Copyright © 2006 Howard Publications, Inc.
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Copyright © 2006 Howard Publications, Inc. |
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Logistics drives NYK's transformation President Takao Kusakari said reorganization will create greater value for customers. by robert mottley |
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At its best, the art of Japanese consensus business management brings together disparate opinions to create a harmonized management that recognizes the importance of tradition and rank but creates a greater whole. In this same manner, Takao Kusakari, president of Nippon Yusen Kabushiki Kaisha, and his management team are reorganizing NYK to bring together its diverse units to create greater value for the carrier’s customers. As one step to that goal, Kusakari and his managers have created a new corporate logo, one that expresses their desire to forge a powerful organization as well as logistics processes to benefit the customer, and create greater value for stockholders while recognizing tradition. NYK’s striking new logo depicts an elegant wave stroke — as graceful as Nike’s Swoosh — above a freshly chosen name: NYK Logistics and Megacarrier. "Logistics" is printed in type three times larger than "Megacarrier." "We give logistics top billing," Kusakari said in a recent interview in New York, where he was joined by Tsunenari Tokugawa, NYK’s senior managing director, and Kinichi "Ken" Hirayama, chairman and chief executive officer of NYK Line (North America) Inc. "People who understand the megacarrier part may ask, ‘where does logistics come into the picture?’ I would say, at the point we decided to be our own outsourcers," Kusakari said. "Within our own reach, we had the means to provide logistics services which third-party companies that are the recipients of outsourced work normally offer," he said. "For NYK to turn to 3PLs would have been redundant. That would not have made good business sense when we had, in our various company ‘houses,’ all of the means necessary to that end." "In the last two years and more, having worked up our own logistics processes and seen them flourish, we decided then to sell those services outside of our company. Already, one-fifth of our gross revenue is coming from our logistics operations. "We have formed a combined logistics team to maximize the synergies that are possible. I am the leader, but I have help," Kusakari said, gesturing to Tokugawa and Hirayama. "We have seen that many facets of our operations, especially marine terminals, have more value when they are part of a global logistics network. We are now investing heavily in selected terminals, in equipment and information technology, because we see their role more clearly in the larger logistics picture," Kusakari said. NYK, founded in 1885, is based in Tokyo. Having lost virtually all of its ships in World War II, the carrier rebounded remarkably in a short period. NYK operates a fleet of 782 vessels, of which it owns 258 and charters 524 (See chart). The company has 13,834 employees worldwide. NYK Line (North America) Inc. is based in Secaucus, N.J. Within NYK, its New Wave Logistics Group provides distribution centers around the world. Orient Consolidation repacks cargo shipments. GST Inc., in the United States, and UCIL, in the United Kingdom, serve as regional distribution companies. NYK’s air freight forwarding arm is Yusen Air & Sea Service. In 2000, NYK reported fiscal performance in seven business segments: shipping, cruise, shipping-related services, logistics, oil wholesaling, real estate, and an "other" category. While consolidated revenues for shipping, NYK’s largest segment, declined slightly in 2000, the company reported that "profitability recovered substantially, owing to rate restorations and measures to reduce costs." Cruise revenues in 2000 were lower due to the appreciation of the yen. Shipping-related services were up 4.8 percent in revenue. Logistics revenues rose 1.7 percent. Oil wholesaling revenues dropped 8.3 percent, "owing largely to intense price competition," the company said. Real estate revenues rose 10 percent, buoyed by sales of condominiums. Miscellaneous income dipped. In 2000, "our overall company’s total gross revenues were about $10 billion," Kusakari said. Of that amount, NYK liner services accounted for $2.5 billion, and its tramp, tanker and bulk carrier services accounted for $3.5 billion. "Our logistics sector brought in $2 billion in gross revenue," Kusakari said, "and we had about $2 billion from our other operations." "We believe that the $2 billion from logistics could double, or reach the point of accounting for more than half of our total gross revenues," he said. Best Practices. As NYK’s management team brings components together by "strengthening the flow of our synergies," as Kusakari prefers to say, his company has obviously absorbed a lesson writ large in multiple trades: Survival for a major carrier in the 21st century means that shippers have to perceive it as being a total logistics organization — as Deutsche Post has become, expanding dramatically from its original postal roots. At the same time, "we’re a conservative company," Kusakari said, not