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Section OneState of Chinas Logistics - Challenges & Future Growth State of Chinas Logistic Market
Market Characteristics Understanding the Costs and Challenges Industry Trends and Drivers Future Market Potential
Manufacturing Bias
Industrial products has a 90% share of the goods transported.
2009
Agricultural products Industrial Products Imported Products Recycled products Comm & Pers Source: KPMG Products
Yoy Growth
43% 14.6% 22.1% 39.5% 14.7%
Mkt Share
18% 90% 7.5% 0.4% 0.2%
Total
Source: National Development & Reform Commission Source: KPMG
125,413
15%
Expansion of Value-Added
Logistic value-added showing market expansion since 2006- value-added increasing at rate of tiertary (service) sector
Source: CFLP
Source: CFLP
Warehouse 8%
Transportati on 55%
Management 12%
Chinese logistics has significant room for cost & efficiency gains..
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Challenges faced
Chinas Logistic Industry Large but Undeveloped..
Logistic practices not upto global standdards..Foreign companies only allowed into sector in 2005 and still not fully plugged-into the market
Poor penetration by 3PLs; spend on 3PL only 2.7% in 2009 vs 30% for EU
Poor use of logistics i.e. lack of cold-chain logistics; poor planning tools 2009 China
10% 60,000
Other
US/JPN: 80% ME: 50% US: 250,000 JP: 150.000
3PL
Source: CB Ellis
Coming Demand & Growth in Logistics due to shift in Manufacturing to Western China
7
De-regulated environment allows foreign participation In China retail Expansion in Online Shopping similarly adds to demand Modern Logistic a pillar in Chinas 11th Year Plan
IMF estimates that by 2025, retail will dominate 75% of domestic logistics
Source: PWC Report on Asia Retail 2010
Major consumption centres are building up inland i.e. Strong retail sales for past 3 years in Chongqing, Changsha, Chengdu, Xian where logistics will be required to transport consumer goods to these cities.
Coming Demand & Growth in Consumption-Driven Retail Logistics offers new business opportunities
Fragmented & Growing market Opportunity for Consolidation to become Market Leader
Hubs
Rail Network brings significant new efficiencies in land transportation; New hubs will be created
10
eLogistics
11
CAGR
12.8% 6.5% 9.8% 9.5% 20.6%
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Outsourcing Characteristics
Enterprises outsourcing more of internal logistics especially transportation & distribution functions; future needs are advanced logistic functions Types of Functions Outsourced
Section TwoState of Chinas Logistics - Challenges & Future Growth State of Chinas Logistic Market
Market Characteristics Understanding the Costs and Challenges Industry Trends and Drivers Future Market Potential
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Source: Research Centre for Modern Logistics Tsinghua University, National Bureau Statistics
16
Transportation Capacity
Traffic Capacity by Transportation Modes
Road Transportation remained the primary mode for passenger and freight traffic while air transportation mode saw the strongest rise. While road traffic capacity has increased MILEAGE PER CAPITA CHINA VS US ONLY 10%
17
2010 to 2020
18
19
Hub
20
Energy Saving
Major passenger carrier 2007: 1.4bn pax;3.2bn tons goods 2007-2012: US$300bn invested
Competition
Intense competition from other transport modes esp. road with heavy investment
Social Demand
Poor Financing
High construction capex funded through domestic bonds; limited flexibility
Already high load density but demand outstrip supply. Need further expansion
Container Transport
Limited Profitability
Driving Force Restraining Force
Profit margin 1-2%; Low pricing esp passenger as viewed as public service
Govt Support
5
21
17
VS
13
Strict Control
Viewed as strategic asset with semi-military control; lacks market flexibility
Source: Research by Zheng Wan , University of California Xiang Liu, University of Illinois Urbana-Campaign
22
Sub-hubs in each Geographical area with International, Regional and Trunk Airports
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A Crowded market.. Need to offer unique proposition to stand out against Competition
25
PRD Hub
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Logistic Cities
City Locations with Logistic Potential
State Council designated Cities due to being part of air, land or sea transportation nodes; State Council also identified 10 logistic passages with key traffic volume
1. 2. 3. 4. 5. 6. 7. 8.
To reduce tax burden for all logistics companies effectively To increase support for Logistics Land Policy To promote and facilitate convenient passages for transportation vehicles To improve management of logistics enterprises To encourage integration of logistics facilities and resources To promote innovation and application of logistics technology To increase investment in logistics industry To promote development of agricultural logistics.
