China Logistics: Its On The Road, Not In The Air

Monday, December 10, 2007 18:43
Posted in category China Logistics
Comments Off on China Logistics: Its On The Road, Not In The Air

For anyone in the logistics industry, the title will not come as a shock.  It is something I have writeen on a few times, and is the basis of a few reports that I have written, but more than anything there are a few things that are common knowledge in China’s logistics industry:

1) With the majority of forgein owned frienght being for Export/ import, and the majority of manufacturing for export being on the EAst coast, the need for roadhaul is much greater than air frieght

2) As fragmented as road haul carriers are, the airlines are an even bigger mess (something we recently found out when costing airfrieght for 15 cities around China)

3) Only foreign firms shipping high value goods (Intel in Chengdu) are going to rely on air frieght.  Others, who are not time sensitive and are shipping common items, will chose a trucking or Kuai Yun copmany to support them (CNEX, FedEx, Kerry, STO, etc)

and while reading the FT this morning, I found a couple of good articles that sum up some of the issues facing China’s logistics industry, and those in need of services, quite well.

the first, Air freight from China: Clouds on the horizon, focuses on the fact that while many areas are setting up new airports (currently there are 130 +/-, with 30~50 more planned), there are relatively few companies putting goods into the belly of the aircrafts right now… and that there could be a situation where there is a significant amount of overcapacity and imbalance in the market (good for those who need to ship stuff… bad for carriers).

The second article,China: Logistics is key to inland shift, to be honest is not as well written as the first (Different writers) and starts off with a bit of what I think is a factual error by stating:

China’s spectacular economic development record has largely been concentrated in two areas – the so-called Pearl River Delta just north of Hong Kong and the immediate hinterland of Shanghai.

Uh, maybe I am getting picky here, but Tianjin has also done a fantastic job of attracting investment as well??

following that though, the authors rightly focus on the fact that few companies are going to be willing to move inland to manufacture unless the logistics is there to support them… something I would agree with, BUT, for many of the firms I work with they are not looking for export logistics support, but regional logistics support as their investments are 2nd and 3rd investments meant to supply a region.

To get goods across country, there is often (as in the case of this article) a look at the Yangtze and rail, and while it is good to look at those from the angle of “in 5 years… “, I would say 98% of foreign companies would not benefit by looking at these modes of transportation right now.  Both are very limited in terms of capacity, and with loss rates significantly higher than road haul, it just doesn’t make sense at this time.  But.. in 5 years..

Take the time to read the articles, and then also look through some of my past posts (there are a couple dozen by now) to see where, when, and why you should chose one form of logistics over another.

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