China Logistics Sector Logistics Sector Term Paper

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Repatriation of profits have proven to be a problem as well. Fourth, as stated by Staff (2004) is the challenge presented by poor training in the sector which is stated to be "...weak both at a practical level as well as at a higher strategic level" and the problem has only been exaggerated due to the government and other regulatory authorities in China to promote logistics programs." (Staff, 2004) the fifth challenge stated is in relation to "information and communications technology" in China characterized by a: "...lack of it standards and poor systems integration and equipment. At a very basic level, the consistent supply of energy is also problematic leading to interruptions to communications through power outage." (Staff, 2004) Sixth presenting in the way of a challenge is the "undeveloped domestic industry" due to fragmentation of the logistics sector in China that is: "...dominated by commoditized and low quality transport and warehousing, providing little base on which to build a modern industry." (Staff, 2004) the seventh stated challenge for the logistics sector in China is "high transport costs" which are estimated at "...up to 50% more than in developed regions such as Japan, Europe and North American. These costs are increased by high tolls on roads." (Staff, 2004) the logistics cost which are inclusive of costs such as warehousing, distribution, inventory holding, and order processing are believed to be "...two to three times the norm and in excess of 20%." (Staff, 2004) the economy in China is stated of Staff (2004) to be characterized by: "...wide variances in levels of economic activity and development." The problem is related to distribution and a significant imbalance of the flow of goods traveling toward the undeveloped west from the developed east in China. (Staff, 2004; paraphrased) Resulting has been stated to include: "...difficulties in finding backloads, leading to higher costs for Chinese haulage companies which are then passed on to their clients. Internationally these imbalances also exist between China and the rest of the world, leading to difficulties in re-positioning empty containers." (Staff, 2004) Lastly, Staff relates that a challenges in presented in the area of "domestic trade barriers" in the country of China and while the accession of the Chinese to the World Trade Organization has brought about a lowering in trade barriers (tariffs and quotas on international shipments) other difficulties exist in relation to transport of goods within the country of China due to unofficial border tolls. Staff states that: "This is particularly evidence when shipping from an inland manufacturing location to a port city or vice versa." (2004)

The industry logistics report entitled: "Logistics in China H1 2005" published by the firm China Strategic Development Partners LLC states: "According to Wang Yang of Georgia Technical Institute, the next battle for corporate competitiveness will be about supply chain management. This battle has already begun, and the Chinese logistics industry, in keeping with China's broader growth trends, has displayed and is expected to continue to display exceptional growth. According to Transport Intelligence's most recent report, China Logistics 2004, the Chinese logistics industry is expected to expand at a compound annual growth rate of 33% through 2007. Partly due to the industry's previously underdeveloped state, growth, especially coming from third party logistics firms (3PLs), is expected to be derived from the growing numbers of multinational corporations operating in China and an increasing number of domestic firms outsourcing their logistics functions." (2005) There have been steps of a significant nature taken by the Chinese toward liberalization of the transportation and logistics sector markets. Three agreements are stated as 'key agreements' and are those as follows: (1) WTO: This has opened the sectors to foreign ownership; (2) the Mainland/Hong Kong Closer Economic Partnership Arrangement (CEPA); and (3) June 2004 U.S./China Aviation Liberalization Agreement. (China Strategic Development Partners LLC, 2005)

In a recent GAIN Report entitled: "Peoples Republic of China: Market Development Reports - China Logistics Profile" it is stated that the "emerging 3PL industry in China may be categorized into four types: (1)Large SOEs (such as Sinotrans, COSCO and China Post) with extensive transport and warehousing assets, broad national networks, and strong relationships with central and provincial governments. These firms already enjoy a monopoly in several areas of trucking, shipping and postal services; (2) Medium-sized domestic logistics providers (generally privately owned), which focus on one or two key industries; (3) Logistics divisions of manufacturers and processors, primarily providing services to internal customers, but sometimes offering 3PL services to outside companies. The Shanghai Fruit Distribution Center is an example of a subsidiary company that has sought to internalize logistics needs. However, as an SOE, the division is struggling to update its facilities and compete with private counterparts; and (4) Foreign logistics providers, including multinational firms, new Wholly Foreign Owned Entities (WFOEs) and smaller firms working in niche markets. (GAIN Report, 2003)




Research relating to career dynamics of the logistics sector in China finds that in the country of China: "...the logistics industry wants 600,000 professionals" according to an online news service the 'China Economic Net'. ( Career News, 2001) the commitment of the government in China as related to addressing the poor shape of the infrastructure in the logistics sector will result in many labor positions needing to be filled as well. The work of Thomas a. Foster entitled: "Logistics Inside China: The Next Big Supply Chain Challenge" states that among the most recent of success stories in the country of China, a country presently in the throes of a 'retail revolution' (Foster, 2005) are "...the large global retailers that have been able to tap into the needs of China's blossoming middle-class. Retailers such as Wal-Mart and Carrefour are rapidly building superstores throughout the country. Carrefour projects that it will have 61 large stores there by the end of the year." (Foster, 2005) Retailers are expanding their businesses using 3 PLs to handle their complete supply chains. This business model is one build upon 'outsourcing' enabling the businesses to: "...move quickly and limit the time and investment of holding inventory." (Foster, 2005)

Because of the overall growth in the logistics sector, the creation of career opportunities will be an inherent gain for the country of China, as well as within other related industries in the sector throughout the world. Integration of logistics and improvements that are planned hold great promise in opening up China as a worldwide marketplace for goods in the coming decade.


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