about to minimize its core strengths. "As our logistics processes grow and flourish, I don’t know that we will ever change our company’s name totally — in the advancement of such a perception -- to eliminate the ocean carriage part entirely," he said. What "raised" logistics to have such a high priority in NYK? "Wherever in the world we provide services, there are important customers with logistics needs," Kusakari said. "We have thus developed regionally deep-rooted logistics units in 19 key countries. Our goal used to be to provide our customers with a comprehensive logistical infrastructure," he said. "That is no longer enough. Now, I want NYK to widen its business scope to provide supply chain solutions beyond simple transportation and distribution." "Our objective is to grow our new integrated solution business to the point of its becoming the fifth core business of NYK, on top of liner, bulk, logistics and passenger ships," he said. "We naturally benchmark the strategies of our competitors, especially those of carrier-affiliated logistics providers such as APL Logistics," Kusakari said. "However, we don’t intend to copy any of them. We will find our own place in the market by leveraging our relative strengths. "For example, for 15 years, we have invested in physical assets such as distribution centers," he said, "and actually operate them by ourselves." NYK has 166 warehouses around the world, totaling 12 million square feet of storage space. "I firmly believe that we can be a reliable and flexible supply chain management partner," Kusakari said. Bud Krick, director of strategic planning at Country Peddlers and Co. of America, an importer based in Alsip, Ill., has had experience with NYK Logistics "then and now. I used NYK until 1996, and then in another job, I started using them again in 2000. I liked them before, but they are much better now. They have steadily expanded their services. Before, I would have to deal with a U.S. customs broker. Now, NYK handles that. They also provide landed cost calculations on a stock-number-by-stock-number basis, which saves me time." NYK Logistics’ consolidation services are "crucial" for Belinda Bathie, director of imports for Kohl’s, a department store in Menomonee Falls, Wis. "NYK has been first-rate for us. We are most interested in its expanding logistics services." Rosa Hakala, director of international logistics for Home Depot, based in Atlanta, said NYK Line won her company’s "best in class" award last year. "That should tell you how we feel about them." Home Depot has used the logistics services within several NYK units for integrating shipments. "The fact that they are now tightening those services internally would suggest that what they did well before can only improve," Hakala said. If NYK needs extra help in logistics services, the company has not ruled out buying an established 3PL. "In today’s rapidly changing competitive environment, we will also contemplate acquisition opportunities more actively then ever," Kusakari said. In that eventuality, "a cultural fit to preserve the consistency of quality would be our primary agenda." As other carriers are doing, NYK is having to deal with powerful U.S. shippers who increasingly insist, in confidential service contracts, on concessions from carriers that would have been unthinkable prior to the U.S. Ocean Shipping Reform Act. For its part, NYK (North America) said it has not encountered excessive demands from its shipper customers. "So far, we haven’t had a serious problem, although in discussions, we’ve had to indicate very firmly where we would draw the line," Hirayama said. Shunning Portals. As NYK coheres its service factions, "management control is one of the salient factors," Tokugawa said. The company’s new logistics hub is located in Tokyo, operating under Kusakari’s direct eye. A desire to perfect internal processes may be why NYK has yet to join one of the major ocean shipping portals. "Our position is not to deny the value of any of them," Kusakari said. "NYK sees benefits to portals, as shippers would no longer need to access individual homepages should they want to book or trace their shipments. "Our question is this: Would customers really see a great value to those portals under the present circumstances? There exist at least three different portals with three different participating carriers. Also, most of the portals are still under development and have yet to reach full functionality," he said. "For those reasons, NYK thinks that the timing is not right for us to join any of those portals, although we may do so at a later stage, should we become confident that our customers see their value and decide to use them," Kusakari said. "Major customers naturally want personalized attention. Some portals in which the benefits appear to be more generalized than targeted leave that to chance, but that is not a risk we can take," Tokugawa added. "Until such time as we join a portal, NYK will concentrate on developing its Pegasus system," Kusakari said. Pegasus, an electronic commerce Web site begun in March, allows NYK’s customers to print bills of lading, trace cargo, and inquire about schedules. Further services, such as rate inquiry and online cargo booking, will be