Entrepreneur thrashes through myriad problems of transporting merchandise from points A to B
By Hu Min |
January 28, 2012, Saturday
|
Print Edition
Print Edition
THE challenges facing logistics companies are immense, ranging from high costs and vicious competition to low efficiency and poor vehicle management.
Nick Zhang, president and CEO of Runbow Logistics, recalls all too well the problems confronting him when he set up his company headquartered in Minhang's Meilong area.
"IKEA's two-digit rise in profit sounded more like a nightmare for me," he said.
IKEA is a client of the company, whose business centers on urban logistics. Zhang calls it "the last mile" of the supply chain. Goods are divided into hundreds of thousands of batches and delivered to customers at their doors.
Zhang worked in logistics consulting for another company before deciding to set up his own business in 2005. He saw a gap: Many international companies had trouble gaining a foothold in the domestic market because they couldn't find reliable goods tracking and delivery services.
"I saw city delivery as a booming business," Zhang said. "I wanted to elevate it into a supply chain total solution, supported by information technology, which few companies do here."
The name of his company was not chosen idly. The letter "R" in Runbow stands for responsibility, the "U" for unity, the "N" for never give up, the "B" for belief, the "O" open-mindedness and the "W" for willingness to change.
The company's success, he said, rested on turning all those concepts into a working formula.
He set up the company with the help of several friends, some of them Chinese returning from overseas. It started out with home furnishings and small consumer goods.
"The biggest obstacle in the initial stages was finding a big-name client to boost our company's profile," Zhang said.
When he got word that IKEA had a tender out for logistics in the city, he put a bid in and won it.
IKEA was a big name all right, but its strict criteria for logistics service suppliers put pressure on Zhang to perform. IKEA required an on-time delivery rate of 98 percent every month and a complaint rate of no more than 0.4 percent. If Zhang's company failed to meet those requirements, the contract could be terminated.
The situation was complicated by the fact that IKEA had only two branches in China at that time, making the movement and on-time delivery of goods more problematical.
Runbow had to struggle. IKEA's business volume was growing rapidly at that time, and its urban freight distribution orders totaled between 300 and 500 a day.
Runbow couriers had to handle up to 5,000 pieces of goods daily and found themselves at a loss, running from one end of large warehouses to the other trying to find merchandise. Then, too, there was the problem of sorting the goods into delivery areas and arranging transport.
Efficiency
Work often stretched into the wee hours of the morning, and the error rate was high.
Zhang and two senior level officials visited IKEA's warehouses to tackle the problems.
"I felt we might lose our client," Zhang recalled.
The troubleshooting seemed to boil down to people. Zhang needed to find a way to deploy manpower more efficiently. His company's future depended on it.
He hired professionals in software development, and the team designed a complete navigation system, which mapped routes and delivery sequences. It took the team four months to fully develop the system.
At first, improved efficiency didn't equate to a decrease of complaints. Customers groused that the couriers and staff assembling furniture were unkempt and their attitude was unpleasant. So Zhang insisted that workers cut their hair, improve their appearances and adopt a more friendly demeanor.
The company developed an assessment system related to customer relations and assembly time for furniture. It began awarding certificates to outstanding staff members, with pay pegged to performance.
Although IKEA accounted for only about 10 percent of Runbow's business at that time, Zhang said he felt it was important to deliver the best service possible and instill that ethic company-wide.
As IKEA opened new branches, Runbow continued to grow as its logistics partner.
Zhang was careful not to fall into the trap that dooms so many logistics companies, where competition can lead to freight overloading and drivers sleeping in their trucks.
Runbow went on to win orders from Nike and Adidas, and made the apparel industry one of its priorities.
About 90 percent of freight distribution vehicles are small fleet or individually run. They are typically hired on a piecemeal basis by logistics companies. That system leads to missing goods and disputes over small issues such as gasoline costs.
Good vehicle management means a fast-response capability and a low rate of error, Zhang said. He and his team established a system that rewarded drivers with good records and paid them in a more timely way than is normal.
A logistics firm also has to be prepared for the unexpected.
In January 2008, severe snow and ice storms blanketed central, southern and eastern parts of China, cutting many travel links and hampering deliveries.
It was a very difficult period because the Chinese Lunar New Year was approaching with its normally heavy volume of goods to be delivered, Zhang said.
He resorted to air transport where possible and mobilized local villagers to deliver goods by foot. It was expensive, but Zhang said he was able to maintain most delivery times.
"The key to starting up one's own business is to put the company's survival above one's own interests," he said.
Zhang said he believes in establishing team spirit so that those who work for him share the same vision and enthusiasm.
