For over 150 years the fundamental prosperity of Hong Kong has been linked to its success as a port. In the 1990s the investment of billions of dollars in the Port and Airport Development Strategy (PADS) scheme seemed to ensure that Hong Kong would remain one of the world's great trading centres well into the twenty-first century. But in recent years Hong Kong's status and prosperity as a port has come under threat like never before. As China has opened its doors to international trade and become the world's major global exporter, the Beijing government has also opened more coastal ports. Massive investment has seen these ports develop quickly in terms of facilities and standards of service, challenging Hong Kong, while other neighbouring countries - including Korea, Taiwan, Japan and even Singapore - are competing very aggressively for the lucrative business of trans-shipping: loading and off-loading parts of a cargo as a ship makes its way around the world.

The corporations that own and control Hong Kong's port facilities have had to respond aggressively to these challenges. By far the biggest and most successful of all Hong Kong's terminal owners is HIT - Hong Kong International Terminals - and they've been right at the forefront in meeting the challenges of this new era in regional trading.

Since 1998, the managing director, and the man responsible for creating and driving many of HIT's business initiatives, has been Mr Eric Ip. In this interview with Tradelink Talk, Mr Ip discussed his strategies and business philosophy, and gave us some insights into the future of Hong Kong's role in the region's fast-changing trade networks.

A time of changes

"When I joined HIT in 1993, it was definitely a time of change. For a very long period Hong Kong had enjoyed a virtual monopoly on shipping into and out of China. Terminal owners like HIT simply concentrated on the operations side of the business, and didn't worry about areas like marketing and customer relations. But the newly-opened ports in China meant this period was coming to an end. We had to become competitive."

Eric Ip's university education in England studying international relations and politics seemed an unlikely foundation for a successful career at the sharp edge of the shipping industry, but in fact some of that knowledge, plus more than a decade spent working for major international shipping
lines- most notably a period spent running the Inchcape shipping agency- proved invaluable for the tasks he confronted at HIT. In 1998, just five years after his arrival at HIT, Mr Ip was appointed managing director, a remarkable achievement- but one which he modestly says had a lot to do with the changing times.

"After five years as General Manager, Commercial, I'd learned a lot about our customers," he says. "But I'd also worked for shipping lines before and essentially run a complete shipping agency, so I understood what they wanted. I knew how to build customer relations, go after and win new business, and generally make a company grow. And I could also run the business overall. This was obviously very important to the shareholders."

Customers are the key

With competitors threatening to lure HIT's customers away, one of Mr Ip's first priorities was to cement their essential business relationships. He started by establishing better communications channels and a department completely dedicated to customer service.

"When I arrived," he says, "we didn't even have a Customer Service desk. If shipping lines had a problem, they'd have to go to the Operations Department, and the managers there saw many of their requests as a costly allocation of HIT's resources. Our commercial guys would find themselves fighting these ops guys, one lot wanting to satisfy their customers and the other not wanting to incur costs that they saw as non-essential. We couldn't keep going like that, so I set up a Customer Service Department. It was virtually a one-stop shop for everything a shipping client of ours might require. At the same time I made sure we improved the co-ordination between Commercial and Operations - it was important to get it all sorted out and strike the right balance."

This was typical of Eric Ip's approach to management. "I never spend too much time on administration," he says. "I have strong managers working under me, so I don't interfere in the functioning of the various departments. But it is very important that we build the company as a complete, interactive unit, so I do spend time establishing and building teamwork at all levels and in all departments. I also try to create an environment in which people can work together peacefully; and I try to take away any potential political problems. I don't like politics in a company- it's very destructive.

"Most of my time is spent on business, especially improving the corporate environment between ourselves and the shipping lines. I don't just deal with the local managers: I go to head offices and talk about the future. We look to establish global alliances with our customers."

Competitive advantages: the IT edge

But obviously building relationships with customers is just part of the picture. In order to stay ahead of tough competitors, you have to keep delivering at a product level, and make sure you let both your existing and potential clients know about it.

"We had to clearly differentiate ourselves from other competing ports," says Mr Ip. "We work better, and we work faster - to the extent that Hong Kong is known as a 'catch-up port.' If a vessel has lost time through slip ups in a previous port, they know HIT can organize an even faster turnaround than usual so they can get back on schedule.

