(UPDATED JULY 31) Beijing Olympic Games : Logistics / Supply Chain impact update

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Update: July 31st: Don’t say we didn’t warn you – the smog in Beijing is still a problem, despite all the measures Beijing has already taken, so they are now considering even further measures in a drastic effort to reduce pollution before the games. Via the International Herald Tribune:

Earlier this week, China’s state media warned that more restrictions were possible and cautioned that one proposal called for removing 90 percent of all vehicles from the roads in Beijing.

The plan unveiled Thursday is not so severe; it maintains the odd-even restrictions but adds a new prohibition that bans driving on days that match the last number on a motorist’s license plate. (Anyone with a plate ending in 9 could not drive on Aug. 9 or Aug. 19, while other motorists with odd-numbered plates could still do so.) This would remove another 10 percent of all vehicles from the streets.

The plan would also suspend production at 105 more factories in Beijing and at another 56 coal-fired power plants, chemical plants and other industries in nearby Tianjin.

In Tianjin, a municipality with more than 11 million people, motorists also would be subjected to the odd-even restrictions.

Meanwhile, in Hebei Province, motorists in major cities would face odd-even driving restrictions in the daytime and early evening. The province would also suspend or reduce operations at another 61 factories.

Here’s more from All Roads Lead to China:

So, for those of you who are in Tianjin or Hebei, and thought you were safe, you should look out the window, assess the smog levels, and make the necessary phone calls to suppliers and logistics providers.

Good advice.

Original Post: If you source or ship from China and don’t check in regularly with Richard Brubaker’s insightful All Roads Lead to China blog you should be. He, like us, have been sounding the warning bells regarding the impact the Beijing Olympics COULD have on your supply chain for quite some time now. Fresh on the heels of his reminder yet again to assess your suppliers and possible impact to logistics, we thought it would be prudent to share our latest and greatest based on information we have received.

For those of you who have no idea what we are talking about, you are late to the game, but welcome. To summarize as briefly as possible: In an effort to reduce pollution and congestion before, during, and after the Olympic Games the Chinese government has implemented a variety of measures aimed at restricting and/or closing down heavy polluting industries, forced reductions in traffic, etc. Such measures are expected to impact cargo transportation in and around the Beijing area as well as to and from the major ports, such as Tianjin/Xingang and Qingdao.

Which cities/ports might be affected?
While Beijing is the host city there are 6 other cities hosting specific events:
(1) Equestrian events in Hong Kong
(2) Sailing in Qingdao
(3) Football (Soccer) in Shanghai, (4) Tianjin, (5) Shenyang, and (6) Qinhuangdao.
The heaviest impact, obviously, will be in and around Beijing. As for the ports, little to no impact is expected in Hong Kong, Shenyang, or Qinhuangdao. Based on our sources, Shanghai is still up in the air, but currently not expected to be impacted significantly, unless you ship cargo classified as hazardous materials, which will be restricted.

Tianjing/Xingang will be affected due to traffic control issues and possible special cargo handling and restrictions to Hazardous Materials. Qingdao is not expected to be affected despite hosting the sailing event, although some traffic control measures are to be in effect during the games.

Is my supplier/manufacturer in North Eastern China at risk of being closed down?
If they are considered a “heavy polluter” by the Chinese government chances are they were closed some time ago and/or forced to move operations somewhere else. But just because your supplier/manufacturer is still operating normally today doesn’t mean they couldn’t temporarily be asked to shut down by the government if they are deemed a pollution risk and they want to improve the pollution picture even further. We have received word that a number of “heavy polluting” factories, (such as chemical, paper, tire, metal, cement, and tile manufacturers) will be closed from July – September while others will manage to stay open due to their “superior pollution control” systems.

Bottom line, if you source a product that the Chinese government thinks causes “heavy pollution” in the course of manufacturing and your supplier doesn’t have “superior pollution control” systems they may be asked to shut down. The situation could relax or become more restrictive depending on the pollution picture as we get closer to the games.

What specific transport measures are being implemented that will affect my supply chain?
Currently in effect: Trucks weighing in excess of 3 tons restricted from entering Beijing City. Ring roads 3-5 designated by Beijing Organizing Committee for Olympic Games as “Olympic Lanes”.
July 1st – August 27th: Trucks registered in other provinces restricted from entering Beijing.
July 1st – July 19th: 20% of registered Beijing enterprise vehicles will be restricted from running during the Olympics.
July 20th – September 20th: All vehicles subject to odd-even license plate number controls, meaning only one type of vehicle (odd or even) allowed to operate in Beijing that specific day.
July 1st – September 20th: Trucks that are not emission-controlled will be prohibited from entering Beijing.
August 28th – September 20th: Non-Beijing licensed vehicles allowed into Beijing but can not pass beyond the 5th ring road.
Other Measures: Hazardous Materials transport to be strictly controlled.

