Archive for the 'cold chain systems' Category

Following increasing concerns of food safety in China logistics companies are calling for the set up of standards in cold chain systems to monitor quality of farm produce.

Yin Haiping, general manager of Shanghai Speed Fresh Logistics, a 3PL company with a distribution network covering retailers in the Yangtze River Delta area, told a Transportation and Logistics Summit in Shanghai that with the growing concern about food safety, high quality cold chain systems are required.

He said, ‘There is a need for the development of modern food logistics [in China] and the basis of the logistics services [for food transportation] has to be improved,” he said. He added that cold chain systems have to be set up for the transport of farm produce as well as pharmaceutical products.

Zhang Qianming, chairman of the China Food Industry Association Food Logistics Council, the food industry’s regulatory body, admitted the development of cold chain standards is very slow compared to the growth in the logistics industry.

He said, ‘There could be chaos in the cold chain business without standards. The set up and implementation of standards are important to speed up the development of the logistics industry.’

China accounts for 13% of global fruit production and 40% of the vegetable output. But because of inefficiency in the distribution and transport of farm products there is a loss of US$10 billion annually.

Around 30% of the total production of fruit and vegetables are wasted because of a lack of temperature control.
60% of the meat and 80% of the milk and soya bean products in China do not use cold chain systems, posing a serious food safety concern.
Source: CargoNews Asia

World Courier has great expertise in cold chain networks. These are used, obviously, for frozen foods. And, at a higher level for biological specimens and investigational drugs and, at a lower level, for dead bodies although the companies concerned do not emphasize this over much.

Now World Courier has extended its network within China to 36 major cities with cold chain transport services and supplies to every clinical trial location currently approved by the Chinese State Food and Drug Administration. Which is praiseworthy.

Henning Voss, director for World Courier, North Asia said, ‘China is poised to become the fourth largest pharmaceutical market by 2012. With our new operational network in place, we look forward to helping pharmaceutical companies, central labs and clinical research organizations improve their supply chain efficiencies in this vital, but complex country.’

It appears that in China cold chain distribution has been a huge stumbling block for large western fast food outlets.

McDonald’s and KFC have their own networks, and in April, the most splendidly named Yum! Restaurants China opened a 12,000 square meter distribution centre to provide cold chain distribution services to more than 400 stores in Guangzhou and surrounding cities.

Yum! China — the subsidiary of Yum! Brands Inc, the world’s biggest restaurant company — runs more than 2,000 KFC, Taco Bell and Pizza Hut chains and has 16 distribution centers in the country. It plans to open 300 stores in the mainland this year and its own cold chain network.
Source: CargoNews Asia

Excerpts from speeches given by logistics industry executives at the recent Council of Supply Chain Management Professionals conference in Tianjin.

Supply chain service providers have great potential for profits if China’s fulfils its ambition to cut logistics costs.
China’s logistics costs totaled $498 billion in 2006 or 18.3% of GDP compared with 9.9% in the United States.
The mainland’s logistics industry still lags two or three decades behind advanced nations.
Domestic logistics companies are small in scale, scattered in several regions and have a low-level of operation and management.
The satisfaction rate of services on a basis of five points is 3.96 for overseas-funded logistic providers, 3.72 for private domestic providers, and 3.61 for state-owned providers.

Alan Turley, vice-president of international affairs for FedEx, Asia Pacific division, said there were poor connections between rail, road and port facilities and a lack of coordination between air, rail and communications authorities. The government, although keen to promote the industry, is hampered by a multiple-layered administration, which only adds to logistics costs.

Fan Gang, director of China’s National Economic Research Institute, said, ‘As China’s urbanization spreads from the coastal provinces to inland rural towns, opportunities will abound for state-of-the-art logistic services in the future as 900 million Chinese live in the countryside and most of the consumption has come from the urbanization process over the years.’
Source: CargoNews Asia

Serious money exists in the middle class which is growing in China year by year. According to McKinsey, 77% of urban Chinese households live on less than RMB25,000 a year, but by 2025 that figure will drop to 10%.

