At the Center of the World

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here Hong Kong companies have truly distinguished themselves is in the growing field of supply-chain management?rather than merely sourcing, they can supervise the entire production process, handling everything from merchandise design to quality control to transportation. Some firms will even conduct investigations into factories to ensure that they comply with labor and safety regulations, thereby protecting U.S. companies from attacks by human-rights groups. "We're doing more in terms of services than we ever comprehended," says Cicetti of William E. Connor & Associates.

Hong Kong's trading companies have moved into sectors beyond consumer goods. Noble Group, founded in 1987 in Hong Kong by a former steel trader named Richard Elman, sources commodities ranging from soybeans to petrochemicals to aluminum. A Chinese steel mill searching for a well-priced and reliable supply of iron ore can hire Noble to find it, deliver the ore, and then market the steel made from it. For some products, Noble controls the entire supply chain?for example, it grows oilseeds in Argentina, stores them in Noble-owned warehouses, ships them to China from Noble-controlled Argentine ports, processes and refines them in Noble factories on the mainland, and delivers the oil to customers. With 72 offices in 42 countries, Noble is now the second-largest coal merchant in the world and a major exporter of Asian-grown coffee. The group is constantly looking for the next big thing. One of its latest lines is ethanol, an alternative fuel made from agricultural products that is becoming more attractive as oil prices rise.

Noble is a large investor in ethanol factories in the U.S. "We have to constantly reinvent ourselves since markets are always changing," says Elman.

Similarly opportunistic, some Hong Kong-based manufacturers are now reinventing themselves by providing supply-chain-management services to big customers. TAL Apparel, which makes one out of every seven dress shirts sold in the U.S. at its factories located in Asia and North America, nimbly adjusts its production for major customers like J.C. Penney based on week-to-week sales results. Instead of stocking up on huge, costly inventories, retailers can send orders to TAL each week. TAL then ships out the product in four days or less?emergency orders can be rushed through in a mere four hours. TAL even boxes up the apparel into shipments prepared for each individual retail store. "We don't call ourselves a manufacturing company," says TAL managing director Harry Lee. "We call ourselves a service provider."

Companies need to be more than just nimble. Firms such as Li & Fung and Noble Group have been successful because they've invested millions of dollars in sophisticated computer systems that make it possible to micro-manage logistics as never before. Noble Group has a ship-management division that oversees the operations of 150 vessels around the world, all from the comfort of a Hong Kong office. Software tracks the fleet on an on-screen map, with the position of each vessel marked by an icon. Click on one and the computer calls up every scrap of data you can imagine?the ship's current route and historic movements, its cargo, its entire crew roster, and its maintenance schedule. One ship, the program tells you, is dropping off 6,000 tons of fruit in Rotterdam, another is discharging steel products in Tanzania, while yet another is loading methanol in Malaysia. Port operator Hutchison Whampoa has an equally impressive system to help run its Hong Kong port. Incoming ships send data on their cargoes to Hutchison's operations center on shore. That information then gets fed through computers that plan the loading and unloading process to make it as fast as possible. Hutchison has spread the technology around. With 44 ports in 22 countries, including Panama, Germany and Egypt, it is now the world's largest port operator. Hong Kong outfits "are exporting expertise and management to other countries," says John Meredith, group managing director of Hutchison's port business. As Hong Kong's economy becomes increasingly knowledge-based, transferring know-how globally is "Hong Kong's fastest-growing occupation," he says.

It's the combination of lessons from the old-style China trade coupled with modern high technology that has helped Hong Kong remain a force in international commerce. "Rather than being a follower, we're leading the trends," says Peter Solomon, chief executive of Linmark Group, a Hong Kong-based supply-chain-management company. Someone?someplace?has to be globalization's enabler. Turns out, it's that famous barren rock in the South China Sea.