Logistics in China: How Does it Measure Up?
China has some way to go before the performance of its logistics infrastructure equals that of the west.
That was the key conclusion in a white paper recently published by oTMS and Transportation Intelligence.
“The country still has sky-high logistics costs, which prove a huge drag on the overall economy,” said the paper. “It is estimated that China’s logistics costs as a proportion of GDP are 18 percent,” versus 8.5 percent in the United States.”
Logistics pressures are only increasing as manufacturing operations move to lower-cost locations in the western part of China.
China has been investing heavily in transportation with 11 percent of GDP going towards infrastructure projects, the majority of that to building roads. The government’s latest five-year plan shows seven new highways focused on Beijing, nine running north-south, and 18 east-west.
“However, new roads are only part of the challenge,” the paper says. “In many cases road freight companies will not use the new highways as the high cost of tolls imposed make operating unsustainable. Instead they will often use slower and cheaper local networks” which are much less efficient.
Another logistics challenge in China is its fragmented trucking system. Pick up, over-the-road transport, and final delivery are rarely done using the assets of a single company. As a result, “it is difficult to identify who has control of the shipment at any one time.”
Visibility in general is a problem with Chinese logistics. A complex transportation system and the lack of digital linkages, mean that shippers rely on the phone to ascertain the status of their shipments. Shipping documents, including proof of delivery, “are more often than not in paper.” Security of shipments also present problems.
There are opportunities “for industry leaders, especially in the LTL sector, to implement innovative technologies which transform their relationship, not only with their customers, but also with their suppliers,” the paper concludes. “Providing the same level of visibility in China which shippers and transport service providers have long accepted as standard in many developed countries, will provide a huge competitive advantage. Armed with such a technological solution, the main challenge will be for the freight company to convince their customers that a greater investment in their logistics systems will result in a far bigger benefit in terms of inventory reduction and other efficiencies.”
Studies have shown that logistics service providers operating in the Chinese market that use transportation management systems provide greater visibility and reliability to their customers.
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