The Heng Sang University of Hong Kong

SCM4103

The Company Project

Final Report

Yuen Shing Kam

S206100

Topic: A lean proposal for improving operational

performance in Hactl

1
 Content Page

Cover P1

Content Page P2

Abstract P3

Introduction P4-5

Project Purpose P5-6

Research Scope P7-8

Methodology P9-10

Findings P11-16

Evaluation P17-24

Problem Summary P25-26

Lean Recommendation P26-30

Conclusion P31-33

Appendix P34-35

Reference P36

Specific Thanks P37

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 Abstract

Hong Kong's import and export trade has developed rapidly in response to

globalization and the prevalence of the e-commerce industry. The air transport

industry is one of the most relevant industries among these trends, which affects

whether global trade can develop smoothly. The purpose of this research and proposal

about Hactl is the largest air transport station in Hong Kong and one of the important

international air cargo terminals to pointed out some operational problems and

provided effective improvement measures to maintain Hong Kong's competitiveness

and attractiveness as an international trade port.

In the operation evaluation, we used some official data to conduct a proportional

evaluation, interviewed Hactl employees and conducted on-site observation to

evaluate the company’s actual operating conditions and process design. The results

showed that the company lacks detailed work processes and employee training. It

became the main reason for the company's mishandling of goods. The Business

Process Reengineering plan was proposed to improve the above problems.

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 Introduction

Hong Kong Air Cargo Terminal is the only independent air cargo terminal operator in

Hong Kong which is also one of the world’s leading air cargo terminals which the

terminal can handle 3.5 million tons of cargo annually. There has the most

comprehensive cargo operation area in the terminal in Hong Kong such as total

number of 3500 Container Storage System, 10000 of Box Storage System, 1573 of

empty ULD Standard Position and some special cargo handling facilities like Horse

Handling Centre, Valuable Cargo Handling Centre etc. Furthermore, more than 100

airlines and 1000 freight forwarders were made the contract with Hactl which give the

delivery service to them. By the basic data of Hactl, we can seem that Hactl has an

immense business scale in the air cargo industry. In behind of these facts, what is the

operation systems and management can support the company’s business?

In this report, the reason of discuss the Hactl is because the company is the most

important air cargo breakdown and deliver center in Hong Kong. In fact, seems from

HKIA operation data, it has 5-million-ton air freight throughput and Hactl

commitment the among of 3.5 million of it per annual. In simply, the destiny of air

cargo industry in Hong Kong is holding by Hactl. So, the research of Hactl operation

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performance is the key of understanding the air cargo industry in Hong Kong and

make a sustainable improvement for that is protecting Hong Kong position of air

cargo industry in the world.

Project Purpose

From Hactl established from 1970s, the business scale of the company was

continuously developing, the cargo handling throughput from 250 thousand tons in

1979 progressed to 2.9 million tons in 2010. It reflected that Hactl gain the huge

success in the business development. But, behind the success of that, the company is

facing the major challenges more and more in recent nears.

The rapid development of the freight industry in recent years has indeed led to

considerable growth in the company's business, but it has brought more and more

heavy operational pressures. Due to the complexity of the procedures for handling air

cargo, it is more complicated than other modes of transportation. The processing flow

must be carried out many of document check in order to correctly complete the

disassembly and allocation. Therefore, any error in the processing procedure may

cause the operation of the cargo station to collapse.

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In a Hong Kong airport demonstration in 2019, 200 flights at Hong Kong Airport

were cancelled. Thousands of tons of cargo of the flights were significantly delayed.

At that time, Hactl's operational services were greatly affected and could not handle

any cargo, which was equivalent to the company. Forced to suspend transportation for

a period of time. In addition to affecting the business, this incident also brought major

loopholes in the operating procedures. For example, it is impossible to track

shipments. Many cargo transportation records are lost. Many containers have

accumulated in a short period of time. Service and operation are very dissatisfied by

the customers. This all reflects the company’s operational program design problems.

The above examples are a major warning sign for the company and even Hong

Kong’s air transport industry development. Therefore, in this proposal I will conduct

some fundamental assessments and make some lean suggestions on some of Hactl’s

operational performance, procedures and system design. Enable the company to have

a more effective and sustainable operating model.

