Making Inroads in China
Sumisho looks to expand logistics services in Asia and the United
States
What once seemed half a world away is closer than ever before.
As doors continue to open to and within China, Sumisho Global Logistics (USA) Corporation,
a SCOA subsidiary, is well positioned to make this nation a primary
element of its logistics and warehousing services for customers
worldwide.
Sumisho’s origins in the Sumitomo Corporation Network:
Transporting Business Around the World
Sumisho Global Logistics (USA) Corporation is a full-service transportation company
licensed non-vessel operator common carrier (NVOCC) and freight
forwarder, which was created in 1984 from SCOA’s Traffic Division.
That was the year Sumisho began to sell outside services at better
rates for NVOCC, explained Yasutsugu Kawahara, Assistant to the
President, Sumisho Global Logistics (USA) Corporation. However, Sumisho still supports
SCOA’s logistics needs, with a team of 15 in the New Hyde
Park, New York office that works on imports, exports and domestic
shipping for SCOA.
Sumitomo Corporation’s (SC) Logistics and Insurance Business
Division, located in the company headquarters in Tokyo, has been
developing a number of successful logistics-related businesses,
such as NVOCC, distribution centers, and insurance, taking advantage
of the company’s wide-ranging expertise as a leading integrated
trading company.
As one of the top trading companies, Sumitomo Corporation has accumulated
extensive expertise in a wide variety of business fields. Combining
these strengths as an integrated trading company with its expertise
in information technology and logistics technology, SC can provide
its customers with unique logistics services that meet their fast-changing
needs.
“More and more of our customers are becoming involved in
business with China. So to respond to their needs, the SC Logistics
Division wants to build up trade between China-Japan and Japan-China,”
said Michael Muhich, Senior Vice President at Sumisho in New York.
As this develops, the next step is the further development of trade
and logistics services between the United States and China, he added.
“There is a constant dialogue between Sumisho
in the U.S. and Sumisho Japan to build China-U.S. trade and talks
between SC and SCOA to increase business,” said Mr. Muhich.
“Our strength is Sumitomo Corporation’s headquarters
and network in Asia, and the proximity to China and all that it
affords.”
China’s emergence onto the world stage
China’s acceptance to the World Trade Organization in 2001
marked a new beginning for the largest country on the planet. With
a population of over a billion people and new laws making it easier
for foreign companies to do business in China, the country has made
available its enormous labor and natural resources desired by its
neighbors in Asia and in the West.
In the past, logistics businesses were restricted to companies
which established joint ventures with a domestic Chinese company.
However, due to the new CEPA laws, a Hong Kong based company can
develop logistics in China without a joint venture, explained
Mr. Muhich.
As a result of China’s new laws, SC Tokyo’s Logistics
Department is working closely with Sumisho Hong Kong to develop
a network for 100 percent ownership under Sumisho Hong Kong. Shigetomi
Kawamoto, President, Sumisho Hong Kong, will head up this effort,
said Mr. Muhich.
Up close and personal: Assessing the challenges and opportunities
To foster relationships and see first-hand what China has to offer,
several SC, SCOA and Sumisho executives have visited China over
the past months.
In March 2004, SCOA President and CEO Atsushi Nishijo and Sumisho
President Junichi Itoh traveled to China to explore trade and business
opportunities for both Sumisho and SCOA, said Mr. Itoh.
The pair spent two days in Shanghai, and then Mr. Nishijo traveled
on for a day in Beijing, meeting with Shizuka Tamura, President
of Sumitomo China. Messers. Nishijo and Itoh also toured Wuxi Huayou
Industrial Park, a joint venture established by the four parties,
including SC Tokyo and SC Shanghai Ltd. It is the only industrial
park in China that SC has invested in thus far, and is the first
modern industrial park in the Wuxi New District, focusing on attracting
high-tech enterprises from Japan and other countries and regions.
“In light of recent trends in the Pacific rim, every industry
is focused on developing business there. We look forward to playing
a key role for transportation, warehousing and logistics in China,”
said Mr. Itoh.
Joint Venture: On the ground research in China
In order to better understand the structure and challenges of doing
business in China, other Sumisho representatives visited several
logistics centers in China in November 2003.
