Company visit 1 - HIT

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Hongkong International Terminals (HIT) is a member of HPH Trust, the world's first container port business trust listed in Singapore. HIT is also a part of HPH's global network of port and logistics operations, and continues to have access to services and resources enjoyed by companies within the HPH Group.

Situated in the Kwai Tsing container port area of Hong Kong - one of the busiest container ports in the world - HIT operates twelve berths at Terminals 4, 6, 7 and 9 and another two through its joint venture with COSCO Pacific Limited at Terminal 8 (East). HIT and COSCO-HIT handle over 50 per cent of Kwai Tsing's container port traffic.

Established in 1969, HIT has continuously set the industry benchmarks for productivity, efficiency and value-added services. Using modern management techniques, state-of-the-art computer systems and award winning IT applications, HIT has become the center of excellence for the group, Hutchison Port Holdings.  

1. Hong Kong is one of the most experienced container ports in the world. Compared with other container ports, are there any unique advantages of HIT? How does IT help HIT to develop a sustainable advantage to keep their competitiveness?


Unique advantages
From their company statement, HIT has continuously set industry benchmarks for productivity, efficiency and value-added services. Using modern management techniques, state-of-the-art computer systems and award winning IT applications, HIT has become a pinnacle of industry excellence.

a. Productivity

Through the innovative use of systems and technology in the Kwai Chung container terminal operators, the container terminal lead the world in utilizing space and productivity.
Kwai Tsing container port area of Hong Kong - one of the busiest container ports in the world - HIT operates twelve berths at Terminals 4, 6, 7 and 9 and another two through its joint venture with COSCO Pacific Limited at Terminal 8 (East).
By 1987, Hong Kong was number one in the world container league, handling almost half of Hong Kong's throughput. The year 2000 was another banner year with double-digit growth in port throughput. Today, with over 80 international shipping lines providing 460 weekly container services to more than 170 ports worldwide, Hong Kong dwarfs its rivals.
 

b. Value-added services

Since 1990s with continued growth , HIT has established a unique kind of container handling mode in Hong Kong known as midstream operations. Midstream operations contribute to the service flexibility of the Port of Hong Kong by offering smaller container ships the ability to lie at secure buoys in the harbor and be unloaded by barge.
This operation can greatly reduce the cost of spending a pier for the ship, and avoid the delay of transaction due to the searching of pier.

c. Efficiency

With the help of the innovative technologies, most of the process can be automatized. There are mainly two parts of automation in HIT.

i. Yard automation

Container yard activities are planned, coordinated and monitored automatically. HIT reduces the time vessels spend at berth, saves tractor turnaround time in the terminal, and provides flexibility in handling customers' special requirements. The computer system maintains detailed information on each container and provides a variety of enquiry, reporting and analysis facilities to assist in management of container inventory.
A special feature of the system is a yard map that contains the exact location of all containers in the terminal at any one time.
The system links to the Customer Plus and Gate Automation.
Coordination with other ports
New forces are at work. The integration of Kwai Chung into the network of South China ports, expansion of midstream and river trade operations, supported by sophisticated and electronically delivered logistics services, continue to make Hong Kong a sea-trade logistics hub.

ii.Gate automation

Gate procedures at HIT are fully automated to increase service and efficiency.

Shippers can dial in their tractor information to ensure rapid turnaround.

Drivers can make appointments up to three days in advance.

Drivers use a "Common Tractor Identity Card" to enter and leave the terminal.

Our Smart Dual Move System enables drivers to deliver and collect, avoiding empty runs.

Drivers get instructions on pick-up and grounding locations through Mobile Terminal Message via mobile phone.

HIT TECHNOLOGY

a. nGen

nGen,( Next Generation Terminal Management System) is a complete rewrite of award winning 3P Terminal Management System using much enhanced process logic and the latest open computer technologies.
With the implementation of nGen, the system controls the entire scope of terminal operations from ship and yard planning, gate operations, vessel operations and interactions, yard configuration and performance, overall operations monitoring, equipment utilization, productivity to costs optimization.

b.Electronic data interchange(EDI) and Customer Plus

HIT has made extensive use of electronic communications and has developed a number of links with customers and port users. Shipping-related documents are converted into electronic form to speed up communications, increase efficiency, reduce paperwork and provide value-added services.
Electronic communications have been particularly beneficial for traffic flow, with HIT scheduling vehicle arrivals to avoid congestion in the port area.
EDI and Customer Plus allows HIT to transfer electronically data files such as:
Export booking data
Stowage instructions and Stowage plans
Loading/discharging container data
Gate movement log
Tractor pre-advice & appointment
Empty delivery & collection
Terminal receipt
Invoice

c. Tractor Appointment System

The Tractor Appointment System is HIT's innovative scheduling system for collecting inbound, loaded containers. It has helped meet the needs of customers by:

handling a higher number of tractors without delay

increasing productivity by keeping tractors picking up cargo away from discharging areas

ensuring rapid turnaround for ships and tractors

The appointment system is a key part of HIT's gate automation process.

