT can provide extra equipment if it is needed for the ship parking at the port.

Q. What role does HIT hope to play in the Chinese Government’s One Belt One Road Initiative?

HIT plays an important role under the policy as HIT has more than 20 harbours, which are the transportation points in the One Belt One Road. It is important to import and export products between different countries. Thus, HIT has more opportunities to provide service in this new channel and expand new customer base.

Q. Asian shipping industry has been suffering from sharp declines in recent years due to more and more factories have been moving to Africa, how will HIT react to this unfavorable trend?

Although we saw that more factories have been moving to Africa, it did not directly impact in the operation aspect of HIT. However, it should point out that the decline of shipping industry can be contributed to the dropped of global trading. It is a challenge for HIT as it will directly affect the demand for service of the container terminal.

Q. How HIT can achieve the highest operating efficiency of the immediate

transhipment with the lowest operating costs?

HIT has a transportation team especially for internal transshipment. The transportation team is needed to transport merchandise between harbour and warehouse. In order to reduce the cost of inbond transportation, HIT developed a system that it will calculate the distance between harbour and the trucks. Then, it will arrange the most nearest and available truck to take the transport order. Under this strategy, HIT can reduce the delivery time and the operating cost.

Q. What are the major challenges faced by HIT in their daily operation?

As HIT applied some advanced system for operation and monitored by professional teams, it can perform stable and effective daily operation. However, it would has exception during some special situation such as the  extremely bad weather. The impact of  the special case is unpredictable so HIT have to formulate some emergency plan to response it.

Q. What exact measures does HIT incorporate into its daily operations to align with its corporate value of environmental protection?

HIT has implemented some environmental plans. For example, 90% of the diesel-driven RTGCS converted into hybrid RTGCs. The change of fuel is environmental-friendly as Hybrid RTGCs consume 30-50 % less fuel than diesel-driven RTGCs, produce 50% less carbon emissions.

Also, HIT keen on developing renewable energy in response to sustainable development. For example, the has developed the shore power in Yantian, one of the container terminal of HIT.

Shore power or shore supply is the provision of shoreside electrical power to a ship at berth while its main and auxiliary engines are shut down. When vessels use shore power, they tap landside electricity for their power needs at berth instead of running diesel-fuelled auxiliary on-board engines. Using shore power reduces noise and emissions, including CO2 and SO2.

IKEA Group Company Visit

Company Background

 IKEA, founded in 1943, is a multinational company with headquarter located in the Netherlands. As of 31 August 2016, IKEA has 389 stores in 48 countries. IKEA designs and sells ready-to-assemble furniture, household appliances, and home decors. IKEA’s vision statement is “To create a better everyday life for the many people”. To make IKEA’s product affordable, the company offers a wide range of well-designed, functional home furnishing products at low prices. Furthermore, IKEA has a strong tradition of working with sustainability. The company has been implementing the “People & Planet Positive” plan since 2012.

Introduction by Goods Flow Manager- Ivan

Ivan first introduced the organization chart of IKEA. The place we visited was Central Unit. He told us the Central Unit is a reformed central warehouse, which improved the efficiency along the warehousing. Central Unit manages three vital departments consist of the Good flow, Sales & Supply Support and business Navigation & Operations. These three departments perform the basic function of Central Unit, which is to make replenishment and delivery after receiving customers ‘order.

Secondly, he introduced the distribution method, which quite different from other company, there are two distributions centres. They are high flow and low flow distribution centre. High flow distribution centre stores high-demanded inventories, while the low flow one stores low-demanded inventories. This increases the distribution efficiency.

After that comes to the layout of Central Unit, is implied the most important issue, which can reduce operation cost and save a lot of time. IKEA divides Central Unit into five regions, which are furniture, long pallet, mattress, sofa and market hall region. And then Ivan briefly described the different functions of those regions.

We gained a brief insight of Central Unit before the guided tour around the Central Unit.

Guided Tour

When we stopped at the entrance of Central Unit, there is a welcome banner to welcome us.

The word “Hej” means Hello in Swedish.

 The worker made use of the forklift to pick up inventories.

We walked through the shelves. Each shelve carries different size of inventories. 

There is enough space between racks so the forklift can go through between the racks easily.

 The manager, Ivan, is pointing different kinds of stock. He introduces the functions of labels on the box. The label carries some number which can show the category of the stock. 

IKEA Central Unit covers thousand of square feets and with a high ceiling. This can make good use of upper part of space in order to carry more stocks.

In the upper photo, the stocks are placed on wood pallets on the shelve. In the lower photo, wood pallets also are used when moving a certain amount of inventory by forklift. The can consolidate the inventory properly and easy to move as well as utilising the space.

Central Unit uses different colours of the sticker to identify the status of inventory. The sticker in white means the inventory is kind of buffer. The orange sticker means the inventory is ready to be picked. The yellow sticker means the stock was replenished in last month. 

Generally, they will put the heaviest items on the top of the shelf because those items are very big and seldom to move. The rack is consist of three shelves, which are flexible, in order to adjust the space between shelves. 

This is called loading area. The major loading activities are carried out in the area and the trucks are also ready out there. The area must be unblocked and inventory cannot be stocked here for a long time unless the inventory is ready to be loaded soon.

A lot of wooden pallets are used to consolidate the stock. When the pallets are idle, workers will put them here for next time usage.

The red arrow label means these items should be picked first based on the first-in-first-out. Basically, IKEA Central Unit applies a system that can make forecast base on the lead time, safety stock and stock availability. What is more, the system can alert staff to handle those items if stayed over 120 days. 