Research scope
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In the scope of the lean proposal, the proposal would concentrate on evaluating the

landside service and the cargo breakdown service in the terminal with the serval index

or criteria. Furthermore, to research the information technology built up by Hactl

which called COSAC-PLUS within its sub-system CSS and BSS how to assist the

cargo operation in the warehouse and delivery categories. The relative research and

data is less evaluated and discussed in the company.  It is important to define whether

the operation system in the company is well-developed and make improvements.

Commence with the evaluation criteria of landside service, there have 5 subdivisions

1. Export Truck Waiting Time (within 30 mins)

2. Import Truck Waiting Time (within 30 mins

3. Empty ULD Truck Waiting Time (within 30 mins)

4. Cargo Acceptance (within 15 mins)

5.  Cargo Release (within 30 mins)

In cargo breakdown service, It will evaluate with 6 subdivisions:

1. Passenger Flight (within 5 hrs after ATA

2. Freighter (within 8 hrs after ATA)

3. Perishable Cargo (within 2 hrs after ATA)

4. Express Cargo (within 2 hrs after ATA)

5. Cargo Mishandling Rate

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6. Late-Positioning of ULD

In the COSAC-PLUS system, Hactl designed this system to track the flow of goods

and record the recent cargo handling status. To evaluate the performance of operation

from this system, there are some criteria would evaluate.

 Details of cargo status (air waybill number, cargo type, gross weight, number of pieces)

 The correction function of cargo status

 The tracing function of air cargo or ULD location in terminal

 Error reminder function

 The system coverage for the terminal operation

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 Methodology

After searching for Hactl's information, that was found that the company lacks an

official annual report and related operating data. This has certain difficulties for this

operational performance evaluation. In view of this, this performance evaluation and

lean recommendations will be based on a small part of the operational data At the

beginning, some subjective opinions and site inspections were integrated as the data

search method for this plan.

In the data collection part, the information mainly comes from the official part of

Hactl. In the official website, we found the subdivision criteria of the landside service

and cargo breakdown service mentioned in the above research scope. The official

website provides the company's expectations and actual ratio in the above

subdivisions which called the above data as indicators of operating performance.

These indicators have a basic evaluation role in this report and can be used to extend

the analysis of operating procedures.

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In the subjective opinion search, in mid-August, I interviewed two employees

working in the cargo terminal about their feelings about some work procedures and

their main operating assistance software COSAC-PLUS, based on these opinions to

evaluate the operating procedures and put forward lean recommendations. The

purpose of the direction reference.

Finally, during the site observation, I arrived at the freight station on September 5 for

a site inspection. There are some public areas on the ground floor and first floor of the

freight station where you can observe some of the employees’ work conditions and

the placement of facilities. These data can be used as relevant evidence and

elucidation to extend the performance evaluation argument.

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 Findings

Figure 1: The ratio of landside service operation about the Hactl’s expectation

standard and actual performance.

Landside Service Target 2020 Monthly Aug 2021

Average Performance

Performance

Export Truck Waiting 96% 97.4% 99.4%

Time (within 30 mins)

Import Truck Waiting 96% 99.9% 100%

Time (within 30 mins)

Empty ULD Truck 96% 99.9% 100%

Waiting Time (within

30 mins)

Cargo Acceptance 96% 100% 100%

(within 15 mins)

Cargo Release 96% 100% 100%

(within 30 mins)

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From seen the above of the data, the performance about those 5 subdivisions are all

meet the target set up by Hactl. 4 of these can get the nearly perfect performance and

exactly perfect performance in the landside service criteria. It seems that the

performance in the landside service to the customer in Hactl is basically excellent.

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Figure 2: The ratio of cargo breakdown service operation about Hactl’s expectation

and actual performance.

Cargo Breakdown Target 2020 Monthly Aug 2021

Service Average Performance

Performance

Passenger Flight 96% 99.5% 98.8%

(within 5 hrs after

ATA)

Freighter (within 8 96% 99.8% 98.1%

hrs after ATA)

Perishable Cargo 96% 99.8% 98.1%

(within 2 hrs after

ATA)

Express Cargo 96% 100% 100%

(within 2 hrs after

ATA)

Cargo Mishandling <1.5 case/10000 0.17 case/10000 0.17 case/10000

Rate orders orders orders

Late-Positioning of <1 loaded 0 ULD/10000 0 ULD/10000

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 ULD ULD/10000 flights flights flights

In the cargo breakdown service performance, those of the subdivisions about the

operation categories are also have an excellent performance, especially the Express

cargo handling and Late-Positioning of ULD are prefect performance. It seems that

the cargo breakdown service in Hactl is also without any major problem.

