[photopress:wto.jpg,full,alignright]This is a short summary of an article on logistics which is well worth further study. Indeed, it is a major study of logistics in China, the problems, the opportunities, the solutions. The link is at the end of the article under ‘Source’.
With its entry into the World Trade Organization, China agreed to open up product and service markets that had been protected from global competition so far. China’s 11th Five-year Plan (2006-2010) for the service industries states as two of its top priorities transportation and modern logistics development.
For this reason, the government of China has made substantial investments in upgrading its transportation infrastructure over the past decade and will continue to do so in the future. However, China’s logistics infrastructure is characterized by fragmented supply and distribution systems, insufficient technology application and many bureaucratic obstacles. Moreover, rivalry among local governments creates trade barriers between provinces and adds to the complexity.
Recently, the Chinese transportation and logistics market has been growing at an enormous rate. From 2002 to 2005, more than half of all logistics service providers have reported a yearly growth rate of more than 30 percent. This growth is promising, but the delivery performance is far from being efficient. In China, logistics often make up 20 to 40 percent of the cost of goods sold, compared to just about 10 percent in the United States. Viewed comparatively, China’s logistics spending as a percent of gross domestic product (GDP) is twice that of the United States.
This inefficiency might be partly due to the fact that in China several hundred thousand logistics companies exist, compared to only about 7,000 in the United States. As a result, no logistics service provider offers nationwide distribution service or has more than about 2 percent market share.
Authors: Prof. Dr. Christopher Jahns is rector of the European Business School (ebs), Oestrich-Winkel, Germany, and executive director of the Supply Management Institute SMI in Wiesbaden, Germany. Roger Moser is director of SMI International Network, Shanghai. Martin Lockström is director, SMI China, Shanghai.