d. Control tower and planning

Four systems are involved in here

Operations Monitoring System (OMS)

OMS helps HIT staff visualize information on terminal operations and container stacking through a graphic representation. Overviews cover the entire container yard down to details of an individual container. The system can predict yard congestion so operators can take preemptive action.

Ship Planning System (Guider)

Guider delivers optimal sequences for discharging and loading vessels, ensuring ship stability and efficient operations. Computers hold a library of every vessel berthing at the terminal. The system generates pier-side instructions to yard operators.

Radio Data System (RDS)

RDS uses radio channels and remote terminals to provide detailed information on yard operations and container movements. RDS acts as the eyes and ears to the main computer system nGen. Terminals include computers mounted in the cabins of each Rubber-Tyred Gantry Crane and hand-held computers carried by operators and supervisors in the yards and on the quayside.

Paging

Private paging is used by internal tractors serving the vessel and marshaling operations. Pagers dispatch precise movement instructions to the tractor drivers on a real-time basis.

2. How is HIT security functioning so as to ensure there are no prohibited products in the port?
 

Before arriving the terminal
 

For ship
 

Before ocean-going vessels arrive, key information such as container numbers, weight, size and type is sent to HIT via Electronic Data Interchange and Customer Plus.

External tractor drivers can make appointments using the Tractor Appointment System to pick up containers using Interactive Voice Response.

Therefore, HIT can gather all detailed information before check-in of all trucks it ensures that there is a well preparation for the further operations.

For automobiles
 

Before automobiles arrive the entry gate, they will be separate into two lines which are car with containers or without containers. The line with containers will be checked regularly to ensure it is safe when it leaves the terminal.

During check-in the terminal
 

For ship
 

There will be customs doing inspection regularly to make sure there are not any prohibited things on ship.

For automobiles
 

After the details enter the system as well as external tractors enter HIT, gate checkpoints scan the driver’s Tractor Identify Card(TID) and HIT’s nGen System acknowledges the vehicle’s arrival. Tractor drivers can go directly to the yard for container pickup/grounding or await further notice using Mobile Terminal Message. Tractor drivers do not need to leave the cabin at any time.

       

Leaving the exit gate (For automobiles only)
 

Drivers must complete the procedure for container inspection. The TID is scanned again for system confirmation.

3.What is the contingency plan for the quayside operation when it has extreme weather condition? 
 

There are some measures to make sure the terminal is able to minimizing the effects on extreme weather condition.
 

Typhoon 1
 

HIT triggers its monitoring mechanism by maintaining a close contact with the Hong Kong Observatory to keep track of the tropical cyclone / typhoon and prepares to secure its container yard and equipment.
 

Continuous weather-related information is sent by the Hong Kong Observatory. On-site wind-monitoring equipment measures local wind speeds at HIT terminals. If speeds exceed 61kph, an alarm will be activated to alert people in the container yard.

Typhoon 3
 

Precautionary measures:

a. Scheduling on-berth vessels to stop work and leave the Terminal for shelters,

b. Announcing to the public the time when the Terminal will close and securing the container yard and equipment before a higher signal is hoisted.

c. Stacks of containers are leveled out, as protruding containers are more susceptible to damage.

d. Ships move away from berths.

e. Quayside cranes are firmly secured and yard cranes are moved to designated positions and anchored.

f. Container stacks are made rigid with special fittings.

Securing the terminal takes hundreds of workers and a minimum of 16 hours.

Continuous weather-related information is obtained from the Hong Kong Observatory. On-site wind-monitoring equipment measures local wind speeds at HIT terminals. If speeds exceed 61kph, an alarm will be activated to alert people in the container yard.

Typhoon 8/9/10

HIT will cease all terminal operations.

 

4. How can HIT deal with the challenges from the port of Shenzhen as their cargoes throughput keeps rapidly increasing?
 

The positioning of two terminals are different, it is difficult to harm each other as both of them works very well in their segment. The different can be seen below by both terminals company focus.

 

HIT
 

HIT focus on transit trade, therefore, HIT is developed to satisfy it which is transshipment. Most of the customers from other countries are putting their product to  HIT, which seen as a inter-medium, and then pick up by other customers from different countries. For example, Vietnam ship to HK for store, and then pick up and shipped to North America.