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Figure 3: The Cargo operation status in COSAC-PLUS system

The picture shows the cargo operation status in for single cargo order call CNR

function. In this function which will show the following main information.

 11-digit air waybill number, to identify cargo and shipping airline

 The origin and destination airport of the cargo

 The code about the shipping company

 The amount of the cargo with the same air waybill

 The net weight of the cargo bulk

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  The inventory location in the terminal and ULD code with the cargo amount

and net weight

 The flight information (flight number, flight arrival date)

 The cargo bulk release information

 The additional picture about the cargo

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 Evaluation

Is the realistic operation is reflected in the data?

In the above figure1 and figure 2 data, Hactl's performance in the landside service and

cargo breakdown service are in line with their expectations. However, the goals they

set are in a state of not advancing or retreating in today's market trends.

From the development of Hong Kong Airport, the development of both passenger and

cargo transportation has risen rapidly. This is a huge opportunity for Hactl but also

faces increasing operational challenges. Hactl also noticed this trend, so in 2001-2005

the implementation of the "Delivery Capacity Improvement Plan" in to face the

increasing trend of freight volume has increased Hactl’s maximum handling volume

from 1.5 million tons in 1991 to 3.5 million tons now, and the actual operation

volume has also increased from the current amount 1 million tons increased to 2.9

million tons. In addition, with the increasing coverage of globalization and changes in

shopping culture, the rapid development of global online shopping platforms such as

AMAZON, Newegg, etc. has also caused the air freight volume to continue to rise.

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The data and information reflect the current situation of Hactl: the upward trend of the

air cargo throughput is stable and predictable.

When the above cargo volume data is applied to figures 1 and 2, it can be found that

Hactl's operating data still has room for improvement in some sub-items. For

example, in the export truck waiting time sub-item of Landside Service, where the

average performance in 2020 is that 97.4% of export trucks have a waiting time of

less than 30 minutes. At present, Hactl has more than 1,000 cooperative logistics

companies. If one-fifth of the logistics company’s trucks enter the freight station

every day, the average monthly There will be 150 export trucks that need to wait more

than 30 minutes to enter the export cargo loading and unloading process. This

example is not to show that Hactl's current operating performance is unacceptable, but

it is time for Hactl to increase the standard based on the increase in service scale. The

maximum number of trucks parked in Hactl's freight station is 313, which are

allocated to export trucks and import trucks. When the base number of services

continues to increase with the trend, an operation error and system failure may have

the opportunity to cause a major congestion, repeating the 2019 situation. Hactl needs

to pay attention to this small loophole to prevent the occurrence of operations

paralyzed again.

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How the mistake happened in a system?

In the operation of the company, mistakes are almost inevitable. Most of the

company's response actions have found the root causes and solutions of these

problems in operational problems, and Hactl also uses this method to solve problems

when dealing with operational problems. Therefore, Hactl invested a lot of money to

develop the cargo tracking system COSAC-PLUS, which allows employees to handle

cargo operations and corrective measures when they encounter some human

problems, thereby improving the overall efficiency of cargo handling operations.

After research about the part of the system's functions with the use of employees, I

found out some point would the cause of Hactl’s operational errors.

In terms of inventory management, when Hactl receives goods from airlines and local

logistics companies, they will store the goods on different floors and designated

locations according to the type of goods. Then the employees who handle the receipt

and delivery of the goods will use the COSAC-PLUS system to update the

warehousing information of the goods, so that other employees can query the detailed

storage information of the goods (as shown in figure3) based on the input of their air

waybill, such as storage location, storage code of unit load device, the size of unit

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load device with the loaded freight, etc., Hactl's basic cargo handling process must be

completed by this system.

