Supply chain Global Sourcing for Hanjin Shipping research paper.docx
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Supply chain Global Sourcing for Hanjin Shipping research paper.docx
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SupplychainGlobalSourcingforHanjinShippingresearchpaper
HanjinBankruptcyandItsInfluenceonGlobalSupplyChain
ShuhuiSun
TheOhioStateUniversity
Abstract
OnAugust31st,2016,HanjinShippingCo.Ltd.officiallyfiledthebankruptcyduetothelackofsolvency,leadinglotofmishandlingcargoshipmentstallingintheharbor.Theworldwidemaritimeindustrywasshockedbytheevent,consideringwhichshippingcompanywouldbenext.Themajorreasonsforbankruptcymainlyresultfromtheaftermathofworldeconomicrecession,overexpansioninHanjinpastdecadebusinessstrategyandlosebusinessasU.S.Navycontractors.Whatiscertainisthatthebankruptcyleavesasignificantimpactininternationaltransportationandcauseissuesforcargoownersandharboroperationcompanies.Inthispaper,thebankruptcyissueswillbediscussedandanalyzethereason.Theriskpreventionandconcernwillalsobementionedaswell.
Keywords:
HanjinShipping,internationalshipping,outsourcing
HanjinBankruptcyandItsInfluenceonGlobalSupplyChain
TheHanjinShippingCo.Ltd.isarenownedcontainershippingcompanyinthepastdecade.Thecontainershippingindustryriseswhentheglobalindustryprospers,andfallswhentheeconomicrecesses.TheshockingnewsoccursandworldwidenewsfocusonthesmallcountrySouthKoreawithitsmassiveaffluenceininternationalshippingindustry.ThesignofthedestinyofbankruptcyforHanjinShippingshowslongbeforetheactualbankruptcyoccurrence.Whatisthelaststrawforthecompanyistherefusalofbanktoleaseloantothecompany,leadingtotheimmediatebreakdowninthefinancialcashflowanddeclaringofthebankruptcy.
TheserviceprovidedbytheHanjinShippingCo.Ltd.mainlyfocusesonthemaritimeshippingwithrelevantterminal,containerandbulkcargoservice.Bythetimeofbankruptcy,HanjinShippingwasoneoftheworldTop10Carrierinthencontainershippingindustry.AccordingtoBelgum(2016),itislistedasseventhinmaritimeshippingindustry,andistheserviceprovidertoapparelsas Hanesbrands, UnderArmour,retailers J.C.Penney and FredMeyerandgroceryretailerKroger.Sincethecompanyhasitsrenownedreputation,alotoffreightforwardersandcargoshippersdonotexpectthebankruptcy.ThelossofthesestakeholdersandlawsuitsfollowthebankruptcyofHanjinevent.Thebankruptcyeventalsoleadstowidespreaddiscussioninsocialmediaandargumentsintheworld.Therearemanyopinionstowardthereasonofbankruptcy.Inthisarticle,themajorthreereasonsarebelievedtobetherootofbankruptcy.
∙HanjinandItsRelationshipwithU.S.NavyasContractor
∙OverExpansionofBusiness
∙EconomicRegressionandBearMarketinShippingIndustry
Theinfluenceandchaoscausedbythebankruptcyareanalyzedatendofthepaper.Suggestionstorelevantstakeholderswillbelistedtoretailerstohaveabetterriskmanagementandcontingencyplaninfuture.
HistoryofHanjinShippingCo.Ltd
TohaveabetterunderstandoftheHanjinShippingCo.Ltd(HanjinShipping),thehistoryofthecompanyanditsmothercompanyHanjinGroupisintroducedhere.Thestagesofdevelopmentcanbedividedintofourstages.
∙FoundationPeriod
∙DevelopingPeriod
∙FastGrowingPeriodandSecondGrowthPeriod
∙HanjinCurrentPeriod
FoundationPeriod
TheHanjinShippingCo.Ltd.ispartoftheHanjinGroup.TheHanjinGroupwasestablishedon1stNovember,1945(Hanjin,2017),byMr.ChoongHoonCho.Bythetimeof1958,HanjinstartedacloserelationshipwithtransportationofAmericanForcesmunitionsandpicking&movingservice.TheclosebusinesswithAmericanForcelaidthefoundationfortheHanjin,whichlaterbecomethemothercompanyofHanjinGroup,whichlaterbecomesthelargestlogisticscompanyinSouthKorea.
DevelopingPeriod
Bythetimeof1966whentheVietnamWarhappened,HanjinbecomeatransportationcontractorofU.S.government.ThecompanyactivelyinvolvedinthebusinesswithUnitedStatesanddevelopedfastduringtheperiodwithair,landandsea.HanjinShippingwasestablishedin1977andKoreanAviationPublicCorporation(currentKoreanAir)wasacquiredin1969.Duringthisperiodoftime,theKoreaneconomicalsogrewrapidlyandHanjinwasnolongeraregionalplayerintheshippingindustry.ItexpandeditsbusinessintoKuwaitandSaudiArabia,launchingitspathtostevedoringindustry.
FastGrowingPeriodandSecondGrowthPeriod
In1983,Hanjinstarteditscoastalshipping,containerizedshippingandmetalshippingthroughmajorports.Thebusinesssteppedfootinthebulkcargoshippingsuchasgrainandmineral,withhugeinvestmentinsilofacilities.Theservicetransformedintoanintegratedlogisticsservice,whichmeansthatthestrengthinintegrationtoprovideintermodaltransportation.DuringSecondGrowthPeriod,Hanjincompletedconstructionofcuttingedgefacilities,andexpansionwithacquisitionofShinsegaeDreamExpress.