offered by the end of 2001. Dirigibles And Waterships. The creation of harmonized management within NYK may focus on traditional Japanese values, but not at the cost of looking to the future. Indeed, the carrier’s espousal of two revolutionary transportation concepts is extraordinary for a self-styled ‘conservative’ company. Looking to the sky, NYK has acquired an interest in CargoLifter, a European company developing cargo-hauling airships, in a cutting-edge association that clearly pleases Kusakari. "We need three or four years to assess the definite potential that’s developing there," he said. "Meantime, we are the only ocean carrier to invest in CargoLifter. Dirigibles appear to be the most efficient way of transporting project or heavy lift cargo over 200-400-mile distances. "We also believe that, in this century, water is going to become a key factor in our lives." "Now, I’m not talking about the U.S., or advanced countries in Europe," he explained. "However, in China, India, and some parts of Africa, it is already very clear that water is going to be in short supply," Kusakari said. He believes that the bulk transportation of drinking water in vessels conceived as floating rubber balloons or bladders will become very profitable. "We are putting some money into a water carrier company, along with a Saudi Arabian partner. There’ll have to be new nautical designs for waterships. Obviously, the complicated piping systems on our existing tankers are not suitable for the conversion of those vessels to carry drinking water," he explained. Why Size Matters. One hears more talk around the industry about 10,000-TEU containerships, but not at NYK. "We do not, at the moment, intend to build such a big vessel," Kusakari said. "I believe that 5,000-TEU to 6000-TEU ships are the operationally maximum size for us." Tokugawa, NYK’s senior managing director, detailed the problems such vessels would cause. "If we had 10,000-TEU ships, we would have to consider the infrastructure of ports at which we called. It is not wise, in our view, to consider building vessels of such size without thinking of the context in which they have to do business," Tokugawa said. "Now, that is today’s context, to be sure, but it won’t change much by 2003 or whenever such ships could be delivered. They would cause chaos in many key ports that could not unload and reload them within a reasonable period. You can design such a ship, but the problem is the receiving port, not the vessel itself," he said. "We don’t want the port stay for our customers’ containers to be extended. NYK has been assessing its present terminal operations with the idea of increasing efficiency," Kusakari said. "We’ve been discussing that along the lines of ‘where would we go and what would we do? Would we buy more land? Rent extra space?’ "At this stage, given dredging, crane, and yard improvements, we will probably pace our terminal improvements to stay just ahead of trouble, if you define that as a surge in TEUs that would overstress the handling capacity of a particular port," said Kinichi Hirayama, of NYK (North America) Inc. Dangerous Year. In Japan, a decade-long stagnant economy has forced corporations to retool, optimally by drawing together their processes as NYK has done. When asked about continuing reforms within the business infrastructure of Japan, Kusakari said, "I’m terribly sorry to say that I am not optimistic." Prime Minister Junichiro Koizumi could make a difference. "If he gets the chance, he will be a strong leader. If so, it will take some time for his leadership to make a change. This year, frankly, I have no hope of any improvement," Kusakari said. Last December, Kusakari told his executives in a private meeting to "provide for winter," a succinct Japanese caveat. "I meant that in the sense that these relatively good years are not going to continue. I think that 2001 is much more dangerous, given the troubled U.S. economy and difficulties in Japan," he said. Social Commitment. Kusakari and his wife, Minako, have two grown children: a son, Daisuke, and a daughter, Akiko. His executive life is carefully scripted with appointments, and not just at the office. "Almost every Saturday when I’m in Japan, I have to play golf for business reasons. It’s more than a game — a very serious social commitment. On Sundays, I enjoy staying home and reading. That is my one holiday each week," he said. |
"Within our own reach, we had the means to provide logistics services which third-party companies that are the recipients of outsourced work normally offer. For NYK to turn to 3PLs would have been redundant. That would not have made good business sense when we had, in our various company ‘houses,’ all of the means necessary to that end." Takao Kusakari
"Our objective is to grow our new integrated solution business to the point of its becoming the fifth core business of NYK, on top of liner, bulk, logistic and passenger ships."
"If we had 10,000-TEU ships, we would have to consider the infrastructure of ports at which we called. It is not wise, in our view, to consider building vessels of such size without thinking of the context in which they have to do business." Tsunenari Tokugawa
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