Ports have long been looking overseas to broaden their prospects. But for Busan, entwined with the more usual terminal operation, port consulting and management service offerings there\u2019s a new strand: overseas warehousing.<\/p>\n
It started, says Jinsun Shin of Busan Port Authority, with a series of gripes. \u201cOver the course of a two-year stay in Rotterdam I heard a lot of complaints from Korean manufacturing companies who would like to advance into the Europe market… but they told me they were encountering difficulties in finding suitable warehousing,\u201d says Ms Shin. The issues were fairly broad, covering everything from finding somewhere willing to handle fairly small volumes to high logistics costs and communication difficulties.<\/p>\n
She explains that BPA, being both a state-owned entity as well as a commercial enterprise, \u201crecognised that it\u2019s our responsibility to provide a foothold for Korean companies, whether these are importers or exporters\u201d.<\/p>\n
Consequently, Busan Port Authority is going ahead with the construction of a 50,000-square metre logistics zone including 34,000 square metres of warehousing and supporting facilities, located in Rotterdam\u2019s Maasvlakte Industrial Park. Commercial operations are predicted to begin in the summer of 2021.<\/p>\n
According to Ms Shin, the pairing is entirely natural: \u201cRotterdam is not just a port for the Netherlands but a gateway for Europe. Likewise, Busan is not just a Korean port but a Northeast Asian transhipment point \u2014 so I would like to connect these two hubs, the one in Europe and the one in Northeast Asia.<\/p>\n
\u201cIt\u2019s early days,\u201d she says, but so far the plans are that Rotterdam will support the site\u2019s administrative procedures required for construction and running, while BPA will draw up business plans, facility designs, and business models. \u201cThough obviously in terms of selecting the tenants there will be several conditions that will need to be met, it\u2019s really open to all Busan\u2019s clients.\u201d<\/p>\n
Value proposition<\/strong><\/p>\n It makes sense to Drew Davis of Establish Inc who sees this move as a value proposition. It could mean that customers \u201cget favourable rates and guaranteed space at this compound… and that equals more freight through Busan\u201d.<\/p>\n Busan is also looking at replicating the experiment further afield. According to Ms Shin, if this venture yields enough returns in the way of custom or reputation \u201cwe\u2019d like to do the same in Poland\u201d: a European manufacturing base which poses rather similar issues for Korean manufacturers.<\/p>\n However, she doesn\u2019t expect the initiative to stop with Europe: BPA is also investigating possibilities from Africa to South America \u201cand Russia too\u201d. In fact, it seems as if Busan is looking at most places with a budding hub and a promising economy \u201calthough we are looking for commitment to development\u201d, she says.<\/p>\n But is port warehousing the best option? There are obvious benefits accruing to certain hub ports with free trade zones in their backyards, but bonded warehouses are only a tiny part of the story as the advantages only apply to transhipment goods.<\/p>\n \u201cFrom the client\u2019s perspective it\u2019s typically better to have distribution closer to the customers,\u201d says Mr Davis.<\/p>\n Brian Templar of Davies & Robson adds: \u201cIt\u2019s all about the stem mileage.\u201d He explains: \u201cA lot of companies will want to keep their goods in the shipping container where it\u2019s all tightly packed in and get it closer to a more strategically positioned warehouse before opening it. That\u2019s generally easier than breaking it up and shipping fragmented orders out from the arrival port which leaves you with multiple, long road legs before you get into the main delivery area.\u201d<\/p>\n Despite this, Mr Davis points out \u201cif you\u2019re struggling to find warehouse space, you\u2019ll take what you can get\u201d.<\/p>\n However, this approach can lead to problems, as short-term solutions might be at the cost of long-term viability. \u201cWarehousing has to be strategically sound, rather than tactically convenient,\u201d says Mr Templar.<\/p>\n \u201cWhat you don\u2019t do is start with deciding where the warehouse will be. You first ask where the optimum solution is: it\u2019ll fail if it\u2019s not in the right spot as it won\u2019t be cost effective.\u201d He goes on to say: \u201cI\u2019ve seen it in the past, someone comes into the country with a quick and dirty fix, then recognised that they\u2019re with the wrong supplier, in the wrong place. Then you either stick with a suboptimal solution or go through the whole process again.\u201d<\/p>\n Port proximity<\/strong><\/p>\n Having said all that, there are exceptions, says Mr Davis. \u201cI\u2019ve seen strategic location projects where, because of the freight terms, product type and business model, shippers are better off being near a port.\u201d<\/p>\n He continues: \u201cSome shippers don\u2019t pay for their outbound freight as that\u2019s down to their clients: for example in the US, the big retailers have their own networks and contracts which pick it all up.\u201d In these situations he argues that \u201cbeing near a port could be the best financial decision as it minimises your inbound costs\u201d. Likewise, \u201cIf you\u2019re importing frozen or perishable goods, being near a port helps prolong the shelf-life.