Logistics Management in China
Content
Logistics Management in China
Challenges, Opportunities and Strategies
China - the rising Star
Source: http://www.chinability.com
China - the rising Star
Source: http://www.chinability.com
China - the rising Star
40% 35% 30% 25% 20% 15% 10% 5% 0% 2001 2002 2003 2004 2005 2006 2007 2008
Annual revenue growth rate of China logistics industry
Source: China Statistical Yearbook
China - the rising Star
Year Transport Cost 11.9 11.0 11.2 11.0 11.0 11.6 11.2 11.2 11.6 12.0 12.1 Inventory Administration Total Logistics Carrying cost cost cost 7.0 7.6 7.5 7.7 6.8 6.2 6.5 6.4 6.4 6.3 6.2 3.2 3.4 3.3 3.5 3.5 3.6 3.6 3.5 3.4 3.1 3.0 22.1 22.0 22.0 22.3 21.4 21.4 21.2 21.1 21.5 21.4 21.3
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Logistics expenditure as
of GDP in China
Comparison: USA
/ Japan
Source: China Federation of Logistics and Purchasing
Table of contents
. Preface . Going global . Why China? . Logistics Management in China . Challenges, Opportunities and Strategies . Conclusion
Going global
9 - 999: global trade has grown three times the rate of worldwide GDP Worldwide exchange USD 9 billion a second
of exporting manufacturers are SME
. Global reach is important to a companyµs survival . Multinational companies are more profitable and grow faster
Source: Lee, H. and Lee, C. (
) / Kouvelis, P. and Niederhoff, J. (
)
Going global
Sourcing from low cost countries Maturing markets Price competition from competitors China is top on everyoneµs list for sourcing of North American manufacturers of Western European manufacturers
9
Why China?
Source: Koudal, P. and Engel, D. (
)
Why China?
Great opportunity for low-cost sourcing of sourcing expenditures save up to Fast-growing market
to
of the cost of goods sold is logistics cost double the level in Europe and the US
Source: Koudal, P. and Engel, D. (
)
Logistics Management in China
direct outcomes, economic development, market growth ¾ increasing demand for transportation and logistics
Logistics costs in China: 999 - USD billion / USD more than indrease in
billion (IMF statistics) years
Chinese enterprises: still keep all-in-one business framework No logistics provider can achieve a significant market share
Source: Feng, G. et al. ( )
Logistics Management in China
Government Support ÄFive-Year Development Plan³
Reduce logistics cost by in GDP Logistics companies: in logistics More than industry
Develop a supply chain network
Build up logistics business unions
Source: Feng, G. et al. (
)
Challenges, Opportunities & Strategies
flow of goods Suppliers Warehouse regulations Warehouse Client
flow of information
Challenges, Opportunities & Strategies
higher transport costs than in developed markets No logistics company can offer nationwide distribution
flow of goods Suppliers Warehouse regulations Warehouse Client
flow of information Average stock time exceeds days
of logistics centers are empty
of on-road trucks transport their own goods are empty loaded average speed: km/h
Challenges, Opportunities & Strategies
Lack of logistics standards Profits from value added services are very low
flow of goods Suppliers Warehouse regulations Warehouse Client
flow of information Each new logistics Äproduct³ requires a new license
Lack of regional or national information exchange platforms
Different regulations hinder creation of national networks
Challenges, Opportunities & Strategies
Separate licences and various governing bodies for different activities
Ministry of Communications, Ministry of Commerce, PRC General Administration of Customs, State General Administration for Quality Supervision Inspection and Quarantine (AQSIQ), Ministry of Railway, State Administration of Industry and Commerce, State Administration of Taxation, State Administration of Foreign Exchange
Challenges, Opportunities & Strategies
distinct regions with varying: - regulatory - legal - infrastructural - cultural - and language differences Underdeveloped infrastructures Fragmented distribution systems Insufficiant techonlogy Onerous regulations
Challenges, Opportunities & Strategies
Big room for development for logistics consulting companies
Developing and expanding commodity exchange markets
Development and more competition in logistics market Lower circulation costs Increase logistics efficiency Adopt comprehensive logistics management
Great opportunites for logistics companies
Challenges, Opportunities & Strategies
Build logistics information systems Manufacturing and commercial companies outsourcing their logistics services Supply chain as seperate bussines unit as important as sales and marketing Strategic partnership between manufacturers and logistics companies Further legal reforms in line with WTO entry Stronger legal frameworks to protect foreign investors from political risks and bureaucratic red tape
) / Koudal, P. and Engel, D. ( Sources: Bolton, J. and Liu, W. ( Leung, K. and Forster, P. ( ) / Feng,G. et al. ( ) / Chan, F. ( Huang, S. ( ) ) )
Conclusion
Very high market potential High growth rates in logistics Government enthusiasm is very high Situations change very fast A lot of challenges... ... but also opportunites exist
You can not ignore the development of the Chinese market as multinational company But be prepared!
