China Ocean Shipping Co (Cosco) has launched itself in the global world of logistics, through the establishment of Cosco Logistics Co. The new company officially took up its responsibilities in January, effectively combining two already creditable but distanced companies, Penavico and Cosco Freight Forwarding.
Cosco Logistics was formed shortly after China's accession to the World Trade Organisation, and is in line with a determined effort by Cosco to present to a combined and focused operation that will cater to the domestic and global transportation sector.
While the newly-formed logistics enterprise will mostly cater to sea and land transportation needs, Cosco management has emphasised that Cosco Logistics will also assume an air freight role. Existing units dedicated to the air sector within the Cosco company will, from now on, operate as part of the new logistics operation.
Eight separate Cosco Logistics subsidiaries have been formed, and these will be based in Dalian, Beijing, Qingdao, Shanghai, Ningbo, Xiamen, Guangzhou and Wuhan. Dalian and Qingdao have emerged as major seaport centres for containerised traffic to and from the US and Europe. Shanghai and satellite port, Ningbo, have made their own mark on the sea transportation map as major ports for central China. Xiamen is expected to develop its established maritime cargo handling base, particularly with a focus on Taiwan, and the possibilities of direct trade.
In the past, Cosco's logistics solutions have been handled by mixture of separate businesses, which in many cases competed against each other.
"What was offered by Cosco, until now, has been outdated and complicated to those companies we see as our new potential customers," says a senior Cosco source. "What we have done is place it all under one roof and present ourselves as a major force, matching other big liner companies in this business, which have also moved in the total logistics direction."
Forming the backbone of Cosco Logistics will be a strong workforce drawn partly from the old style Cosco Freight Forwarding Co, and from within the Cosco liner shipping arm. The demise of the freight forwarding arm will mean that other staff employed within that company will shift across to expected to develop its maritime ties with Taiwan Cosco Container Lines (Coscon).
Under the logistics company, Cosco will offer a specialised platform of services answering the needs of total online container transportation. There will be online systems for inventory management information, road transportation, space booking and settlement.
Cosco's chairman,Wei Jiafu, explains the initiative behind Cosco Logistics by saying the "target customer for such a total service is the multinational company that has a global supply chain." With China's entry into the WTO, the list of interested parties in this new venture is fast expanding.
As has been the case with similar moves by other liner shipping companies into the dedicated logistics field, Cosco says the end product does not stop at the internet and paperless communications. Senior management in Beijing believe the way is now open for much further development, including warehousing, distribution and manufacturing.
Cosco's major liner shipping partners include Japan's Kawasaki Kisen Kaisha (K Line), which has also moved down the path of the total logistics product, forming K Line Logistics Corp in October 2001. Elsewhere in recent months, leading shipping lines such as Maersk Sealand, APL and Mitsui- OSK Lines have set up their own logistics organisations. Maersk Sealand and APL have both set up joint ventures in China.
Sources at K Line say they welcome the initiative of Cosco, which it felt "was moving into the future with assertiveness and clear understanding of the demands of total transportation." Maersk Sealand executives believe the move by Cosco is long overdue, and that the company is making clear its dedicated intentions of providing the total transportation product.