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    Lange Lange Presentation Transcript

    • Developing and Deploying Outsourced Logistics in China The Market, The Opportunities, The Challenges
    • Efficiency of Goods Distribution Infrastructure 1=Very Inefficient 10=Very Efficient Survey on distribution infrastructure of goods and service efficiency (The World Competitiveness Yearbook 1999) 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 Hong Kong France Germany Singapore
    • Cross-Country Logistics Cost Comparison 80% 11.37% Japan 30%-40% 10% Europe 57% 9.9% US <10% 16-20% China Logistics activities performed by 3 rd party /Logistics activities Logistics Cost/GDP Country
    • Composition of Outsourcing Providers in China
      • APL
      • Maersk
      • Menlo Worldwide
      • Panalpina
      • Exel
      • Danzas
      • TNT
      • Schenker
      • FedEx
      • UPS
      • DHL
      • Haier Logistics
      • Attend Logistics
      • Ding Xing Logistics
      • TCL
      • Bright Diary
      • Legend Computers
      • EAS
      • ST-Anda
      • PGL
      • China Overseas Logistics
      • DTW
      • Costco
      • Sinotrans
      • China Shipping
      • China Resources
      • China Post
      • China Merchants
      Foreign Logistics Companies Emerging Logistics Companies Traditional Chinese Transportation Companies Internal Logistics Departments Of Chinese Companies
    • The Push by Global Providers
      • Sinotrans IPO:
        • Biggest Investors:
          • Exel: US$10 Million
            • (Already has a JV with 1200 employees in 15 cities)
          • Deutsche Post: US$52 Million
      • Danzas Investing US$35million in IT Infrastucture in Asia
      • UPS to invest US$100 million to gain control of its China network, purchased MWF to add a heavyweight air freight component
      • TNT to invest US$303 million in China
      • APL Logistics Investing US$6.5 million in JV with Legend Holdings to attack IT logistics market
      • Schenker Investing US$4 million in JV in China
    • High Level Summary of the Market
      • The Market is large, fast-growing, highly fragmented and in a very early stage of development
        • The market for outsourced logistics is estimated at roughly RMB 40 billion (US$4.8 billion)
        • While many logistics providers have experienced growth rates at or near 30% over the last three years, 85% of services offered are basic transportation or warehousing.
        • Many providers believe clients are not yet ready for outsourcing, and shippers cite many obstacles, mainly 3PL service quality
        • The Market is fragmented with no market share greater than 2%. 80% of revenues come from the Yangtse and Pearl River Delta regions
      • The demands of multinationals and Chinese shippers are very different, suggesting two distinct market development paths.
      • Many providers are seeking partners for growth
      • Govt. initiatives are stimulating the 3PL market in China, but often to the benefit of local players.
    • Growth Rates and Service Breakdown
    • Primary Industry Sectors
      • Industry sector
      • Electronic Products, Computer and Telecommunication
      • Household Appliance
      • Automotive and Parts
      • Fast Moving Consumer Products
      • Food and Beverage
      • Industrial Machinery and Equipment
      • Textile and Apparel
      • Furniture
      • Pharmaceutical
      • Other
      • Average Revenue Contribution (%)
      • 15.92
      • 15.35
      • 9.65
      • 9.65
      • 9.40
      • 6.00
      • 4.58
      • 4.06
      • 5.85
      • 16.69
      Source: 2002 China Logistics Provider Survey (Georgia Tech)
    • Global vs. Local Capailities
      • Chinese providers focus more on domestic opportunities due to lack of overseas networks. Foreign providers draw most of their revenue from import and export-related logistics as they focus on servicing their global accounts
    • Cost Tracking Between MNC’s and Local Shippers The tracking of direct and indirect costs by MNC’s and local companies is a strong indicator of internal incentives for outsourcing. While low tracking of admin and inventory costs by local companies could be seen as an opportunity for foreign providers, at the same time, it suggests a significant challenge if the lack of cost tracking also suggests a lack of perceived need for value-added logistics outsourcing.
    • Outsourcing by Service/Shipper Not surprisingly, given the attention to direct and indirect costs in the supply chain between local companies and MNC’s, outsourcing’s value is apparently still seen as primarily related to direct transportation as opposed to value-added logistics services. The ratio of outsourcing between MNC’s and local companies Would suggest a considerable learning curve to be overcome in this area.
    • MNC’s Are a Powerful Growth Factor for the Outsourcing Market Indications would suggest that the largest users of outsourcing in China remain to be multinational corporations. While this would suggest that MNC’s act the same in China as they do elsewhere, the biggest challenge for both Chinese and foreign providers is the meet the expectations of both corporate and local management of these companies.
    • Foreign vs. Chinese Providers The suggested polarization of the market between foreign and local providers and their customers suggests that a defined segmentation of target markets and customers will be necessary to facilitate profitable, cross enterprise growth. The data would suggest that a broader approach to the market would necessitate the acquisition, through partnership, JV or other form, of those advantages perceived to be held by Chinese providers.
    • Challenges for Growth There are many similarities between Chinese and Foreign providers in the way that they perceive growth challenges. The biggest exception is the identification of Government restrictions as the leading obstacle for growth on the part of foreign providers.
    • Conclusions
      • Observations of the China Market would suggest that any perceived opportunity is accompanied by significant challenges
      • Regulatory issues remain high on the list of those challenges. Although the WTO reforms suggest significant opportunities, history has shown that proposed reforms rarely occur as expected and often tend to favor local industries.
      • The suggested polarization of the market between local and foreign providers, as well as the requirements of local companies and MNC’s, will require careful thought regarding target industries and customers.
      • Cost competitiveness will continue to be a major competitive issue, regardless of whether a provider is local or foreign. The extent to which the concept of added value can be effectively conveyed in solution development will be a key competitive advantage on top of competitive transactional pricing.
      • Apart from customer demand, overcoming the obstacles for growth will be a major area of competition between both Local and foreign providers.