DB Schenker recently broke ground on a 42,000-square meter, state-of-the-art warehouse in China for automotive customers. General Manager Max Menzel talks about the benefits this facility offers, the joint venture behind it and his views on doing business in China during a period of decelerated growth.
How do you rate the significance of the new Shenyang Tiexi Logistics Center?
Both the logistics center in the city of Shenyang and the joint venture with our Chinese partner Jinbei Automotive represent a major step forward for DB Schenker as they magnify our footprint in the biggest automotive market worldwide. The facility is our biggest single investment in China to date and will be the largest property owned by us in this country. That alone sends a clear signal to our customers to the effect that we are prepared to fully commit to the contract logistics market in China. And of course, it means that our customers can expect a broad spectrum of services in a highly modern multi-user facility.
When are operations due to begin? And what services will you be offering?
Construction work began in June and the facilities are planned to start operating as early as November. By that time, our customers will have access to 42,567 square meters of high quality logistics space in two warehouses. The facility will employ up to 300 members of staff. The facility is primarily designed to function as a supplier hub. Our main task is to store, consolidate and transship consignments from both local suppliers and those based overseas. This includes services like just in time/sequence inventory (JIT/JIS), inventory management, quality control, vendor managed inventory (VMI) as well as supply chain management. Our service offer also includes transport and distribution. Toyota is our first top-level customer in its capacity as a supplier for BMW, and negotiations are currently ongoing with numerous other companies.
This city in Northeast China has a population of more than eight million. What is more, it is an automotive hotspot. It therefore made most sense to establish the joint venture right here, and to build the facility, officially called the Shenyang Tiexi Logistics Center, in this city. We are conveniently situated in direct proximity to original equipment manufacturers (OEM) as well as first and second tier suppliers. DB Schenker has been providing freight forwarding services to automotive customers in Shenyang since 2003 and will be the first international logistics company to have its own logistics center in the city. I am convinced that this will give us a first mover advantage.
How does the joint venture work and what makes Jinbei the right partner?
Each of the partners holds a 50-percent share in Schenker Jinbei Logistics (SJL). The operative management is the responsibility of DB Schenker. Jinbei is an established OEM in China. The company specializes in the manufacture of utility vans and minibuses and also operates as a trading company for the export of automotive components. The company is majority-owned by the Brilliance Group, which itself runs a joint venture with BMW – whose newest plant is located just 300 meters from our facility. Jinbei and Brilliance are both based in Shenyang, where they have deep roots. That made it easier for us to gain access to a land plot in such an ideal location. The joint venture creates a bridge between international logistical quality standards on the one hand and a local network and know-how on the other.
“WE STILL EXPECT TO SEE A CERTAIN LEVEL OF GROWTH IN THE AUTOMOTIVE SECTOR. FIVE PERCENT PER YEAR ARE ATTAINABLE“
What virtues should a logistics expert possess to be successful in China?
You have to be fast and incredibly flexible. This is because often things do not go ahead as planned and that is a challenge you have to meet! It also means, for example, that you have to be prepared for growth at any given time. We encounter situations in which we not only have to hire 100 or 200 employees within a couple of weeks but we also have to train them so that we can successfully complete a new business implementation.
Currently, China’s economy is not exactly prompting many positive headlines. You’re in the midst of it all. What is your take on the situation?
In China many business leaders refer to the economic situation as the “new normal,” a period of slower, but more stable growth compared with previous years, when economic growth seemed to know no bounds. 2015 was a difficult year for the automotive industry in China. For us as logistics specialists, for example, it meant declining export volumes. Yet, it must be said that the European press paints a far bleaker picture than it appears from here. Again, with regard to the automotive sector, we still expect to see a healthy level of growth. It will certainly not be in the two-digit range, but five percent per year are attainable. This puts China squarely in the top bracket, to the effect that it continues to be an absolute core market for DB Schenker.