NYK Synchronizes its Service Offering

Secaucus, New Jersey USA Site Visit
June 15, 2010
By
Evan Armstrong

Key NYK Logistics (Americas) Inc. Personnel:
Kazuo Ishizuka – President & Chief Executive Officer
Anthony Chiarello – Executive Vice President & Chief Operating Officer
James A. Craig – Senior Vice President of Sales and Marketing
Donald M. Meewes – Senior Vice President & Chief Information Officer
David A. Proctor – Senior Vice President Supply Chain Solutions
John Lucas – President, Transportation Division
Kirsten M. Jensen – Senior Vice President & General Manager, Human Resources
Ronald M. Marotta – Executive Vice President, International Network Solutions Division
James Armstrong – Senior Vice President & General Manager, Warehouse Division
Timothy J. Nolan – Senior Vice President & General Manager, NVOCC & CHB Division
Paul Cubby – Director of Marketing

NYK Group Logistics Operations Overview
Founded in 1885, NYK Group has grown to be an $18 billion logistics and transportation provider. While ocean shipping accounts for 61% of its revenue, the Group’s third-party logistics (3PL) operations–NYK Logistics and Yusen Air & Sea Service–are its fastest growing business units and have grown to account for 19% of total revenues. Over the past 15 years, NYK Group has had a sea change in its strategic thinking from being ocean shipping centric to now seeing itself as a global logistics integrator.

The Group’s logistics operations are the cornerstone to NYK’s integrated service offering and as part of its evolution, NYK Logistics and Yusen Air & Sea are slated to be merged into one company, Yusen Logistics Co., Ltd., in 2011. Combined both companies have operations in 67 countries employing approximately 15,000 people. They have a global network of 431 operating locations and 310 warehouses with approximately 25.2 million square feet of space. Yusen’s international freight forwarding centric operations will be combined with NYK Logistics global non-asset transportation management, warehousing, and freight forwarding operations. The resulting forwarding volumes will exceed 600,000 ocean trailer equivalent units (TEUs) and 500,000 airfreight metric tons. The combined revenues for the merged company will be approximately split between air and ocean freight forwarding, warehousing, and domestic U.S. transportation management. The business portfolio integration is shown in the figure below.

Combined NYK Logistics and Yusen Air & Sea Revenues by Service Offering and Geography

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NYK Logistics Growth and Service Offering
Operating separately from its sister company Yusen Air & Sea, NYK Logistics has grown through acquisition and organically and has built a significant presence in Asia, Europe and the Americas. NYK Logistics’ international transportation management and value-added warehousing and distribution services are strong in the Americas, Asia and Europe. In the Americas, NYK Logistics Americas (NLA) has significant domestic and international transportation management capabilities and a transloading focused warehouse network with facilities at major ports and cities within the U.S. Because of its ability to support global supply chain networks, many of NYK Logistics’ top customers fall into the Apparel, Consumer, Health & Beauty, and Retail vertical industries. Key accounts include: Big Lots, CVS, Dell, Home Depot, Kohl’s, J.C. Penney, Lennox, P&G, Sony, and Wal-Mart.

Key to NYK Logistics’ service offering is NYK Logistics Supply Chain Solutions group which works with customers and other NYK Logistics business units in reengineering, implementing and operating supply chain networks. Its efforts drive reduced customer inventory carrying cost, increased speed to market, and reductions in customers cost of goods sold.

Domestic Transportation Management Division
NYK Logistics Americas’ (NLA) transportation division is the largest of the NLA divisions. It is a non-asset based provider and one of the largest intermodal and over the road freight brokers in America. It had 2009 gross revenue of $520 million and operates a North American network of 22 branch offices with two in Mexico and one in Canada. Approximately 50% of its revenue is from intermodal rail transportation and 30% is U.S. dry-van truckload. It manages approximately 350,000 shipments per year and has over 15,000 carriers under contract.

NLA transportation’s service offering includes: over the road and intermodal rail, refrigerated, flatbed, less than truckload (LTL), and cross border Mexico transportation services. In addition, it has specific capabilities in supporting expedited freight and managing air cargo and project logistics.

 

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NYK Logistics International Services
Internationally, NYK Logistics helps customers manage international purchase orders (P.O.’s) from origin vendors and manufacturers to final destinations. It provides customers with an international supply chain management network with the requisite shipment consolidation, transportation, distribution, and information technology service skill set. NYK Logistics’ current global network has operations based in 162 cities and ports within 67 countries. In addition to vendor and P.O. management, NYK Logistics performs origin port consolidations of less than container load (LCL) shipments into full container loads (FCL), arranges for international ocean and air transportation, and oversees final distribution. In 2009 it managed 9.1 million cubic meters (163,850 full trailer equivalent units) of products.

NYK Logistics Origin Consolidation to Delivery Shipment and Data Flows
To support operations, NYK Logistics has developed a proprietary supply chain management system dubbed “Griffin”. Griffin provides a system for managing all inbound operations milestones from pre-purchase order raw material procurement and certification, P.O. receipt, vendor shipment order generation, carrier booking, container loading and customs clearance to final delivery. It also provides tracking and tracing capabilities to the order, stock keeping unit (SKU), and even sub-SKU levels when needed.

 

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U.S. Warehousing and Transloading Network
The NYK Logistics Americas U.S. warehousing and transloading network has 22 high-velocity facilities that are vital to the NYK Group’s international import operations. Upon its integration with Yusen, that number will more than double. Ocean containers are brought from ports to the facilities where product is either directly transloaded from an ocean container to an over-the-road (OTR) or intermodal rail trailer, or cross-docked as less-than-truckload (LTL) shipments into separate trailers. NLA has the ability to allocate the contents of each inbound ocean container based upon customer inventory demand needs prior to it arriving at the transload facility. This allows NLA to plan out which product will be transloaded, cross-docked and consolidated with other LTL shipments to build truckloads, and which inbound containers can bypass the transload facility for direct customer delivery. NLA transloads and cross-docks over 240,000 containers annually. To support the transload facility operations, it utilizes Infor’s WMS (warehouse management system) and YMS (yard management system). A basic example of how imports flow through a transload facility is shown in the figure below.

NYK Logistics Americas Example Transload Operations Flow

In addition to cross-docked import shipments, NLA also provides merge in transit services to its customers. Imported and domestic products are received into the transload facility and staged. When all of the required product is received into the facility, it is then co-loaded into intermodal or OTR trailers which are dispatched to the customer. The merging of inbound imports and domestic products allows for increased supply chain efficiencies and improved inventory management.

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In addition to its forward logistics capabilities, NLA has built a significant reverse logistics network and offers services including: refurbishment, liquidation, re-marketing and closed loop recycling. Many of its services support shippers’ “Green” initiatives. NLA offers closed loop programs providing customers with solutions to significantly reduce and eliminate landfill waste management. NLA sees this integrated forward and reverse supply chain services offering as one of its key competitive differentiators.

Summary
NYK Group and its 3PL operations perform many sophisticated services supporting global trade and supply chain management. It is one of a select group of 3PLs that have this level of global supply chain management expertise. The combination of NYK Logistics and Yusen Air & Sea into Yusen Logistics is a logical step in streamlining and synchronizing its operations to provide a single market “face” to customers. The integrated company will be one of a handful of global 3PLs with the ability to handle shipments from origin to final destination completely within its own network. We anticipate that this strategy will be a significant step in driving the 3PL operations continued growth.

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