Wilhelmsen’s business transformation programme is all about getting the right products to the customer through a leaner, smarter supply chain.
Container crane and the tip of the westernmost ship docked at the massive Busan New Container Terminal (BNCT) are just visible from the entrance; inside the WSS warehouse in Busan, a container freshly arrived from Europe is about to be unloaded.
Just as the busy port has become a key player in Northeast Asia trade, so too has this office become central to Wilhelmsen’s work in the region. From November 2014, it began operations as Wilhelmsen’s Northeast Asia Distribution Center, responsible for not only Korea but also China, Japan, Hong Kong and Taiwan.
It’s part of the business transformation programme for WSS’s Marine Products business. This process is intended to streamline and energise the supply chain and rationalise the products provided while paving the way for new growth.
“Marine products has only grown by a few percent over the past three to five years,” says Kjell André Engen, vice president of marine products in Oslo and the man driving the transformation- programme. “Things hadn’t changed in many years, so we needed to clean up and create a supply chain that can address future growth.”
The new international role played by Busan as the Korea Distribution Center (KDC), serving the warehouses of the area, is one good example of the project being put into action. The previous centre for the region was in Singapore; now it is much closer to Northeast Asian ports, a region that continues to expand as a centre of world shipping.
The warehouse is a new one, which opened at the same time as the inauguration of the transformation project. It provides 2 000 products (and spare parts for Technical Services), a massive drop from the 6 000 previously offered by Marine Products. “We needed to rationalise and clean up our product offering,” Engen says. “For years we added products, but didn’t remove old ones, so it became more difficult to bring in new products with actual demand from our customers.”
Most products cut, he explains, were outdated or poor sellers – and made up less than one percent of sales. “They also created great complexity, so there was a need to simplify.”
On a practical level, the reduction in number of products had little effect on customers. As logistics manager in Busan, Dennis Kim, says, “The transition has been smooth. While there was some overlap where discontinued products were ordered by customers, this has not been a major problem. Our biggest challenge is in inventory control, and the new steps are already helping a lot.”
“The biggest change for us, naturally, is that we no longer have just external customers, but internal customers as well in the regional warehouses,” says Woon-Sik Choi, general manager in Busan. The supply coordinator in charge of KDC side of Busan’s business, John Yoon, says, “I normally receive two to three orders each day, but they’re much larger than the domestic deliveries to vessels. The warehouses have most of the major products in stock, but sometimes they need less common items, and often on very short notice, so I have to be able to move fast,” says Yoon. So while the closer proximity has cut ocean shipping times to the regional warehouses for normal deliveries, Yoon now also must handle occasional rush shipments by air as well.
“Even though it’s internal, you’re still a supplier serving a customer, which is a challenge,” Yoon adds with a smile. “This is still a new project, but my challenge is to really know the products, and all the different countries’ customs clearance procedures, so we can be sure there are no delays.”
Dennis Kim stands before a five-tonne truck, an unusually large delivery vehicle for the warehouse. It’s being loaded with supplies for a newbuild ship, he explains – an important part of the business with much of Korea’s huge shipbuilding industry not far away. “This is where we can really start develop our business, with newer products going to these new ships – they’ll come back to us in the future,” he says. “This is a rented building, because we hope that, with the expansion of inventory in the future, we will need to move again to a larger facility.”
There’s no doubt that things are busier than prior to the implementation of the transformation project, but the Busan team has clearly risen to the challenge. H.Y. Kim is the lead man in the warehouse, supervising a team of some seven drivers (he is actually directly employed by a partner firm housed within the warehouse, “but we really all act as one team here,” Choi says). “We’re definitely busier now, but that’s not much of a challenge,” Kim says confidently. “We just have to work a little faster!”
Making the transformation
According to Kjell André Engen, the goals of the project include:
Increase efficiency. Provide more service, through an actively-created, agile supply chain that can handle more, new products.
