Logistics in China

China is a low cost country so logistics is low cost, right?

Actually not. Technomics has a podcast up by Steve Crandall and Jim Serstad. It is well done. Take some time to listen to what they have to say here.

In it, Steve said China has 800,000 or so trucking companies. The US has 360,000 trucking companies.  Both countries have the vast majority of  companies as a single truck or a handful of trucks.

The Chinese economy is half the US economy, so should have half the trucking companies, but it is not so. The efficiency of the Chinese logistics system is very low. Jim Serstad, in the same podcast, said that Europe’s GDP has 9% logistics and the US is 8%, while China is 18%. Logistics in China has a long way to go before it reaches Western levels of efficiency.

It is hard work to get approval for multi-provincial shipping, so DHL, Federal Express, and others are all working at that here.

Products can be shipped in China, and sometimes cheaply, but on average it will cost more to get the same service.  Gradually, this will improve but only through deep involvement of Western Human Resources to get it there.  China has a lot of room to grow and logistics is one clear area where a lot of change is to come. Some of us will make money in that change and some of us can because of that change.

Thoughts?

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Posted in: China, Customers, Market Entry, Sourcing

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