Fac­tory ex­o­dus fuels lo­gis­tics boom

China Daily (Hong Kong) - - BUSINESS | HK - By CHAI HUA in Shen­zhen grace@chi­nadai­lyhk.com

As op­er­a­tors of la­bor­in­ten­sive fac­to­ries scram­ble to move out of the Pearl River Delta (PRD) re­gion and re­lo­cate to South­east Asia, tak­ing ad­van­tage of the lower op­er­a­tional and la­bor costs there, lo­gis­tics com­pa­nies are rid­ing high on the ex­o­dus de­spite the chal­lenges con­fronting them.

But, in­dus­try ex­perts point out that fac­tory re­lo­ca­tion is a much more com­pli­cated pro­cess than homes re­moval, as it in­volves equip­ment from an en­tire as­sem­bly line and it’s ex­tremely dif­fi­cult to trans­port them.

According to Guan Tian­wen, a man­ager at Guangzhou Ming­tong Heavy Lo­gis­tics Co Ltd, the pro­cess is com­pounded by the prob­lem of safety, and pro­fes­sion­als have to be brought in.

“A ssem­bly line work­ers would not know how to dis­man­tle, hoist or load these de­vices, so they need pro­fes­sion­als to do the job to guar­an­tee their safety,” he told China Daily.

It’s also costly for fac­tory op­er­a­tors to in­stall new ma­chines abroad and, most i m p o r t a n t l y, s o m e o f t h e equip­ment are tai­lor-made and could not be pur­chased in South­east Asian coun­tries. So, they ’re forced to re­use them, he said.

Guan said time is another cru­cial fac­tor in mov­ing fac­to­ries to other coun­tries as the pro­cess would take much l o n g e r, c o u p l e d w i t h t h e in­tense prepa­ra­tions needed to set up the new plant and hire lo­cal staff.

Com­pa­nies like Ming­tong are in­volved in up­load­ing and trans­port­ing the equip­ment do­mes­ti­cally, while the over­seas role has to be taken up by pro­fes­sional clearance com­pa­nies.

Dong­guan Pan­tom Inter- na­tional Freight For warders Co Ltd, which used to “im­port” new and sec­ond­hand elec­tro-me­chan­i­cal equip­ment since its es­tab­lish­ment in 2008, has now started “ex­port­ing” them.

Mar tin Che­ung , a man­ager with the com­pany, said many fac­to­ries in the PRD have moved out, or are plan­ning to re­lo­cate to South­east Asia, lured by the cheap la­bor costs there, so “im­port­ing” machin­ery is on the de­cline.

He said some of their clients need help to move their fac­tory fa­cil­i­ties abroad, so his com­pany is now of­fer­ing re­lated ser­vices.

But, he said, the most dif­fi­cult and costly part of the op­er­a­tion con­cerns cus­toms clearance as some of the fac­tory equip­ment have spe­cial func­tions, and it’s hard to iden­tify their cus­toms code.

“Thus, the re­la­tion­ships we’ve set up, as well as the ex­pe­ri­ence gained from our pre­vi­ous im­port busi­ness, come in hand­ily,” he said.

According to Che­ung, the tra­di­tional method to move such equip­ment to South­east Asia is by sea al­though many com­pa­nies now reckon that land trans­porta­tion is more ef­fi­cient.

A businessman, who runs a lo­gis­tics en­ter­prise in the PRD, said trans­port­ing machin­ery by land to Myan­mar, for in­stance, would take just 15 days — twice as fast as by sea — according to a Hong Kong me­dia re­port.

He would choose heavy freight trunk routes from Yun­nan prov­ince to en­ter Myan­mar, and most of his clients are in the cloth­ing, bags and shoe man­u­fac­tur­ing busi­ness, about 40 per­cent of which in­volves Hong Kong in­vest­ment.

He ad­mit­ted being able to reap a net profit of at least 10,000 yuan ($1,450) for each op­er­a­tion, re­mov­ing sewing ma­chines, elec­tric gen­er­a­tors and cloth­ing ma­te­rial for some 25 fac­to­ries lo­cated in Shen­zhen, Dong­guan, Zhuhai and other cities in Guang­dong prov­ince in the first 10 months of this year.

