Dimerco Continues its Service Line Expansion
Guangzhou, China Site Visit
April 7, 2016
By
Evan Armstrong

Key Personnel:
Edward Lin – Chief Executive Officer
Andy Hsu – Corporate Vice President
Kimber Lee –  Corporate Ocean Freight Vice President
Brandon Wang – Regional Director, Europe
Jeffrey Shih – Regional Vice President, South East Asia
Greg Spudic – Regional Vice President of Marketing & Sales, North America
Kathy Liu –  Regional Director of Sales & Marketing, Greater China
Parveen Dadala – Country Manager, India
Vicky Wen – Corporate Marketing Director

Dimerco Express Group Overview
Founded in 1971 as a Taiwan based air freight forwarder and transportation provider, Dimerco Express Group has risen to be a top 25 global air freight forwarder managing 202,000 metric tons of air freight in 2015. While 53.6% of its revenues still come from air freight forwarding, Dimerco has expanded its service offering and is a leader of integrated third-party logistics solutions in Asia, with key complementary operations in Europe and North America. Its global network operates in 59 countries from over 300 operating locations. Dimerco’s staff of over 2,000 generated $489.62 million in gross revenue and $73.82 million in gross profit in 2015. It has strategically expanded its ocean freight forwarding operations, which now manage over 175,000 TEUs (Twenty-foot Equivalent Units), and has increased its warehousing and domestic transportation management capabilities. Dimerco is a high-tech specialist whose customers include: Epson, Flextronics, Lam Research, Lenovo, Netgear, ON Semiconductor, and Samsung. It is targeting growth with customers in Aerospace, cross border E-Commerce, Oil & Gas, Apparel & Textiles, and Automotive Component industry segments in 2016.

Dimerco’s core service offering includes:

• Air and Ocean Freight Forwarding
• Integrated Air, Sea, and Ground Multimodal Solutions
• Domestic and Cross Border Transportation Management
• Value-Added Warehousing and Distribution
• Customs Brokerage
• China AQSIQ (General Administration of Quality Supervision, Inspection & Quarantine)
• Aircraft Chartering
• Cargo Insurance Brokerage
• In-house Logistics Support
• Supply Chain Management Consulting

Dimerco is a licensed NVOCC (Non Vessel Operating Common Carrier), IATA (International Air Transport Association) Cargo Agent, is Class A Licensed in China, and holds the following certifications: ISO 9001 and ISO 28000, and TAPA (Technology Asset Protection Association). In addition, it is an Authorized Economic Operator (AEO) in the European Union and is Customs-Trade Partnership Against Terrorism (C-TPAT) certified in the United States.

Dimerco’s global network is shown below. It uses a mix of owned offices, agents, joint ventures, and alliances with or without equity participation.

Dimerco Express Group Global Network

In 2015, Greater China (including Hong Kong and Taiwan) accounted for 58.3% of Dimerco’s total revenue, North America was 20.9%, other Asian countries were 17.7%, and Europe accounted for 3.1%. Dimerco plans on finishing 2016 with 152 of its own offices by adding Taicang and Zhaoqing in China; Mumbai, Ahmedabad, and Hyderabad in India, and Houston, Charlotte, and Milwaukee in the United States.

Dimerco’s value-added warehousing and distribution services include: Vendor Managed Inventory (VMI), pick/pack operations, kitting, merge-in-transit services, product labeling, reverse logistics management, spare/service parts order management and fulfillment, cross-docking, and container consolidation/deconsolidation. Its warehousing network includes operations in the following cities: Hong Kong, Shanghai, Beijing, Tianjin, Shenzhen, Singapore, Jakarta, Taipei, Amsterdam, London, Los Angeles, San Francisco, New Jersey, and Chicago.

Dimerco leverages its relationships with core air carriers China Airlines, Air China, EVA Airways, Cathay Pacific Airways, Korean Airlines, and Hong Kong Dragon Airlines for the majority of its air freight forwarding services. Ocean freight forwarding is managed through Dimerco’s Diversified Freight System division. Its major ocean carrier relationships include: Evergreen, Maersk, NYK, China Shipping, COSCO, APL, OOCL, Wan Hai Lines, Hapag-Lloyd, Yang Ming Line, and ZIM.

To further expand its customs brokerage capabilities, Dimerco acquired a U.S. based customs broker MYK Global Service Inc. on January 16, 2012. The acquisition provided Dimerco customers with coordinated customs brokerage operations in Asia and the U.S. Dimerco has the necessary certificates for customs brokerage operations in Greater China including a Customs Brokerage License, AQSIQ Broker License for Entry-Exit Inspection and Quarantine, a Customs Supervised Warehouse License, and a Customs HS Code Classification Specialist Certificate.

ASEAN Cross Border Transportation Management Services
In addition to international air and ocean freight forwarding, Dimerco has built significant intra-Asia ground transportation management operations. In 2000, Dimerco began providing cross border transportation management services between Singapore, Malaysia, and Thailand. Since then, it has expanded its ground transportation management services to serve the ASEAN (The Association of Southeast Asian Nations) countries through multiple operational hub locations. Using Bangkok as a main north-south gateway, its ground transportation network links countries through major hubs in Beijing, Guangzhou, Shenzhen, Shanghai, Singapore, Johor Bahru, Kuala Lumpur, Penang, and Hanoi. The network has further connections in Laos, Cambodia and Myanmar, and is slated to add India in the near-term.

The total transit time for Dimerco’s Less Than Truckload (LTL) service from Shenzhen to Singapore is seven days. To address security concerns, Dimerco’s ground transportation management network incorporates web-based GPS (Global Positioning System) technology, enabling customers to track and monitor the status of shipments. In addition, Dimerco also utilizes a security e-lock system with SMS or bar code scanner technology, to ensure safety while trucks are enroute to final destinations.