“Our purpose was to assist a customer, a manufacturer of
high-end athletic footwear, with distribution from China to the
United States. So a team of 5 people from Sumisho and SC Tokyo
Logistics went for a first-hand look. We met the company’s
executive vice president and spent three days at its manufacturing
facilities in China,” said Mr. Muhich. “During our 10
days in China, our team toured three factories and tried to show
how Sumisho and SC’s network can ship from the factory to
the Shenzhen port and then to their distributors worldwide.
“After these meetings, our customer decided to take the project
to an even larger global scale, and is using Sumitomo Corporation
companies to achieve this. It has moved the project from an exclusive
U.S. – China project to a global one based out of Japan. As
a result, the company has enlisted SC Tokyo logistics department
and Sumisho Japan to develop a joint venture with SC logistics
and Sumisho.”
“This face to face contact is invaluable,” said Mr.
Muhich. “By traveling and meeting our customer and partners
in China, we were able to think outside the box and come up with
a new solution for our customer, maximizing Sumitomo Corporation’s
reach in Asia and the United States. This is an arrangement we hope
to replicate in the months ahead.”
While in China, the team also toured the Quality Inspection facility
at Luckwin Summit, a joint venture between a mail order business
in Japan and Sumitomo Corporation. The 35 inspectors at this facility
inspect the apparel made in China that is then shipped and sold
in Japan.
“Our goal in taking the trip to China was to educate ourselves
so we in turn may educate our customers, to see first-hand how we
can use the vast SC network, and to find opportunities for SCOA,”
Mr. Muhich told Visions. “These are the early stages of building
relations with customers and to network in China.”
Starting on the inside out: Creating an internal infrastructure
Back in the New Hyde Park, New York office, China seems closer
than ever.
There are a number of people working on developing business with
China from the Sumisho office in New Hyde Park. In addition to
Mr. Muhich, who oversees the China business projects, Tetsu Kuroda,
from SC Tokyo, identifies leads for logistics and manufacturing
in China from the Sumisho New York office. “There exists
a certain good infrastructure in China, but it needs to be better
networked, and Mr. Kuroda is working towards that end,” said
Mr. Muhich. In addition, Tatsu Kawano, Manager at Sumisho, is
a specialist who tracks U.S. companies doing business in China at
any point in the supply chain.
Technology has led to increased efficiencies in building up business
in the booming Chinese market. Currently, Sumisho uses LMS, Logistics
Management System, for recording day-to-day operations connecting
to its accounting system; Trackpoint to track its shipments throughout
the world; and Salesforce, which organizes all leads and activities
into a database for Sumisho’s domestic operations to generate
business and perform as a customer service platform.
“The information database PIERS also was purchased by Sumisho.
PIERS tracks all import and export activity recorded by the United
States government, for example, shoes that are sent from the United
States to China. Salesforce.com will then filter down this information
to legitimate leads. After this is created, Sumisho can contact
the companies,” said Mr. Muhich.
“This is part of the organized strategy we are establishing
for Sumisho,” said Mr. Muhich.
In the future, Sumisho would like to offer warehousing and transportation
services in Tier I cities in the United States, such as Los Angeles,
Chicago, the New York/New Jersey metropolitan area, Seattle, Dallas
and the Southeast.
Looking ahead
Taking an overview of today’s industry, Mr. Muhich commented
that the ocean freight business since 1983 has become “gray.”
The margins have been dropping for the last few years and companies
are overlapping with the services they offer,” he said. “To
compete globally, customers want one-stop shopping, and we are working
to achieve this.”
To reach this goal and level of service, Sumisho has purchased
ServiceCraft, a leading third-party logistics solutions provider.
[See related article on page 3.]
“The acquisition of ServiceCraft and an increase in business
in the China-Japan market will help make Sumisho a one-stop shop
for customers and help us become a global provider. Sumisho’s
transformation from NVOCC provider to logistics provider will make
the most of our parent company’s network to become this global
logistics provider,” said Mr. Muhich.
He continued, “We are building off our core functions. Our
trans-Pacific trade link has a proven reputation for service and
cost effectiveness.”
“For Sumisho, we would like the U.S. side to work with the
China side by aggressively promoting new business and fine-tune
our process for identifying future prospects,” Mr. Itoh added.
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