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China Logistics Past, Present and Future. Yang Wang Georgia Institute of Technology Atlanta, GA30332 U.S.A The Logistics Institute-Asia Pacific National University of Singapore Singapore wang@math.gatech.edu. - PowerPoint PPT Presentation
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The Logistics Institute – Asia Pacific
• Premier Asia Pacific Logistics Educational Venue• Dual MS Degree Program
– MSc in Logistics & Supply Chain Management (NUS)
– MS in Industrial Engineering (Georgia Tech)• Industrial Outreach Programs
– Leaders in Logistics– Student Sponsors– Partners in Research
Website: www.tliap.nus.edu.sg
China LogisticsPast, Present and Future
Yang WangGeorgia Institute of Technology
Atlanta, GA30332U.S.A
The Logistics Institute-Asia PacificNational University of Singapore
Singapore
wang@math.gatech.edu
Survey on distribution infrastructure of goods and service efficiency (The World Competitiveness Yearbook 1999)
10=Very Efficient 1=Very Inefficient
2.34
3.48
5.3
5.5
6.36
6.91
7.76
8.42
8.49
8.74
9.31
India
Indonesia
Thailand
China
Taiwan
Japan
USA
HongKong
France
Germany
Singapore
Cross-Country Logistics Cost Comparison (1999)
Country Logistics Cost/GDP
Logistics activities performed by 3rd party /Logistics activities
China 16-20% <10%
US 9.9% 57%
Europe 10% 30%-40%
Japan 11.37% 80%
The People’s Liberation Army (PLA) was the first organization in the post-revolution China to understand the importance of modern logistics.
It learned the lesson painfully in the Korean War, after devastating defeats during the Fourth & Fifth Campaigns.
Its logistics operations must be able to withstand constant aerial bombardment by the U.S.
A separate logistics unit was established.
Gen. Hong Xuezhi was appointed the commander
of the logistics unit, in charge of all logistics
operations.
Gen. Hong trained his unit to be agile, creative
and opportunistic. The logistics operations
improved markedly.
The improved logistics was credited by several
Korean War historians as one of the key factors
that the PLA fought the mighty U.S. to a standstill.
The Dawn of Modern Logistics (1985-1995)
MNCs are beginning to set up JVs in China.
The Association of China Logistics is founded (1984).
Heightened awareness of logistics barriers and their impact on industrial modernization.
First highway opened (1988, 20km).
Increased demand for international and inter-province distributions.
State control of transport and warehousing in China
A irlines
C A A C
R oadT ranspo rt
C O S C O
W ate rT ranspo rt
M in is try ofC om m un ica itons
C h ina R a il
R a il T ranspo rt
M in is try ofR a ilw ays
S ino trans
F o re ign Investm ent
M in is try o f Fo re ign T radeand E conom ic C oope ra tion
C M S T
C om m erc ia l W arehous ing
W ho lesa ling & R e ta iling
M in is try of In te rnalT rade
S ta te C ounc il
T ra ff ic O ffice F o re ig n Tra d e a ndE co no m y C o m m ittee
B u rea u o f In te rna l Tra de M u n icip a l F in a n cea n d T ra de O ffice
L icen ses
B u ild in g R e g u la tio ns
P ro v inc ia l G o ve rnm e nt
The Dawn of Modern Logistics (1985-1995)
Ignorance of modern logistics persisted into early 90’s.More and more 2PLs, but no 3PLs yet.The logistics operations were plagued by:o Limited air, waterway, road capacityo Completely unreliable railway serviceso Virtually nonexistent IT supporto Poor facility and equipmento Local protectionismo Rampant corruptionso Unpredictable “road blocks”o Others
Many of these problems still exist today.
Toward WTO (1995-2001)In 1995, PG Logistics took over the supply chain management of Procter & Gamble, becoming the first true 3PL provider in China.
In 1998, Danzas became the first foreign company to be granted a “Class A” license by MOFTEC, allowing it to operate international freight forwarding.
3PL market with annual growth over 30%.
“Class A” license granted to major international freight forwarders and shipping companies.