Shekou Container Terminals Ltd (SCT)
 

As Shenzhen is an export business party, so it  takes advantage on export.

SCT has developed sea-rail inter modal transportation network, which connects rapidly growing cities, such as Changsha, Zhuzhou, Liling, Hengyang, Kunming, Nanchang and Shaoguan, in the west and southwest of China. As such they form the basis of SCT’s central strategy to expand its cargo hinterland.

5. Facing the great competition with China, how can Hong Kong sustain its competitive advantages as an international export center?
 

a.Efficiency

HIT maintain a very low turn over rate which enhance customers efficiency as well. Through the technology HIT using, it can be highly useful to enhance the efficiency of the terminals.

b. Security

HIT is prior to provide a safety environment to all employees, contractors, and terminal users. Therefore, it has set up a committee to ensure the knowledge of safety for all employees.

With the practising of safety working environment, Hongkong International Terminals (HIT) has received the Continual Improvement Safety Programme Recognition of System (CISPROS) Level 3 certificate from the Occupational Safety & Health Council (OSHC) HIT is one of only five companies in Hong Kong to have received this prestigious recognition from the OSHC.

Besides, the products and cargoes stored in HIT has been treated well as well and the products are always be treated in a very good condition which helps to enhance confidence as well.

b.Trust 

Through the efficiency and trust stated above, good relationship between HIT and customers should be enhanced due to the well working performance maintained by HIT.

 

6. As the global trade and the needs for logistic chain management increases, how can your company diversify your operations beyond the traditional role of a container port operator?
 

There is no doubt that the technology development play a great role in HIT, especially nGen. Therefore, the development of nGen is a important factor for HIT to sustain their competitive advantage. 

Maintain economic of scale is an important factor as well as the larger the scale they had, it is more possible for them to provide a better price for their customers and also it is used to enhance their productivity as well.

With real-time operator alerts, each control staff can customize more than a dozen automated alerts to suit different situations. These alerts not only allow the operators to take appropriate actions at appropriate times, but also relieve on-the-job pressure. 

Finally, nGen has over one hundred user-definable business rules that can be fine-tuned. For example, an operator can adjust the laden box grounding and internal tractor deployment rules to meet customers' specific operating requirements. No more reprogramming and compiling, as nGen now adapts effortlessly.

Human resources training is very important too as technology is growing rapidly, more and more manpower is shifted into office instead of the port as the port is seen to be developed automatically someday afterwards to reduce the danger workers exposure as well as to ensure efficiency and accuracy as well.

Case study 1 - TAL APPAREL LIMITED

Introduction

TAL is the world leader in the production of innovative clothes that combine style, comfort and functionality.Headquartered in Hong Kong, It specialize in the manufacture of quality men’s and women’s garments for the world’s leading brands.  Currently they produce 1 out of 6 dress shirts sold in the USA.They continuous innovation through investment in research and development has given TAL the technological edge that guarantees their garments deliver enhanced performance, and look great! From wrinkle free and stain resistant treatments, to every aspect of garment manufacturing technology TAL leads the way and sets the industry standards.

Q.1a The dynamics of the apparel value chain 

Out source of manufacturing processes to Asia

The production sector of the apparel industry had undergone several migrations in the past few decades: from North America and Western Europe to Japan in the 1950, from Japan to Hong Kong, Taiwan, and South Korea (collectively known as the Asian Big Three) in the 1970, and most recently from the Big Three to other developing economies in the 1980.

Reasons behind

1. Supply of low-cost and abundant labor had provided significant competitive advantage for the region’s export growth.
2. The elimination of all textile quotas under the WTO Agreement on Textiles and Clothing (ATC) by January 1, 2005
3. Preferential tariffs in their regional trade networks.

Differences of past and nowadays apparel industry environment

Past

Producer-driven value chains

In producer-driven value chains, large, usually transnational, manufacturers play the central roles in coordinating production networks.

