1. Developing and Deploying Outsourced Logistics in China The Market, The Opportunities, The Challenges
2. Efficiency of Goods Distribution Infrastructure 1=Very Inefficient 10=Very Efficient Survey on distribution infrastructure of goods and service efficiency (The World Competitiveness Yearbook 1999) 2.34 3.48 5.3 5.5 6.36 6.91 7.76 8.42 8.49 8.74 9.31 India Indonesia Thailand China Taiwan Japan USA Hong Kong France Germany Singapore
3. Cross-Country Logistics Cost Comparison 80% 11.37% Japan 30%-40% 10% Europe 57% 9.9% US <10% 16-20% China Logistics activities performed by 3 rd party /Logistics activities Logistics Cost/GDP Country
10. Cost Tracking Between MNC’s and Local Shippers The tracking of direct and indirect costs by MNC’s and local companies is a strong indicator of internal incentives for outsourcing. While low tracking of admin and inventory costs by local companies could be seen as an opportunity for foreign providers, at the same time, it suggests a significant challenge if the lack of cost tracking also suggests a lack of perceived need for value-added logistics outsourcing.
11. Outsourcing by Service/Shipper Not surprisingly, given the attention to direct and indirect costs in the supply chain between local companies and MNC’s, outsourcing’s value is apparently still seen as primarily related to direct transportation as opposed to value-added logistics services. The ratio of outsourcing between MNC’s and local companies Would suggest a considerable learning curve to be overcome in this area.
12. MNC’s Are a Powerful Growth Factor for the Outsourcing Market Indications would suggest that the largest users of outsourcing in China remain to be multinational corporations. While this would suggest that MNC’s act the same in China as they do elsewhere, the biggest challenge for both Chinese and foreign providers is the meet the expectations of both corporate and local management of these companies.
13. Foreign vs. Chinese Providers The suggested polarization of the market between foreign and local providers and their customers suggests that a defined segmentation of target markets and customers will be necessary to facilitate profitable, cross enterprise growth. The data would suggest that a broader approach to the market would necessitate the acquisition, through partnership, JV or other form, of those advantages perceived to be held by Chinese providers.
14. Challenges for Growth There are many similarities between Chinese and Foreign providers in the way that they perceive growth challenges. The biggest exception is the identification of Government restrictions as the leading obstacle for growth on the part of foreign providers.