This may well result in a shopping spree which will resemble a tsunami. It should start to hit around 2010 as hundreds of millions of consumers go on a shopping spree seeking the trappings of a middle class lifestyle. In a sense, this will be the biggest Chinese revolution of them all — the move of the working class to middle class, a direct result of the consistently robust growth percentages coming from China’s GDP.

All the big global forwarders and logistics operators are already operating in China through various partnerships or on a solo basis. Several of these operators have bought out their JV partners and are going it alone although those tend to be companies providing services for big international clients, not local companies.

As internal logistics demands increase giant retailers that, earlier, outsourced their manufacturing to China are also opening stores in the mainland at a speed almost beyond comprehension. The same applies to foreign fast food chains like McDonald’s and KFC which bring its own problems. Ignoring whether it is desirable to have these chains bringing fast food and obesity — the two often go hand in hand — to China there is the under-developed cold chain which makes food logistics a separate and far more complex issue.

The situation with big brand retailers is both simpler and more complex. They are both manufacturing and selling in China and thus becoming de facto Chinese companies requiring internal logistics services, including warehousing and nationwide distribution networks.

Despite massive investment, road and rail infrastructure is still inadequate and, unlike demand for retail goods, cannot increase overnight. The trucking industry is in a woefully fragmented state so that logistics operators are forced to rely on a mixed bag of trucking companies operating regionally.

One way around this, which is a natural progression, is to have the big retailers in the major centers which makes delivery easier but not easy. It still has some way to go.

Logistics business in China is predicted to grow at 25% a year for the next five years. The incredible logistics demands of keeping hundreds of millions of people fed, connected, seated or clothed will see huge investment in distribution networks by logistics providers. China at the moment is about speed of growth and we can expect amalgamations and extensions in logistics companies to bring about the efficient system that is desperately needed.
Source: Cargo News Asia

A five-day/five-cities tour will bring together experts and practitioners to discuss the latest in supply chain management in China in an interactive series of half-day seminars. These are industry driven. Not seminars brought in by a professional seminar company making a dollar.

Max Henry, Founder & Executive Director of the Global Supply Chain Council, said, ‘Many China-based executives are wondering how supply chain management will impact their business this year. There are a lot of questions about SCM, and this Roadshow is designed to provide specific answers to all their questions.’

This series of non-profit seminars run for half-a-day each. Each stop is scheduled for half-a-day afternoon seminar featuring four to five speakers. The roadshow will stop at the following cities: Tianjin, Monday, June 4; Beijing, Tuesday, June 5; Chengdu, Wednesday, June 6; Guangzhou, Thursday, June 7; Shenzhen, Friday, June 8.
Source: Press release

According to the China Logistics Information Center demand in the logistics sector will rise 15% year on year in China in 2007.

The sector turned over RMB59.7 trillion ($7.65 trillion) in 2006, up 17.1% over the previous year in comparable prices, mainly because of fast growth in shipping of industrial products and imported goods.

Industrial products contributed RMB52 trillion, up 16.4%, while imported goods added RMB6.5 trillion, up 25.2%.

Expenditures on shipping were estimated at RMB4 trillion ast year, up 13.2%. The costs are expected to grow at least 11% in 2007 due to rising oil prices and increasing labor costs.
Source: China View

China now accounts for 8% of global exports and recently overtook Japan as the world’s third-largest country in terms of foreign trade volumes. Exports have more than doubled over the last five years and are expected to double again by 2010, accounting for 11% of the global total.

According to the China Federation of Logistics and Purchasing (CFLP), logistics industry revenue grew 20% in 2002, 27% in 2003, 30% in 2004 and 33% in 2005. Which is pretty snazzy and shows amazing growth. But the picture is far from perfect.

According to Business Week the industry in China is still dogged by inefficiency, with CFLP figures showing that logistics costs accounted for 21.6% of GDP in 2004.

Given that logistics costs come to 9% of the United States GDP and 11% of Japanese GDP, it could be argued that China wastes around one-tenth of its total GDP through logistical inefficiencies.

This seems to be a fair assessment and matches other available figures.

The total handling capacity of China’s coastal ports is already over one billion tons, and capacity is increasing quickly. But not that is not quite enough.

