Miroslav Jakab, an experienced transport and logistics professional with in-depth technical knowledge, skills and wide exposure to the project logistics in different parts of the world. He has first-hand experience with Chinese Module Fabrication Yards logistics, including Processing Trade set up and management both from the Client and also Fabrication Yard perspective.
Since 2016 he led Fluor China Logistics department, including China Fabrication Logistics Desk.

Q: Could you please share your understanding of China processing trade environment impact on EPC project logistics? What do you think are the main challenges and risks of China processing trade related EPC project logistics? How to avoid risks?

A: China processing trade environment can have very significant impact on the logistics of Engineering, Procurement, and Construction (EPC) projects.

Processing trade refers to the import of raw materials or components into China for assembly and re-export, and it has significant impact on the whole EPC project as well as supply chain and logistics of EPC projects.

On the positive side, advantages of fabricating spools, modules, and Floating Production Storage and Offloading units (FPSOs) in a controlled environment of a fabrication yard compared to a stick-build approach are:

Improved quality control:

•          Fabrication yards are equipped with state-of-the-art technology and quality control processes that ensure consistent, high-quality workmanship.
•          This reduces the risk of rework and minimizes the need for rectification work during the construction process.

Increased productivity:

•          Fabrication yards are designed to maximize efficiency and productivity, with the use of cranes and specialized equipment allowing for a more streamlined fabrication process.

Reduced project duration:

•          By fabricating components in a controlled environment, it is possible to reduce the duration of the overall project, as fabrication can be carried out concurrently with other project activities

Improved safety:

•          Fabrication yards typically have well-defined procedures and processes in place to endure a safe working environment, reducing the risk of accidents and injuries

Improved cost control:

•          Fabricating components in a controlled environment allows for better cost control and management, as it reduces the need for costly site mobilization and demobilization processes.

However, we must also consider the potential risks, which include:

Complex regulations and procedures:

•          Processing trade in China is governed by complex regulations and procedures that can change frequently, leading to confusion and uncertainty in the supply chain.

Tariffs and taxes:

•          Import and export taxes, as well as tariffs, can add significant costs to the overall project budget and impact project timelines (about 2000 different HS codes are not applicable for processing trade in China)

Supply chain disruptions:

•          Disruptions in the supply chain can result from factors such as customs delays, logistical challenges, and limited transportation infrastructure, which can impact project schedules and increase costs.

To mitigate the risks of the processing trade, the companies may need to adopt effective supply chain management strategies, such as using qualified and highly professional suppliers, establishing partnerships with logistics providers, and implementing advanced logistics technologies.

Additionally, it is necessary to closely monitor and adapt the changes on the processing trade environment, such as shifts in government regulations or changes in trade agreements.

Proper and exact documentation, timely and cost-effective delivery of material and equipment to fabrication yard, as well as timely and efficient export of finished product are absolute must.

Overall, the processing trade advantages highly prevail over the risks, but only if the processes are set up, applied, and managed properly.

Q: Could you kindly share your opinion about the current status of global EPC project logistics and forecast the development trend of project logistics in 2023?

A: The main responsibilities of an EPC project logistics team include:

•          Careful and thorough planning, including defining scope and contract during Front End Loading
•          Building a highly skilled and efficient project team (including the key partners and logistics services providers) working in cooperative and collaborating manner
•          Optimize the execution to respond to changing circumstances and minimize any potential negative effects

Since early 2020, the EPC project logistics industry has used the challenges it faced as a 'wake-up-call' to adjust its approach and improve its outcomes. The field is rapidly evolving and highly competitive, with companies investing in digital technologies such as AI and cloud computing to streamline operations and increase efficiency. Additionally, container carriers are making inroads into the project logistics segment, with the arrival of large new vessels driving upgrades to port infrastructure. EPC companies are also investing in developing their project logistics teams to optimize project schedules and costs.

In conclusion, the current rapid development of EPC project logistics is a positive trend that will benefit to EPC market in the future.

Q: As a senior industry expert in EPC project logistics, what advices and suggestions can you give to the younger generation?

A: I've been working in logistics for my entire career, and I still find it to be one of the most fascinating and rewarding fields. To be a good logistician, it largely depends on the individual and their own effort, rather than external factors. I also believe that logistics, especially EPC project logistics, is one of the most inclusive professions.

However, it is also one of the most challenging fields. Those interested in EPC project logistics must learn about various aspects such as:

•          Logistics disciplines (container shipping, breakbulk shipping, modules logistics, airfreight, road, rail, and waterway inland haulage for all types of cargo, cargo handling, etc.)
•          International trading and shipping legislation, including main import/export countries regulations and international agreements
•          Payment method and related rules (UCP 600 for documentary letter of credits etc.)
•          Insurance types, coverage, and exclusions
•          Project expertise and basic understanding of other supply chain and construction disciplines in the context of EPC projects
•          Knowledge of language and cultures worldwide
•          Business and logistics geography
•          Data analysis

The list is not exhaustive and becoming a good EPC project logistician requires not only years of experience, but also continuous skill development and market intelligence. The cost may seem high, but the rewards are worth it. The satisfaction of solving a problem that others thought impossible is priceless.

So, to all aspiring young colleagues, I would say: Believe in yourself, work hard, study even harder, network with others, and the success will come.