China Shipping Australia

www.cnshipping.com.au

Executive Summary

China Shipping (Australia) Agency (CSAA) is the wholly owned Australian subsidiary of the China Shipping Group. Established in 1998, the company offers shipping and container services for both export and import traffic between Australia and Asia. The company has offices in Sydney, Melbourne and Brisbane and employs 45 full time staff.

CSAA developed an e-commerce initiative in 2000 with the belief that it could significantly reduce operating costs and improve customer satisfaction. The three interstate offices needed a system that would allow more efficient information exchange and streamline administrative processes.  A Frame Relay Network was installed to meet this objective. In addition, the company developed an interactive website to enhance marketing and allow customers to interact with the company electronically.

Frame relay is a telecommunication service designed for cost-efficient data transmission in wide area networks (WAN), or a network of two or more local area networks (LAN) spanning large geographical areas. The network provides a permanent virtual connection, which means that the people using frame relay have a continuous, dedicated connection without having to pay for a full-time leased line. Frame relay is used to connect the local area networks of the company's three distributed offices into one virtual office.

In addition to the frame relay network, China Shipping also uses technologies such as Virtual Private Network and Voice over Internet Protocol to enable secure, cost effective data transfer and digital phone calls. The company website is used as a means of providing customers with company news, schedules and freight charges. Registered customers also enjoy services such as online quoting, reservations and cargo tracking.

Additional businesses derived as a result of the company's online presence have contributed $200,000 towards gross profit in 2001.  Cost savings totalled $232,375, due mostly to reduced marketing and labour expenditure achieved from e-commerce efficiencies. The initial establishment cost of the e-commerce system was $34,640.

The Business

China Shipping (Australia) Agency (CSAA) is the wholly owned Australian subsidiary of the China Shipping Group. Established in 1998, the company offers shipping and container services for both export and import traffic between Australia and Asia (including North Asia, China, Hong Kong, Taiwan, Korea, and Japan).

The company has offices in Sydney, Melbourne and Brisbane. It employs 45 full time staff.

Getting Started

National IT manager, Karl Nasri, initiated the e-commerce development in 2000. He believed that e-commerce could significantly reduce operating costs by expediting time-consuming administrative processes, particularly correspondence between the three interstate offices.  Karl recognised that e-commerce was necessary to remain competitive and respond to increasing customer demand for the technology. 

In addition to utilising his knowledge gained as an IT specialist, Karl contacted business peers and a web developer in conducting preliminary research.

Frame Relay Network

Frame relay is a telecommunication service designed for cost-efficient data transmission for intermittent traffic in wide area networks (WAN), networks spanning large geographical areas. The network provides a permanent virtual connection without having to pay for a full-time leased line. The service provider determines the route of each frame to its destination and charges for the service based on the amount of data transmitted.

CSAA is able to process customer requests promptly because of the networking capabilities of its three offices. Frame relay is used to connect the local area networks (LAN) of the offices, effectively creating a single virtual office. The company uses an ADSL broadband Internet connection to support the frame relay network.  The technology also allows CSAA to quickly incorporate new applications and organisational units when required.   This set up ensures that new requirements are economically accommodated through minor software and hardware modifications.

Current e-commerce strategy

The frame relay network has facilitated greater collaboration and unity between the Melbourne, Sydney and Brisbane offices.  Administrative processes requiring data transfer are processed quickly and efficiently via the enhanced wide area network.  Broadband technology enables faster and more reliable execution of web-based transactions such as after-sales service emails to customers.

The company is also connected to China via an Integrated Services Digital Network (ISDN) link.  This allows CSAA to access the main network of related companies in China via a Virtual Private Network (VPN).  Voice over Internet Protocol technology enables digital transmission of voice data over the existing frame relay network rather than the public telecommunications network avoiding the interstate and international charges of ordinary telephone services.

The CSAA website is mainly used as a means of providing information to customers including company history, shipping schedules, freight charges, exchange rates and container specifications.  Contact details for CSAA as well as other business partners and ports are provided so that customers may directly contact them via telephone, fax or email.  Customers can also subscribe to company news via the website and receive updates and promotions via emails.  CSAA currently receives over 200 enquiries and registrations per week via its website. 