sources
Lee, L. and Lee, C. ( ) ÄPreface³ in Lee, L. and Lee, C. (eds.), Building Supply Chain Excellence in Emerging Economies, New York, Springer, pp. xiii-xviii. Kouvelis, P. and Niederhoff, J. ( ) ÄOn the Globalization of Operations and Supply Chain .
Strategies³ in Lee, L. and Lee, C. (eds.), Building Supply Chain Excellence in Emerging Economies, New York, Springer, pp. Koudal, P. and Engel, D. ( pp. . ) ÄIntegrated Fulfillment in Todayµs China³ in Lee, L. and Lee, C.
) ÄGlobalization and Emerging Markets³ in Lee, L. and Lee,
C. (eds.), Building Supply Chain Excellence in Emerging Economies, New York, Springer,
Bolton, J. and Liu, W. ( .
(eds.), Building Supply Chain Excellence in Emerging Economies, New York, Springer, pp.
Feng, G. et al. ( 99.
) ÄLogistics Management in China³ in Lee, L. and Lee, C. (eds.), -
Building Supply Chain Excellence in Emerging Economies, New York, Springer, pp.
sources
Leung, K. and Forster, P. ( ) ÄDHL in China³ in Lee, L. and Lee, C. (eds.), Building . Supply Chain Excellence in Emerging Economies, New York, Springer, pp. Chan, F. ( Chinability ( ) ÄLogistics Management in China³ UNEAC Asia Papers, No. ) ÄFDI inflows 9 ³ (online) (cited November ). Available
from <http://www.chinability.com/FDI.htm> Chinability ( ) ÄGDP growth 9 ³ (online) (cited November ). Available
from <http://www.chinability.com/GDP.htm> Huang, S. ( ) ÄGrowing pains for Chinaµs PL market³ (online) (cited November >
). Available from <http://www.cargonewsasia.com/secured/article.aspx?article=
Challenges, Opportunities and Strategies
China - the rising Star
Source: http://www.chinability.com
China - the rising Star
Source: http://www.chinability.com
China - the rising Star
40% 35% 30% 25% 20% 15% 10% 5% 0% 2001 2002 2003 2004 2005 2006 2007 2008
Annual revenue growth rate of China logistics industry
Source: China Statistical Yearbook
China - the rising Star
Year Transport Cost 11.9 11.0 11.2 11.0 11.0 11.6 11.2 11.2 11.6 12.0 12.1 Inventory Administration Total Logistics Carrying cost cost cost 7.0 7.6 7.5 7.7 6.8 6.2 6.5 6.4 6.4 6.3 6.2 3.2 3.4 3.3 3.5 3.5 3.6 3.6 3.5 3.4 3.1 3.0 22.1 22.0 22.0 22.3 21.4 21.4 21.2 21.1 21.5 21.4 21.3
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Logistics expenditure as
of GDP in China
Comparison: USA
/ Japan
Source: China Federation of Logistics and Purchasing
Table of contents
. Preface . Going global . Why China? . Logistics Management in China . Challenges, Opportunities and Strategies . Conclusion
Going global
9 - 999: global trade has grown three times the rate of worldwide GDP Worldwide exchange USD 9 billion a second
of exporting manufacturers are SME
. Global reach is important to a companyµs survival . Multinational companies are more profitable and grow faster
Source: Lee, H. and Lee, C. (
) / Kouvelis, P. and Niederhoff, J. (
)
Going global
Sourcing from low cost countries Maturing markets Price competition from competitors China is top on everyoneµs list for sourcing of North American manufacturers of Western European manufacturers
9
Why China?
Source: Koudal, P. and Engel, D. (
)
Why China?