Toward WTO (1995-2001)Major investments by the government in infrastructures:
Highway networkContainer HarborsAirportsInformation networksLogistics hubs
Major investments by MNCs and some domestic companies in:
IT supportQualified supply chain management personnelModern equipment and facility
Toward WTO (1995-2001)
Commitment by the government on:
Fighting corruptions
Removing many barriers
Reducing red-tapes
Naming logistics a “strategic sector”
Toward WTO (1995-2001)
Changes fueled by:
China becoming the manufacturing center of the world
Fast growing domestic market
Industry consolidations
Demands by MNCs and key domestic companies for quality operating environment and services
China’s Industrial Output (RMB 100 million Yuan)
Year Total Output SOEs Collective Private Others1980 5154 3916 1213 1 24
1985 9716 6302 3117 180 117
1990 23924 13064 8523 1290 1047
1991 26625 14955 8783 1287 1600
1992 34599 17824 12135 2006 2634
1993 48402 22725 16464 3861 5352
1994 70176 26201 26472 7082 10421
1995 91894 31220 33623 11821 15231
1996 99595 36173 39232 15420 16582
1997 113733 35968 43347 20376 20982
1998 119048 33621 45730 20372 27270
1999 126111 35571 44607 22928 32962
Cargo Transportation Breakdown in Year 1999
Transportation mode
Transported cargo volume (10,000 tons)
Average distance (km) per ton transported
Railway 167196 760
Road 990444 58
Waterway 114608 1855
Air 170 2670
Pipeline 20232 310
Length of Transportation Lines in Year 2000 ( Unit :
10,000 km )
5.79
135.17
11.65
152.22
2.490
20
40
60
80
100
120
140
160
Rail
Road
River
Air
Pipeline
Container Throughput of Top Ten Container Terminals (1998-2000)
1998 1999 2000 Annual % inc
Shanghai 3066 4216 5612 35%Shenzhen 1952 2824 3959 42%Qi ngdao 1213 1543 2116 32%Ti anj i n 1018 1302 1708 30%
Guangzhou 846 1120 1426 30%Xi amen 654 848 1034 26%Dal i an 526 736 1008 38%Ni ngbo 353 601 902 60%
Zhongshan 384 415 457 9%Fuzhou 252 318 400 26%
contai ner termi nal
Container Throughput (,000 TEUs)
China Highway Development Plan to 2006
Toufenhe
HarbinManzhouli
BeijingHuhehaote
Lanzhou
ShanghaiNingbo
Hangzhou
NanjingHefei
Xining
Urumqi
Keshi
Kunming
Zhanjiang
Fuzhou
XiamenShenzhen
JinanYantai
Dalian
Shenyang
QingdaoLianyungang
Chongqing
Datong
Wuhan
Luoyang
Chengdu
YinchuanKuerle
Geermu
Qinhuangdao
Baotou
Xian
ChangshaGuiyang
Nanchang
Zhengzhou
GuangzhouLiuzhou
Nanning Zhuhai
Tianjin
ShaoguanHuaihua
Taiyuan Shijiazhuang
Lasha
Hekou
Erlianhaote
Tongjiang
Dandong
Ruili
Huoerguosi
China Railway
Road (km)
YearTotal Length
High-way
1st grade
2nd grade
3rd grade
4th grade
Others
1995
1157009
2141 9580 8491020728
260684
124625
5
1996
1185789
34221177
996990
216619
617608
239371
1997
1226405
47711463
711156
423078
763573
722890
9
1998
1278474
87331527
712524
525794
766204
120923
1
1999
1351691
11605
17716
139957
269078
718380
194955
1990 1993 1995 1998 1999 Total 970620 1115771 1234811 1264361 1289631
Rai l 150681 162663 165855 161243 164177Road 724040 840256 940387 976004 990444Water 80094 97938 113194 109555 114608Ai r 37 69. 4 101. 1 140. 1 170. 4
Pi pe- l i ne 15750 14845 15274 17419 20232
Rai l 15. 5 14. 6 13. 4 12. 8 12. 7Road 74. 6 75. 3 76. 2 77. 2 76. 8Water 8. 3 8. 8 9. 2 8. 7 8. 9Ai r 0 0. 01 0. 01 0. 01 0. 01
Pi pe- l i ne 1.6 1. 3 1. 2 1. 4 1. 6
YearTransported Cargo Volume (10,000 tonnes)
Proporti on (%)
1990 1993 1995 1998 1999 Total 26208 30511 35730 37841 40273
Rai l 10622. 4 11954. 6 12870. 3 12312. 2 12615. 5Road 3358. 1 4070. 5 4694. 9 5483. 4 5724. 3Water 11591. 9 13860. 8 17552. 2 19405. 8 21262. 8Ai r 8. 2 16. 6 22. 3 33. 5 42. 3
Pi pe-l i ne 627 608 590 606 628
Rai l 40. 5 39. 2 36 32. 5 31. 3Road 12. 8 13. 3 13. 1 14. 5 14. 2Water 44. 4 45. 4 49. 1 51. 3 52. 8Ai r 0. 03 0. 05 0. 06 0. 09 0. 11
Pi pe-l i ne 2. 4 2 1. 7 1. 6 1. 6
YearCargo km-ton (100 million km-tons)
Proporti on (%)
Barriers and Challenges Entering WTO
Infrastructures and hardware limitations.