For registered customers, the website provides password-protected access to the company's accounting and freight tracking system.  This enables customers to track container shipments, book online and request quotes for services.  For online bookings, customers issue a request via the website.  This information is automatically forwarded to the customer service department which confirms the booking by contacting the customer directly.  Online quotes are processed in a similar manner with the customer service department contacting the customer to provide an approximate costing.

The container tracking service on the website allows a customer with a bill or container number to view the location of the container. The customer simply accesses the container tracking area of the website and enters in the number. Information is provided on the location of the container, the carrying vessel and approximate arrival date at the destination.  From the company's perspective, this tracking service also functions to enhance management of its containers.

The company website is promoted via stationery, branding promotions, sales representatives and email correspondence.  Container tracking details are updated in real time due to linkage with the global database in China.  In addition, the sailing schedule is updated weekly while the rest of the website is updated as required, usually on a monthly basis.

CSAA employs various security measures including password protection, encryption and firewall technology to protect its online systems.  Comprehensive backup systems have been implemented including a Sydney based back up server and daily back up of Melbourne data with tapes stored in a fireproof safe onsite.  Physical security measures include restricted physical access to the technology infrastructure.

Revenue and Costs

* Note: Capital Expenditure is amortised over a four-year period

Financial Analysis

The generation of new business as a result of enquiries via the website has contributed approximately $200,000 towards gross profit in 2001.

Cost savings totalled $232,375 in 2001.  Once the company's website was fully operational advertising such as the production and supply of brochures was no longer required, this lead to cost savings in marketing of $110,000.  Streamlined after sales service via the Internet reduced expenses by $35,000 and improved staff productivity has resulted in estimated cost savings associated with administration ($55,000) and communication ($7,875).  A reduction in the incidences of administrative errors has reduced staff time spent correcting details and file searching, totalling $500.  The emergence of the company website as the main portal for distributing information such as shipping timetables reduced postage and freight ($1,000), printing ($3,500) and stationery expenses ($4,500).

CSAA invested approximately $34,640 into the advanced e-commerce system.  Web development, preliminary research and consultant fees constituted $12,000. Staff training was required to ensure full utilisation of the system's function, incurring $1,500.  Expenses associated with setting up the online infrastructure include installation of the frame relay line ($1,500), Broadband installation ($1,000), SSL certificate software ($150) and routers ($17,000).  The implementation of security measures incurred $1,000 for a backup server and $300 for backup tapes.

Ongoing costs of the e-commerce system totalled $99,386 in 2001.  A major portion was allocated to telephony costs from the frame relay network ($72,000).  Costs associated with system maintenance include internet service provider fees ($1,800), website hosting ($1,200) and maintenance ($12,000).  In addition, capital expenditure was amortised over a four-year period, incurring $8,660.

Non-Financial Benefits

By implementing e-commerce, customer services have been greatly enhanced.  Through its website, China Shipping can now offer detailed and customised information to both potential and existing customers.   Registered visitors to the website are provided with greater monitoring and control over their orders through the ability to check schedules, track shipments and obtain vessel details.

Staff satisfaction has also been positively impacted.  Less time is now spent in non-productive administrative tasks such as filing and managing phone enquiries.  By referring customers to the website, information is constantly available at their convenience, overcoming the barriers of geography and differing time zones.

Challenges

One of the main challenges faced by China Shipping was the aversion to new technology inherent in the shipping industry.  Many customers preferred to use telephone and fax as the main form of communication and placed greater reliance on hardcopy documentation over electronic correspondence.  To overcome this hurdle, the company has produced educational documentation in the form of power point slides to teach customers how to operate the website.

In designing the website, China Shipping found it difficult to balance the goal of providing detailed information against the need for a user-friendly, secure site.

Future

The company plans to expand its use of e-commerce to provide greater functionality of the website and to encourage more customers to become web-enabled.  China Shipping intends to fully integrate its website with shipping software, enabling customers to check, create and delete bookings online.

Karl's advice to those planning to embark upon e-commerce is that they should plan ahead and know exactly what they want from e-commerce.  Karl believes that having a focussed goal is crucial for the successful implementation of an online system.