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Global logistics strategies and experiences: The case of Korea Express

Article  in  International Journal of Logistics Systems and Management · July 2011

DOI: 10.1504/IJLSM.2011.041502

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Paul C Hong Mark A Vonderembse

University of Toledo University of Toledo
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Int. J. Logistics Systems and Management, Vol.

Global logistics strategies and experiences:

the case of Korea Express

Paul Hong* and Mark Vonderembse

Information Operations and Technology Management,
College of Business Administration,
University of Toledo, USA
E-mail: Paul.Hong@Utoledo.edu
E-mail: Mark.Vonderembse@utoledo.edu
*Corresponding author

Abstract: As global trade expands, the need to move supplies, parts,

components, sub-assemblies and products increases at a rapid pace; and the
need to have immediate, accurate, and secure information about the content of
each shipment and its arrival time becomes vital. For firms facing these
dynamic markets, global supply chains and distribution channels that require
global logistic platforms are essential for success. This paper features an
interview with the chief executive officer and other members of the senior
management team at Korea Express (KX) which is one of largest global
logistics firms in Asia. KX is recreating itself to respond to these emerging
trends in global logistics by effectively serving not only national and regional
markets including China and Japan but by serving international markets. Senior
executives discuss key aspects of the global logistics strategies and their
experiences at KX.

Keywords: global logistics strategy; Korean economic progress; KX;

Korea express.

Reference to this paper should be made as follows: Hong, P. and

Vonderembse, M. (2011) ‘Global logistics strategies and experiences: the case
of Korea Express’, Int. J. Logistics Systems and Management, Vol.

Biographical notes: Paul Hong is Professor of Operations Management at the

University of Toledo, USA. He holds a Doctoral Degree in Manufacturing
Management and Engineering from the University of Toledo. He also holds an
MBA and an MA in Economics Degree from Bowling Green State University,
USA and a BA from Yonsei University in Seoul, Korea. His articles have been
published in journals including European Journal of Innovation Management,
International Journal of Operations and Production Management, Journal of
Operations Management, International Journal of Production Economics,
Research in International Business and Finance. His research interests are in
technology management, operational strategy and global supply chain
management. He is research network coordinator for annual International
Symposium and Workshop in Global Supply Chain.

M. Vondermbse is Professor of Information Operations and Technology

Management of University of Toledo (UT). He earned his PhD from the
University of Michigan and his MBA from the Wharton School at the
University of Pennsylvania. He has published in academic and professional
journals including the Journal of Operations Management, Decisions Sciences,
MIS Quarterly, Management Science, and the International Journal of

Copyright © 2011 Inderscience Enterprises Ltd.

142 P. Hong and M. Vonderembse

Production Research. His interdisciplinary research has manufacturing

strategy and supply chain management at its core with links to other fields
including information systems, organisational structure and culture, and
product development. As PhD Program Director, he has been instrumental in
developing UT’s doctoral program. His collaborative work enabled UT to be
designated as University Transportation Centre by US Department of
Transportation. He is also Former Director of Intermodal Transportation
Institute at the University of Toledo.

This paper is a revised and expanded version of a paper presented at

3rd International Symposium and Workshop in Global Supply Chains
in Coimbatore, India, held from January 7–9, 2009.

1 Introduction

The contemporary economy is characterised by “the globalisation of production and trade

and the growth of industrial capabilities in a wide range of developing countries”
(Gereffi et al., 2005). In terms of economic impact and rate of growth, the strategic
importance of North East Asia (China, South Korea, and Japan) is both substantial and
globally important. The combined GDP of China, Japan, and Korea accounts for 74.1%
of that of Asia (Thompson Financial News, 2008). Global logistics are critical in
supporting the increasing flows of goods, services and information. Strategically located
between China and Japan, Korea’s role in global commerce has grown rapidly in the past
20 years (Cho et al., 2008; Fagerberg and Srholec, 2008; Lee et al., 2008). Particularly,
the need for global logistics has expanded rapidly. Busan as the third largest container
port in the world while the annual growth volumes of thee top Chinese ports – Shanghai,
Shenzhen, and Qingdao are more than 45% per year (Notteboom, 2004).
As the need for global logistics capabilities multiplies, competitive intensity
increases, and many firms require help to formulate, evaluate, and implement global
logistics strategy. The views of senior executives from global logistics firms such as
Korea express are valuable as managers of firms competing in the global marketplace
assess their environment and determine their global logistics strategy and practices.
This paper focuses on Korea Express, a Korean logistics company. Recently,
Korea Express, which has a reported value of $2 billion (Wright Reports, 2009), was
acquired by Kumho-Asiana Business Group, which is South Korea’s seventh-largest
conglomerate, with assets of $24.1 billion (Kumho Asiana Annual Reports, 2008). Korea
Express gives Kumho-Asiana Group a critical platform to become a top global logistics
player.
This is one of the series of executive interviews being planned for the global logistics
firms including Asia-based ones. The purpose of these executive interviews is to listen to
how global logistics firms strategically plan and execute their logistics practices.
Mr. Kook Dong Lee, CEO of Korea Express, told Paul Hong and Mark Vonderembse of
University of Toledo about its global logistics strategy and experiences. What follows is
an edited version of the interview with the company’s president and subsequent
discussions with the Vice-President of Hachang Lee of Korea Express and Youngju Lee
(Executive Vice President of Keumho Group-Parent Company of Korea Express).
The interview has four major sections:
 Global logistics strategies and experiences 143