"It's the key to a competitive edge," he said.
Last year, the company's sales surged 50 percent. Runbow now employs about 1,000 people.
Nick Zhang, president and CEO of Runbow Logistics, recalls all too well the problems confronting him when he set up his company headquartered in Minhang's Meilong area.
"IKEA's two-digit rise in profit sounded more like a nightmare for me," he said.
IKEA is a client of the company, whose business centers on urban logistics. Zhang calls it "the last mile" of the supply chain. Goods are divided into hundreds of thousands of batches and delivered to customers at their doors.
Zhang worked in logistics consulting for another company before deciding to set up his own business in 2005. He saw a gap: Many international companies had trouble gaining a foothold in the domestic market because they couldn't find reliable goods tracking and delivery services.
"I saw city delivery as a booming business," Zhang said. "I wanted to elevate it into a supply chain total solution, supported by information technology, which few companies do here."
The name of his company was not chosen idly. The letter "R" in Runbow stands for responsibility, the "U" for unity, the "N" for never give up, the "B" for belief, the "O" open-mindedness and the "W" for willingness to change.
The company's success, he said, rested on turning all those concepts into a working formula.
He set up the company with the help of several friends, some of them Chinese returning from overseas. It started out with home furnishings and small consumer goods.
"The biggest obstacle in the initial stages was finding a big-name client to boost our company's profile," Zhang said.
When he got word that IKEA had a tender out for logistics in the city, he put a bid in and won it.
IKEA was a big name all right, but its strict criteria for logistics service suppliers put pressure on Zhang to perform. IKEA required an on-time delivery rate of 98 percent every month and a complaint rate of no more than 0.4 percent. If Zhang's company failed to meet those requirements, the contract could be terminated.
The situation was complicated by the fact that IKEA had only two branches in China at that time, making the movement and on-time delivery of goods more problematical.
Runbow had to struggle. IKEA's business volume was growing rapidly at that time, and its urban freight distribution orders totaled between 300 and 500 a day.
Runbow couriers had to handle up to 5,000 pieces of goods daily and found themselves at a loss, running from one end of large warehouses to the other trying to find merchandise. Then, too, there was the problem of sorting the goods into delivery areas and arranging transport.
Efficiency
Work often stretched into the wee hours of the morning, and the error rate was high.
Zhang and two senior level officials visited IKEA's warehouses to tackle the problems.
"I felt we might lose our client," Zhang recalled.
The troubleshooting seemed to boil down to people. Zhang needed to find a way to deploy manpower more efficiently. His company's future depended on it.
He hired professionals in software development, and the team designed a complete navigation system, which mapped routes and delivery sequences. It took the team four months to fully develop the system.
At first, improved efficiency didn't equate to a decrease of complaints. Customers groused that the couriers and staff assembling furniture were unkempt and their attitude was unpleasant. So Zhang insisted that workers cut their hair, improve their appearances and adopt a more friendly demeanor.
The company developed an assessment system related to customer relations and assembly time for furniture. It began awarding certificates to outstanding staff members, with pay pegged to performance.
Although IKEA accounted for only about 10 percent of Runbow's business at that time, Zhang said he felt it was important to deliver the best service possible and instill that ethic company-wide.
As IKEA opened new branches, Runbow continued to grow as its logistics partner.
Zhang was careful not to fall into the trap that dooms so many logistics companies, where competition can lead to freight overloading and drivers sleeping in their trucks.
Runbow went on to win orders from Nike and Adidas, and made the apparel industry one of its priorities.
About 90 percent of freight distribution vehicles are small fleet or individually run. They are typically hired on a piecemeal basis by logistics companies. That system leads to missing goods and disputes over small issues such as gasoline costs.
Good vehicle management means a fast-response capability and a low rate of error, Zhang said. He and his team established a system that rewarded drivers with good records and paid them in a more timely way than is normal.
A logistics firm also has to be prepared for the unexpected.
In January 2008, severe snow and ice storms blanketed central, southern and eastern parts of China, cutting many travel links and hampering deliveries.
It was a very difficult period because the Chinese Lunar New Year was approaching with its normally heavy volume of goods to be delivered, Zhang said.
He resorted to air transport where possible and mobilized local villagers to deliver goods by foot. It was expensive, but Zhang said he was able to maintain most delivery times.
"The key to starting up one's own business is to put the company's survival above one's own interests," he said.
Zhang said he believes in establishing team spirit so that those who work for him share the same vision and enthusiasm.
"It's the key to a competitive edge," he said.
Last year, the company's sales surged 50 percent. Runbow now employs about 1,000 people.
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