In a strategic maneuver aimed at optimizing logistics and reducing costs, Maanshan Iron and Steel has revamped its logistics operations, focusing on restructuring, cost reduction, and efficiency enhancement. The collaboration between Magang’s procurement center and the logistics team has yielded a groundbreaking logistics model that promises substantial cost savings and operational efficiency.
At the crux of this initiative is the shift from the conventional direct foreign vessel entry mode to the innovative complete foreign vessel unloading + domestic trade river transport model. Traditionally, the logistics process involved foreign vessels unloading part of their cargo at sea ports, with the remaining cargo transported to river ports for further unloading and distribution. However, this method was fraught with inefficiencies and higher costs.
The new logistics strategy entails the complete unloading of foreign vessels at sea ports, followed by domestic trade vessels transporting the cargo via rivers to its final destination. This approach has proven to be not only more cost-effective but also significantly more efficient. By May, the new logistics model had already resulted in a cost reduction of 8.724 million RMB.
Global maritime trends have further underscored the necessity of this strategic shift. The Capesize bulk market has witnessed a robust upward trajectory due to increased global shipping demand and rerouting necessitated by the Red Sea crisis. The average freight rate on the BCI-C5 (Western Australia to Qingdao, China) route surged by 29%, reaching $10.23 per metric ton. In contrast, the domestic coastal bulk market has remained relatively stable.
Magang's logistics team, in response to these market dynamics, has demonstrated exceptional agility. Upon receiving the monthly return transport plans from the transport department, they have swiftly adjusted their transport organization based on internal inventory levels, port resource distribution, and external logistics environment changes. This proactive approach has ensured a stable and smooth supply of production materials.
A meticulous cost-benefit analysis of the traditional direct foreign vessel entry mode versus the new complete foreign vessel unloading + domestic trade river transport model revealed significant cost advantages for the latter. The comprehensive logistics cost of a standard Capesize foreign vessel under the new model is markedly lower than that of the traditional model. This strategic pivot reflects a deep understanding of the volatile logistics market and the imperative to maintain a lean inventory.
From January to May, Magang's logistics team arranged for 18 foreign vessels to adopt the new logistics model, resulting in a substantial reduction in logistics costs. Looking ahead, the team remains committed to continuous optimization and cost-saving measures. They plan to further refine their logistics structure, ensuring safe supply under low inventory conditions while striving for greater cost reduction.