Your local transport provider in Beijing will need a Beijing “Passport Road License”. This license is only being provided to providers who have a valid Transportation Business License and they must operate a specified number of so-called “Green Label” trucks that have proper emissions-controls. If you or your supplier already work with a large, well established 3PL or Consolidator chances are they already have this in place. But if you work with small mom-and-pop suppliers or freight forwarders, this could be a problem.

Tianjin is only hosting the football (soccer) event, so a major disruption due to Olympic events is not expected. However, Xingang Port is the gateway to Tianjin and beyond, so any impact felt in Beijing and the surrounding areas will affect container transport to and from the port. In terms of local transportation, it is possible that some traffic controls will be implemented and trucks might be restricted from going past the 4th ring road. And of course Hazardous Material shipments will be tightly controlled – it is speculated that Hazardous cargo will not be accepted in Tianjin during the Olympic Games. Check with your logistics provider to see if they have contingency plans in place in case of any traffic disruptions, but so far so good.

As already mentioned there does not appear to be a significant effect to port operations and ship sailings due to the Sailing event. Traffic controls may be implemented but no concrete information as of yet. As with other cities/ports, Hazardous Materials shipments will be controlled. It’s also possible that your logistics/international transportation provider could be closed if their offices are at/near the port. Those companies located close to the Olympic Sailing site may be asked to shutdown during the event for security reasons.

Strong controls on Hazardous Materials shipments. Possible restrictions on explosives and other specific categories of Hazardous cargo during the Olympic Games.

Supposedly they will not accept IMO 1 cargo until the Olympic Games are over. Other than that, no restrictive measures that we are aware of.

What can we do to mitigate the risk to our supply chain?
If you source “heavy polluting” products (such as chemicals, metals, paper, tile, etc.), good luck, it may be too late to do anything, unless your supplier took steps a long time ago to install/implement strong pollution/emissions control systems into their manufacturing processes. Otherwise I hope your supplier took the time to alert you early on that they might be closed sometime between July and September and worked out a solution directly with your company. If not, then I suggest you identify those orders most critical to your supply chain and make sure you get them out before your supplier shuts down for the Olympics.

If the products you source aren’t “heavy polluting” and your manufacturers are staying open during the Olympic Games then your primary worry is getting cargo to and from the ports due to traffic restrictions and controls. If you haven’t done so already, identify your most critical orders and work with your supplier and logistics provider to prioritize those orders. Find out from your logistics provider:
– Have they consulted with your suppliers and local trucking companies to arrange proper routing and transportation of cargo during the restrictive periods?
– How is their warehouse capacity? Are they prepared to allocate extra space to cope with possible early deliveries and/or sudden increase in volume both before and after the Olympic Games?
– Will truckers be increasing their rates during this time period due to the restrictions place on transportation? What about storage charges in case cargo gets stuck?

Also make sure you have on hand key contact names and home/mobile phone numbers for your critical suppliers and logistics providers. I’ll leave you with these parting thoughts from All Roads Lead to China’s post on the same subject:

Critical to this process, and mitigating any impacts, will be to understand which of your suppliers are at the highest risk and speaking to them about developing some measure of safety stock within their/ your warehouse. Next will be to get your sales and logistics departments together and make sure they are in sync over the capabilities of shipping department vs. customer delivery times. finally, bring this all together at the top levels to develop a clear picture of what you need to do over the next 2 weeks.

Parting thoughts

There may be 60 days until the Olympics, but there is only 4 weeks to go before the first shutdowns could occur…. and while I hope nothing happens, I also hope that you (my readers) will take the time to plan this out and prepare your contingencies. Even if nothing happens, you will be glad you did.

Update 6-18-2008:
Hazardous Materials Cargo: The company I work for just received notice from our international logistics provider that they will not accept any cargo falling under IMO Classes 1-8 from July 18 – September 30. The Public Security Bureau of Beijing has a list of 257 restricted chemicals and fireworks during the Olympic Games. Last, but not least, the Civil Aviation Administration of China will restrict the movement of dangerous goods by Air for the airports of Beijing, Tianjin, Shenyang, Qinhuangdao, Qingdao, and Shanghai.

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