Intermodal transportation capability poor.
Qualified personnel scarce.
IT adoption slow.
Government slow to adopt uniform standards.
Local protectionism.
Absence of rule by law.
Corruptions.
Fragmentation, no quality LTL services.
Dirt cheap labor slows down modernization.
Razor thin margin.
Others.
Comparison of Cargo and Container Throughput (1999)
Port Cargo throughput (’000 tonnes)
Container throughput (’000 TEUs)
PSA 325,902.2 15,945
Port of Hong Kong
168,838 16,211
Shanghai 186,410 4,216
Proportion of types of warehouse owned (2000 market survey on logistics)
29.0%
19.0%
5.0%7.0% 6.0% 5.0%
2.0%4.0% 4.0%
19.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
Com
mon
bung
alow
Com
mon
storie
dbu
ildin
gSt
orie
d-sh
elve
swa
reho
use
Solid
ware
hous
e
Heat
pres
erva
tion
Cold
ware
hous
e
Free
zing
refri
gera
tion
Air-
cond
itioni
ngwa
reho
use
Dang
erou
se
Facil
itywa
reho
use
Inbound Logistics Activities of Manufacturing (2000 market survey on logistics)
3PL21%
Supplier71%
in-house8%
Types of International Standard Pallets
Europe: 1200mm 1000mm; 800 1200mm
Australia: 1140mm 1140mm
America: 40 Feet 48 inches
Japan and other Asian countries: 1100mm
1100mm
• China: all of the above types of pallets
with 1000mm 1200mm most widely
used.
Key Logistics Players: SOEsFormer monopolies, mostly asset-based and gigantic 2PLs.Sinotrans, COSCO, China Rail, CMST, China Post,
etc.Assets may be out-dated; lack skill and experience for integrated logistics management.
3PLs as SBUs of 2PLs and manufacturers. Sinotrans Logistics and Development, COSCO
Logistics, Haier Logistics, CMST Logistics, etc.
Local providers.
Key Players in Logistics: MNCs, JVs, Private
Pure 3PLST-Anda, PG Logistics, etc.
3PL/Freight ForwarderDanzas AEI, Exel, EAS, etc.
Container Shipping CompanyMaersk Sealand, APL, NYK, OOCL, P&O,
etc.They are landing.
Express Parcel CompaniesDHL, FedEx, TNT, UPS.
SOEs v.s MNCs and JVs
SOEs: Competitive pricing, local connections, less barriers to policy protections.
Customers are mostly SOEs or private domestic companies.
MNCs: Extensive global network, IT integration, quality services and management, brand name.
Customers are mostly network MNCs from parent company.
Some JVs: Somewhere in between.
Post WTO Outlook
In 4-5 years, almost all policy barriers will be removed.
The battlefield will not be leveled then – it will be tilted in favor of MNCs and JVs.
Consolidation; M&AGlobal players acquiring well managed domestic player is a winning formula.
Major restructuring by asset-based SOE 2PLs to stay alive – spin offs.
Post WTO Outlook: Route to Success
M&A3PL+3PL, 3PL buys 3PL.Express buys 3PL.2PL+2PL, 2PL buys 2PL.Domestic 2PL forming partnership with foreign 3PL.
Winners are likely to have extensive global network, and offer integration, cost optimization and value-added services through a combination of technology, skill and physical assets.
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