Shipping problem persists, with Shanghai lockdown impact to come

Global shipping and supply chains are still far from normal following the initial disruptions from the Covid pandemic and logistics companies are bracing for another likely hit from the gridlock in Shanghai’s port.

In today’s Face-to-Face interview, Samuel Wilson, CEO of logistics firm TKHS, tells us about some of the challenges he has been facing in providing Asia’s integrated resorts with the gaming equipment and other supplies that they need.

He also tells us where he sees the most potential in Asia and offers up some insight into one of the most interesting problems he has had to solve, which involved Sheldon Adelson and his chair cushions. 

AGBrief: So thank you very much for joining us today Samuel. I wonder whether you could start off by telling us a little bit about what you actually do at TKHS.

TKHS stands for Turnkey Hospitality Services. It’s my company. I established this almost 10 years ago. Basically, we are supporting casinos, but also hotel developers in getting their properties open in terms of logistics services. If somebody is building a new property, we will get involved in transporting all of the items that they need, from gaming equipment, to furniture, to bed sheets to glassware.

We organize all of those deliveries from wherever they’re coming from around the world. We’re dealing with the different suppliers, the vendors that they’re buying from and organizing the shipping arrangements, whether it’s sea freight, air freight, tracking and managing the customs clearance, that’s a very important part in the process, which varies from country to country.

So we oversee that, and more often than not, we set up a warehouse specifically for each project we receive everything into. And then we can deliver to the site just in time to fit the schedule. And we also provide an installation service for many items.

AGBrief: What would you say the biggest challenges have been for you when it comes to the gambling and hospitality industry?

In general,  the gaming industry is very demanding in terms of time. That’s the biggest challenge that everything just needs to happen now. Often decisions are made late in terms of logistics planning. There’s a lot of discussion about design and other types of planning for the project. But the logistics can be underestimated sometimes.

And it’s often late in the game that this comes to a head and they need to actually plan for the logistics, so we’re often brought in quite late, maybe 12 months out from the opening. The biggest challenge by far would be working to the timeframe that the developers have. But that’s the business we’re in and we’ve adapted to that. We have established procedures and processes and experienced teams and systems. So we’re well equipped to deal with that. 

AGBrief: So you mentioned working across several Asian countries? Do they all have their own unique sets of challenges? Which would you say was the more demanding?

They definitely do all have their own sets of challenges. Maybe start with Macau, as I used to live there and have done many projects over the years. There, the number one challenge is the manpower, especially as working in a warehouse, or driving trucks, or doing installation on site is not the most desired job. So in Macau, that’s been by far the biggest challenge.

In the Philippines, the infrastructure is pretty weak. The port is not too bad, but the airport certainly has limited capacity and it’s a little bit more complicated to deal with than in other countries. Then there’s the whole road network here, finding good quality warehouses, these kinds of things. And also the weather conditions.

We have typhoons, earthquakes, volcanoes, tsunamis, everything is here. So that’s also one of the big, big challenges. For us, the Philippines and Vietnam, are the most challenging. Vietnam is also not an easy place to work. Customs clearance is very challenging there with a lot of special requirements. So that’s also the reason why we did this joint venture as over the years I’ve realized it’s important to have a good strong setup on the ground. 

AGBrief: You just mentioned you’re expanding in Vietnam. Tell us a bit more about that and why you see Vietnam as being perhaps one of the most promising destinations in terms of growth in Asia. 

I attend various events not only for gaming, but also for hospitality. And the three countries that kept coming up were Vietnam, Indonesia, and the Philippines. We also have a contract with Marriott Hotels, which is the biggest hotel company in the world, and looking at their pipeline we also see there’s a lot going on and a lot coming up in these countries. So specifically for gaming in Vietnam, we really saw a lot happening there from Hoiana to expansions at Ho Tram to Phu Quoc so it was very clear that it was somewhere we needed to be on the map.

AGBrief: We’ve been seeing for a few years now that there have been disruptions to global supply chains. What are you seeing on the ground?

It’s far from settled down, you know. These issues started due to COVID back in early 2020. The initial issue was a shortage of sea freight containers. Typically, a lot of the cargo comes out of Asia, predominantly China, and ships around the world. But as various countries were going into lockdown, these containers couldn’t get emptied, delivered to factories or returned back to the port. So there was just a slowdown in all of the countries, which meant that the empty containers couldn’t get back to Asia quickly enough to pick up the next load.

So that’s how it all started with a restriction on the availability of the containers that resulted in a lot of delayed shipments, but also really huge increases in shipping costs, and also a lot of unreliability. However, unfortunately, as we went through COVID, the shipping lines who actually own these containers and own the vessels, have capitalized on this situation, and we saw, all-time record high profits from a lot of the shipping lines over the last two years.

They had been through a tough, two or three years before that and some shipping lines went bankrupt, because it was becoming so cutthroat so I can understand to some extent, but it’s really been getting out of hand. We saw orders being canceled because it wasn’t worth shipping anymore. I would say it has improved. Over the past six months or so, rates have started to drop down to some extent, but still a long way off what they were pre COVID. The main challenge right now is the issues in Shanghai due to the strict lockdown.

There’s hundreds of vessels, literally queuing to get into Shanghai and that really messes up the schedule for the whole world. What we’re expecting as we come out of the lockdown is that actually we might go into a more severe lack of supply, again, with the containers, because there’ll be a backlog of a lot of cargo and product that needs to be shipped out. So we’re kind of bracing ourselves for that at the moment. 

AGBrief: Are you seeing any moves among any of your clients to source more locally, given these issues?

To some extent, but it is a challenge, right, especially in this industry. There are specific suppliers that are really experts in producing slot machines or playing cards or table games and so I think it’s hard to get away from those really experienced reputed licensed, you know, suppliers that have all the relevant accreditations and things but but yeah, for some other products, yes, we have seen that move a little bit. 

AGBrief: To put you on the spot, over your career what has been the biggest challenge? 

I remember one issue actually, many years ago, for Sands when Sheldon Adelson was coming in, and I think this was for the Venetian Macau project. The suite that he needed to stay in that night was missing the cushions of the chair and these were actually in China. We got the call at 6pm, that evening that he was arriving at midnight, and these had to be there and at that point, you can’t move cargo across the border as customs already closed.

So the only way to do this was to go over to China and hand carry these over. So I personally did that and delivered them at about 11.30 pm, so that was a memorable occasion. We had lots of challenges, we’ve done charters of planes for urgent cargo that had to come in for one project right before Christmas, which is the most difficult time for air freight. So, this is also what makes it exciting. There are all these unforeseen issues that come up.

AGBrief: Is there anything else you’d like to add?

I think it’s an interesting time. I think the logistics has been very challenging throughout the whole COVID situation. But I think there are also a lot of other changes going on and it’s still unclear how things will develop moving forward in the gaming industry. With the restrictions that are still in place all businesses in Macau are really feeling it after two and a half years. That’s really challenging. We have our eyes open to other markets where we can grow and where we think there’s potential. That’s really our focus now to grow in Vietnam, grow in Indonesia, and also the Middle East. For hospitality. Saudi Arabia has really huge plans.