Now 

Buyer-driven value chains

Buyer-driven value chains are those in which large retailers, marketers and branded manufacturers play the pivotal roles in setting up decentralized production networks

-power shift to downstream

-pull system

Q.1b How the global apparel industry is classified as a buyer-driven industry

1. As retailers strive to cut costs and keep pace with consumer tastes, they are coming to depend more on suppliers that can respond swiftly to their changing needs.
2.  The retailers capture large market share, 68%.
3. The retailers are able to understand the customers’ needs as they can get the latest information of customers.
4. Global buyers determine what is to be produced, where, by whom, and at what price.
5. Capitalizing on their current full-package supply model, providing and coordinating all activities in the production, trade and financial networks to their foreign buyers.
6. Using this model, suppliers were able to gain valuable market knowledge about their foreign buyers ‘purchase preferences and generate backward linkages with their raw material suppliers for a reliable sourcing network.
7. A few giants dominates the market e.g. USA, Germany and England + China
8. Large capacity (over-capacity) increase competition and decrease prices
9. Buyers values and perception lead the market
10. Diversity of products types contribute to increasing choices for buyers
11. Turnover, the trend is up-to-date and new products announced frequently

Q.2 Based upon the Porter’s value chain model,  the use of VMI has enabled TAL to turn the sequential value chain to an integrated and synchronous value network with its major customer such as JC Penny.

Vendor-managed inventory

A means of optimizing Supply Chain performance in which the manufacturer is responsible for maintaining the distributor’s inventory levels. The manufacturer has access to the distributor’s inventory data and is responsible for generating purchase orders.

Vendor-managed inventory (VMI) was receiving increased attention as a means of supply

chain collaboration in the retail industry.

VMI was a continuous replenishment program whereby the vendor created the

purchase orders based on the demand at the store or warehouse level.

 It could be viewed as a backward replenishment tool whereby the vendor did the demand creation and fulfillment based on real-time front-line sales information. Reduced inventory and shorter replenishment cycles were the primary benefits offered by a VMI program.

Advantages of using VMI

1. Reduced inventory
2. shorter replenishment cycles were the primary benefits offered by a VMI program.
3. Sensitive to the inventory level avoid back order.
4. Reduce inventory management cost
5. Reduce administration cost of the transaction cost (pO creation ) and save time

Q3. How did Porter and Millar (1985) classify the impacts of IT on competition? Discuss the benefits and impacts of the use of IT initiatives have contributed to the strategic re-positioning of the company in the apparel value chain.

Porter and Millar (1985) state that IT can affect competition in three ways; these are changing industry structure, creating competitive advantages and spawning whole new businesses.

Strategic Impacts:  TAL’s use of IT

1) Driving change in industrial structure:

Minimize threat of new entrant:

1. Erect entry barriers by tying up distribution channels in the integrated value system.
2. Increase entry barriers y using MTM, as it require tighter integration with the user’s value chain

Balance the power of buyers:

1. Increase switching cost by demanding exclusive supplier relationship in VMI
2. Gain customers information to understand sales pattern at the store level

Erode power of suppliers:

1. Erode supplier power y controlling major recourses in the value system (i.e manufacturing technologies and customer relationship)

2) Creating product and service differentiation

Create highly differentiated services offerings:

1. Provide full-package supply solutions to transform the traditional commodity-like generic products
2. Bundle information with physical product package, creating barriers to imitation.
3. MTM system product provides additional source of differentiation.

3) Spawning new business opportunities

Creation new business opportunities:

1. Providing logistics and supply chain management as stand-alone service offerings
2. Venture into design and marketing activities in the apparel industry

Impacts of using IT

1. Capital-intensive
2. Involve huge human-resource (e.g. need to set up extra IT department and hire expertise)
3. Cost involved to train staff to be multi-skill
4. Hard to coordinate the staff from different educational background

Q4. The Company’s latest development on new technologies and business innovation.

1. TAL exceptional wrinkle free technology – Machine washable and dry able and no need to iron thanks to TAL exceptional wrinkle free technology
2. Innovation Nano-technology – Combined with advanced POS data-mining expertise, reduce the customers cost and risk of new launches
3. Floor ready merchandise – able to offer additional cost savings and lead time reduction for our customers, all TAL garments are packaged, tagged and priced to the specification of their customer before the stocks leave the factory
4. X-Docking system – eliminates costly warehousing of inventory and further shortens lead-times from order to store. All products are packed to store and bar-coded at TAL factories. When the stocks reach the customer’s distribution centers, they can simply be scanned and routed straight to the appropriate dispatch truck for immediate shipment to store
5. TAL Pucker Free ® Seam Technology – an innovative sewing technology utilizes adhesives along the seams to prevent pockets, cuffs, arm-holes and plackets from puckering.
6. Expandable Waistband – TAL’s patented expandable waistband technology imparts just the right amount of natural elasticity to provide better breathing and comfort throughout the day. Designed for maximum performance the natural elasticity lasts for the lifetime of the garment.
7. Dot. TAL – De-odorant Technology of TAL
8. An anti-microbial finish – acts as a shield against bacteria and mold growth on, thus preventing unpleasant odors.
9. SofTAL Wool – TAL’s washable wool is made from 100% pure wool. Our unique SofTAL Wool process enables us to provide machine wash and dry able wool garments without the headaches of shrinkage or felting. Good fabric and seam smoothness, as well as sharp pleats are retained after multiple wash cycles. No other manufacturers can offer the same product.

