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Positive Signs from Logistics in China

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  • Positive Signs from Logistics in China

    A little over ten years ago I remember reading an article that described the key challenges of logistics in China. Looking back on it I was struck by how much things have improved. At that time some of the main issues were seen to be:

    Poor Infrastructure
    This is the one that has probably changed the most. Talk to anyone who traveled by train in China 10 years ago and you'll likely hear a few shocking things, but today the picture couldn't be more different. When I travel from Shanghai to Yiwu, a big manufacturing hub for a lot of lower cost items, the 300km journey takes just an hour and half at a cost of 120 yuan (USD 20). The trains are clean, comfortable, and I get a good phone signal along the way. This improvement is reflected in commercial transportation as well, and much of it stems from the massive infrastructure investment done to boost the economy since 2008. These days more and more companies are beginning to look inland, to cities such as Chengdu, where costs are lower, now that the transportation infrastructure is there.

    Regulation
    Local regulations have been streamlined in many areas as well. The opening of the Shanghai free trade zone has made operating a WFOE (Wholly Foreign Owned Entity) much simpler, and Lufthansa, UPS, and DHL have all setup operations there. Essentially there is a cooperation agreement with the Shanghai Airport Customs and Shanghai International Airport Entry-Exit Inspection & Quarantine Bureau to ensure 24-hour processing of overseas cargo. Prior to this, barriers to operations inside of China created the additional challenge of supply chain management from the outside.

    Bureaucracy & Culture
    This one is a little trickier, and to some extent I believe remains a challenge. The important cultural differences are the deep seated ones that represent worldviews we all take as natural. This makes even identifying the sources of conflict and misunderstanding very difficult. The advice I received many years ago still applies today. Take your time building relationships until meeting someone you trust before getting fully into bed with a local business partner. Bureaucracy however, has drastically improved in many areas. Shanghai presents few barriers to entry for foreign companies, but the picture still does vary province to province.

    Underdeveloped Domestic Industry
    There is some argument about the amount of progress here in China people on average still save 30% of disposable income. However, retail sales, particularly online, are exploding here as consumer spending dramatically increases year-on-year. While economists continue to debate the extent growth in the Chinese domestic market, smart companies are moving in to position themselves to take advantage of local consumers who are asking for better products.

    All in all I don't want to understate the risks of the Chinese side of a supply chain. The appreciation of the currency in recent years has had a strong effect on fuel prices, and pressures on wages continue to exert an upward force, but overall the discussion of supply chain management here is moving towards the same topics as we'd have anywhere else, as some of the artificially unique challenges are erased through ongoing economic liberalization.

  • #2
    Re: Positive Signs from Logistics in China

    China has caught the e-commerce bug and they are focus on improving logistics efficiency and boosting domestic consumption. The Chinese e-commerce market is already bigger than that of the United States, and soon is projected to be the size of those of the United States, Britain, Germany, Japan and France combined. Logistics is one of the bottlenecks hindering China's commerce and trade development, but many large companies are building their own warehouses and shipping their own goods.

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    • #3
      Re: Positive Signs from Logistics in China

      Originally posted by NicCris View Post
      China has caught the e-commerce bug and they are focus on improving logistics efficiency and boosting domestic consumption. The Chinese e-commerce market is already bigger than that of the United States, and soon is projected to be the size of those of the United States, Britain, Germany, Japan and France combined. Logistics is one of the bottlenecks hindering China's commerce and trade development, but many large companies are building their own warehouses and shipping their own goods.
      I love the state e-commerce here in China, and many, if not most, of the companies have done a fantastic job with their distribution systems. You can jump on Taobao order almost anything for less than it costs in a brick and mortar store, and it will arrive the next day. We've switched all of our smaller deliveries from DHL or UPS to Shunfeng. They have proven to be incredibly reliable.

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      • #4
        Re: Positive Signs from Logistics in China

        Originally posted by NicCris View Post
        China has caught the e-commerce bug and they are focus on improving logistics efficiency and boosting domestic consumption. The Chinese e-commerce market is already bigger than that of the United States, and soon is projected to be the size of those of the United States, Britain, Germany, Japan and France combined. Logistics is one of the bottlenecks hindering China's commerce and trade development, but many large companies are building their own warehouses and shipping their own goods.
        I have also read an article about this in New York Times. Their big factories are upgrading their systems to conform with international standards, not necessarily ISO but at least that's a major improvement. Even their use of coal-fired generators in the rural areas are being questioned now and the government is looking for alternatives to lessen the pollution.

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        • #5
          Re: Positive Signs from Logistics in China

          I have heard the continuous reports about the problems involving the importation of goods from China. However, the good news is that Chinese Government has taken note of the difficulties and is moving to correct the problem. One instance of this move is the sanctioning of one of the world's largest e-commerce entity, Ali Baba which is a Chinese-controlled entity. Ali Baba was sanctioned by the Chinese Government for allegedly not exercising the requisite control and due diligence on some of its partner suppliers. I believe that the Chinese Government has realized the importance of an efficient trading platform and will be seeking to formalize this situation as soon as possible.

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          • #6
            Re: Positive Signs from Logistics in China

            The only problem which I face now, while sourcing from china is the communication.

            I don't know if they have so much work that they simply cant communicate on time or they just do not give importance to communication, but it creates a lot of hassles.

            As for the infrastructure, I think that is much better now as I have been sourcing from china for a year and never had delays or other problems, which makes it clear that they have surely got their act together as compared to the years you are talking about.

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            • #7
              Re: Positive Signs from Logistics in China

              As for my opinion they need to cope up with the trend of technology because in some firms they are now fully automated their logistics has become more efficient and successful. I don't know about the others lol. But for me this is a new era and technology is rising so businesses needs to adapt the new technology in order to be more competitive with regards to their logistics.


              Regards,
              Emelia Ingram
              BR International 3pl Logistics

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              • #8
                These are some great news.
                I'm happy to see that things have improved significantly over the last couple of years.
                ___________________________________________
                Dumitru from freight forwarders

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