Speaking in January, Shen Yihua, vice director of the commerce ministry’s Waterway Transport Planning Institute, said that China cannot expand port facilities quickly enough to meet rising demand. In 2005, the turnover capacity of coastal ports was officially 2.52 billion tons, but 3.38 billion tons were actually handled.

He said, ‘In the next 10 years, the development of port construction should be faster than economic growth.’

David Oldridge, an associate at consultancy JHK Hong Kong, suggested where the main problems lie: ‘institutionalised bureaucracy.’ Up to five government organizations are involved in the logistics function in China, many of which operate on a provincial level.

Jaime Bolton, Greater China and North Asia supply chain management lead for consultancy Accenture, said, ‘I guess in any country those types of processes can be streamlined. If you look at the facts and you see that logistics is double the cost of elsewhere, I think there are certainly opportunities for streamlining.’
Source: Businessweek

Supply chain planning expert Fraser Ironside at the 4th Annual Supply Chain Modelling Forum run by Manufacturing and Logistics IT in the UK, said, traditionally, organizations operating in China have built their supply chains based on a need to ensure market penetration and product availability. Now the time has come for companies to review how they do it and save money through effective optimization.

Ironside, said, ‘Historically, the supply chain in China has always been unreliable, with highly fragmented distribution centre configurations driven by infrastructure constraints and the dominance of local players. However this is already beginning to change with the entry of foreign owned 3PLs and the ongoing improvements to the road network.’

At present, although China remains a low cost economy, spending on logistics in 2004 reached 21.3% of GDP. This compares to logistics spending of approximately 9% of GDP in Europe and the US. (Note that these figures are not always consistent. Think of them as approximations. They serve a purpose in highlighting a major discrepancy.)

Matters, however, are improving. Within just a few years, next day delivery for ex-stock product will become the standard service offer for top level customers, while the acceptable service time for make-to-order products will fall from the current 8-10 days to just 2 or 3 days.

For this reason, according to Fraser Ironside, network modelling is not something that can be carried out once every five years. It has to be an ongoing process to make sure companies benefit from the most efficient supply chain possible given their specific circumstances. Getting the supply chain right can make a significant difference to the bottom line and this is particularly the case in China today.
Source: Logistics IT

The Chinese mainland’s mounting demand for refrigerated storage and transport of fresh food is being restricted by a shortfall of facilities. It is creating a potentially huge market for cold chain logistics service operators.

As incomes rise in China, followed by fast expanding foreign and domestic food chains, cold supply chain logistics has caught increasing attention from market players.

The mainland’s largest logistics and transport company Sinotrans Group has started work on its first center for cold chain logistics, or refrigerated logistics, in Shanghai’s northeast Jiading District.

The mainland’s frozen food market is growing at an estimated annual rate of about 10 percent and the annual output of processed frozen food is growing at 20 percent. In the ice-cream sector, per capita consumption is still below one liter in the mainland, compared to about 6.5 liters in Europe and 12 liters in the US which suggests a huge potential for growth.

Jamie Bolton, a partner with Accenture Supply Chain Management service line, said, ‘WTO-mandated tariff reductions are allowing more foreign products to reach China’s mainland. Improvements in frozen and fresh food supply chains also are probable following the opening of the distribution sector under WTO entry.’
Source: Shanghai Daily

Bolt on. Remember that term. It seems to be coming into use in the area of logistics. For example, Logistics provider Toll Holdings Ltd (basically operating as an Australian company but now working throughout Asia) wants to expand in Asia and is looking for ‘bolt-on’ acquisition opportunities in China to add to its new Toll Asia business.

What does ‘bolt on’ mean?

In this context, a company of small to medium size that fits in and extends what already exists.

Paul Little, Toll chief executive told reporters after the company’s annual general meeting last week, ‘We’re very keen to work with our Australian-based companies to assist them putting in place this seamless logistics service out of China into Australia. At the present time, we’ve got a couple of the parts of the logistics chain that we need that aren’t there and we’re talking to some prospective acquisitions in that regard now.’

How big will these acquisitions be? Not very big.

Paul Little said, ‘They’re only bolt-on, they’re not significant in scale, but they’re very significant in the value-add that they’ll bring.’
Source: The Age