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China
driving factor
for ILB group earnings
COMPANY
FOCUS, STARBIZ, MONDAY, 16TH AUGUST 2004
By: Sidek Kamiso
For Integrated Logistics Bhd (ILB), the burgeoning China economy
is where its future lies.
It
has fought hard to be in China. Its first venture into the
country almost failed when the 1997 currency crisis hit many
companies, including ILB.
Now,
the growing demand for logistics solutions, aided by the increasing
presence of multinational companies (MNCs) in China, is the
driving factor for the group's earnings growth.
Chief
executive officer Tee Tuan Sem said China operations were
expected to contribute some 60% to the group's total earnings
this year.
"And
the number is set to grow in future as the company completes
its expansion plan," he said.
The
company currently has a total of 92,000 sq meters of warehousing
facilities located in two cities, Shenzhen and Shanghai. Two
additional warehouses (Shenzhen - 62,000 sq meter; Shanghai
- 20,000 sq meter) will be completed by April next year.
The
additional warehouses will increase ILB's capacity in China
by 70%, making it one of the leading logistics providers in
the country. Its total worldwide capacity is 427,000 sq meter.
By
the end of the year, the company will open offices in Dalian,
Tianjin, Suzhou and Guangzhou.
"Demand
for logistics solution is high in China as MNCs continue to
open up their bases in the country. The future looks good
for ILB as we are among the pioneer logistics companies to
set up business there," he said.
According
to Tee, the company provides a complete logistics solution
to these MNCs at competitive rates.
"We
are not competing with the local players. We are somewhere
in the middle in terms of pricing, but the services we offer
are competitive," he said.
Most
MNCs are used to the idea of outsourcing their logistics requirements
and they expect the same good service in China.
However,
the standard of logistics services between local and international
players is poles apart.
Most
of the local operators provide very basic warehousing facilities
while the multinational logistics operators provide high-end
services.
Tee
said the company was promoting its corporate image as a leading
logistics service provider in the country.
"One
of our objectives is to develop best practices and achieve
best-in-class services among competitors in the country,"
he said.
Now,
ILB boasts clientele such as Panasonic, IKEA, Hitachi and
IBM.
As
more MNCs set up their operations in China, more people would
demand such services, said Tee.
One
of the key success factors for ILB in China is its ability
to adapt to the changes demanded by MNCs. Now more MNCs are
outsourcing their logistics requirements to third parties.
"We
are not selling just empty warehouse space, but we provide
them with a complete solution from storage to their entire
supply chain operation," he said.
Tee
said despite having planned well for Shenzhen and Shanghai,
demand was expected to outstretch supply for warehousing space
in China.
"We
are currently renting some of our facilities because some
of the land in Shenzhen and Shanghai are not big enough to
accommodate the company's requirement," he said.
In
Shenzhen, one of ILB's clients occupies two levels of the
company's warehouse, uses as its production line, an indication
of space constraint in the warehouse space.
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