• globalisation practices
• expanding opportunities resulting from the merger with Kumho-Asiana Group
• global long-term strategy
• implementing supply chain practice.
The responses to the questions were made by Korea Express CEO and executives and
Kumho-Asiana Group executives. The comments were edited and organised by Dr. Hong
and Dr. Vonderembse. The edited comments were reviewed, revised, and approved by
the CEO and executives.

2 Globalisation practices of Korea Express (KX)

Mr. Lee, what are the abilities of KX that enable it to be successful in highly competitive
global markets?
KX is the largest logistics company in Korea. Because of its strategic location in North
East Asia and its substantial capabilities, KX should not limit its role to a domestic
or regional logistics provider. KX should move beyond this to achieve globalisation,
which is a strategic goal and a challenge to achieve. It should execute the radical overseas
expansion and business restructuring to cope with current trend and address its
customers’ need for global reach.
KX has developed its corporate culture, transportation system, and
telecommunication network to overcome regional differences in culture, society, and the
economy. At the same time, growing global competition is driving most corporations to
accelerate global sourcing, and growing global opportunities are forcing them to cope
with worldwide markets in order to improve their competitive position. As a result, it is
well positioned strategically and geographically to expand its footprint in the global
logistics and distribution business. Globalisation is indeed a core strategy for the
company’s long-term survival and an engine for substantial growth. To comply with
customers’ needs for diverse and complex services, it must establish its own global
network and corresponding comprehensive IT system.
KX recognises the importance of overseas expansion. As early as the 1970s, KX
established overseas branches in Japan and the USA. Recently, many of its customers
have adopted global sourcing and built overseas factories. As a result, customers are
increasingly requesting global logistics services, which prompted KX to establish the
‘Global Logistics Network’ (GLN) in 2005. The GLN expands logistics operations
beyond North East Asia and its goals are to move toward global operations. As its
practical steps, KX has set up operations in Vietnam, China (Shanghai, Tianjin, and Hong
Kong), and Germany and is in the process of expanding its global network into the UK,
India and other developed and developing countries.
In expanding globally, how does KX determine where to compete?
KX defines its strategic vision as becoming “an integrated, global logistics provider like
Deutsche Post or UPS”. It is KX’s vision to become one of the Top 10 worldwide
logistics company by 2020. This is consistent with the Korean government’s “Strategy of
National Logistics Industry Promotion”. However, as KX reviews the current world
144 P. Hong and M. Vonderembse

logistics market, it is clear that it does not yet have the full line of services that enable it
to become an all-round player in the world market. To move toward this goal, KX is
expanding into Asia, including Korea-China-Japan, with specialised logistics services.
KX will continue to expand its network and services until it covers the world market.
KX sees North East Asia, mainly Korea, China, and Japan, growing its importance in
global trade. This is evidenced by recent economic data. The North East Asia region
accounts for 20% of world GDP, 33% of worldwide container transportation volumes,
and 25% of world population. The logistics industry is growing rapidly because of North
East Asia’s industrial development, which is increasing cargo volume. At the same time,
efforts to open logistics market, make collaborations among countries, and avoid national
protectionism are accelerating. This is driving growth in the Korean economy and
increasing company profits.
KX built the logistics cluster that ties Korea, China, and Japan together by proactive
investments in logistic service infrastructure and market development. KX provides
customer services through the logistics cluster concept and by developing and operating
its inter-modal services in connection with transportation modes such as sea, road, and
rail transportation within and between Japan, Korea, and China. These integrated services
are examples of making the best of KX’s logistics cluster to achieve low cost, good
service, and efficient operations.
To take advantage of Korea’s central location in the region, KX established KX
Busan Newport Distripark (BND), a logistics centre, which will play a leading role in this
Japan-Korea-China logistics cluster. It has established a world-class logistics centre with
scale of 66,000 sq. meters in the free trade Zone at the Busan New port. This “KX BND
logistics centre” will function as an Asia’s consolidation and distribution hub which
bridges shipments from many Asian countries to Europe and America.
How does KX define and develop the competence it needs to achieve globalisation?
KX, as a global logistical company, derives its core competence from logistics-based
specialised services. Recently, KX has restructured its operations to expand its global
core competences. For example, KX focuses on the global integrated logistics business
that builds on existing international logistical network and various terminal operations
including overseas ports development and expanding business operations. KX selects and
trains highly competent professionals and has upgraded its IT system to be world class.
KX has implemented continuous systematic education to expand its human resource base
for global operations. For this goal, KX has implemented its own logistics MBA
program, foreign language training programs, overseas site tours, and executive exchange
program.
In the technological area, KX has achieved a high level of information integration
throughout its value chains and has customised logistic-specific IT system to meet
complex customer information requirements. As a part of Kumho-Asiana Group, KX
takes advantages of the technological support of Asiana IDT, which is IT specialised
company to help to integrate IT system in Kumho-Asiana Group. KX is happy to report
that its IT system is quite capable of meeting the ever increasing level of its global
customer requirements.
What are KX’s challenge and obstacle to become successful global company?
There are several barriers to overcome. KX must expand its network beyond North East
Asia into overseas market where it faces stiff competition from leading global integrated
 Global logistics strategies and experiences 145

