Neville Lai

Macroscope | How to overhaul Hong Kong’s pandemic-hit logistics sector

Unprepared for disruptions to supply chains, Hong Kong must shift from a ‘just-in-time’ to a ‘just-in-case’ strategy with the help of smart tech

Digital and autonomous technology can improve communication and cooperation between supply chain nodes, while reducing dependency on human operators

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Shipping containers are piled up at the Kwai Tsing Container Terminals on March 14. Hong Kong has long championed the global transportation of high value-added products. Photo: Bloomberg

Neville Lai

Published: 6:45am, 19 Mar 2022

As Hong Kong battles its fifth wave of Covid-19, there has been a rise in panic buying across the city. The situation has cast serious doubt over the resilience of the city’s logistics industry amid empty supermarket shelves, extreme price mark-ups on fresh vegetables at wet markets, and endless queues at pharmacies.

Indeed, as a world-class city, Hong Kong’s logistics industry needs an overhaul. Crucially, it requires a mindset shift from “just-in-time” to “just-in-case”, which could be most aptly captured by the Chinese saying wèiyǔchóumóu – plan ahead, or prepare for a rainy day.

According to the 2021 census, the logistics and trading industry makes up around a fifth of the local economy, amounting to over HK$500 billion in GDP. Indeed, Hong Kong has long championed the global transportation of high value-added products.

Inspired by Toyota’s lean manufacturing practices after the second world war, the sector has for decades focused on cost above all else, which meant keeping minimum stock and flexible contracts to allow for an easy adjustment to fluctuating supply and demand.

This approach allows shelves to be filled just as they become empty and customers to buy what they want, when they want. It works well in reducing management and storage cost during sunny days. But it does not work so well during black swan events like the ones we are currently experiencing.

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Hong Kong must now be prepared to refine its just-in-time practice and lean more towards a just-in-case approach. This doesn’t simply mean increasing inventory storage, but also improving the ability to forecast crises and having a readily-available emergency plan in place.