Largely in response to the pull from their American client base, mid-sized US freight forwarders have been expanding aggressively in China. Typically, this has drawn them to Shanghai first, but as their customers move inland, regional and domestic activities in other locations are on the rise.

IJS Global is a relative newcomer to China. The company’s declared goal is to become a logistics firm with annual revenues of around US$500 million and a global footprint, employing 1,200-1,500 people.

Over the past two years IJS has opened offices around the world. By mid-January, it had offices in 36 locations, plus agency partnerships in a host of markets. According to chairman and chief executive officer Giorgio Laccona, the expansion is now largely completed.

The forwarder opened its first China office in Shanghai and subsequently added Shenzhen.

Giorgio Laccona said, ‘We used to cover the area from Hong Kong, but we saw good opportunities with people we knew in Shenzhen. Now you can fly cargo from Shenzhen, you can truck it to Hong Kong or to Guangzhou.’

IJS is currently talking with an undisclosed Chinese company about a possible tie-in, which would give the US-based outfit a presence in a host of Chinese cities.

Giorgio Laccona said, ‘If this does not work out, we can expand into another four facilities with our Class A licence. In that case, the most likely targets would be Beijing, Qingdao, Guangzhou and Ningbo.

Chris Coppersmith, president and chief executive officer of California-based Target Logistics Services said, ‘Our emphasis has been on specific sales to American multinationals. Our American clients have pushed us to those locations.’ Target currently has nine locations in China and has had its own licence in the country since 1997.

BDP’s first China branch opened in Shanghai, followed by a representative office in Beijing, as it was not permitted to open its own office in the capital at the time, Ken Wensel recalled. He said that the red tape has shrunk significantly in the meantime.
Ken Wensel said, ‘The regulations are not obstacles any more, they’re hurdles now. They used to be showstoppers.’
Source: CargoNews Asia

Premier Wen Jiabao has urged all departments concerned to ensure safe and smooth transportation during the traditional Chinese New Year holidays.

In truth, these exhortations are probably unnecessary because China rail and air all seem to be well organized and immensely keen on moving the largest amount of people ever moved at one time in the world. The only serious worry will be the weather.

Premier Wen Jiboa visited a service zone of an expressway and a railway station and inspected the traffic situation before and during the Spring Festival holidays, the busiest travel season in the country.

The Spring Festival traffic season is 20 days ahead and 20 days after the Chinese Lunar New Year, which falls on February 7 this year. All kinds of traffic will be busy with shipping homebound passengers and food and major industrial goods.

The problem is that since January 12, rare snowfalls, the heaviest in decades for some central and southern provinces, have further worsened the traffic problems in the country. Many expressways and airports have been closed, forcing many passengers to choose railways as their option.

The Beijing West Railway Station, which is expected to see 22 million outgoing and incoming passengers during the Spring Festival transportation season, has opened 266 ticket windows.

The Ministry of Railways recently estimated that railway passengers are likely to reach 178.6 million between January 23 and March 2. Migrant workers account for 70% of the railway passengers.
Source: China View

According to the estimates of the China Federation of Logistics and Purchasing (CFLP), in 2007 China’s total logistics flow in 2007 grew 25.5% to RMB74.8 trillion ($10.27 trillion).

Lu Jiang, chairman of the CFLP at a forum on international logistics cooperation in Beijing said, ‘Although the industry maintained stable development in 2007, competition from foreign peers will mount in 2008 and the domestic logistics sector will see increasing openness.’

Lu also pointed out challenges facing domestic logistics enterprises, including insufficient information technology support and unadvanced transportation methods.

These seem to be good reasons why China ranks thirty in the world when it comes to logistics efficiency. See story on China’s logistics efficiency below.
Source: China View

A goods train from Beijing has arrived in Hamburg. The ‘Beijing-Hamburg Container Express’ left the Chinese capital on January 9 with its cargo of shoes, toys and electronic goods and covered the distance of 10,000 kilometers (6,200 miles) in 15 days.

Germany’s state-owned rail operator Deutsche Bahn logistics chief, Norbert Bensel, said the inaugural journey on the new rail route had delivered its cargo in roughly half the time it would have taken to arrive in the northern German port city by sea. The sea journey takes about 30 days.

Norbert Bensel said, ‘The test train was a success. We have demonstrated that we can transport goods by rail between China and Germany safely, reliably and yet twice as fast as compared with ships. At the same time, we are considerably cheaper than air freight for many types of cargo.”

The train made its way from China to Germany through Mongolia, Russia, Belarus and Poland.
Source: AFP

This is a corrected version of the original story.

The World Bank had prepared a Logistics Perception Index (LPI) which is the simple average of the country scores on seven key dimensions:

Efficiency and effectiveness of the clearance process by Customs and other border control agencies;
Quality of transport and IT infrastructure for logistics;
Ease and affordability of arranging shipments;
Competence in the local logistics industry (e.g., transport operators, customs brokers);
Ability to track and trace shipments;
Domestic logistics costs (e.g., local transportation, terminal handling, warehousing); and
Timeliness of shipments in reaching destination.

On a world ranking scale on logistics China comes in at thirty.

The leader is Singapore, followed by the Netherlands, Germany, Sweden, Austria, Japan. China is, sadly, some way down the list at number 30. Reading the figures the area which pulls China down is ‘customs’ and ‘tracking and tracing’ although there is plainly much to be done right across the board to get up to the dizzy heights of Singapore which is currently the leader of the pack.