Total Logistics value grow at CAGR 14% Logistics Value-added increase at CAGR 15%
Lack of co-ordination among Govt Dept leads to multiple jurisdictions and limits development of logistic industry; provincial level authority still exerts influence and impacts industry Functions of government departments regulating civil aviation, postal services, communications and urban public transportation consolidated under establishment of Ministry of Transport in 2008 Other dept still responsible for monitoring different aspects of logistics industry
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Section TwoState of Chinas Logistics - Challenges & Future Growth State of Chinas Logistic Market
Market Characteristics Understanding the Costs and Challenges Industry Trends and Drivers Future Market Potential
30
1. 2. 3. 4. 5.
Fedex Asia-Pacific delivery center in Guangzhou Baiyun Airport commenced operations in 2009- largest outside the US. UPS relocated its intra-Asia hub from Clarke in Philippines to Shenzhen in 2010 DHL entered agreement with China Merchants Maritime Logistics in June 2010 to establish a global distribution center in Qinghai, Shenzhen TNT established and invest EUR 170M in a wholly-owned road transportation subsidiary in Hangzhou In 2010 Japans largest logistic co. Yamato Holdings will setup cold-chain land transport company in YRD with aim to reach 30 bn yen in 5 years
150,000
270,000
300,000 40,000 -
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Large sports retailers: eg. Nike & Adidas. E-commerce: eg Alibaba, DangDang, Amazon. Retailers: eg. Carrefour, Tesco, Watson etc. Automobile & Car components: eg. Benz, BMW; GiTi, Faurecia. Food Industry: eg. Havi LC (McDonald) vs YLC (Yum! KFC) Cold chain logistics: eg. Americold, China Merchant Log, PFS. Others: Medical Pharma, Chemical logistics. eg. CWT, Kerry Log. SERVICE PROVIDERS: 3PLs: moving from freights (DHL, Fedex, UPS) to Contract Logistics: eg. APL- Hanes, Legend; YCH- Dell; Schenker- BMW. 3PLs-Shippers: eg. CEVA, Maersk, K+N, Samudera. SCM / BPO: eg. Banks- CitiBank, DEM/OEM- Hi-P, Eternal Asia.
World Class centres needed to support world class players logistics needs
35
36
Scoping of Opportunities
Identify Possible Market Segment Opportunity
Screen Potential of Market Landscape & Competitiveness; Analyse Opportunity Transportation Mode vs Industry Segment
Air Freight
Air Express
Intl Freight
Remark
Large Mkt
Gd. Margins
Small. Mkt
Scoping of Opportunities
Identify Possible Market Segment Opportunity
Screen Potential of Market Landscape & Competitiveness; Analyse Opportunity Transportation Mode vs Logistic Segment
Pharma Logistics
Hi-tech/Auto Logistics
Agro-Food Logistics
Remark
Outsourcing trend Outsourcing trend Outsourcing trend
Distribution Warehousing
Med. Mkt
Small. Mkt
Scoping of Opportunities..
Identify Possible Market Segment Opportunity
Screen Potential of Market Landscape & Competitiveness; Screening Opportunity by Transportation Mode vs Location
Road/Rail Freight
Western Chengdu Chongqing Mega-hub Central Wuhan Eastern Shanghai Northeast Bohai-Tianjin Southern GZ-SZ
River Freight
Air Freight/Exp
Intl
Remark
Foreign Investments
Current automation levels low Only 5% have good IT systems Existing warehouse in populated areas which restricts trucking
Source: Tomkins International Survey 2009
Foreign investments concentrated inBeijing, Shanghai and Guangzhou hubs Warehousing focus for retail, apparel, auto, pharma, electronics and tobacco sectors
Invests U$1.2bn in logistics Zhejiang International invests US$15M in Pharma logistic center
Hi-Tech/Auto Logistics
Invests U$200M In Suzhou to cater for manufacturing & supermart retail RMB680M Distribution Centre in Chongqing
GDP
RMB 456bn
Transport Nodes
4th Aviation Hub Road/Rail hub Largest inland River port
Economic Drivers
Hi-tech Biotech Auto- Honda, PSA Logistic TNT, DHL
Competitive Edge
Large pool U grads Strong IT foundation Rel. low land/labour costs Strategic centre of Chinas transport network
GDP
RMB 450bn
Transport Nodes
Aviation Hub Asias largest rail container hub Largest rail network
Economic Drivers
Hi-tech and IT BPO hub Biotech Food processing Logistic TNT, DHL
Competitive Edge
Large pool U grads Strong IT foundation Rel. low land/labour costs Strategic centre of Chinas transport network