Company visit 2 - TAL

Q1. What would you do to balance the huge cost in technology and other areas?

TAL makes use of its own well-known brand as a strategy to overcome the huge production cost. Since TAL noticed that the production cost was keeping increasing due to unstable economic environment, it was essential for TAL to change the strategy to provide more value-added service to retain and attract more customers. Thus, TAL has invested lots of money in R&D in order to re-position itself as “innovative manufacturer” and provide more value-added services to the market. Now, TAL’s Brand not only sells the manufacturing experience, but also the new manufacturing technology to the market. This strategy is successful since it builds a strong partnership with those retailers aiming at selling high quality to market and requesting fast responses logistic service. Although the costs incurred in R&D are high, the benefit of the technology and the value-added service provided by TAL greatly outweighs the high production cost. Thus, the service of TAL gains the customers’ recognition and TAL was awarded by Burberry Ltd as a best vendor in 2012. Therefore, it is still worth to form the partnership with TAL.

Q2. What is your lasted technology for the apparel industry?

TAL has invested lots of money in Product Development Team. It provides addition features and new fashion to the clothes such as Soft TAL technology and the TAL pucker free steam technology. These technologies help to wash the clothes easily and no need to iron the clothes frequently. Besides, 2 collections are developed by Product Development Team per year with new fabrication, new performance features and new designs. PD Team will share these collections with customers through roadshow or customer visits. Apart from that, TAL also shares the corporate social responsibilities (CSR Programme) to green the gases and reduce the air pollution. To achieve the target, TAL runs the Low Carbon Manufacturing Programme to reduce TAL Green House Gas (GHG) footprint intensity by 21 by end of 2014.

 Q3. Most of the TAL’s factories are built in Asia, are there any alternatives to deal with the increasing labor cost in Asia in the coming years?

To balance the increasing labor coat, TAL may recycle the left cloth to reproduce to the new recycled cloth. This issue not only reduces the pollution cased to environment, but also reduces the wastage and cost. However, the recycled cloth’s quality is different from the original cloth. Thus, the price for the recycled will be charged less.

Q4. How can you make your IT system to become a sustainable competitive advantage to help you stand out in the industry?

Replenishment Models:

Replenishment Models	Competitive advantage of system
1. Quick Response (QR)	Speed up response time Later order placement, lower the chance of stock-outs Improve the quality of inventory flow
2. Continuous Replenishment (CR)	Shorten lead time Align the demand and supply equilibrium Response to market more quickly Save cost from too much inventory up/loss sales Size management
3. Vendor Managed Inventory (VMI)	Align store allocation and warehouse demand planning Increase in-stock rate from 70% to 97%
4. Made-to-measure	More choices and personalized service for end customer No inventory in stores Order flexibility

Other Supply Chain Service

Supply Chain Service	Competitive advantage of system
1. Cross Docking	Reduce the storage cost Reduce the operation cost
2. Pick to Light	Sophisticated racking system Pick by 1 pc or multiple pc inner box SKU picked to light LCD display Each picked item is QC scanned for 100% accuracy

Finally, TAL provides the scorecard to its customer to evaluate the vendor service performance and control system. The scorecards can quickly view on the weakness and strength of TAL service, jumping outside and re-evaluated the real situation. It also let TAL know the weakness and take the corrective measure to fix the problem. It also provides ease of communication during discussion between TAL and its clients.

Q5. Using Vendor-managed inventory, company can enjoy many advantages, such as gaining the exclusion supply contracts from its retailer customers in product line, and blocking out the company’s competitors. However, are there any drawbacks of implementing using VMI?

To provide VMI service, TAL has to get the stock level information from the clients. In this stage, Faith and Trust are very important element to provide such service. Therefore, it is not easy to provide this service to new clients. TAL prefers to provide this service to clients that form long time partnership.

Q6. The US economy has been deteriorating and the fiscal cliff is coming ahead. Given that US market accounts for 78% of your Company’s sale revenue, how serious does the bad US economy affect your company and what is your company going to encounter and to deal with during this hard time?

There are four main directions for TAL to keep leading the way in the industry. They are innovative products, supply chain capabilities, value-added service and sustainability.  Although US economy has been deteriorating and the fiscal cliff is coming ahead, TAL keep changes itself to face with the unprecedented challenges by providing different new feature products and supply chain logistic service to attract and retain its clients.