Ryder System, Inc., a transportation and supply chain management solutions provider, and a Fortune 500 company, is optimistic about China’s logistics market growth potential and it is rapidly expanding its network and infrastructure reach to all the coastal cities on the Mainland. Wong Joon San reports from Shanghai.
The company, which first came to China in 2000 as a consulting company to set up Shanghai General Motors’ inbound logistics, will move to inland cities after establishing its hold in the coastal cities. “We will go the same way as other multi-national logistics companies have gone in Mainland China, from coastal cities to inland cities, depending on demand, of course,” said Christopher Woodward, vice-president & managing director of China – Ryder Logistics (Shanghai) Co. Ltd.
The Ryder consulting company, which exists and operates in China till today, worked with Shanghai General Motors via a local logistics company called Tong Hui to provide it with logistics services in Shanghai. However, Ryder had to give up the contract in 2003 as it did not have an operating licence.
Ryder also carried out another project with a local logistics company called Mentor Media to help Hewlett Packard with their distribution and kitting activities in Shenzhen between 2000-2005, but had to give up this project as well because of the operating licence issue.
Woodward, who came to Shanghai as a lawyer advising the Ryder consulting company about rules and regulations, is heading Ryder Logistics (Shanghai)’s operations which started its operations in April, 2006 with 5-6 employees, working from one location. After receiving its operating licence in August 2006, Ryder Logistics (Shanghai) Co., Ltd, a wholly-owned subsidiary of Ryder Systems, became officially operational in China. The company, which has grown dramatically, will have 80 employees by May, 2007.
Presently, the company has alliance agreements with 13 local Chinese logistics services providers who operate warehouses to serve Ryder’s clients. The company’s alliance will be increased to a total of 15 locations, with the addition of two more local logistics services partners, who joined last month.
In Shanghai, Ryder’s alliance partner’s warehouse is about 2,000 square metres, and the other warehouses vary in sizes between 1,000 square metres to 7,000 square metres. In total, Ryder has 24,000 square metres of warehouse space covering 13 locations in the whole of China.
For trucking services, Ryder presently provides its customers with such services via local contractors. It intends to control such operations in the future after obtaining its own licences. As part of this plan, Ryder recently obtained a trucking licence for Shanghai.
“We will receive trucking licences for the whole of China by September, 2007,” Woodward said. Asked about Ryder’s warehouse management system, Woodward said the company had licensed a system from a local company, and then carried out modifications to suit its local needs. “We have now produced a system with English and Chinese capabilities,” Woodward said. Explaining Ryder’s operations, he said that Ryder places one staff in each location overseeing its sub-contractors to ensure the system operates in accordance to the criteria set by Ryder.
Regarding its staff strength, Woodward said that of the total 80 staff in May, 78 were locals. Besides Woodward, there is only another Malaysian Chinese employed by Ryder in Shanghai. This executive, who studied in the US, speaks fluent English and Chinese and heads Ryder’s engineering department in China.
Woodward said a Ryder engineer from US was also in Shanghai to train local staff so that they could provide the same level of services that customers were accustomed to in the US. Asked about its customers, he said Ryder had four tier 1 automotive customers – from both China and overseas – for whom Ryder provides mostly OEM importation of components services. “Our company is seeing more import components with newer models of vehicles and as they grow older, the local component contents increases,” Woodward said.
He pointed out that Ryder, in cooperation with one of its partners, Cosco Logistics, had recently closed a deal in Suzhou with European White Goods Company. The project is to set up inbound logistics, that is, bringing parts into the manufacturing facility in Suzhou for the customer. “Some of the parts are for local use, while others are for exports. The deal uses a mix of air and seafreight,” Woodward explained.
Ryder also recently registered an entity to operate in Hong Kong, but presently it does not have an office or any staff in Hong Kong. Sources said: “Ryder is in talks to acquire a company for its expansion.” When asked about Ryder’s expansion plans, Woodward said Ryder would expand through organic growth, growth by alliances, joint ventures as well as mergers and acquisitions.
“We plan to grow into a logistics market leader in the China market. We are looking at all possibilities, and China is an important equation in the overall Ryder’s expansion plans overseas,” Woodward said.
Commenting about Ryder’s past experience in Singapore after a merger & acquisition, Woodward said that once a target was identified, negotiations would take place and all the processes completed until the takeover was effected. “A certain period is allowed for the transition of the merged target to become assimilated as a Ryder company.
All Ryder’s operations are fully controlled by the group,” he explained. According to Ryder, conducting logistics in Asia-Pacific is challenging due to the highly fragmented market structures and the lack of common customs and trade practices among the countries in this region.
In October 2000, Ryder acquired Ascent Logistics, establishing Ryder- Ascent Logistics as its main operating unit in the region and basing the regional headquarters for Ryder Asia Pacific in Singapore. According to Ryder-Ascent, the company aims to bring value to its customers by being the only point-of-contact needed to fulfill their logistics and transportation needs, a philosophy that Ryder is also attempting to do in China.