A&A UPS South China Operations Site Visit 2-2005

UPS Supply Chain Solutions (SCS)

South China Operations

February 2005

Richard Armstrong

Key Personnel:

W.K. Wong, Terminal Manager

Ivan Li, Director – Business Development Support & Marketing

Celine Lee, Business Development

The most striking feature about UPS’ South China operations is neither its individual largeness nor its modern, uniform supply chain/logistics methods. The thing that got my attention was how much UPS presence is already there. UPS, a true global power, is making a large footprint in South China. And it’s only one of the footprints of UPS, the brown giant, as it routinely expands on its original steps in Asia.

For most 3PLs, duplicating what UPS has put in place in a few years would be a huge undertaking. For UPS, it is a fairly standard solution among many in globalization. A well run company with over $36 billion in revenue and more than $2 billion a year in free cash flow can do things like that. I could feel it when I visited the new Futian FTZwarehouse. (Futian is across the border from Hong Kong – about one hour away.)

Construction on this facility is completing. It is 240,000 square feet on six floors. The first five have 6,000 pallet positions per floor. The office is on top. The facility handles both inbound and outbound. Customers include the high-tech company Molex, Toshiba, Gortex, LexMark and others. The facility uses barcodes, cycle counts, A&B designations and UPS’ global WMS. Exceed.

In addition to Futian, UPS SCS has a 300,000 square foot warehouse in Yantian for its export container operations. It handles about 4,000 FEUs per month with seasonal fluctuations. The maximum throughput of the facility is about 8,000 FEUs per month. Most operations involve LCL consolidation and pick & pack. There are 16 forklifts, 12 checkers and about 50 laborers (W.K.). This is a customs supervised export license operation whose peak season is June – October.

The Hong Kong warehouse is a mere 150,000 square feet housed in the ATL Logistics center. The ATL center is 13 floors high and said to be the world’s largest concrete building with 5 kilometers of roadway inside it. ATL is home to most of the major Hong Kong 3PLs. UPS SCS’ Hong Kong operation handles ocean freight – about 3,000 FEUs per month. The maximum throughput is about 9,000 FEUs per month.

UPS SCS’ major competitor in this area, as in most of the Far East, is DHL/Danzas. While there is still room for other players, they will need to be nimble and creative to avoid being stepped on by these giants.

If you are a potential UPS SCS customer for the Hong Kong region, you will find the sales people educated, articulate, with good English and quite able to craft solutions. But if you want a real feel for what you are going to get, talk to W.K. Wong. He is a good operator who understands the business and is serious about getting it done right. He is a lot like warehouse managers I’ve meet in Chicago, Dallas or The Netherlands.

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