Since its introduction and till a few years back, the idea of Entrepot (A.K.A free port) trade logistics has been a sought-after solution for supply chain manager to obtain feasibility in operation planning, efficiency in order placement and cost reduction.
Commodity traders involved in emerging markets have been fond of Entrepot operation due to tightening trade finance terms by the banks, who were not in favor of financing trade contract with long distance transportation. That said, international trade from Africa to Far East, from South Asia across Pacific Ocean to North America, where there was a significant lag between the placement of an order and receipt of the goods were having difficulties with bank financing.
Singapore, Malaysia and Hong Kong have been riding the waves of their geographical advantage in Asia, and become the most favorable spots for temporary storage, import and re-export operation. Reasonably, this was largely due to the fact that China being the factory to the world, where materials were imported and finished goods exported.
Things are changing in accordance with industrial upgrade and the switch of consumption power in the region, where there is a noticeable tendency in
Moving low-end production out of China to neighboring South-Eastern Asia countries
Importing more and more semi-finished and finished goods into China
Under such circumstance, the requirements for Entrepot trade logistics are getting more specific and demanding, which lead to the “Asia Hub” as known today.
Global supply chain consolidation
The concept and operation of “Asia Hub” is similar to that of Entrepot, while “Asia Hub” is pushing the limit of logistics efficiency with “China Focus”, due to following reasons;
Fastest transit time ex Shanghai and Yantian to the U.S. on container shipping route
A fairy large percentage of OEM orders for international brands are still being produced in China
Competitive operation cost at Shanghai and Yantian compared to their counterpart at HongKong, Malaysia and Singapore
Relaxing customs policy and IT infrastructure buildup to support both B2B and B2C orders
To take furniture as an example to explain “Asia Hub” operation;
A full set of furniture, let it be desk, chair or anything, there might be parts produced in China and Vietnam (even in more countries) due to various reason i.e. raw material availability/trade quotas/production limitation/preferential tariff condition etc.
However, buyer on the receiving end do not expect to receive separated parts from different country with different arrival time, to sort the parts at destination warehouse into sets, and deliver to final customer. Instead, they expect to receive a full set of furniture in the same container, with proper packing so as to have all the parts that eventually make the whole set of furniture delivered to final customer right after container discharged.
With “Asia Hub”
Parts produced in Vietnam, China or other Asia countries are shipped to a customs bonded operation hub in China, where sorting, packing, relabeling and loading are done. A container with full set of furniture is then ship to the destination country.
By doing so, there are huge benefits in
Purchasing, as all the parts are sourced directly from the region with competitive cost
Shipping, parts are consolidated in FCL instead of different LCL shipment
Handling, goods are ready to ship directly to ultimate buyer right after container discharged
In the theme of “source globally and sell globally”, to the likes of furniture, clothing and other categories that heavily rely on low purchasing cost and seamless global supply chain consolidation, “Asia Hub” has emerged as a favorable operation solution to global business opportunities.
Trade revolution
Due to the maturity in cross-border online shopping behavior, sales channel of goods export from and import to China are becoming more likely a combination of B2B and B2C.
The change in consumer behavior has reshaped trading practice and is pushing seller and buyer to adapt themselves to new changes to stay competitive (and to survive), which are;
SKU proliferation, more SKU and selection
Low safe stock level, quick turn-around time
Small replenishment order and high frequency
Short delivery lead time
Although most international trading order are being fulfilled in shipping container, there is a fast growing trend to see more orders being fulfilled in shipping carton.
That said, order fulfillment is getting quicker (in delivery), smaller (in volume) and scattering (in distribution), “Asia Hub” operation could thus effectively improve efficiency for both B2B and B2C logistics arrangement.
From our experience, such operation is highly suggested for customers who are
Sourcing and importing components and parts from Asia with majority from China
Selling merchandise of overseas origin into China ( Food & Beverage in particular)
New to China consumer market and intend to make a start with large SKU line but smaller volume
Participating the 1st ever China International Import Expo (CIIE) with samples, parts or merchandizes from various country of origin to showcase during the event
Drop us a line if you are interested in knowing more about this solution to your goods to and from China.
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