Logistics: A Quickly Growing Market

Logistics: A Quickly Growing Market

Overview

China’s logistics sector is already the biggest in the world. After opening up the industry within the scope of joining the WTO, almost all big players from Western countries are present in the country. A number of Chinese logistics companies is successfully competing with them, often largely limited to the domestic China logistics market.

Article Highlights

  • The usually quite good Chinese infrastructure allows reliable services of logistics companies.
  • Freight forwarders are particularly important because of the country’s strong export orientation.
  • The logistics industry is very sensitive to changes in the overall economic condition of China.

Overview

China’s logistics sector is already the biggest in the world. After opening up the industry within the scope of joining the WTO, almost all big players from Western countries are present in the country. A number of Chinese logistics companies is successfully competing with them, often largely limited to the domestic China logistics market.

The China logistics market presents another sourcing problem which is also an objective of third party consulting companies’ services. The task of finding a suitable manufacturer can be difficult in itself, but then choosing the appropriate method of transport can be challenging, too. Several factors should be considered.

Firstly, the production location establishes which method to be used; for example, a factory located next to a specific shipping port will provide advantages to one in the center of the country. Although infrastructure is mostly well developed in China, it can still make significant differences. Secondly, the shipping timeframes should be considered: Air freight is significantly faster than sea freight and it is typically 5 to 6 times more expensive than shipping. Shipment rates have to be compared and eventually the right logistics provider has to be identified in the vast China logistics market.

 

With the help of the China logistics market exports are made possible. From China to the world – the question how exactly remains.

 

Development of the China Logistics Market

The worldwide logistics industry has grown tremendously over the last decade from globalization. China, being the world’s largest exporter, is a driving force behind this development. It took 4 years after China’s entry into the WTO (which happened in 2001) to completely open the China logistics market. These industry reforms allowed increased foreign direct investment (FDI) becoming a boon for growth. International firms moved quickly to establish themselves in the market: UPS paid a lot of money to purchase state owned logistic enterprises. China’s share of the global logistics industry reached at $1.59trillion in 2013–a total share of 18.6%–making it the largest industry in the world (the USA industry is occupies 15.8% of the world industry). Yet, China’s logistics market is still growing.

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Freight Forwarders

A freight forwarder acts as an agent which organizes the shipment process from the manufacturer to the customer. Through their professional contacts they are able to determine the most effective way to ship the goods. They play a crucial part in the logistics market in China and can make it a lot easier to receive sourced goods. Freight forwarding companies vary in size: some are small (who contact carriers directly) while some are large, international logistics companies (like Dachser and Burlington).

 

Express Sector

This area is mainly concerned with delivery your goods as fast as possible. With it, generally comes a price premium which may be worthwhile depending on your goods. The express sector in China is the largest in the world and will continue to grow expected. Well-known Western companies (FedEx, DHL, and UPS) deliver domestic and international parcels. Local competition (SF Express and STO), however, remains largely domestic focused.

 

Modes of transportation of China logistics market.Various ways of transportation are available – the China logistics market is highly developed.

 

Outlook for the China Logistics Market

There are plenty of comparisons to be drawn between the logistics market growth over the last decade with the growth of China’s economy as a whole. However, with China’s slowing growth, China’s logistics market may also begin to slow.

The direct link between China’s logistics market and the e-commerce industries suggest growth may not taper. China has one of the most vibrant online shopping cultures; an intense demand for seen postal services and shipping companies will persist.