New Logistics Model Sharpens Corporate Core Competitiveness - Lubricant Company's North China Warehousing Center Takes Shape

Recently, as an important link in the construction of Kunlun Lubricant's three-circle, two-support and one-zone logistics system, the building of the Kunlun Lubricant North China regional warehousing and logistics center has achieved phased results. At present, the Beijing Lubricant Plant warehouse that adopted a third-party logistics system has achieved 100 percent inventory accuracy and 99 percent on-time rates for both picking up and delivering shipments, saving labor costs and accelerating the transformation of the company's non-core competitiveness into core competitiveness.
In recent years, as its business has been continuously consolidated, the Beijing Lubricant Plant has entered a fast track of development. Production capacity has grown from 2,000 tons per year at the outset to 60,000 tons today, while distribution capacity has risen from 1,500 tons per year at the plant's founding to 47,000 tons, with average growth of more than 30 percent over the past two years, making the plant the company's logistics distribution center in North China. Rapid growth, however, made problems in warehousing and logistics increasingly prominent. Faster inventory turnover and growing shipment volumes made the original logistics and distribution system hard pressed to meet customer demand, and a product range of as many as 236 varieties added to management complexity, gradually exposing an efficiency bottleneck.
To resolve this contradiction, ensure timely and accurate supply and clarify supply and sales responsibilities, early last year the Beijing Lubricant Plant, in line with the Lubricant Company's production and logistics optimization plan of three circles, two supports and one zone and the strategic principle of strengthening the foundation and optimizing for improvement set out at the company's 2009 work conference, was the first within the Lubricant Company to introduce third-party logistics management, successively packaging up the warehousing management and logistics distribution of its production and operation processes and handing them over to a third-party logistics company.
After a year of operation, the Beijing Lubricant Plant has used the third-party logistics provider's nationwide network and advanced logistics management methods to raise its warehousing management level and strengthen its logistics capabilities.
Following rules such as first-in-first-out and batch number management, the third-party logistics company completes systematic picking, scanning and outbound operations, cutting the Beijing Lubricant Plant's warehousing costs by 4.4 percent year on year. By combining existing warehouse resources with the warehouse operations management system, it reduced unreasonable occupation of storage locations, raising warehouse utilization by nearly 10 percent and reducing warehouse damage costs to zero. By rearranging high-frequency and low-frequency products in the warehouse according to data from previous years, it raised the warehouse turnover rate from 5.6 to 8.5 times per year.
By signing detailed and strict transport contracts with the third-party logistics company, the Beijing Lubricant Plant transferred the risk of cargo damage during transport and ensured smooth operations at every stage. At present, the plant's on-time rates for picking up and delivering goods both reach 99 percent, its delivery integrity rate and customer satisfaction both reach 99.5 percent, and its warehouse inventory accuracy reaches 100 percent.
'Handing over the non-core parts to a third-party logistics company not only lets us play to our strengths and avoid our weaknesses, but also strengthens the advantages of both partners, allowing us to focus on improving our own core competitiveness and turning non-core competitiveness into core competitiveness. The successful experience of the Beijing Lubricant Plant has accelerated the Lubricant Company's exploration of logistics cooperation models,' said Gong Weijun, Deputy General Manager of the Lubricant Company.