Interview with Mr Gary So, Deputy Managing Director, Kerry Logistics
One Belt, One Road (OBOR), frequently referred to as a game-changer in the region, is an ambitious development plan to link Asia to Europe with an unbroken chain of modern infrastructure. The initiative encourages the development of railways, bridges and ports, among other infrastructure, to foster trade and connectivity. It is no wonder that supply chain and logistics players, such as Kerry Logistics, are eager to be part of this regional plan. For example, there are plans for Kerry Logistics to acquire Commonwealth of Independent States (CIS) to significantly expand the company’s coverage in Central Asia.
“OBOR is not a completely new concept but a traditional trade link with more efficient vehicles, which offers customers an alternative to ocean freight and new business opportunities across China, Central Asia and Europe. China-Europe rail freight services have been in the market for decades. It is the new technology that facilitates faster rail freight services, making it a more viable and economic option to international customers,” says Mr Gary So, Deputy Managing Director of Kerry Logistics.
In this issue of Supply Chain Asia magazine, Mr So discusses his role at the company, OBOR’s impact on air and ocean freights, as well as his vision for the logistics of the next century.
After nine years with Kerry Logistics, you left to pursue other interests before returning in 2015. Can you share with us more about this?
The year 2000 was the time the logistics industry really started to take shape in the Hong Kong market, which was when I first joined the company. I spent the first three years in Hong Kong, then relocated to Shanghai to kickstart the business there. Following which, I was relocated to Taiwan in 2009 to develop the logistics and express business after the acquisition of T-Join.
I left Kerry Logistics in 2010 for a change in scenary and took up a regional management role based in Shanghai for a global 3PL headquartered in the US for two years, before subsequently joining a Fortune 500 company engaged in pulp and paper business for three years.
I was invited to re-join the Kerry Logistics family in 2015 when the company initiated the development of an Asian-wide express network. We are currently offering domestic and cross-border express services in six countries, including Thailand, Vietnam, Malaysia, Cambodia, Taiwan and Hong Kong. I also look after the road freight business under the brand name of KART, a China-ASEAN road transportation network covering China, Thailand, Vietnam, Malaysia, Singapore, Cambodia, Laos and Myanmar. Kerry Logistics has launched ‘One Belt, One Road’ UK-China rail services.
In your opinion, do you think global air and ocean freights will drop drastically due to OBOR? Why or why not? Who will benefit most from OBOR?
Both the falling global demand and the slowing economy in China has affected the global air and ocean freight market in the past five years. The global rise of protectionist and anti-globalisation sentiments will further impact the global economy in the near future. Nonetheless, the strong growth of cross-border e-commerce in recent years has generated new opportunities for the global air freight industry and the trend will continue to grow in the coming years.
OBOR is not a completely new concept but a traditional trade link with more efficient vehicles, which offers customers an alternative to ocean freight and new business opportunities across China, Central Asia and Europe. China-Europe rail freight services have been in the market for decades. It is the new technology that facilitates faster rail freight services, making it a more viable and economic option to international customers.
Neighbouring countries of China, in particular developing countries, are expected to benefit most from OBOR riding on the multi-million dollar infrastructure and investment projects on the agenda.
Kerry Logistics has been involved in numerous mergers and acquisitions (M&A) activities, such as the acquisition of Bofill & Arnan and Multi Logistics. What are the Group’s M&A strategies and how does the company intend to assimilate its new businesses into the overall service offerings? Is KLN expecting more M&A activities soon?
Kerry Logistics is devoted to growing organically and through selective mergers and acquisitions to strengthen our global network and service capabilities.
As part of our long-term international freight forwarding strategy, we have acquired a majority stake in APEX in June 2016 and the business integration progressed as planned, continuously benefiting our international freight forwarding business by virtue of the increased capacity and a broadened client base.
Greater China remains at our core and the OBOR Initiative will continue to provide a framework for Kerry Logistics’ expansion. We plan to further establish our presence in five of the international economic co-operation corridors to seize new opportunities in project, rail and multimodal logistics businesses. Leveraging mainland China’s increasing connectivity with the rest of the world, we will continue to seek for appropriate M&A opportunities and targets to open the door to potential markets with growth prospects.
Like other 3PLs, Kerry Logistics is intent on riding the e-commerce boom in APAC, particularly China. What sets Kerry Logistics’ e-commerce offerings apart from its competitors?
It is definitely our cross-border e-commerce logistics capability and network across China and ASEAN as well as our domestic last-mile delivery in individual countries, including Thailand, Vietnam, Malaysia, Cambodia, Taiwan and Hong Kong.
Our current set-up includes an import e-commerce hub in Ningbo, serving the two biggest China e-retailers, an export e-commerce hub in southern China, e-commerce consolidation hubs in Hong Kong and Shenzhen, and various express centres in Thailand, Vietnam, Malaysia, Taiwan, Hong Kong and recently in Indonesia. E-commerce will continue to be a key growth driver for Kerry Logistics, with particularly strong demand momentum driven by cross-border e-commerce between Greater China and ASEAN.
How does Kerry Logistics position itself vis-a-vis international, regional and local players?
Kerry Logistics is a fast growing global 3PL with a strong network in Asia. We are serving many top 100 brands and fortune 500 companies across various industries – from fashion & lifestyle, electronics & technology, F&B to FMCG, pharmaceutical & healthcare, industrial & material science and automotive. Our unique regional network in Greater China and Asia as a whole is setting a high level of standard very few could match.
What are your thoughts on the regional trade growth for 2017? Will it be a repeat of weak global demand like last year? Why or why not?
Traditional trade patterns will not see significant growth, such as air and ocean freight. Cross-border e-commerce will continue to drive regional business growth across Asia. With various uncertainties in the macro-environment, global economic growth is expected to remain soft in 2017 and first half of 2018.
How do you envision logistics of the next century?
I foresee warehouse operations will be highly automated or even be dominated by robots in the next two decades. Back in 2015, we introduced seven fully automated and programmed robotic butlers at our flagship facility PC in Hong Kong. Kerry Logistics is one of the first third-party logistics in Asia to adopt robotic butlers in its operations to enhance fulfillment efficiency and accuracy.
The robotic butlers operate 24/7 and can pick at a rate four times faster than in the normal course. The solution is ideal for retail brands, which sell a wide variety of consumer products with potentially expanding e-commerce business. In China, some large express players are already trial running robot sorting systems in their sorting hubs, which means this will no doubt trending towards full automation.
What are your thoughts on talent development in Asia (China + SEA)? In your opinion, is there enough talent in the region?
Internally, our talent supply is stable and secure through efforts in our group management trainee development programmes as well as specialised trainee programmes in local markets across the world in the past two decades. We have built a talented supply chain within the group on a global level.
In general, we found that there is not enough talent in the market, in particular within Asia. For instance, the talent supply in Greater China is at an acceptable level, but there are not enough young talents readily available in the ASEAN region.
I believe one of the reasons is logistics/ global supply chain/transportation tertiary academic curriculum is not available or comprehensive enough in the region. Moreover, the new generation seems more enthusiastic in starting new businesses than getting a job or working in the logistics operations.
In some Asian countries, when we were launching management trainee programmes and designing the programme promotion strategies, we found it difficult to identify the target group, i.e. suitable institutes with logistics-related academic curriculums. The younger generation is also not familiar with the concept supply chain or logistics, which may hinder them from starting a career in the industry.