His com­pany also pro­vides fur­nish­ing and dec­o­ra­tion ser­vices for these new fac­to­ries. There are also other com­pa­nies of­fer­ing pack­aged ser­vices, in­clud­ing com­pany reg­is­tra­tion, rent­ing of land and fac­tory con­struc­tion at their new lo­ca­tions.

In­dus­try in­sid­ers, how­ever, warned that these com­pa­nies are also in the la­bor-in­ten­sive busi­ness, and face sim­i­lar prob­lems like high la­bor costs and stiff com­pe­ti­tion.

Luo Xiang yang , a press of­fi­cer with the Shen­zhen Gar­ment In­dus­try As­so­ci­a­tion, said most of the fac­to­ries re­lo­cat­ing to Myan­mar are OEMs (orig­i­nal equip­ment man­u­fac­tur­ers) and their num­ber is not very high.

“Guang­dong’s in­dus­trial chain, fa­cil­i­ties, the busi­ness environment and la­bor skills are bet­ter,” he said, so he be­lieves that the de­mand of such re­moval busi­ness is lim­ited.

“In Shen­zhen, in par­tic­u­lar, the cloth­ing com­pa­nies are mostly fo­cused on es­tab­lish­ing their own brands and de­vel­op­ing the do­mes­tic mar­ket, so they would not move out.”

Chen Linyan, gen­eral man­ager of the Shen­zhen Lo­gis­tics In­dus­try As­so­ci­a­tion, told China Daily she has yet to see a dis­tinct surge in the num­ber of lo­gis­tic op­er­a­tors among its mem­bers that are in­volved in the busi­ness of help­ing fac­to­ries mov­ing abroad.

There are no spe­cific charg­ing stan­dards in this field, she noted, and that could be a bar­rier for the busi­ness to grow.

Al­though the cost of mov­ing one con­tainer equip­ment is about 10,000 yuan on av­er­age, the lo­gis­tics fee usu­ally varies, de­pend­ing on the type of ma­chine to be de­liv­ered, Che­ung said.

For small and medi­umsized man­u­fac­tur­ers, the re­moval cost presents a sort of chal­lenge, con­sid­er­ing they also need to spend mil­lions of dol­lars on the ac­qui­si­tion of land, build­ings and tal­ents, said Willy Lin Sun-mo, man­ag­ing di­rec­tor of Milo’s Knitwear (In­ter­na­tional) Ltd.

In­stead of re­lo­cat­ing, Lin said his com­pany has cho­sen to up­grade its au­to­ma­tion level by de­ploy­ing more ro­bots to offse t the ac ute la­bor short­age.

Guang­dong’s in­dus­trial chain, fa­cil­i­ties, the busi­ness environment and la­bor skills are bet­ter ... the de­mand of such re­moval busi­ness is lim­ited.” In­stead of re­lo­cat­ing, my com­pany has cho­sen to up­grade its au­to­ma­tion level by de­ploy­ing more ro­bots to off­set the acute la­bor short­age.”


Work­ers as­sem­ble mon­i­tors at a TCL Corp fac­tory in Huizhou, Guang­dong prov­ince. Ris­ing la­bor costs and stiff com­pe­ti­tion have driven some fac­to­ries out of the Pearl River Delta re­gion, which used to host vast clus­ters of man­u­fac­tur­ers. Re­lo­cat­ing the fac­to­ries to mar­kets with lower op­er­a­tional costs, such as South­east Asia, how­ever, is a dif­fer­ent story.

Luo Xiangyang, press of­fi­cer with the Shen­zhen Gar­ment In­dus­try As­so­ci­a­tion

Willy Lin Sun-mo, man­ag­ing di­rec­tor of Milo’s Knitwear (In­ter­na­tional) Ltd

Newspapers in English

Newspapers from China

© PressReader. All rights reserved.