Government Certifies Logistics Industry

On the morning of January 12 in the meeting room of the Trade Tower in Gangnam-gu, Seoul, the “explanation event for strategic partnership under the certification system of the comprehensive logistics industry” was held by the Korea International Logistics Council (KILC) of Korea International Trade Association. Presidents and employees of small- and medium-sized logistics companies flocked to the event.

They wrote down the explanation by an official from the Ministry of Construction and Transportation, not to miss even a small detail.

After the official completed his explanation, questions were asked: “If we fail even after establishing a strategic partnership, is there any other way to get certified?” or “What if something goes wrong and the shipper file a lawsuit against us?”

The KILC said, “Some 80 people, a much larger number than expected, participated in the event and showed keen interest.”

The logistics industry is shaking from an early New Year because the “certification system of the comprehensive logistics industry,” which took effect this month, is heralding a massive restructuring. Some experts say that it will mark the starting point of the “big bang of logistics.”

The related industry said, “This year, Korea is at a crossroads of developing into a ‘logistics power’ or not.”

The Core of Big Bang: The Certification System of Comprehensive Logistics-

The certification system is predicted to change the overall picture of the logistics industry.

The core of the new system is that the government will certify logistics which meet certain criteria, including facility, size, and experts, and offer them benefits, such as priority to move in to certain areas and financial assistance. Small- and medium-sized companies below the criteria can establish a strategic partnership with one another.

The government is expected to provide an additional assistance – a tax benefit to a shipper which uses certified logistics companies – after discussion with related organizations. In short, it wants a “selective nurturing” of companies which meet the standards.

An official of the logistics policy team of the Ministry of Construction and Transportation said, “It is expected that companies will begin to apply for certification in droves, starting from late this month,” forecasting, “More companies will fail than succeed in getting certified.”

Against this backdrop, most of the small logistics firms, which face great difficulty to become certified, will undergo merger and acquisitions or be kicked out of the market. Currently, there are about 800 logistics companies, large and small, excluding the self-employed.

Acceleration of “Revolution toward Total Logistics”-

The system is the embodiment of the government’s will to focus on nurturing world-class logistics companies which can conduct the “third party logistics.”

The third party logistics mean that a logistics company handles the entire process of logistics apart from the production of goods.

Logistics was thought to be “transportation of goods from one place to another” in the past, but the scope of the third party logistics has expanded, even encompassing stock management and adjustment of production schedules for client companies.

The system enables the shippers to greatly reduce their costs. Korea’s logistics costs currently stand at 12.5 percent of the Gross Domestic Product, which is higher than eight to nine percent of advanced countries.

Large logistics firms are already engaged in intense competition to seize the third party logistics market.

Kumho Asiana Group brought Managing Director Jang Gye-won, a female executive from CJ and an expert in the third party logistics, early this month to start comprehensive logistics business, which is a long-standing dream of the group.

Park Jung-won, president of Hanjin Shipping, said while unveiling the management plan for this year on January 10, “We will invest $66.9 million in the third party logistics this year,” as much as 20 times that of last year.

KEC International has recently established a division specialized in the third party logistics.

Korea Post, a government-affiliated organization, is also planning to conduct a comprehensive logistics business which covers warehousing and keeping of goods, stock management, and handling of returning goods.