logistics companies. In spite of the vast improvement over the years, Korea’s logistics
infrastructure and supporting IT must be upgraded to the best in the world. In addition,
many global logistical firms have entered the Korean market. KX is concerned that if
Korea’s domestic logistics companies merely maintain logistics services in some of their
national and regional markets, they will be isolated from world markets and face the risk
of losing business opportunities. To overcome this challenge, KX should make its best
effort to upgrade and differentiate its services and enhance logistical competitiveness to
keep pace with the demands of global customers.
At the same time, the Korean government’s policy must support the domestic firms so
they can compete with foreign-based global logistics companies. Recently, the Korean
government strengthened the domestic logistics company’s power by introducing the
“Certificate of Integrated-Logistics Companies” and passing legislation to assist logistical
companies that intends to expand into the global market. However, these assistant
policies must be more efficient and effective. KX anticipates that the government will
provide tax advantages and will free companies from excessive regulation. In addition,
KX requests the government to reduce logistical infrastructure charges (e.g., port charge)
and expand capital investment for strategic infrastructure development in the form of
Social Overhead Capital (SOC). Nippon Express of Japan has achieved its global
development and expansion while Japanese trading and manufacturing companies have
expanded their operations overseas. Following that lead, Korean global firms are required
to support the global expansion of Korean logistics companies by retaining win-win
partnership and cooperation.

3 Expanded opportunities through merger into Kumho-Asiana group

What kinds of synergy do you expect from the M&A with Kumho-Asiana group?
Kumho-Asiana provides links to other industries that are needed to facilitate global
expansion. KX’s sales and profits may increase through cooperation with Kumho-Asiana
Group’s affiliated businesses that include construction, transportation and logistics
services, and manufacturing and petrochemicals. These can be sound business
relationships that create synergy when combined with KX. Through ties with Daewoo
E&C and Kumho E&C, KX expects to develop ports and terminals at home and abroad.
In addition, through cooperation with Group’s affiliates such as Daewoo E&C and
Kumho E&C, KX will transport building materials, dispose of building wastes, and
perform forwarding services and customs clearance for in/out bound construction
materials. Particularly, as Daewoo E&C has rich experiences in overseas construction,
KX expects to tie with Daewoo E&C to participate in the Great Man-made Rive (GMR)
Project and other public works for agriculture in Lybia (USD 20 million).
Kumho Tires and Kumho Petrochemical, major manufacturing companies in
Kumho-Asiana Groups, can supply their products to customers in global market much
efficiently and successfully by utilising KX’s logistics know-how and infrastructure.
KX also expects sales promotion through operating connection by using the Korea
Integrated Freight Terminal’s (KIFT) warehouse facilities and Asiana Airlines’ air cargo
services.
146 P. Hong and M. Vonderembse

The M&A with another entity having a different company culture inevitably accompanies
certain difficulties. Could you specify some of these difficulties?
KX and Kumho-Asiana Group have similar company cultures including long business
history, tradition, exemplary labour-management cooperation, and experience to
overcome difficulties and hardships. Particularly, the seven management principles to
realise a ‘Beautiful Company’ (such as irreproachable management, strong partnerships,
helping the underprivileged, blood donation campaign, support for Arts & Culture,
healthy labour-management relations, and environmental & safety management) are
consistent with the culture at KX. A beautiful relationship between Kumho-Asiana Group
and KX will be prosperous and ever sustained.
How has KX dealt with the above difficulties? Or, how is KX planning to?
In view of the above-mentioned organisational culture practices, KX is pursuing
organisational culture ties with Kumho-Asiana Group that lead to the ‘Beautiful
Company’ to build public confidence and encourage socially responsible corporate
practices.

4 Global Long-term strategy

How would you describe the long-term strategy of KX?