HanjinCurrentPeriod
TheHanjinGroupisstillleadingcompanyindevelopingnewmarketsuchasChina,CentralAsia,Europe.However,thebankruptcyofHanjinShippingCo.Ltd.indicatesthepotentialproblemsastheresultsofextremelyfastexpansionandanewbusinessstrategychangeinthecurrentHanjinGroup.ThemothercompanyHanjinGroupChairman-Mr.Cho(Reuters,2017)wasunderinvestigationforhissuspiciousimproperfunduseforpersonalpurposeinOctober16th,2017,oneyearafterthebankruptcyofHanjinShipping.ThisalsoindicatesasevermanagementissueinHanjinShippingandHanjiinGroup.
BankruptcyofHanjinShipping
ThedayofAugust31St,2016wastheendofHanjinShipping,acompanythathasbeentheoneofthelargestcontainerlinecarrierwithmorethan60lineallovertheworld.ThisshippingcompanieslikemanyothershippingcompanyCOSCOandMSC,tendtohaveastronggovernmentbackgroundandsupport.Overthedecades,theshippingcompaniesenjoythetasteandaidfromgovernmentindifferentchannelssubsidiary,taxreduction,lowerinterestrateloanandothers.Itseemstopublicthatthenewsreleaseofthefinalcourtordertoliquidaterepresentstheendofthecompany.However,manythingshappenedduringthewholebankruptcyprocess,inwhichmanypartiesinvolved.Tohaveanunderstandthewholepictureofthebankruptcy,thetimelineoftheissueisorganized.
ThetimelineofthebankruptcycanbeshownasfollowingTable1:
Table1
TimeLineofHanjinBankruptcy
Time
BankruptcyAnnouncement
Apr.2016
Applicationtocreditorsfordebtrestructuring.(Nam,2016a)
Aug.312016
Filedfor receivership attheSeoulCentralDistrictCourtandrequestedthecourttofreezeitsassets(Lee&Lee,2016).
Sep.22016
HanjinShippingfiledpapersinU.S.Bankruptcycourttoreleasevessel(“JOC”,2016).
Sep.5,2016
NewsofHanjin'sbreakdownreleased,andcreditorsinitiatedawaveofassetconfiscation.VesselsofHanjinwasdeniedinmanyports(Ryan,2016).
Oct.18,2016
SellassetsusedinAsia-to-U.S.routestopotentialbidderHyundaiMerchantMarine(“Reuters”,2016).
Oct.24,2016
ShutdownofficeinEurope(Nam,2016b).
Nov.122016-Jan2017
Lay-offseamanandemployee2,500marinecrew(“MaritimeBusiness,2016).
Feb.172017
DeclarationofbankruptcybySouthKoreancourts.
Feb.2017
SMLineofSamraMidas(SM)Grouppurchased5vesselsofHanjin(HanjinBremerhaven,HanjinBudapest,HanjinPortKelang,HanjinTianjinandHanjinXiamen)totakeoveritsU.S.-Asianroute.(WorldMaritimeNews,2017)
Mar.2017
SMLinepurchased2portsfromHanjininthecitiesofGwangyangandIncheon
Oct.2017
SouthKoreapolicearrestedtheChairmanCho(Reuters,2017)
FromApril2016toAugust2016,whenfinaldeclarationofbankruptcywasannounced,ithadbeenfourmonthsstrugglingandHanjinhadmadethelastattempttosurvive.Beforethebankruptcyhappened,thebiggesttwoshippingcompanyinSouthKoreahadbeenunprofitableforyears.ThesizeofdebtforcompanybecameaheavyburdentofinancialhealthwiththedebtofHanjin -6trillionwonequivalentof$5.7billionin2015,andHyundai-4.8trillionwon(Nam,2016a).
AccordingtoBelgum(2016),thechairman,ChoYang-ho,andformerHanjinShippingChairChoiun-younggaveHanjinShippingpersonalassetsof$35.7millionand$8.9millionandalongsidethis,KoreanAirLinesCo.,alsocameupatotalof$54milliontoensurethereleaseofcargo.However,theactionscouldonlyensurethecargotobereleasedtotheconsignee,andHanjinShippingremainedinstruggle.OtherSouthKoreanofficialsandgovernmentalsotriedtohelpHanjinShippingaswell.However,alltheseattemptsendedupuseless.
Whenbankruptcyhappened,Hanjincausedalotoftroubletoitscustomers,eventhoughtherewereeffortsmadetoreleasethecargotoowners.Thebiggestconcernwhypeoplefocusonthebankruptcyisthatthedelayofshipment.TherelatedlogisticscompaniesandstevedoresorterminaloperatorsrefusedtoprovideservicetoHanjinShipping.ThevesselofHanjinwasalsorejectedbyterminalsorconfiscatedtothecreditors.Thedelayofshipmentcausednotonlythefluctuationinshippingindustry,butalsocongestioninharbor.Theretailerandcargoownerssufferedlossfromthebankruptcy.Inaddition,peoplewhoworkedforHanjinwerealsoaffectedandgotlaidoff.
Thedetailedreactionofdifferentstakeholders–retailer,competitors,relatedlogisticscompaniesandterminaloperators–isanalyzedinaftermathinfluenceofbankruptcy.
TheAftermathInfluenceofBankruptcy
Somestakeholdersperformtheemergencyplantoensureon-timedelivery,andsomestakeholdersbenefitsfromthebankruptcy.Retailers,competitorsofHanjinandLogisticscompanyhavedifferentreact
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