This system has a great influence on Hactl's inventory management, because Hactl's

business scope is mainly divided into dispatching and assisting airlines to store air

cargo arriving in Hong Kong. These goods must be stored in the warehouse waiting

for the failure, transfer, and delivery process. Due to the limited storage space of the

company's warehouse and the company has many cooperative logistics and airlines,

the company has set up yellow boxes in the storage operations to facilitate the storage

and transportation of bulk goods. In addition, they use BBS and CSS systems to

transport the shellfish stored in each storage area to a designated location code. The

instructions entered by the staff in the system will be connected to the COSAC-PLUS

system for easy tracking and checking of its updated location so that another order can

be stored in this area. The connection of these systems improves the operational

efficiency of Hactl's inventory management. In addition, when employees enter

wrong information in these systems, such as the unit load device number and storage

location, COSAC-PLUS will provide the function of correcting the information so

that the employees can correct themselves when they find the error, effectively

reducing the error rate of delivery while reducing reporting and response the mistake

time, increase operational efficiency.

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Figure 4: The adjustment function in inventory location

Hactl uses COSAC-PLUS as the core operation model to systematize the logistics

operation and storage management of the air cargo terminal. This is of course an ideal

model, and the functional design of these systems must be very complete on the

premise. Because of the data of these functions Most inputs rely on human hands, and

when there are errors that are not discovered in time, there will be major problems.

The employee I interviewed gave an example of a mistake in the breakdown process

of goods due to a loophole in the system.

In the CSS system, when employees need to store ULD, they need to enter the ULD

number, the destination location of the storage and the current location of the ULD.

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When the location and location are entered incorrectly, the system will pop up a

message indicating the input error. However, the system cannot Detect whether the

number on the ULD storage platform matches the input. If there is a vehicle on the

platform, it will be transported to the destination entered. Therefore, some employees

will order the transport due to the wrong vehicle number or destination. The location

of the equipment is difficult to track, because the COSAC-PLUS system will

mistakenly recognize that the original vehicle has been delivered to the destination,

resulting in a significant delay in the operation time of the cargo. This loophole not

only shows that the design of COSAC-PLUS and its auxiliary systems is not perfect,

but also reflects in order for this system to be able to effectively handle the logistics

operation of the freight station, it depends on the familiarity of the employees with the

system. Simply put, it is to evaluate the comprehensiveness of the company's

operational design. I learned from the employees interviewed that it is not

comprehensive and transparent.

In the CSS system, when employees need to store ULD, they need to enter the ULD

number, the destination location of the storage and the current location of the ULD.

When the location and location are entered incorrectly, the system will pop up a

message indicating the input error. However, the system cannot Detect whether the

number on the ULD storage platform matches the input. As long as there is a vehicle

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on the platform, it will be transported to the destination entered. Therefore, some

employees will order the transport due to the wrong ULD number or destination. The

location of the equipment is difficult to track, because the COSAC-PLUS system will

mistakenly recognize that the original ULD has been delivered to the destination,

resulting in a significant delay in the operation time of the cargo. This loophole not

only shows that the design of COSAC-PLUS and its auxiliary systems is not perfect,

but also reflects In order for this system to be able to effectively handle the logistics

operation of the freight station, it depends on the familiarity of the employees with the

system. Simply put, it is to evaluate the comprehensiveness of the company's

operational design. I learned from the employees interviewed that it is not

comprehensive and transparent.

Hactl invested more than hundred million Hong Kong dollars in the design of

COSAC-PLUS, a unique cargo handling system, but one thing that cannot be

understood is that the company did not train all employees on the use of this system.

The employee reflected that the employees only can learning the use of system from

the supervisors and senior employees. Only supervisors or employees in specific

positions will have training courses for the use of the system. Ironically, they must use

these functions to complete their assigned tasks. Not only is there a lack of training in

the use of the system, but there is also no relevant guidance for the training and

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working procedures of the position. They can only listen to the prompts given by the

supervisor when assigning the work instead of the formal instructions. These

manpower training and program design problems often It will be reflected in the

operating performance and service quality, causing employees to make mistakes in

the goods. Under this overall operating system, there will only be defect frequency

would be happened without the possibly of no defect in the operation.

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 Problem Summary

After the evaluation about the operation in Hactl, some problem was found out at the

followings:

1. The standards of service requirements begin to fail to reflect the true quality as

the operating base increases.

2. The completeness of the COSAC-PLUS system is still lacking, so it is very

dependent on the staff's familiarity with the system.

3. Under the complicated operating procedures of the air transport industry, the

company lacks formal training for grassroots employees.

