logistics management in china

8/7/2019 Logistics Management in China

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Logistics Management in

China

Challenges, Opportunities and

Strategies


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China - the rising Star

Source: http://www.chinability.com


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Source: http://www.chinability.com


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Source: China Statistical Yearbook

0%

5%

10%

15%

20%

25%

30%

35%

40%

2001 2002 2003 2004 2005 2006 2007 2008

Annual revenue growth rate of China logistics industry


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Source: China Federation of Logistics and Purchasing

Logistics expenditure as of GDP in China

Year TransportCost

InventoryCarrying cost

Administrationcost

Total Logisticscost

1994 11.9 7.0 3.2 22.1

1995 11.0 7.6 3.4 22.0

1996 11.2 7.5 3.3 22.0

1997 11.0 7.7 3.5 22.3

1998 11.0 6.8 3.5 21.4

1999 11.6 6.2 3.6 21.42000 11.2 6.5 3.6 21.2

2001 11.2 6.4 3.5 21.1

2002 11.6 6.4 3.4 21.5

2003 12.0 6.3 3.1 21.4

2004 12.1 6.2 3.0 21.3

Comparison: USA / Japan


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Table of contents

. Preface

. Going global

. Why China?

. Logistics Management in China

. Challenges, Opportunities and Strategies

. Conclusion


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Going global

9 - 999: global trade has grown three times the rate of

worldwide GDP

Worldwide exchange USD billion a second

9 of exporting manufacturers are SME

. Global reach is important to a companys survival

. Multinational companies are more profitable and grow faster

Source: Lee, H. and Lee, C. ( ) / Kouvelis, P. and Niederhoff, J. ( )


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Going global

Sourcing from low cost countries

Maturing markets

Price competition from competitors

China is top on everyones list for sourcing

of North American manufacturers

9 of Western European manufacturers

Why China?

Source: Koudal, P. and Engel, D. ( )


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Why China?

Great opportunity for low-cost sourcing

save up to of sourcing expenditures

Fast-growing market

Source: Koudal, P. and Engel, D. ( )

to of the cost of goods sold is logistics cost

double the level in Europe and the US


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Logistics Management in China

direct outcomes, economic development, market growth

increasing demand for transportation and logistics

Logistics costs in China:

999 - USD billion / USD billion (IMF statistics)

more than indrease in years

Chinese enterprises: still keep all-in-one business framework

No logistics provider can achieve a significant market share

Source: Feng, G. et al. ( )


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Logistics Management in China

Source: Feng, G. et al. ( )

Government Support

Five-Year Development Plan

Reduce logistics cost by

in GDP

Logistics companies:

More than in logistics

industry

Develop a supply chain

network

Build up logistics business

unions


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Challenges, Opportunities & Strategies

Suppliers ClientWare-

house

Ware-

houseregulations

flow of goods

flow of information


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house

Ware-

houseregulations

flow of goods

flow of information

No logistics companycan offer nationwide

distribution

higher transport coststhan in developed markets

of on-road trucks transport

their own goods

are empty loaded

average speed: km/h

Average stocktime exceeds

daysof logistics

centers are empty


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house

Ware-

houseregulations

flow of goods

flow of information

Profits from value added

services are very low

Lack of regional or national

information exchange

platforms

Lack of logisticsstandards

Each new logistics product

requires a new license

Different regulations hinder

creation of national networks


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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

ofTaxation, State Administration of Foreign Exchange


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distinct regions with varying:- regulatory

- legal

- infrastructural

- cultural- and language differences

Underdeveloped infrastructures

Fragmented distribution systems

Insufficiant techonlogy

Onerous regulations


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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


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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

Sources: Bolton, J. and Liu, W. ( ) / Koudal, P. and Engel, D. ( )

Leung, K. and Forster, P. ( ) / Feng,G. et al. ( ) / Chan, F. ( )

Huang, S. ( )


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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!


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sources

Lee, L. and Lee, C. ( ) Preface in Lee, L. and Lee, C. (eds.), BuildingSupply Chain

Excellence in EmergingEconomies, New York, Springer, pp. xiii-xviii.

Kouvelis, P. and Niederhoff, J. ( ) On the Globalization of Operations and Supply Chain

Strategies in Lee, L. and Lee, C. (eds.), BuildingSupply Chain Excellence in Emerging

Economies, New York, Springer, pp. - .

Koudal, P. and Engel, D. ( ) Globalization and Emerging Markets in Lee, L. and Lee,

C. (eds.), BuildingSupply Chain Excellence in EmergingEconomies, New York, Springer,

pp. - .

Bolton, J. and Liu, W. ( ) Integrated Fulfillment in Todays China in Lee, L. and Lee, C.

(eds.), BuildingSupply Chain Excellence in EmergingEconomies, New York, Springer, pp.- .

Feng, G. et al. ( ) Logistics Management in China in Lee, L. and Lee, C. (eds.),

BuildingSupply Chain Excellence in EmergingEconomies, New York, Springer, pp. -

99.


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sources

Leung, K. and Forster, P. ( ) DHL in China in Lee, L. and Lee, C. (eds.), Building

Supply Chain Excellence in EmergingEconomies, New York, Springer, pp. - .

Chan, F. ( ) Logistics Management in China UNEAC Asia Papers, No.

Chinability ( ) FDI inflows 9 - (online) (cited November ). Available

from

Chinability ( ) GDP growth 9 - (online) (cited November ). Available

from

Huang, S. ( ) Growing pains for Chinas PL market (online) (cited November

). Available from

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