More retailers moving logistics tasks to China

SHANGHAI - RETAILERS and consumer goods companies in the developed world are increasingly moving their logistics operations from their home countries to China.

Goods are sorted, labelled and even placed in displays for direct shipment to individual stores before leaving Chinese ports.

Shipping lines, logistics companies and warehouse operators say costs are spurring customers to move the sorting process away from consuming countries, continuing the outsourcing trend to lower-wage economies that began with manufacturing going to China.

The process is known as 'distribution centre bypass' because it cuts out distribution centres in the destination country.

Logistics companies and those using the system tend to be wary of publicity, but British fashion retailer Next retailer is known to do much of its sorting for delivery at ATL Logistics in Hong Kong, a distribution warehouse owned by Dubai's DP World.

Goods are packed into containers in the right quantities and right order to take direct from a British port to individual shops.

Distribution jobs were once thought least likely to go overseas because it is complex to arrange supplies of goods for stores in the right quantities.

Ms Vera Tang, general manager for corporate development of Hong Kong-based Kerry Logistics, expects growth in the next few years to be 'huge' as so many companies still run expensive distribution centres at home.

'You can imagine - in those high-living-standard countries like Scandinavia - if we can replace what they are doing at the destination with a similar operation at origin, the percentage (savings) can be huge.'

Among Kerry clients using distribution centre bypass are a New Zealand-based lingerie maker and department store chains in the United States, Spain and Chile.

In Chile's case, Ms Tang said the company shifted logistics operations abroad, not primarily for cost reasons, but because Chinese workers were more reliable.

Companies not phasing out distribution centres at home are cutting handling costs by paying for processing in China. Boxes of goods for Tesco's British supermarkets from NYK Logistics in Shanghai are shrink-wrapped in quantities needed by each store to reduce British handling.

Many expect Chinese processing to become more sophisticated. Mr Erxin Yao, managing director for China at OOCL, a Hong Kong shipping line, said his company's logistics arm hoped to attract imports of goods not made in China for sorting at its warehouse to distribute to Japan and Korea.

It already handles logistics for Chinese-made exports to Japanese and Korean shops from a Shanghai warehouse.

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