Expert Column Case Study: Project Logistics (Manufacturing Facilities)

1. What Is Project Logistics? The realization of large-scale industrial projects, such as building ports, building factories and power plants, and creating oil and gas drilling complexes, requires materials and equipment on a massive scale. The construction of these large-scale plants calls for materials and equipment that weigh hundreds of tons, are tens of meters long, and have huge volumes. The process of transporting such an overwhelming amount of materials and equipment to the construction site is extremely complex, which is why the role of project logistics is all the more important.

To be specific, project logistics is a service that focuses on the transportation of cargo that is difficult to standardize due to its significant size and weight. However, project logistics is not just about the transportation of large materials and equipment. It requires comprehensive logistics management, including the planning of transportation routes, selection of appropriate modes of transportation, safe handling and storage of cargo, compliance with applicable laws and regulations, and timely coordination of delivery to the site. Large-scale development projects that require project logistics usually have long lead times, complex logistical requirements that need to be addressed, and specialized know-how and expertise in handling specialized equipment, and therefore it is important to choose a professional logistics service company. With the recent prolonged global economic recession, project logistics is gaining more attention as various countries are undertaking large-scale infrastructure construction and development projects aimed at revitalizing their economies.

Differences between General Cargo and Project Logistics Cargo
Freight in project logistics differs from general freight in many ways in terms of the transportation process. Unlike general cargo, which is transported in standardized containers and on predetermined routes, project cargo is transported in bulk or heavy loads (by sea) or by charter on an irregular basis (by air). Unlike the general freight transportation market, where many carriers and forwarders compete on a wide range of standardized services, the project logistics market tends to be highly consolidated, consisting of companies that have the experience and capacity to successfully accomplish projects.

Project Logistics Execution Process
Due to the scale and complexity of the project logistics process, it takes a considerable amount of time from preliminary preparation to actual completion. In general, the entire process of project logistics can take from 1 to 2-3 years, and the entire process is as follows: global local logistics environment survey → route survey → optimal transportation plan → international transportation → customs clearance → inland transportation & installation at destination.

2. Case Study: Manufacturing Facilities Company S, a manufacturer of copper foil used for electric vehicle batteries, aims to build an annual production system of 250,000 tons of copper foil in South Korea, Malaysia, Poland, Europe, and North America by 2025, in order to meet the growing demand for electric vehicle batteries. In July 2021, Company S broke ground on its first plant in Kota Kinabalu Industrial Park (KKIP), a 40-minute drive from downtown Kota Kinabalu, Sabah, Malaysia, with an investment of approximately KRW 650 billion. The first plant, which is the size of 23 soccer fields (162,700㎡), began mass production in November 2023. The second plant is currently being finalized and will start operation in May 2024. Once the first and second plants are fully operational as scheduled, Company S’ Malaysian copper foil production capacity will reach 57,000 tons per year, which is larger than in Korea.

Samsung SDS was selected as the logistics company for the copper foil plant under construction in Company S' KKIP industrial park. Samsung SDS will be responsible for all logistics process for the import of production equipment for the factory, from equipment import to raw material transport. The cargo to be transported in this project was raw materials and imported equipment, including about 60 10,000㎥ tanks, with the total transport weight of the tanks alone being over 500 tons. It was also important to note that the port of Sepanggar is a 'Conventional Only' port that can only handle conventional cargo vessels, not containers, while the port of Kota Kinabalu can handle 'Roll-on/Roll-off' vessels including trucks/containers.

Pre-analysis of transportation restrictions
First, we conducted a preliminary survey of the estimated cargo size before the shipment. We categorized the cargo into three types: tanks, drums, and raw materials, and analyzed the precautions, considerations, and references for each type of ocean/inland transportation.

Preparation for import customs clearance and licenses
Additionally, it is important to thoroughly prepare for customs clearance and various licenses for each exporting and importing country before the actual transportation begins, and closely monitor the progress of procedures such as inspections to detect and respond to any abnormalities as early as possible. In particular, Malaysian government has been implementing various tax exemption programs to attract investment in the manufacturing sector, and the requirements and minimum periods vary by program. Each program should be carefully reviewed to take advantage of various tax incentives.

International transport and inland transport
The containers from the ship were transported to the site in 20-30 large trucks. First, a 13-kilometer-long road leading from Port of Sepanggar to Company S' factory in the KKIP was closed, and nearby power was cut off to prepare for any contingencies. Trees that were in the way of transportation were cut down, and road signs, wires, and electric poles were removed. After the transportation was completed, civil works were also carried out to restore the area to its original state.

Project Management and Monitoring
As for the new plant construction projects, the overall schedule is tight and the transportation of equipment also has a tight schedule. Therefore, the key to the success of the project is to have skilled and experienced personnel on site to micromanage the progress, and to monitor the entire process at the headquarters.

Samsung SDS has 56 offices and more than 6,000 logistics experts in 36 countries around the world. The HQ spreads its experience and innovations from projects in various regions to each location, and supports the setup of local experts and processes at the beginning of the project. In addition, SOP (Standard Operating Process), which includes about 1,800 activities, R&D and work processes by organization, reflects the characteristics of the client's business and local conditions to ensure that the quality of the project is maintained regardless of location and that the project can be stabilized early.

Samsung SDS also monitors various situations that may arise during logistics operations, such as disasters, catastrophes, and delays in arrival, through the Global Control Center (GCC), which operates 24 hours a day. Through the GCC, it is possible to monitor the flow of goods throughout the logistics chain and manage abnormal situations to prevent issues such as disruptions and delays in advance. In the event of an unexpected emergency, the GCC responds quickly according to 17 predefined scenarios by type, and minimizes the impact by forming a crisis response TF including the area where the situation occurred.

In addition to the cases introduced in this blog, Samsung SDS has references for various industries, including semiconductor facilities, marine cranes, and construction materials. It also has experience and processes for various types of cargo, including special cargo that requires vibration, constant temperature, humidity, and lightning management, and dangerous goods that require separate handling/management processes. We look forward to meeting customers in various industries through our project logistics services.

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