Establishing a core company to reinforce customer services

Q. Various group companies are developing businesses in the logistics field. Please discuss future strategies and targets.
Tanabe: We set out the following three major business targets for the future.
General Manager
Masahiro Tanabe
(1)   Develop the ocean consolidation business (OCB*1) service that can complement our core ocean shipping business.
(2)   Carefully review existing projects' profitability, encourage group companies to act independently as free-standing enterprises, and withdraw or scale down, if need be.
(3)   Reinforce management base of independent group logistics companies, as occasion demands, including but not limited to, by inputting money and/or human resources into them.
With the first item, we expect synergistic effects mainly in the liner business. This will fortify support for our customers as an ocean shipping company. We plan to tie up with reliable companies and partners all over the world to offer services that utilize the global-scale network we have as an ocean shipping company.

Speaking of next two, we need to establish a core company within the group that offers a wide variety of unique logistics services primarily to customers. If we can develop like that, it will contribute to growth and expansion of the existing group companies at the same time. If our existing group companies might not be fitted with these strategies, we will cultivate ways alternatively to involve external companies, even by measures such as M&A.

*1: Ocean Consolidation Business. It is generally called "buyer's consolidation." In this type of logistics service, European and U.S. retailers buy products manufactured in multiple plants, mainly in Asia, and transport them by containership after consolidation at a loading port.
OCB service business will grow thanks to our own system

Q. Please explain the current status of OCB service and the outlook in MOL ADVANCE.

Tanabe: Our company developed its unique "Starlink" system that can visualize inventory in the integrated logistics process - from production to delivery of the merchandise. This system is Internet-based, enabling us to offer customer cargo information in real time.

Actually, we already created a structure to provide consolidation service physically in all Asian nations up to the Middle East, covering points of origins in such coastal nations. We founded newly MOL Consolidation Service Ltd. in Hong Kong three years ago, and started a full-scale OCB service project with that new company as the parent. Starting from zero, the annual trade volume in 2006 was climbing up to about 40,000 TEUs. The targets for the coming three years are now set as follows:
Target of OCB Service Annual Trade Volume
2007 About 80,000 TEUs
2008 About 150,000 TEUs
2009 About 300,000 TEUs
The market scale of OCB service is about 60-70%, or about 7 million to 8 million TEUs, among the annual trade of 13 million TEUs from Asia to North America. There is a strong possibility it will grow.

Currently, we provide logistics services for all the products Wilson (U.S.) purchases in Asia, as well as IKEA Group (Sweden) purchases in North China and Shanghai.
We are expanding our networks in highly competitive markets.

Q. Please talk about business expansion in China.

Tanabe: Last year, we established the wholly owned subsidiary MOL Consolidation Service Ltd , separately domiciled in Shanghai to further concentrate on the OCB business in China, as a key point of origin for OCB cargo. MOL Consolidation Service acquired a new business license from the government of China to offer all forwarding related service legitimately in that nation. It has plans to swiftly expand its service networks and start business in six additional branches.

MOL Logistics (Japan) Co., Ltd. (MLG) also locate a subsidiary in China, and is heavily involved in air cargo forwarding. They also operate a subsidiary that provides "pick and pack services" for apparel products at the loading site, a trucking subsidiary, and their own warehouse in the Shanghai Waigaoqiao Bonded Logistics Zone (WBLZ). They can offer similar OCB logistics services, too. These moves reflect our group-wide approaches to expanding networks in China.
Developing a wider ranger of services

Q. How are the tie-ups with KWE and CalCartage progressing?

Tanabe: Kintetsu World Express (KWE) is the second largest company in the Japanese air cargo forwarding industry. We fully respect their expertise, and are asking for their cooperation to jointly offer services related to demands our company receives for air cargo, while working closely with MLG. This is one of objectives and intentions of the tie-up. We hope MLG itself will expand its business scale and eventually become one of leaders, as well, in the industry through that process.

In some cases, KWE offers its own OCB service while working together with our company, which is part of KWE's business strategies. Within this year, MOL and KWE plan to jointly offer service for all air cargo shipped by the Wilson Group all over the world, as well as ocean transport arrangements through our OCB service. Looking at this business model, it's clear that the MOL-KWE alliance is already under operation and can offer literally "one-stop" logistics services.

CalCartage is also a major company based in Los Angeles that has the top- class capability in cross docking service*2 for logistics. With this company as a partner, we have an additional ability to arrange international logistics services for both ocean and air cargo all over the world with the integrated strength of MOL, KWE, and MLG. Then we can cover all domestic logistics transport through CalCartage, once the cargo is unloaded in the Unites States and requires logistics arrangements.

*2: Type of shipping in which shipped products are sorted without being stored as inventory.
Growing as an Ocean Shipping Company

Q. Can you give us an idea of the strengths, characteristics, and future image of our logistics business?
Tanabe: Our strength is on the relationship of mutual trust with customers, accumulated over many years, and backed by our credibility as an ocean shipping company. We are already capable enough of offering an entire menu of wide-ranged logistics services, further fortifying customer support, through group companies or business partners.

Our policy is not to advance into business fields unrelated to ocean shipping to compete in the turbulent logistics business. This is a characteristic of the MOL Logistics Business Division. For example, we think air cargo transport is a growing business in the logistics field, but we now don't plan to set out on our own as an air cargo carrier at this time. But we are always prepared to develop an ocean-air alliance with an air cargo carrier. Of course, we will promptly meet our customers' expectations beyond traditional port-to-port ocean shipping services, while maintaining our basic stance as an ocean shipping company.
Q. What would you like to say to the staff in group companies and Logistics Business Division?

Tanabe: I am strongly aware of common humor and pride of the staff in group companies with the Head Office employees. We will proactively offer necessary backup and support to them as the head of the business group. We have about 4,200 employees in group companies related to our division, and feel weighty responsibility to meet the expectations of 10,000 people including their families. I pray that we will be up to the responsibility.