"A lot of this speed and efficiency is achieved by using Information Technology, and we've invested heavily in that" he says. "These days, we don't just move cargo, we move information. We seek to get optimal control of the 'berth window', that period between when the ship arrives at the dock and when it leaves. We can't afford to have any queuing or waiting, and nor can they. So we need timely and accurate information - especially if we're trans-shipping some of the containers from one vessel to another. The shipping lines now communicate all the information with us via the EDI, and then we process it all and pass it to our control tower. But we only have only a very short period of time to do this.

"The activities in the control tower are critical. From here, the "Talkers" constantly monitor all quayside activities, both visually through CCTV and on their computer screens; and they are in constant contact with the supervisors on the ground. If there's a potential bottleneck they're quick to pick it up and notify a supervisor, who then sets about rectifying the situation. The technology is extremely effective. For example, you can see an icon for a crane on the screen, and if the crane starts to fall below its required working rate the icon changes colour. The Talker sees that straight away and acts on the information.

"I think our IT has put us clearly ahead in a number of areas. For example, in the outbound receiving process most terminal operators try to keep the containers as close as possible to the vessel berthing location. But we've developed software - the Grounding Strategy - and we found that we can scatter containers at various points all around the yard in such a way that allows greater ease of access for the cranes and tractors better than an aggregated stack on the dock. We actually get the process done faster. The Grounding Strategy helps to alleviate the yard constraint more than the berth constraint. This is so effective that other terminals have asked us to help them install similar systems.

"But it's important to realize that not everybody gets the same results with the same technology. The quality of our people has a lot to do with it. Our staff have to be enthusiastic and motivated. We make sure supervisors and group managers feel that they are not just doing a job, they are working for a good common goal of the company. Hong Kong is facing a tremendous challenge from other ports, and if everyone is not doing their job well, we'll be knocked out by the competition. HIT has 1,500 full time staff, and almost as many employed by our regular contractors. They all know and understand our way of working, and what's required. These people give us another real advantage."

The road ahead

Eric Ip's methods have not only proven very effective, they have brought him great personal success. In 2003 he was appointed Head of Commercial, Asia for the HPH Group (HIT's parent corporation), and took up the responsibility for guiding the strategy and relationship development between the ports and shipping lines throughout the region. By the end of the year he had also accepted a new role as head of logistics, directing growth strategies in this fast-evolving field. He sees his major tasks as driving and steering the future growth of all these various operations, looking far into the future at Big Picture trends and developments.

"There are many challenges still to come," he says. "For a start, the shipping companies themselves are expanding their role and their areas of operations. They're global and powerful, but they're in a very competitive business so they're willing to take on vertical and horizontal expansions. They've become logistics providers and even terminal owners. We have to be very careful about the way we handle our big customers - we don't want them becoming competitors! That's why I try to form alliances with them, and of course we always try to satisfy their requirements so they're not looking for alternatives."

Then of course, there's the ongoing challenges from other ports, of which Shenzhen is perhaps top of the list. When asked if the move towards commercial unity for the Pearl River Delta is starting to have a positive effect on this situation, Mr Ip is at first reflective.

"All of us in the Pearl River Delta have the same basic objectives, and can see the advantages of forming an expanded economic ring. In Guangdong they're very concerned about the competition from the Yangtze River Basin. Already there's been some movement of businesses from southern China to central China. Guangdong is a major manufacturing zone, but they're also looking to increase their port operations and for Hong Kong it's important how they decide to do that. Hong Kong is more efficient and more reliable, but Shenzhen also has its advantages. For example it's much easier and cheaper to transport goods from all over the province straight to the terminals at Shenzhen. There's also a difference in terminal fees, which is meaningful for end users. But this is a huge market that we're talking about, with a lot of growth still to come and plenty of opportunity for both ports to flourish. Clearly the more open the marketplace becomes, the better it is for everyone, especially the buyers and end users. Over the last ten years at HIT, we've certainly accepted the challenges of the open market, and become bigger, better and more successful as a result. And you can be sure we're going to be doing everything to maintain our competitive edge in the future."