Distribution and Transportation Major Challenges for Industrial Players in China
As the American economy cools, and as China’s domestic consumption increases, more of China’s rapidly growing output will be consumed at home. Already the forecasted GDP growth of 8% between 2006-2010 is expected to translate into a robust growth rate of 18% in the logistics sector, or 95 triilion RMB by 2010.
All forms of transportation technology are growing rapidly, with heavy and light commercial vehicles and cars seeing particularly high growth. The expansion in transportation fleets will need to be matched with significant improvement in transport infrastructure, including roads, ports and aircraft, to efficiently connect this vast country. 3,960 billion RMB has already been budgeted by the Chinese government for infrastructure development between 2006 and 2010.
The fact that every 1% of economic growth produces 2.8% growth in logistics expenditure, indicates the relative current inefficiencies of the industry.
The plethora of smaller logistics companies will probably begin to face consolidation in the coming year. To challenge the arrival of foreign companies such as FedEx, local companies will have to embrace common technological solutions to improve production and distribution efficiencies already adopted by their foreign counterparts. 75% of Chinese enterprises do not deploy barcode technology and only 10% deploy ERP/SCM systems.
While the Chinese economy continues to boom, opportunities to improve efficiency of the logistics and distribution arenas offer enterprises the change to become more flexible, increase profitability, and thus allow greater rewards for companies in the areas of distribution technology, automation and knowledge.
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