Nippon Express concludes tie-up with logistics subsidiary of Dongfeng Motor
18 February 2007
Undertakes procurement logistics for US diesel engine manufacturer in Xiangfan
On February 8 in Xiangfan, China (Hubei Province), Nippon Express signed a business tie-up agreement with Xiangguan Logistics Co., Ltd., the logistics division of Dongfeng Motor Group Company Ltd., marking the start of pickup parts procurement logistics services ("milk runs") for Dongfeng Cummins Engine Co., Ltd., a local joint-venture company founded by a US diesel engine manufacturer expanding into Xiangfan.
Nippon Express and the logistics division of Dongfeng Motor Group, China's second largest automobile manufacturer, have a long-standing relationship in automotive parts logistics within China. Based on Nippon Express' performance and know-how, Dongfeng accepted a proposal for joint improvements to logistics operations, leading to the recent agreement on procurement logistics. Procurement will begin with 13 suppliers in Hubei Province, with plans to expand logistics from the Huadong region to the rest of China and eventually to procure imports from the US.
The local procurement ratio of parts in China by foreign automobile and automotive parts manufacturers has rapidly increased, but the lack of transparency in logistics costs for domestic procurement and poor transport quality are among problems plaguing these companies. Adoption of pickup logistics enable manufacturers to enjoy such benefits as (1) improved cash flow through reduced inventory, (2) greater transport efficiency and (3) reduced and more effective use of warehouse space.
This is Nippon Express' first attempt at a full-scale tie-up with the logistics company of a Chinese automotive manufacturer and, based on the success of this effort, Nippon Express will expand such efforts to other Chinese automotive companies.
The local Nippon Express Group company overseeing this tie-up is Nippon Express (China) Co., Ltd., which has opened a new Xiangfan Branch for this project (the Nippon Express Group has 19 companies and 71 locations in 30 cities in China as of the end of January).
