In this white paper, we take a look at a transportation case of heavy machines and equipment for a new plant being built in response to recent U.S. economic policy changes and how logistics capabilities of Samsung SDS helped the project.
Response from Companies to New U.S. Tariff Policy
On January 22, 2018, the government of the United States declared that it would levy a set of special tariffs on imported solar panels and washing machines.
Under this scheme, solar panel imports would face up to 30% in tariffs for the first year, which will gradually decrease until it reaches a 15% level by the fourth year. For washing machines, the first 1.2 million imports would face a 20% tariff. Any more above that would face a 50% tariff, and the same tariff level would be applied toward the imported components as well.
The United States was traditionally a major consumer of washing machines produced in East Asia, including South Korea, which is why this high tariff came as a shock to many. Some global companies respond with a short-term measure of pushing their export inventory as quickly as possible to be included within the initial limit of 1.2 million. Others, as a mid-to-long-term response, are preparing to relocate their production facilities to the United States, while U.S.-based firms are preparing to reshore1) their production facilities.
1) Re-shoring: A recall of the offshore production facilities, which were made for the reasons of labor costs and exploration of new markets in the first place.
Overview & Mission of the Project Logistics
Samsung SDS was tasked with a project of transporting manufacturing equipment to a new plant being built in South Carolina, U.S. for during nine months since the second half of 2017. The transportation plan for this project was made with a goal of starting mass production by January 2018, which significantly reduced time for equipment production and transportation.
Machines and equipment required at the destination were mostly press and injection molding machines, production line equipment, expanded polystyrene (EPS), measurement devices, and automation equipment. Among them, press and injection molding machines were heavy machinery that required special care. More than 90% of the cargo required for the project were shipped from Korea and loaded at the Port of Busan, while some of the injection molding machines were shipped from Shanghai, China; Bremerhaven, Germany; Genova, Italy; and Yokohama, Japan.
The main destination for this cargo was the Port of Charleston, with the Port of Savannah used as the sub-destination.
The three requests from the shipper in this project were “on-time transportation within the short delivery time with safety of the cargo guaranteed.” To satisfy these requirements, Samsung SDS established the following set of operational principles.
1) Cargo management according to construction schedule and priority
High-priority and critical shipments were separately managed to prevent any disruptions in a short notice.
2) Strategic cooperation with nearby ports
Construction sites are usually very busy and don’t have enough space to keep machinery and equipement. Taking this into account, agreements were reached with the nearby ports, allowing the cargo to stay in these ports, be carried out at will and subsequently transported on time.
3) Unified logistics management process
Samsung SDS Headquarters took charge of the entire process of this project logistics, including vendor shipping and cusoms clearance/inland transport in the U.S.
Heavy Cargo Transportation Process
Step 1: Ocean Transport
The first cargo2) of this project, which was break bul3) (press machine) carried by sea, received a significant amount of attention from the shipper because of its importance in the scheduling of the construction and its heavy weight of nearly 75 tons.
The initial plan for the voyage involved a bulk carrier to cut the cost of the transportation. However, 10 days before the loading date, the Chinese cargo that was supposed to be loaded in the same ship was canceled. This led to the worst-case scenario where the entire cargo had to be canceled as well. Bulk carriers, after all, are not legally bound to transport the cargo even if a contract has been signed. The situation called for emergency transportation to the construction site within 35 days. As such, a voyage was obtained for the break bulk in a container vessel.
2) First cargo: The very first cargo in the project to be transported
3) Break Bulk: A cargo of which size or weight exceeds the capacity of a single flat-rack container. A break bulk cargo is either packaged in full or in its equivalent and is thus different from other bulk cargoes such as grains, coal, or crude oil.
Step 2: Inland Transport in the U.S.
The break-bulk cargo arrived safely at the Ports of Charleston and Savannah in the U.S. After unloaded, it was transported to the construction site around 250–300km away. The cargo involved was a series of heavy cargo ranging from 60 to 140 tons. For the inland transportation, a special multi-axle trailer designed for heavy goods was used.
The laws regarding transportation of heavy cargoes are stringent in the U.S. Heavy cargo transportation is prohibited without permit from the Department of Transportation (DOT), and even then, transportation can only be made on routes approved by the DOT. Further, heavy cargo transportation, in principle, must be carried out during the daytime, meaning that overweight loads shall travel only between thirty minutes after sunrise and thirty minutes before sunset.
Step 3: Into the Plant
During the project, a liaison team of Samsung SDS stayed at the construction site to provide assistance on goods-in locations in the factory, unloading method optimal for each cargo and contingencies. Thanks to the efforts of the liaison team in ensuring safe delivery of the cargo, the project was completed without a single accident
This project involved the construction of a new manufacturing plant in the U.S. because of the changes in the U.S. trade policy. Heavy cargo had to be transported on time to meet the tight construction schedule.
Thus, the plan for the transport required the integration of methods to ensure the on-time and safe transportation of the cargo within the short delivery time. On-time delivery was achieved with the combination of a cargo management scheme that took into account the impact and the priority of the facilities in construction, as well as the utilization of the container yards in nearby ports as storage spaces. The identification of the movement routes in advance also allowed us to determine the methods of transportation and unloading well in advance, thereby allowing us to complete the project safely.
To find out more about project logistics of Samsung SDS, visit Cellologistics.com and download the white paper.