Executive Briefings

Nike Eliminates Its Hong Kong Headaches

Until recently, U.S. manufacturers in China had no choice but to ship their exports out of Hong Kong. But as Nike Inc. recently found out, that's hardly the case today.
Nike has cut the cost of shipping Chinese-made footwear by moving it through the Port of Mawei. That's the closest Chinese port to Fuzhou, site of the largest of four regional Nike factories.

"If I've got to have a 50-page document with all kinds of boilerplates, I don't call that a relationship."- Jack Roscoe of Nike

Mawei was selected by ACS Logistics, part of the Oakland, Calif.-based APL Logistics group of companies. Nike had previously used ACS for consolidation services in the Philippines, but never before in China. Now it was hiring the vendor to revamp its Chinese distribution strategy, with an eye toward reducing drayage and bypassing pricey and congested Hong Kong.

ACS had exactly two months to come up with a solution, following its appointment by Nike in May of 1997. In addition to finding a new port of export for the client, ACS was instructed to set up a consolidation facility with state-of-the-art information technology, then convince Chinese Customs officials to locate at the site.

The choice of Mawei followed numerous site visits by ACS to ports in the area, as well as meetings with Customs. Besides being close to the Nike plant in Fuzhou, Mawei serves all Nike-nominated ocean carriers and allows for bonded customs activities. And it's a quick truck ride from Nike's new consolidation center in Fuzhou.

At the facility, ACS accepts incoming cartons of footwear from Nike's Chinese manufacturing plants, scans them by barcode, and consolidates them into outgoing containers. The vendor uses electronic data interchange to receive purchase order information from Nike, and to send packing-list data back to the customer. Shipments then move under China bills of lading to the nearby Port of Mawei, where ACS relinquishes control to ocean carriers' feeder services. The trip takes less than an hour, said Jack Roscoe, third-party logistics manager at Nike headquarters in Beaverton, Ore.

Because Mawei is a small river port, Nike's containers still end up traveling to Hong Kong for linehaul service to the U.S., Europe and elsewhere. But that leg of the journey is no longer Nike's problem; the terms of shipment are FOB Mawei. The shipper needn't worry about trucking or feedering footwear to Hong Kong, a two-and-a-half day trip that used to cost US$1,600 per container, Roscoe said. Nike also avoids paying Hong Kong's steep labor and terminal handling charges.
Nike has realized further savings by consolidating in Fuzhou and shipping out of the region in full containers. Previously, said Roscoe, it would send less-than-containerload lots direct from the factories to Hong Kong, incurring much higher trucking costs.

Overall savings from the new plan have been "considerable," said Roscoe. "The closer you can get consolidation to your factory base, the cheaper it is."

ACS provides Nike with a unique logistics procedures (LP) document that details all of its obligations to the customer "in excruciating detail," said Robert Hanelt, director of marketing and planning. The LP is used to educate vendors about Nike's strict requirements on matters such as the order, nature and timing of documentation.

Information is a key element in any supply-chain partnership, said Hanelt. In an effort to provide the customer with maximum visibility of product in transit, ACS has extended its data link to include ocean carriers, customs brokers, truckers and railroads.

As for Nike, it prefers not to have a formal contract with ACS - just a service agreement less than two pages long, attached to a rate sheet for each point of origin. And Nike's lawyers never see it.

"If I've got to have a 50-page document with all kinds of boilerplates, I don't call that a relationship," said Roscoe. "Not in my terminology."

Until recently, U.S. manufacturers in China had no choice but to ship their exports out of Hong Kong. But as Nike Inc. recently found out, that's hardly the case today.
Nike has cut the cost of shipping Chinese-made footwear by moving it through the Port of Mawei. That's the closest Chinese port to Fuzhou, site of the largest of four regional Nike factories.

"If I've got to have a 50-page document with all kinds of boilerplates, I don't call that a relationship."- Jack Roscoe of Nike

Mawei was selected by ACS Logistics, part of the Oakland, Calif.-based APL Logistics group of companies. Nike had previously used ACS for consolidation services in the Philippines, but never before in China. Now it was hiring the vendor to revamp its Chinese distribution strategy, with an eye toward reducing drayage and bypassing pricey and congested Hong Kong.

ACS had exactly two months to come up with a solution, following its appointment by Nike in May of 1997. In addition to finding a new port of export for the client, ACS was instructed to set up a consolidation facility with state-of-the-art information technology, then convince Chinese Customs officials to locate at the site.

The choice of Mawei followed numerous site visits by ACS to ports in the area, as well as meetings with Customs. Besides being close to the Nike plant in Fuzhou, Mawei serves all Nike-nominated ocean carriers and allows for bonded customs activities. And it's a quick truck ride from Nike's new consolidation center in Fuzhou.

At the facility, ACS accepts incoming cartons of footwear from Nike's Chinese manufacturing plants, scans them by barcode, and consolidates them into outgoing containers. The vendor uses electronic data interchange to receive purchase order information from Nike, and to send packing-list data back to the customer. Shipments then move under China bills of lading to the nearby Port of Mawei, where ACS relinquishes control to ocean carriers' feeder services. The trip takes less than an hour, said Jack Roscoe, third-party logistics manager at Nike headquarters in Beaverton, Ore.

Because Mawei is a small river port, Nike's containers still end up traveling to Hong Kong for linehaul service to the U.S., Europe and elsewhere. But that leg of the journey is no longer Nike's problem; the terms of shipment are FOB Mawei. The shipper needn't worry about trucking or feedering footwear to Hong Kong, a two-and-a-half day trip that used to cost US$1,600 per container, Roscoe said. Nike also avoids paying Hong Kong's steep labor and terminal handling charges.
Nike has realized further savings by consolidating in Fuzhou and shipping out of the region in full containers. Previously, said Roscoe, it would send less-than-containerload lots direct from the factories to Hong Kong, incurring much higher trucking costs.

Overall savings from the new plan have been "considerable," said Roscoe. "The closer you can get consolidation to your factory base, the cheaper it is."

ACS provides Nike with a unique logistics procedures (LP) document that details all of its obligations to the customer "in excruciating detail," said Robert Hanelt, director of marketing and planning. The LP is used to educate vendors about Nike's strict requirements on matters such as the order, nature and timing of documentation.

Information is a key element in any supply-chain partnership, said Hanelt. In an effort to provide the customer with maximum visibility of product in transit, ACS has extended its data link to include ocean carriers, customs brokers, truckers and railroads.

As for Nike, it prefers not to have a formal contract with ACS - just a service agreement less than two pages long, attached to a rate sheet for each point of origin. And Nike's lawyers never see it.

"If I've got to have a 50-page document with all kinds of boilerplates, I don't call that a relationship," said Roscoe. "Not in my terminology."