DHL, the world’s leading international express and logistics company, is flying high over China, stepping up infrastructure investment geared to capitalize on fast-growing intra-Asia/Pacific trade, in particular Japan-China trade.
According to John Mullen, chief executive officer of DHL Express, the company has been experiencing double-digit growth in the Asia-Pacific region for the last five years.
“The Intra-regional cargo volumes now account for close to 50 percent of DHL Express’ revenues in the Asia-Pacific area and is our fastest growing segment,” he said during a recent media briefing in Hong Kong.
In the Asia-Pacific region, DHL’s key markets include Japan, Hong Kong and Korea, with China as a key driver of its continued growth.
DHL’s business in China has consistently registered an annualized growth rate of 35 percent to 45 percent over the past few years, according to DHL.
By country or area, Japan remains the largest market in the Asia-Pacific region for DHL, which was born on the U.S. West Coast and is now under the wing of the privatized German postal monopoly Deutsche Post.
However, a Japanese executive at DHL Express Japan confided that it is a matter of time before mainland China will surpass Japan as the company’s largest Asian market.
DHL’s focus on the Asia-Pacific region, in particular China, is illustrated by its massive investment in the area.
To date, DHL has spent more than $1.15 billion expanding and enhancing its infrastructure, technology and network in the region. In the Chinese market, DHL is making a major infrastructure investment of $215 million over a five-year period starting in 2003, including the expansion of airport gateways and hubs and the construction of a new express logistics center that will provide value-added services such as spare parts management by third-party vendors.
One of the latest investments is the construction of the $100 million Central Asia Hub facility in Hong Kong, which started a 24-hour operation last summer. Dubbed the Central Asia Hub, the air express cargo facility is located at the Hong Kong International Airport and serves as the largest and centerpiece of DHL’s infrastructure in the Asia-Pacific region.
DHL operates five other hubs, in Bangkok, Seoul, Singapore, Sydney and Tokyo, with gateways in major airports in the region.
Mullen said Hong Kong is within a four-hour average flying time to major cities in the Asia-Pacific region, adding that the new facility will significantly increase the firm’s express shipment throughput capacity in Hong Kong and southern China, strengthening Hong Kong’s position as a leading regional hub and logistics gateway to China.
The 1,638-sq.-meter facility is capable of handling up to 440 tons of air express cargo a day, with a plan to boost its capacity to 900 tons by 2014. More than 60 percent of express cargo processed by the Hong Kong hub facility is intra-Asia Pacific shipments, reflecting the important role Hong Kong plays as a conduit for international and intra-Asia Pacific trade, he said.
In another venture in China, DHL launched a domestic express service last year called China Domestic in partnership with Sinotrans, China’s leading transport and logistics operator, thereby becoming the first foreign express provider to introduce a domestic express service in China. The express door-to-door delivery service is targeted at parcels and freight items, featuring shorter delivery and pickup times and shipment visibility via DHL’s track-and-trace technology.
DHL was the first foreign express delivery company to enter China in 1986, when it established a joint venture with Sinotrans. DHL-Sinotrans today commands close to 40 percent of the express delivery market in China. In the fiercely competitive international express services market, DHL still maintains the top position by surpassing its tough rivals like FedEx, UPS and TNT.
DHL’s operation in China now employs more than 4,700 workers and serves over 300 cities with some 1,100 vehicles. Jerry Hsu, senior vice president of DHL’s Greater China and Korea, said he is satisfied with 18 years of good partnership relations with Sinotrans, adding that the 50-50 joint venture formula with the Chinese interests has proven successful and would be kept intact. DHL now has a 5 percent stake in Sinotrans.
While the burgeoning Chinese domestic market is a major attraction, Japan ranked first and third in China’s imports and exports, respectively, in 2003, providing lucrative business for DHL air express services. A total of 14,723 Japanese companies are doing business in China as migration of Japan’s manufacturing industries to China accelerates.
Scott Price, president of DHL Express Japan, said China continues to be an important business partner for Japan, creating increasingly sophisticated and upgraded logistics needs for those Japanese companies.
“DHL Japan is determined to bolster infrastructure to meet the air express needs in local areas of Japan,” said Scott, who was promoted to the position of chief executive officer of DHL Express Asia Pacific recently.
In this context, DHL Japan unveiled in December a plan to open a new facility at Central Japan International Airport, which is to open today. It will also open 12 new service centers, primarily in the Tokai/Hokuriku region, to strengthen its infrastructure in Japan.
The latest round of new infrastructure investment in Japan, which constitutes the second phase of an investment plan pursued by DHL since 1999, will total approximately 4 billion yen. The facility, boasting with customs clearance and bonded warehousing, is to be built at the new airport later this year, covering more than 5,000 sq. meters.
Prior to the completion of the new facility, DHL has expand its service center in Minato Ward, Nagoya, to provide services such as customs clearance and bonded warehousing to coincide with the opening of the new international airport.
In addition, the new 12 new service centers will be opened primarily in the Chubu area, covering such prefectures as Gifu, Mie, Toyama, Ishikawa and Shiga. This will make a total of 39 DHL service centers in Japan, allowing the company to offer same-day morning deliveries of imported cargo in the Chubu area. This will also enable same-day deliveries to be made in regions such as Tohoku and Kyushu, where service for such cargo was previously restricted to deliveries on the following day.
DHL executives foresee that the opening of the new international airport in Aichi Prefecture will further attract Japanese industries to the region, thereby boosting demand for international express and logistics services, particularly China-related logistic services.
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