Bring scalability into the model. Build a global supply chain that can handle a complex system serving 240 ports in 70 countries. A supply chain that can ensure that the right products are in the right place, even with the reality that ships are a moving target moving between ports.
Rationalisation. The previous 10 700 products have been reduced to 3 800. In the first six months, 4 400 system products were removed, along with 3 000 products with limited sales.
Move from a product- to a solution-based business. It’s no longer about pushing products, Kjell André Engen says, but providing service to ship owners. “My mantra is that as ship owners are becoming more efficient, conversely crews are losing some of their competence on-board new ships. We need to increase our competence and technical expertise to better serve the owners.”
New growth through new products. With a cleaner supply chain, more high-volume products can be introduced. “We’re using joint venture, acquisitions and other methods to accomplish this,” Engen says. “We’re now talking to seven or eight companies about JVs or even acquisition.” This will result, he says, in approximately USD 30 million in new revenues next year.
Seeking efficiency through consolidation
Along with the designation of Busan as the regional headquarters for Northeast Asia, other Marine Products facilities at the national and regional levels have also been brought together for better efficiency.
Prior to December 2014, Japan had three warehouses, in Yokohama, Kobe and Moji (on the northern tip of Kyushu Island). “Each one was independent, so there was a lot of duplication of efforts,” says Masatsugu Mohara, supply chain manager. So the decision was made to bring all three together in the centrally-located Kobe.
“With the majority of our products coming from Europe, it doesn’t make sense to coordinate deliveries to three separate Japanese ports,” adds Yoshihiro Iizuka, general manager. “Now products come here in containers, and we distribute as needed.”
“We send inventory to our partner companies in both Yokohama and Moji whose expertise we can use, but at a lower cost,” Mohara says. “We directly cover Kobe, Osaka and Wakayama, and sometimes deliver by ourselves to Okayama and Hiroshima. Urgent orders from outside our area are a new challenge, which means we have to hustle a bit more, and work closely with delivery companies, something that helps us control costs.”
Sachiko Nakatani, supply coordinator, is in charge of import procedures, and also sees new benefits from the implementation of the project. “Most of our products come in from Rotterdam and Oslo, but now with the regional centre in Korea, we’re getting more materials from there as well. Urgent orders from outside the Kobe region create a new challenge, but having Korea as the regional centre will help out a lot with lead items when we do need to order something urgently.”
In the State of Florida in the US, shifting trade patterns caused a similar central consolidation of offices. “Over the past decade or so, the main ports were Miami (in the far south of the state), Jacksonville (far north) and Tampa (central-west Florida),” says Tim Ryan, marine products director Americas. Cruise ships account for about 40% of the company’s business in the US – and that business in Florida was changing.
“Ten years ago a couple of Disney cruise ships called at Port Canaveral, on the East Coast,” he says. ”These were covered by Jacksonville, which is 282 kilometres away. This made sense when there were only a few vessels, because there wasn’t enough business to support a new office there.”
But as traditional non-cruise business in both Tampa and Jacksonville fell – Miami gaining from Tampa, and other Atlantic ports taking Jacksonville trade – the cruise business continued to grow. “Over 10 year we saw the few cruise ships in Port Canaveral growing to 12 ships being home-ported there,” Ryan says.
The solution was to combine the offices into one in Orlando, with a central location particularly close to Port Canaveral, but also within reasonable distance from Tampa. “We decided that, rather than driving our own trucks to Jacksonville, we now work with a service provider there who can keep an inventory of gas cylinders and other major products on hand.”
The move to using third-party trucks for deliveries outside of the main area does save costs, Ryan says, but has been one of the challenges for employees already dealing with relocation. “It took about three months for this way of thinking to really take root,” he says. “It is a different way of looking at the business and it can be hard for people to get their heads around it.” But thanks to a lot of hard work – particularly by Florida operations manager Shabaaz Fajroo, who lived in a hotel during the three-month transition – Florida now has a system which Ryan says, “makes the best sense from the supply-chain perspective.”