Global logistics companies focus on China’s domestic needs

In the search for new logistics markets, China has always been an obvious target due to the prospect of huge and sustained growth. In a new stage of this development, global logistics service providers are establishing domestic road networks.

The movement of economic development in China westward has triggered a change in the type of services required. The previous focus on container port provision, once expanding at a furious pace, has slowed. The main focus of interest is now on the huge conurbations in the interior of the country, typified by cities such as Chongqing. This trend has been largely driven by the rise in costs of activities such as electronics assembly in the eastern seaboard cities. However, it also reflects domestically driven growth in GDP per head; increasing consumer spend right across the country.

This trend has triggered investment in new types of logistics capability, particularly in the area of road freight. Logistics service providers (LSPs) such as Toll, CEVA and Kerry have already established capabilities and are developing them at a considerable pace. For example, Kerry has just announced both the expansion of its Chongqing logistics centre, increasing its capacity to 83,000 sq m, and an automotive logistics centre in Hefei in the Yangtze valley. It has also opened a new logistics centre in Wuxi outside Shanghai. It is worth noting that Kerry has extensive inter-connecting road freight operations in South-East Asia.

Panalpina has also just announced its entrance into the market. In what appears to be a road forwarding operation, the Swiss based company now offers a through container service, enabling goods to remain in the same sealed 40 ft or 45 ft container throughout the entire journey. Only the trailers are exchanged. This service appears to be pitched at "high-end products" being moved either through the container terminals on the coast or from South–East Asia. The service connects big cities in western China, notably Chengdu and Chongqing which Panalpina suggests struggle to find adequate capacity for air and ocean transport. Whilst a ground container transport service, usually using rail, is hardly new, the ability to offer less than container load is a significant development from what is essentially an ocean and air forwarder.

CEVA has also been expanding its presence with CEO John Pattullo speaking recently of his company’s focus on the opportunities for greater outsourcing. Much of CEVA’s strength is due to its Anji-TNT joint-venture with the Chinese automotive manufacturer SAIC. This relationship to an important State Owned Enterprise (SOE) has been key to CEVA’s success. However, it is likely that the needs of major western original equipment manufacturers (OEMs) to reach Chinese consumers will provide its platform for future growth. For although the level of outsourcing is very low, the inward looking nature of many Chinese SOEs means that this will be a slow process.

What is clear is that this type of investment is set to continue. As Ditlev Blicher, CEVA VP of North Asia comments, "…Worsening of the global financial climate has made more companies focus on the China domestic growth story. A market already sizeable is set to grow immensely over the next few years. Most global LSPs established themselves in the ports of China over the past two decades and were part of the export boom of China; now growth is expected to shift toward the domestic markets".

Quelle: eyefortransport
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