\u201d<\/p>\n There are other challenges with flexibility being high on the list.<\/p>\n For it to work well, says Mr Templar, \u201cthey\u2019ll need to realise that most people with a new venture will be trying to avoid high fixed costs\u201d. He adds: \u201cCommon sense demands making it as flexible as possible, not tying people into 10-year contracts but telling them they can have a space on a six-month rolling basis or whatever. The more tailored they make it, the more attractive it\u2019s likely to be.\u201d<\/p>\n However, while BPA won\u2019t be operating the warehouse themselves, it will be looking at a certain level of commitment to make the venture commercially feasible.<\/p>\n That could be a sticking point, says Mr Templar. \u201cIf the cost-base of your operation ends up higher than that of the locals\u2019, then the competition will only go one way.\u201d<\/p>\n Culture call<\/strong><\/p>\n Mr Davis says that culture has a part to play: \u201cHaving worked through finding warehouses for clients across the world, the various regions and countries have very different ways of doing things…and it\u2019s sometimes a challenge to merge expectations,\u201d he says.<\/p>\n \u201cHaving a warehouse space operated by the same country of origin as the client is a plus. That said, the warehouse must still be capable of shipping and working with the local market.\u201d<\/p>\n Mr Templar echoes this point and goes one step further: \u201cI am fairly sceptical of making it too much a \u2018Korean embassy\u2019,\u201d he says. \u201cIt might \u2013 initially \u2013 all seem rather convenient: for example in the UK, FedEx used to think that it would get a leg-up from US companies already here.\u201d<\/p>\n \u201cBut if you are going to compete, you have to learn the language, rules and business culture of that marketplace. Trying to stay on a campus might seem appealing, but I am not sure how good an idea it is longer term: you have to ask yourself, \u2018are our competitors out there, finding local connections and people to work with?\u2019 So, it might be a good way to start off, but I\u2019m not sure about it going forward.\u201d<\/p>\n Moreover, he adds: \u201cMost businesses are highly competitive, and if you want to compete, you have to do it with the locals.<\/p>\n Still, Mr Davis says: \u201cIf Busan\u2019s clients are having a hard time finding warehouse space, they are just trying to help them out. Good on them.\u201d<\/p>\n COMPETITION FOR CARGO<\/strong><\/p>\n There are other issues at playing in the Busan\u2013Rotterdam warehousing plan. \u201cCurrently, South Korea is landlocked by North Korea, so apart from air, ports are the only shipping method out,” says Establish Inc\u2019s Drew Davis. \u201cThat said, take a look at the news and you\u2019ll find that it\u2019s just a matter of time until the Koreas agree on a railroad to connect South Korea to the Trans-Siberian railway, which will enable rail freight to the European market. If this happens, Busan\u2019s European exports through the port will decrease, potentially significantly.\u201d<\/p>\n It\u2019s still a largely unknown quantity, and \u2014 at least for Busan \u2014 it may heighten the reasons for co-operation.<\/p>\n Davies & Robson\u2019s Brian Templar admits that \u201cRotterdam itself is a special case, as the Dutch have made a big point about putting in lots of facilities to support its role as Europe\u2019s gateway\u201d, but \u201cthat still doesn\u2019t necessarily mean you should put your warehousing there too\u201d.<\/p>\n But, as Mr Davis concludes: \u201cThis space in Rotterdam is worth money. It may just be a good investment overall.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":" At least one port authority is taking it upon itself to help out manufacturers trying to break into a new market. Stevie Knight reports<\/p>\n","protected":false},"author":8,"featured_media":313,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[33],"tags":[],"sponsor":[],"class_list":["post-312","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-equipment"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.portstrategy.com\/greenport-congress\/wp-json\/wp\/v2\/posts\/312","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.portstrategy.com\/greenport-congress\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.portstrategy.com\/greenport-congress\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.portstrategy.com\/greenport-congress\/wp-json\/wp\/v2\/users\/8"}],"replies":[{"embeddable":true,"href":"https:\/\/www.portstrategy.com\/greenport-congress\/wp-json\/wp\/v2\/comments?post=312"}],"version-history":[{"count":0,"href":"https:\/\/www.portstrategy.com\/greenport-congress\/wp-json\/wp\/v2\/posts\/312\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.portstrategy.com\/greenport-congress\/wp-json\/wp\/v2\/media\/313"}],"wp:attachment":[{"href":"https:\/\/www.portstrategy.com\/greenport-congress\/wp-json\/wp\/v2\/media?parent=312"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.portstrategy.com\/greenport-congress\/wp-json\/wp\/v2\/categories?post=312"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.portstrategy.com\/greenport-congress\/wp-json\/wp\/v2\/tags?post=312"},{"taxonomy":"sponsor","embeddable":true,"href":"https:\/\/www.portstrategy.com\/greenport-congress\/wp-json\/wp\/v2\/sponsor?post=312"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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