Using Scooters for Logistics in China
A recent article in the Wall Street Journal shows pictures of logistics couriers in China riding scooters, with stacks of deliveries teetering six feet up in the air, parked outside of office buildings in downtown Shanghai. The reporter goes on to describe the increasing salaries for logistics workers, and goes on to document the high pay but difficult working conditions for logistics in China.
The report validates many of the findings in our new logistics study that will be published by BVL next month, documenting the rise of e-commerce in China, and the inability of the current logistics structure to support the incredible growth of e-commerce. Indeed, clicking on an item for delivery in the US has become a common form of on-line shopping that most people don’t think twice about – but in China, there is no guarantee that your product will be delivered in a timely manner. Jack Ma, the founder of e-commerce company Alibaba Group Holding has said that “terrible logistics are slowing the growth of internet retailing in China.”
The article notes that China has stripped 116 delivery companies of their permits following customer complaints with postal authorities citing lost mail, “barbaric sorting”, and other offenses. Tales of forbidden items like artillery shells and wind-resistance matches being shipped by plane are emerging.
Development of the logistics industry is imperative in China. Government officials predict that e-commerce and logistics are two major industries that will interact and impact each other closely. E-commerce has taken off in China and is growing exponentially. Government officials have begun to recognize that logistics channels must become more streamlined in order to achieve healthy and long-term growth in the e-commerce sector. Although B2C e-commerce is most visible to the public, the level of Business to Business (B2B) e-commerce constitutes the majority of transactions.
In general, the 3PL industry still significantly lags the growth of manufacturing. Chinese manufacturing technology and quality is improving rapidly. However, logistics services still lag Western levels in terms of service scope, processes, quality, etc. In fact, logistics inefficiency has reduced Chinese manufacturers’ global competitiveness both at home and overseas. Chinese products compete largely on price not on quality, but there is increasing focus on the importance of logistics in these markets. Interviews we conducted with senior Chinese government officials acknowledge that although major routes are covered by major logistics companies serving these markets, there is room for growth in the B2C low-end e-commerce delivery. All the major logistics companies including the carriers and forwarders have the presence in China serving the industries
The lack of logistics capability will continue to be a major barrier to economic growth in places like China. The Chinese government is making a strong effort to transform the country from manufacturing-centric to increased value-added industries, and is seeking to invest more in high value-added production and services. Even in the last 5-year plan period during 2006 to 2010, logistics industry is regarded as one of the pillars supporting the growth of economy. Overall the Chinese logistics industry suffers from higher costs, it is due to many reasons which are not under the control of logistics industry, such as high gas prices and high toll charges. Not to mention the prevalence of unstable scooters as a means for delivery.