KX’s long-term strategy is to become a truly global logistics firm that serves the diverse
needs of global customers. KX is going to provide comprehensive and premium value
services that support all the logistical needs of firms that operate in the global supply
chains.
Where are the core competences to build effective global supply chains?
The core competences to establish a global supply chain include specialised global
logistics services and integrated logistics solution.
Based upon the customer’s diversified needs for the supply chain, KX designs an
optimised logistics network and IT system that serve the customer’s requirements
effectively in terms of their applications, implementations, and maintenances. Instead of
segmented and partial logistics services, KX provides end-to-end services that meet the
needs of the global supply chains.
Do you have any specific point of view when dealing with the matter of global
supply chain?
Intension of customers operating within a global supply chain is to have a logistics
service with maximum service qualities but minimised payment. It is KX’s commitment
to achieve multiple customer requirements (e.g., in terms of order fulfilment rates,
on-time delivery, and inventory level and location) by performing effective logistics
and total cost management programs. KX is devoted to developing effective logistics
solution by utilising its enterprise’s resources and making proactive investments.
KX’s performance measures consistently reflect the changing customer requirements and
their priorities.
 Global logistics strategies and experiences 147

5 On implementing supply chain practices

What are KX’s major problems when dealing with supply chain participants in terms of
service quality management? (especially in case of product delivery and customer
satisfaction)
It is essential to sustain highly collaborative and productive partnerships with all
participants to achieve successful supply chain execution. Occasionally, disagreements
arise. Usually, the disagreement between service providers and customer starts with the
preparation of a performance assessment plan for quality management. When the
operation performance of service provider is evaluated periodically, customers often do
not allow for exceptions in logistics service operation. The open communication and
impartial assessment standard between customer and service provider have been always
substantial problem for the service quality management and the assessment.
Also, there can be disagreement about the penalty and reward system regarding
service quality assessment. Customer generally resorts to ‘punishment’ when the service
provider fails to meet the Service Level Agreement (SLA). However, they rarely reward
the provider when logistics services exceed the agreement. Especially in the context of
the Korean market, the customer tends to dominate the service provider; it is generally
accepted that the Korean customer is superior to their service provider. This is called the
‘Master & Servant’ relationship. Instead, the service provider should be treated as a fair
partner in an equal relationship. KX strives to provide reliable and consistent services by
introducing fair service contract and equitable SLA.
How does KX guarantee its service quality assurance for the entire supply chain from
supplier to end customer.
It is strongly recommended that SLA is prepared to guarantee quality assurance and
management of KX’s logistics service. Based on the SLA, KX provides state-of-art
logistics services to our key accounts. According to SLA, KX strictly applies and
manages its Key Performance Index (KPI). As a result, these efforts are rewarded based
on periodical evaluation that began when the contract was initiated.
When KX established methodology to execute efficient supply chain, how did KX use
effective collaboration among the partners?
Sharing information is very important to retain effective collaboration in supply chain.
Logistics companies should check the status of each player’s orders/actions in the supply
chain and update completed event in real time. To make it possible, KX has developed a
web-based logistics IT system, which enable customer to access real-time logistics
information and events easily. Above all, this IT system is designed to support easier
interface with the customer’s IT system to support business-to-business applications.
KX’s IT system enables it to exchange information with customer without obstacles and
to enhance logistics visibility. KX’s customers have an opportunity to reinforce
collaboration with participants in the supply chain. Also, by utilising KX’s IT group,
it has developed and customised the IT system according to customer’s special request
including RFID application.
148 P. Hong and M. Vonderembse

If there will be the new trend or flow in supply chain and logistics management
in five years, what would you think about like to be?
As far as supply chains will continue to evolve and to be much more complex, customers
expand their list of requirements for diversified and specialised services. In the line of
this, customer’s ‘One Contact One Bill’ (1C1B) policy represents the trend that customer
eager for integrated service. They require that one company who has integrated service
capabilities linking their own global network can provide ‘end-to-end’ service covering
all range of their supply chain. Through KX’s integrated service, customer can acquire
multiple benefits such as shorter logistics lead times, lower costs, standardised
transportation and billing, effective delivery flows, and more accurate inventory tracking.
Leading Logistics Service Provider and 4PL will be more important ways to meet
these customer’s needs. KX is focused on improving 4PL services by enhancing its
capabilities, especially in sector of IT and consulting.

6 Concluding remark

The sheer volumes of product, information and service flows from North East Asian
countries (China, Korea, and Japan) are increasing rapidly. The growth of North East
Asian based logistics firms grow as well. The challenges of logistics firms of North
East Asia, including KX, are to handle increasing logistics volume flows in keeping up
with the economic expansion in this region and accelerate level of engagement with the
other parts of the world. As a result, KX will continue to engage, grow, and serve the
global needs of businesses.

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