Great opportunity for low-cost sourcing of sourcing expenditures save up to Fast-growing market
to
of the cost of goods sold is logistics cost double the level in Europe and the US
Source: Koudal, P. and Engel, D. (
)
Logistics Management in China
direct outcomes, economic development, market growth ¾ increasing demand for transportation and logistics
Logistics costs in China: 999 - USD billion / USD more than indrease in
billion (IMF statistics) years
Chinese enterprises: still keep all-in-one business framework No logistics provider can achieve a significant market share
Source: Feng, G. et al. ( )
Logistics Management in China
Government Support ÄFive-Year Development Plan³
Reduce logistics cost by in GDP Logistics companies: in logistics More than industry
Develop a supply chain network
Build up logistics business unions
Source: Feng, G. et al. (
)
Challenges, Opportunities & Strategies
flow of goods Suppliers Warehouse regulations Warehouse Client
flow of information
Challenges, Opportunities & Strategies
higher transport costs than in developed markets No logistics company can offer nationwide distribution
flow of goods Suppliers Warehouse regulations Warehouse Client
flow of information Average stock time exceeds days
of logistics centers are empty
of on-road trucks transport their own goods are empty loaded average speed: km/h
Challenges, Opportunities & Strategies
Lack of logistics standards Profits from value added services are very low
flow of goods Suppliers Warehouse regulations Warehouse Client
flow of information Each new logistics Äproduct³ requires a new license
Lack of regional or national information exchange platforms
Different regulations hinder creation of national networks
Challenges, Opportunities & Strategies
Separate licences and various governing bodies for different activities
Ministry of Communications, Ministry of Commerce, PRC General Administration of Customs, State General Administration for Quality Supervision Inspection and Quarantine (AQSIQ), Ministry of Railway, State Administration of Industry and Commerce, State Administration of Taxation, State Administration of Foreign Exchange
Challenges, Opportunities & Strategies
distinct regions with varying: - regulatory - legal - infrastructural - cultural - and language differences Underdeveloped infrastructures Fragmented distribution systems Insufficiant techonlogy Onerous regulations
Challenges, Opportunities & Strategies
Big room for development for logistics consulting companies
Developing and expanding commodity exchange markets
Development and more competition in logistics market Lower circulation costs Increase logistics efficiency Adopt comprehensive logistics management
Great opportunites for logistics companies
Challenges, Opportunities & Strategies
Build logistics information systems Manufacturing and commercial companies outsourcing their logistics services Supply chain as seperate bussines unit as important as sales and marketing Strategic partnership between manufacturers and logistics companies Further legal reforms in line with WTO entry Stronger legal frameworks to protect foreign investors from political risks and bureaucratic red tape
) / Koudal, P. and Engel, D. ( Sources: Bolton, J. and Liu, W. ( Leung, K. and Forster, P. ( ) / Feng,G. et al. ( ) / Chan, F. ( Huang, S. ( ) ) )
Conclusion
Very high market potential High growth rates in logistics Government enthusiasm is very high Situations change very fast A lot of challenges... ... but also opportunites exist
You can not ignore the development of the Chinese market as multinational company But be prepared!
sources
Lee, L. and Lee, C. ( ) ÄPreface³ in Lee, L. and Lee, C. (eds.), Building Supply Chain Excellence in Emerging Economies, New York, Springer, pp. xiii-xviii. Kouvelis, P. and Niederhoff, J. ( ) ÄOn the Globalization of Operations and Supply Chain .
Strategies³ in Lee, L. and Lee, C. (eds.), Building Supply Chain Excellence in Emerging Economies, New York, Springer, pp. Koudal, P. and Engel, D. ( pp. . ) ÄIntegrated Fulfillment in Todayµs China³ in Lee, L. and Lee, C.
) ÄGlobalization and Emerging Markets³ in Lee, L. and Lee,
C. (eds.), Building Supply Chain Excellence in Emerging Economies, New York, Springer,
Bolton, J. and Liu, W. ( .
(eds.), Building Supply Chain Excellence in Emerging Economies, New York, Springer, pp.
Feng, G. et al. ( 99.
) ÄLogistics Management in China³ in Lee, L. and Lee, C. (eds.), -
Building Supply Chain Excellence in Emerging Economies, New York, Springer, pp.
sources
Leung, K. and Forster, P. ( ) ÄDHL in China³ in Lee, L. and Lee, C. (eds.), Building . Supply Chain Excellence in Emerging Economies, New York, Springer, pp. Chan, F. ( Chinability ( ) ÄLogistics Management in China³ UNEAC Asia Papers, No. ) ÄFDI inflows 9 ³ (online) (cited November ). Available
from <http://www.chinability.com/FDI.htm> Chinability ( ) ÄGDP growth 9 ³ (online) (cited November ). Available
from <http://www.chinability.com/GDP.htm> Huang, S. ( ) ÄGrowing pains for Chinaµs PL market³ (online) (cited November >
). Available from <http://www.cargonewsasia.com/secured/article.aspx?article=