At the end, we left the Central Unit. 

Question and Answers

Q. Being a subsidiary of Jardines, how does IKEA meet the quality management standard of both the parent company and IKEA international?

Hong Kong IKEA reports to Dairy Farm directly. Since Dairy Farm is under Jardines, the standards of Jardines and Dairy Farm are similar, such as their sustainability practice.

Q. How will IKEA respond in the coming 10 years with regard to the trend towards sustainability?

As time is limited, Ivan did not answer this question in detail. Referring to IKEA's website, the company will put effort on transforming the business. IKEA's strategies will wok with the following drivers: Inspire and enable millions of customers to live a more sustainable life

at home, Strive for resource and energy independence and Take a lead in creating a better life for the people and communities. For example, the company is working hard on enhancing resource and energy independence by employing more sustainable sources and investing in renewable energy . 

Q. What is the biggest challenge for IKEA to operate in Hong Kong?

The biggest challenge to operate in Hong Kong is match with IKEA’s global requirement. IKEA located in other countries are stand-alone store. They are able to follow IKEA’s global rules and standard, like store size and facilities provided. However, Hong Kong IKEA cannot operate comprehensive stores. These stores cannot fulfill the global requirements. IKEA group required the stores to display a standard amount of products. But Hong Kong IKEA cannot meet the standard due to the space constraint. Besides, when customers buy furniture in foreign IKEA, they are able to enjoy the products in the same day. Hong Kong IKEA has to receive order first, then wait for the warehouse delivers the furniture to customers’ home. This long process will increase delivery lead time. The main challenges of Hong Kong IKEA are related to space constraint. Hong Kong IKEA is still exploring the ways to reduce the lead time and meet the global standards.

Q. Given that Hong Kong’s expensive rent for inventory storage, but also with the large size of furniture. How do you manage your inventory and forecast demand to meet the customer demand with enough stocks and avoid the problem of overstock that incurs high storage fee?

Manage delivery lead time is important. The key factors are the safety stock level and delivery time. Usually, one suppliers will supply inventories to all IKEA store around the world. In order to meet standard percentage of safety stock, lead time forecasting should be accurate for all the stores.

Q. In the retail level, how does IKEA practice sustainability strategies and minimise waste in operations?

IKEA also has sustainable practice in distribution process. Flat packages are very popular for foreign IKEA. They can help to maximize volume during transportation process. Wooden pallets are expensive, heavy and non-productive. So IKEA uses paper pallets to replace wooden pallets. It helps to decrease handling and carbon footprint.

However, humidity in Hong Kong is relatively high. Paper pallets are not able to provide enough protection to the inventories. To avoid damage, Hong Kong IKEA is still using wooden pallets for transportation.

IKEA encourages customers reduce their own waste. In Hong Kong IKEA stores, recycle bins for battery and light bulb are placed. They provide channels for customers to reduce carbon footprint and promote company image. IKEA can do more in foreign IKEA stores. Since the whole building belongs to IKEA, they also invest to sustainable energy sources, such as solar energy board outside the building.

Q. Has your company ever experienced culture clash with your franchiser (IKEA Group)? If yes, how did you resolve it?

Limited by the high rental cost problem, IKEA store in Hong Kong cannot provide quality service and shopping experience that up to the standard set by the franchiser. For example, Hong Kong customers cannot take away the sizable products immediately after that have purchased it. Therefore, Hong Kong IKEA provides alternatives like online shopping, delivery service and pick up points service to increase customers' satisfaction. 

Besides, IKEA's employees in Hong Kong may not have the chance to undergo comprehensive training which includes in-store training, national training and specialized workshops to develop job competence, management and leadership abilities. To resolve the problem, it relies on Hong Kong IKEA to provide in-house training and strive for oversea training opportunities for their staff. 

Q. How does the logistic centre of IKEA deal with the outdated inventories?

 Normally, the product storing at IKEA's distribution centre will have a product life of 120 days. IKEA arranges the inventories under first-in, first out (FIFO) mechanism. The oldest inventories will have a higher priority to be delivered or sold. For outdated inventories, IKEA will sell it at discounted price or even donate it.     

Q. Why does IKEA not use automation such as the robots or machines to move the inventory?

IKEA do not own the distribution center, therefore, investing in automation or High-Tech facilities is not cost effective. Ivan explained, High-Tech facilities like RFID is often used by company that sells high-margin products like luxury or High-Tech products. However, IKEA's products are sold at low price and that's why IKEA cannot afford such technology. Considering the trade-offs on using automation, IKEA decided to  employ manpower instead of robots or machines. 

Q. How does IKEA minimize the waste produced when transmitting inventories?

IKEA's products have flat packing design and it allows greater quantities on each delivery. Therefore, the waste like carbon footprint can be minimized. In additions, IKEA will avoid any damage on the products during the delivery. Minimizing the damage on the product can stay away from creating extra waste. 

Q. How does IKEA integrate advanced technology in inventory management?

IKEA has an electronic system which records the condition of all inventories. For example, in-bound date, out-bound date,  product life cycle etc. The system will prompt alert to inventories which are near its expire date or already exceed its life cycle.

Q. How do you manage the division of storage for different product types, especially for products with short life cycle (like Vacuum Packed Mattress)?

There is an alert in IKEA’s inventory system. When the inventory keeps more than 120 days, the system will remind workers deliver it to customers first. An area named “AS-IS” in IKEA is a section selling returns, discontinued items and damaged stock at cheaper prices. This area can reduce waste and maximize returns. If inventories are not able to sell out, IKEA will donate it or recycle it.