Ex-Rivals Now Auto Parts Partners

Half of the employees at the GM Daewoo KD Center had GM Daewoo logos on their clothes, 25 percent of workers were wearing the Korea Express uniform, and another 25 percent were from Hanjin. This is because employees of GM Daewoo, the Korea Express and Hanjin came to work together at the GM Daewoo KD Center, which the latter two jointly operate.

The Korea Express and Hanjin, the top leaders of the Korean logistics industry over the past six decades, joined hands for the first time in order to jointly operate GM Daewoo’s logistics business.

From an Enemy to a Partner-

KD Center is in charge of packing auto parts and half-finished goods produced domestically by GM Daewoo and loading them onto ships. The center exports auto parts for 570,000 cars annually to GM assembly factories in 15 countries, including China, India, Russia, and Poland.

After creating a consortium in May 2005, the Korea Express and Hanjin signed a memorandum of understanding on the establishment and operation of KD Center. The two companies then began building the center and completed its construction on October 20. They had leased the site for the center from the government and used it as a yard since 1974.

In an office inside the center, there were six desks- three desks placed opposite to the other three. Hanjin employees were working on the left side and Korea Express employees on the right. But they are not just sharing the same office.

They were working like two different departments of a company: Hanjin was in charge of managing equipment and contract companies, while the Korea Express handled payments. They take care of the areas of work they do best, achieve the best performance and share the profits.

Manager Seong In-mo of KD Operation Team at Hanjin said, “For the first two months, we had conflicts due to our different corporate cultures and kept alert to make sure that corporate secrets were not leaked. However, as we shared a common objective, we came to get along well with one another as naturally as if we belonged to the same company.”

“We not only work together but also dine and go to picnics together. We are learning from each other,” Manager Song Seung-kyu of the Strategic Business Team at the Korea Express said. “But we do not ask each other how much we get paid.”

Working Together to Overcome the Red Ocean-

In fact, the KD Center could’ve been built in another area.

When GM Daewoo announced its plan to outsource the work at KD Center to three contractors in 2004, Incheon, Gunsan in North Jeolla Province, China and Singapore launched their efforts to attract the center.

Gunsan offered land for the center nearly for free, while China and Singapore promised cheap labor costs and free business operation.

When Incheon was struggling hard amid the fierce competition, the Korea Express and Hanjin suggested that they use the 4th Quay Yard as the land for the KD Center. In the end, GM Daewoo selected Incheon Port, thinking highly of its outstanding location and concentration of GM’s partners in Seoul-Incheon area.

The KD Center since then has benefited Incheon, the Korea Express, Hanjin and GM Daewoo each. Incheon City expects that the center will bring the production-inducing effect worth 805.9 billion won and create 4,504 jobs this year alone.

For their part, the Korea Express and Hanjin are learning the global logistics system of GM. They have naturally learned the thorough quality management method that meets global standards while opening up and inspecting 10 percent of packed auto parts in the inspection room. GM Daewoo is also seeing their logistics expense reduced by an annual 25 billion won.

bell@donga.com