The full opening up of the logistics industry in China became reality in Beijing on Aug. 29, 2006.
What are the implications of the arrival of foreign logistics enterprises?
What's the current state of China's logistics industry?
How can Chinese logistics enterprises break through the bottleneck and gain a competitive advantage?
Professor Wang Derong, executive vice president of China Communications and Transportation Association (CCTA) and president of China Logistics Academy asked those questions.
"China's logistics industry started out rather late, but has been growing rapidly. This growth period started in 2001 and went through a preliminary growth period up until 2003," said Wang. "Now it is enjoying a rapid development phase. During this period a group of logistics enterprises emerged in China that provide quality services and are able to make good profits. But still, many challenges exist in the development of China's logistics industry.
"Firstly, the industry is full of many local, regional and small-scale so-called "logistics businesses" that are incapable of providing quality services in a professional matter," continued Wang. "For example, there are only six to seven thousand logistics businesses in the U.S. But in China, there are over several hundred thousand."
Wang said, China's logistics industry is still thinking in a "traditional" way. For most enterprises, the understanding of "logistics" is still limited to the integration of transportation and storage.
China's logistics enterprises, however, are unable to collect process and manage information; they do not have an in-depth understanding of logistics, or the capacity to provide comprehensive quality services.
Secondly, Chinese logistics is in urgent need of talented people. According to Wang, practical experience is extremely important. Like most other industries, logistics enterprises set the same requirements for senior talent: experience, modern management skills, as well as experience in trading, transportation and logistics.
Furthermore foreign language skills, international trade, transportation and logistics operational skills and IT competence are required.
"At present, a medium-sized enterprise which offers an annual package of RMB 500,000 to 1,000,000 still finds it hard to find the right person," explained Wang.
According to Wang, there are a couple of reasons why China lacks logistics talent.
Firstly, he said, it's because logistics education and training started late in China. The scale of the system is small. Students studying logistics are generally very young and inexperienced.
Secondly, China’s academic program hasn't caught up with the changes in the market. "Talent" entering the society isn't actually talented.
Thirdly, China’s logistics enterprise network calls for further improvement. Logistics is very much a network business. A fragmented or weak network restricts the business. To build a larger and stronger logistics business, the construction of an extensive network plays a key role.
Wang puts forward two options.
The first option is for the enterprises to invest in network construction. It requires a relatively high up-front cost, but is highly beneficial to the long-term development. COSCO Logistics is a good example.
The other option is for enterprises to form alliances or cooperate to share their network resources. This enables the network to be improved and at the same time, the cost is minimized. But ultimately, logistics enterprises still have to find ways to build their core competence to avoid being controlled by others.
Another concern is the technology level of logistics enterprises is not high enough. To meet the demands of modern supply chain management, a flexible yet advanced application of information technology is vital. Using information technology to track goods, automate storage management and speed up customs clearance - all of these are subjects calling for immediate attention.
Fourthly, regional protection and multilevel governmental administration have led to low efficiency of China's logistics market. The railway system, postal system and foreign trade transportation were shaped by the government administration during the planned economy era.
All these systems seem to be operating nationally. The truth is they are segmented; the regional office controls the operation according to the geographic location. Nationwide unified operation is difficult to realize.
At present, the logistics industry is consolidating at a much lower speed than manufacturing.
The majority of manufacturing enterprises distribute their products all across China, but none of them could find a single nationwide logistics service provider.
"Up to the end of 2005, almost all the large international logistics enterprises had entered China's market. They are speeding up their investment and activities in China. Chinese logistics enterprises are facing severe challenges and growing competition," said Wang.
He also pointed out that to prepare for the fierce market competition, China's logistics enterprises should strengthen their network construction, make efforts to improve their logistics management and enhance their service quality.
Source:佚名