Our thanks to Rory Mitchell of Speedflex Medianet Limited for pointing out the error of our ways.

You can play with the figures by the hour by clicking on source. Fascinating stuff.
Source: World Bank

The SAL Logistics Enterprises Alliance – Shanghai Airlines (SAL), China United Airlines, SAL Cargo International, SAL International Cargo Services, Shanghai Crane Transportation and Dahang International Transportation — is being called China’s first air logistics alliance.

It is up against the established heavies – DHL, FedEx, TNT and UPS – and they are all fighting for for a slice of the Shanghai market.

Last November DHL established a North Asia hub project at Pudong while UPS set up its Asia transfer center at the airport.

Thus the competition is great.

SAL chairman, Zhou Chi. said the new alliance is trying to position itself alongside Shanghai’s developing logistics sector.

SAL owns about 70 freight and passenger aircraft, which operate on about 30 international and regional routes and around 170 domestic destinations.

The group’s network covers more than 60 medium-sized and large cities in China and overseas.

By 2010, SAL plans to own 100 aircraft.
Source: AirCargo Asia Pacific

A contradiction in terms but China’s fast developing express service industry may slow down in 2008. The fault will lie wih the US economy which is suffering from the sub-prime, dodgy loans which have been such a feature of its financial field.

Logistics Association China puts forward a scenario where foreign majors represented by DHL and Federal Express will tap the chance of Beijing 2008 Olympic Games to reinforce their leading positions in the Chinese market, while domestic players, especially private ones, which feature smaller business volume, weaker capital strength and poorer management, will start to have a rough time.

China’s express service industry has been growing at a pace of around 30% in recent years and become one of the fastest growing markets of the world.

True, but DHL China, which should know, states signs of a slowdown actually appeared in 2007 this despite the fact the Chinese market still maintained steady growth.

Another major foreign player, Federal Express China, is more optimistic, working on the the basis the Chinese economy to a degree can be independent from world market changes, It is certain that domestic express service market will continue stable growth momentum although the view of domestic analysts is that with the market base getting increasingly bigger, the growth of domestic express service industry will get slower as compared to years ago.
Source: CargoNews Asia

Before we get lost in the total alphabet soup which so bedevils Supply Chain Managment it is good to know that VMI, which concerns us here, is Vendor Managed Inventory , Warehouse Management Systems is WMS, Distribution Requirements Planning is DRP, Electronic Funds Transfer is EFT, Enterprise Resource Planning is ERP, Just-in-Time is JIT, Material Requirements Planning is MRP, POS is Point-of-Sale, Total Cost of Ownership is TCO, Vendor Managed Inventory is VMI and Warehouse Management Systems is WMS.

There are many, many others but these are the ones likely to appear in your term paper.
Knight Electronics provides OEM (original equioment manufacture) customers on-the-ground presence in China. So, in effect, they become the company in China.

Knight Electronics has now opened a vendor-managed inventory warehouse in China.
Bob Knight, president of Knight Electronics, said, ‘Our VMI warehouse provides our OEM customers with a presence on-the-ground in Asia, so they don’t have to manage the hassles of shipping, inspections, and delivery times from the United States or Europe to Asia

‘Our customers’ products can be manufactured in China and shipped directly to their Asian customers, reducing inventory, shipping and inspection costs while increasing profit margins.’

In other words the company provides all the services a large company establishes itself on the ground for a large amount of money. For OEMs the VMI warehouse will help reduce large capital outlays for large quantity shipments, provide a point for Asian site inspection, reduce travel time and expenses, solve communication problems, remove a risk associated with quality issues, and solve the logistics problems of shipping, payments and return of defective products. Which is what we said earlier.
Source: EMS Now

As we suggested on April 19th, 2007 United Parcel Service by November should have a one million-square-foot air cargo hub in Shanghai. It will be the first U.S. cargo carrier to open a hub in China.

UPS is not saying what it cost but it has already invested about $600 million in China in the past five years and a guess is it will be a lot more than that.

Stephen Hoedt, UPS analyst with National City Wealth Management in Cleveland, said, the hub will help position the carrier to penetrate ‘what probably, over the next 20 to 30 years, will be the largest domestic delivery market on Earth.

‘China is going to continue to be the manufacturing floor for the world. It’s also a growing market domestically.’

The new hub, plans for which were announced last spring, is expected to employ more than 1,000 by 2010 and serve cities in China as well as the United States, Europe and other parts of Asia.

The around-the-clock operation will accommodate larger, longer-range Boeing 747-400 freighters, compared with MD-11 aircraft that UPS handles out of China.
Source: MSBNC

This is a step which will certainly lead to other things. India has given security clearance to cargo flights by China’s Great Wall Airlines to Mumbai and Chennai. This could pave the way for Beijing to allow Indian carriers to commence operations to various Chinese destinations.

New Delhi’s move, which came as Prime Minister Manmohan Singh began his official visit to China, is expected to encourage Beijing to grant long-pending clearance to Air India and Jet Airways to launch flights to Chinese cities of Guangzhou and Shanghai respectively. Air India already operates to Shanghai.

India had taken the stand in the wake of blacklisting of the carrier by the United States for its alleged involvement in transfer of missile technology to Iran.

As a result of the American decision, the Chinese cargo carrier had folded up operations for six months.

However, it revived in early last year with its controlling stakes going to Beijing Aerospace Satellite Applications Corporation (BASA). This is probably the first step in bringing China and India flight arrangements back to normal. Fascinating to see how it plays out.
Source: The Hindu