4. The company lacks work guidelines in various operating departments, and it is

difficult for employees to deal with specific situations.

The above issues will continue to affect Hactl’s operating efficiency under the

continuous development of Hong Kong’s air transport industry. This will reduce the

company’s competitiveness and at the same time affect the confidence of other air

transport industry stakeholders such as airlines and logistics companies in Hong

Kong’s air transport operations services, contribute to the international status of Hong

Kong in import and export trade has been challenged, and it has overall affected one

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of Hong Kong's important sources of economic development. Therefore, it is

necessary and urgent to make lean recommendations for Hactl's operations.

Lean Recommendation

As mentioned earlier, Hactl needs to keep improving its operational model to remain

the leading air freighter in Hong Kong. The presence of Cathay Pacific and Asia

Airfreight terminus means that consumers have more options of cargo terminals to

engage in business. For the case of Hactl, It has a complicated system COSAC to

presence assures consumers that they will receive their cargo safely without any

delays. The premise of this system can do that is the well-planned process guideline in

operation; The employee is able to applicate the system familiarly; Improving the

process flexible and continuously. Therefore, implementing Business Process

Reengineering model is the best way which can resolve the problem comprehensively

Make more objective in the operation

Under the need to make improvements from the above-mentioned problems, there are

two main aspects that need to be considered by the company: how much to improve

and how to achieve it. In other words, it is to set a new goal and operation method.

These goals and methods are different to the goals and visions mentioned on the

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company's official website really mean that every department needs to have a goal

and operation method and be able to cooperate with other departments and have a

good communication mechanism. This is necessary for a successful company

element.

How can the operation change to be better?

It is not easy to change the business process of a company that has been in operation

for many years, because it takes a lot of time and cost to update the facilities and

operation processes that need to be eliminated, which is the same for Hactl. For

example, the COSAC- PLUS mentioned before the paragraph, the most direct

solution to the imperfect functions and its auxiliary systems such as CSS and BSS are

to improve these functions. But this only a way just fixes the problem at that moment.

The company will always only propose a direct resolve method based on the

immediate problem. Ignoring the cause of the problem and long-term process

planning, this is a vicious circle for the company. What Hactl needs at this stage is a

set of operational processes that can add value to the company and its service goals

(M. Hammers,1990). So, I recommend Hactl to implement business process

reengineering (BPR)for operational improvement.

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In the BPR management model, Michael Hammer puts forward a reflexive point. He

believes that the company should eliminate processes that cannot add more value to

customers and its own operations, instead of blindly accelerating or automating these

processes, but redesigning them. The process should be design that meets the needs of

customers and their own operations and pays attention to things that are important to

the company.

This view is very important to Hactl, because Hactl has always been very proud of the

research and development of COSAC-PLUS, incorporating most of the operating

procedures into the system, but it lacks the most important element for the success of

this system. Manpower training. They ignore the importance of this part to the

company’s performance. When employees have problems with their use, they often

directly cause problems in the cargo handling, causing customers to be dissatisfied

with the company's services. These are the company's operational process design

without careful consideration, the result of blindly automating the operating system.

The BPR principle that Hactl needs most is to determine all the company's operating

procedures and merge some necessary operating procedures. Regarding the problems

in the above evaluation, even if the company does not provide face-to-face operation

28
process training to all employees, at least it should be using the present employee-

specific software developed “Kagor Tiandi" to provide the handling of various goods

and situations in the job position, rather than purely improving the COSAC-PLUS

system to solve the problem.

In the issue of ULD shipping, the most important thing is to send the correctly

numbered ULD to the destination. Therefore, under the redesign of the operating

procedures, what Hactl needs to do is to put the resources in the number that

recognizes the ULD, and its delivery and reception The area of ULD needs to have a

regular communication channel to ensure that the ULD number delivered to it is

correct, even if it is incorrect, the origin of the ULD can be traced through the

COSAC-PLUS system to prevent the loss of ULD. The thing is that this program can

greatly link up the operation between the operation groups which can reduce the time

to continuous notification and resolution of problems due to the loss of ULD, so that

customers will not feel the chaos of the company's operations.

How can BPR achieved in Hactl?

