UPS introduces plans for new intra-Asia air hub

Jeff Berman, Group News Editor -- Logistics Management, 5/21/2008

SHENZEN, China—In an effort to improve customer service by reducing transit times across Asia, UPS said today that it plans to re-locate its intra-Asia air hub from the Philippines to Shenzen, China.

UPS said the new hub will be at the Shenzen Airport in southern China, which is in close proximity to Hong Kong, and this move is expected to take a day off of shipment times-in-transit for Asian shippers, as well as offer higher service levels to a manufacturing region north of Shenzen. The company said that the hub will be operational by 2010 and will cost roughly $180 million.

“Over the last several years, we have seen volume trends shifting towards northern Asia, with 70 percent of intra-Asia shipment volume in the northern Asia area,” said John Flick, UPS international spokesman, in an interview.

And at its current intra-Asia air hub at the former Clark Air Force base in the Philippines, which opened in 2002, UPS was about four hours away from all major Asian destinations, said Clark. By moving to Shenzen, UPS will be closer to its customers, he said. He explained that several things have changed in Asia since 2002: the movement of trade to southeast China; China’s admission to the WTO, which is opening markets for exports; and in December 2004, UPS was the first company to establish wholly-owned operations in China.

This gave UPS the opportunity to invest and expand in China, according to Flick.

“We have very strong logistics operations in Shenzen now,” he said. “And it is also in the center of Guandong Province, which is the manufacturing center of the world. Shenzen is 27 miles from Hong Kong and next to several industrial parks, ranging from manufacturers of appliances to tennis shoes to textiles and computers. This gives us an opportunity to pick up later in the evening and deliver later in the morning for packages going in and out of China.”

Later this year, UPS will open up a Shanghai hub that will consolidate China traffic and be connected to the Shenzen hub. UPS said this hub will link all of China via Shanghai to UPS’s international network with direct service to the Americas, Europe, and Asia. And it will also connect points served in China through a dedicated service provided by Chinese all-cargo airline Yangtze River Express. 

“This is where the fastest-growing trade lanes are,” said Flick. “Even with the U.S. downturn, Asia has not missed a beat. It has shifted shipments from the U.S. to Europe, as well as intra-Asia. Shenzen is centered in an area that is very popular with customers and exports and was a good strategy to pursue.”

When the Shenzen facility opens in 2010, the Clark facility in the Philippines will continue to serve as a strategic location for the company’s multi-hub Asia network, as well as serve as main import and export gateway for the Philippines, according to a company statement. The multi-hub Asia network is currently comprised of facilities in the Philippines, Taiwan, Hong Kong, and Singapore. The Clark hub became the site for a large sorting facility to handle packages destined for other points in Asia, and the other three hubs mainly handle volume moving in or out of Asia to North America and Europe.

UPS added that the new Shenzhen hub will comprise about 89,000 square meters—almost 1 million square feet—and will include an express customs handling unit, sorting facilities, cargo handling and cargo build-up areas and ramp handling operations. It said that the facility will be capable initially of processing up to 18,000 pieces per hour—compared to the existing 7,500 pieces per hour in the Philippines—and can be expanded to a capacity of 36,000 pieces per hour. The hub will employ about 400 people, according to UPS.

"Given the growth in shipping along the southern rim of China, it now makes more sense to sort and dispatch this volume from a hub closer to our customers," said UPS International President Dan Brutto. "And in making the switch, because of the growth we're seeing, we intend to build a new sorting hub in Shenzhen with five times the capacity of the existing hub. UPS is very grateful to the Shenzhen government and Shenzhen Airport Authority for their strong support of our expansion and we look forward to a successful partnership."