Dimerco’s Cross Border Road Transportation Network Links Major Locations in South East Asia and China

China Integrated “Value Plus” Multimodal Transportation Management Service
Within mainland China, Dimerco has extended its domestic transportation management services encompassing an integrated multimodal solution driven by customer on-time performance requirements. Its China “Value Plus” service taps operational hubs with combined logistics capabilities for domestic air and ground transportation, cross border transportation, and warehousing.

The figure below details Dimerco’s China Value Plus hub operations. Chengdu, China is currently being reviewed as a possible network addition.

China Integrated “Value Plus” Multimodal Transportation Management Hubs

Dimerco’s hubs in China are comprised of the following warehouse facilities: a Free Trade Zone warehouse in Shenzhen, a Bonded Logistics Park operation in Shenzhen, a Bonded Logistics Center in Beijing, a Free Trade Zone warehouse in Shanghai, a warehouse in Tianjin, and two warehouses in Hong Kong.

For some cross border shipments to Europe, Dimerco is utilizing the service the of China-Europe International Block Train. The train accepts both 20’ and 40’ containers and has several departures per week from a combination of 16 terminals in China. European destination terminals include Manzhouli/Zabaikalsk, Brest, Warsaw, and Hamburg/Duisburg. With transit times of approximately 15 days, the Block Train can deliver transit times which are twice as fast as standard ocean shipping from China to Europe.

China-Europe International Block Train

Information Technology, ‘Dimerco Value Plus System’
Dimerco has an IT staff of 45 and spends just over 3% of its net revenue on IT. By adopting Web 2.0 and supply chain management, it has developed a proprietary systems platform dubbed the “Dimerco Value Plus System” to manage its operations. Through ongoing research and innovation, its Consolidation Yield Management System and the Data Synchronization Method has successfully received both Taiwan and U.S. Patents. The system provides customers and trading partners with portals and online reporting functions. Key to Dimerco’s growth has been to build an integrated systems backbone which is easy to implement across its network. In addition, it is developing mobile applications to support sales operations.

The Dimerco Value Plus System has the following components:

►1 System – Integrated Transportation & Logistics Service Management System
►2 Banks – Knowledge Bank & Information Bank
►3 Platforms – Operation Platform, Service Platform and Communication Platform (eCMS)
►7 Operation Modules:

• eSAM – Sales Activities Management System
• eAMS – Air Freight Management System
• eOMS – Ocean Freight Management System
• eTMS – Trucking Management System
• eWMS – Logistics Warehouse Management System
• eDAS – Domestic Air Freight Management System
• eFMS – Finance & Accounting Management System

►5 Supplementary Functions:

• CYM – Consolidation Yield Management System (Patent No. US 8,694,440)
• 3PS – Triangle Trade & 3rd Party Billing Management System
• MTS – Multi-Mode Transport Management System
• CBS – Customs Brokerage Management System
• ACS – Automated Centralized Settlement

Cross Border E-Commerce
Cross border E-Commerce is a fast growing service line for Dimerco and it is providing services to large e-retailers including Alibaba and JD.com. Dimerco manages the origin transportation from its customers international suppliers to its overseas consolidation hubs in Asia, Australia, Europe, and the United States.

Dimerco handles the customs brokerage and freight forwarding to destination air and ocean ports in China. From there, Dimerco coordinates bonded transportation to one of its five bonded warehousing operations in Shanghai, Hangzhou, Guangzhou, Zhengzhou, or Ningbo. It can then manage the final delivery to customer distribution operations, or to end consumers.

Tapping India’s Growth
With an estimated 10.2% annual third-party logistics (3PL) market growth rate, India is the fastest growing global 3PL market. To develop services for the growing Indian market, Dimerco established operations in India three years ago. It currently has operations in Bangalore, Chennai, and New Delhi, and is opening offices in Ahmedabad, Hyderabad, and Mumbai this year. In addition to its owned offices, Dimerco has established agreements covering agent operations in 10 other cities. Its main service offering includes air and ocean freight forwarding, customs brokerage, and cargo insurance sales. In addition, Dimerco is providing value-added warehousing and transportation management services through contractual relationships. These include Importer on Record / Exporter on Record and Indian VAT (Value-Added Tax) & tax compliance services. Its current warehousing footprint includes facilities in Bangalore, Chennai, Delhi, and Mumbai. Free Trade Zone warehousing operations in Mumbai, Chennai, and Andhra Pradesh can provide customers with Service Tax exemptions and Duty deferment benefits.

Dimerco is currently serving Telecommunications, High-Tech and Automotive industry customers in India. For one telecom customer, it has developed a program to reduce import duties paid on manufactured smartphones by importing components and supporting the final assembly of handsets in India. In High-Tech electronics, it is providing spare/service parts logistics (SPL) services. Dimerco works with its High-Tech customers by managing the inbound international transportation of parts and components, and warehousing them in a network of contracted warehouses. Once an order its placed, it then manages the transportation of parts and components shipments for delivery to automotive dealers in India.

Summary
Dimerco has been building upon its expertise as an air freight forwarder by adding adjacent supply chain management skills allowing it to provide customers with integrated end-to-end solutions. Its efforts have been paying off and its new service lines now comprise over half of Dimerco’s revenues. With the additional focus of cross border multimodal and E-Commerce operations supporting customers such as JD.com and Alibaba, we anticipate further growth for Dimerco within Asia and globally.

Sources: A&A Primary Research, http://www.dimerco.com/