In achieving the results of BPR, Hactl needs to pay attention to several points:

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The first is that the company must have a sufficient understanding of its own

problems. Even if the problems are discovered during the planned business process

reorganization, they need to understand the cause of the problem and make changes

instead of continuing to follow the original plan to the end. BPR is A flexible model

does not require persist in the wrong things.

In addition, Hactl must provide sufficient support in training, whether in the general

operation process or the implementation of the BPR model. Because training is a

cornerstone for the company to maintain professionalism and competitiveness,

without reliable and professional employees, COSAC-PLUS system and any

operation standard will only become a decoration.

Finally, Hactl needs to know the advantages of its competitors and not spend all of

their time under internal management. At present, the reason why many companies

can stand firm in their industry is that they can learn from the excellent aspects of

their competitors and then refine them or break through to get the favor of customers.

Therefore, Hactl's management team needs to deal with more things related to its own

business. Putting resources on breakthroughs the instead of improving is one of the

elements for the company's success.

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31
 Conclusion

In this operation evaluation of Hactl, we can see some traditional companies’ business

operation trends and resource allocation errors. This has led to the company’s actual

service performance not being satisfied with customers. Also, because of unclear

work instructions caused delays in the delivery of goods, employee feeling in pressure

and helplessness by the company's punishment. The company extremely relies on the

COSAC-PLUS system to carry out most of the air cargo operations, but the lack of

complete operation process design makes customers and employees feel dissatisfied

and pressured. In the long run, the company will gradually lose competitiveness or

need to spend more resources to improve service levels. Therefore, in the lean

recommendations, the Business Process Reengineering (BPR) plan is proposed to

improve the company's operating performance.

In Lean Recommendations, I explained the importance of setting multiple goals so

that the workflow follows established goals instead of meeting standards. In addition,

I asked Hactl how the company can solve the above-mentioned problems mentioned

in the operation based on the BPR model, so that the company can consider the needs

of costs, employees and customers at the same time, and make the company's

32
operations more flexible and rationally allocate resources. In the last part, I also put

forward some concepts, namely how Hactl can successfully implement BPR.

Including paying attention to the company's own current and future operational issues

when implementing business process reengineering; understanding the importance of

training professionals to operate, and then practicing; and working with the company

to absorb and analyze information about competitors and business operations to

increase its own advantages and improve the disadvantages. These suggestions are

more flexible, so that the company can continue to increase the value to customers

and employees in the operation, so that the company's operations become simplified

and clear.

In the final report of this company project, I learnt the most is how to combine the

dispersed data or information to form the opinion or standing which is within a lot of

limits in the process. The information is always not complete and comprehensive in

their official website. Furthermore, It is easy to feel confused about applying the data

and putting it on the self-opinion and trying to make a recommendation of that. In

fact, it is a huge trial to me to make this using the supply chain concept and make sure

the data are relative to my opinion.

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From a knowledge level, this final report gave me a deeper understanding of the

logistics operations in the classroom. From studying Hactl, an air freight company, I

understand that a piece of cargo needs pass through much of documents and security

procedures from the source to the local logistics company. For example, enter a large

amount of information in COSAC-PLUS and issue a receipt for receiving the goods

and declare to the Hong Kong Customs. From these complex procedures, good and

complete cargo handling procedures are important for the air cargo industry and even

the import and export trade in Hong Kong. So, I think this research report on Hactl

will be of great help to my future study and work in related industries.

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 Appendix

Appendix 1: The yellow box with bulk cargo

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Appendix 2: The conveyor of the ULD

36
37
 Reference

HACTL. (2021). Hactl, About Hactl, Hong Kong Air Cargo Terminals Limited.
Retrieved from
https://www.hactl.com/en-US/About-Hactl/Facts-Figures.aspx

HACTL. (2021) Hactl, Services, Performance Standards, Hong Kong Air Cargo
Terminals Limited. Retrieved from https://www.hactl.com/en
US/Services/Performance-Standards.aspx

SweetProcess. (2017), The Ultimate Guide to Business Process Reengineering.

M. Hammer (1990). “Reengineering Work: Don't Automate, Obliterate”. Article from

38
 Thanks
Tsang Wai Ming, Part Time Cargo Handler in Hong Kong Air Cargo Terminal.
Position in Cargo breakdown.

Ho Sik Hong, Part Time Cargo Handler in Hong Kong Air Cargo Terminal. Position
in ULD receiving.

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