Global Logistics—December 2006
Chinas Truckload Market Opening Up
While China has long been a hotspot for low-cost sourcing and manufacturing, logistics companies have largely stayed away from competing in its domestic transportation market. But Wisconsin-based trucking and logistics company Schneider National Inc. is looking to break the mold and tap into one of the world's fastest-growing economies.
Schneider is currently seeking licenses to haul and manage freight in China, and expects to launch truckload services there by mid 2007. The company will likely invest tens of millions of dollars in China over the next year, and may break into the market by acquiring a Chinese company that provides logistics and warehouse services, says president and CEO Chris Lofgren.
Schneider will first focus on managing freight exported to the United States, and later on China's domestic transportation market, which Lofgren predicts will be "the world's next great long-haul truckload market."
Because China's internal transportation market is opening up, and the country has lifted restrictions on foreign involvement, it has become more attractive to American logistics firms. Other U.S. trucking and logistics companies, including YRC Worldwide (formerly Yellow Roadway Corp.), Overland Park, Kan., and Minnesota-based C.H. Robinson, are also targeting the Chinese market.
These firms, however, face plenty of challenges. China's transportation landscape faces both "hard infrastructure" challenges—such as highway improvements, and developing a scale system to enforce weight restrictions and reduce damage to roadways—and "soft infrastructure" obstacles, such as evolving tax rules and other regulations that affect efficient transportation, says Tom Escott, president, Schneider Logistics Inc.
"In addition, the transportation and logistics industry has grown up around major cities and provinces in China, but service tends to be regionally based; it is difficult for carriers to get to other regions without logging high empty miles," he explains. "The industry needs to foster consistent regulations across the country, between provinces, and within the national government."
Changing mindsets within China will also be key for trucking companies, and their shipper customers, to succeed there.
"China maintains a narrow focus on keeping transportation costs down, so carriers are forced to reduce their prices, rather than focus on the overall quality and added value that a full-service transportation provider can offer," Escott says.
Despite the challenges, carriers' quest to introduce safe, efficient, and reliable transportation capacity into the Chinese trucking market is good news for shippers eager to reach the country's 1.3 billion consumers.
Building Boom: Bulgaria
The push for logistics facilities in Eastern Europe is continuing, and one country—Bulgaria—is having trouble keeping up with demand, shows a survey from real estate firm Colliers International Bulgaria.
Bulgaria's current supply of industrial space is estimated at 2.3 million square feet. New industrial zones are forming in key locations throughout the country and around the cities of Sofia and Plovdiv, says Colliers. But it is not enough.
Due to escalating land prices, areas such as Sofia Airport, Druzhba, and Gorublyane have become favorites with third-party logistics providers and build-to-suit developers. Demand is increasing in other areas along major highways because of the low cost of land and accessibility, shows Colliers' research.
The increase in supply should continue because of Bulgaria's strategic location with five trans-European corridors, as well as the country's upcoming EU accession, low costs, and rapid development of the local retail sector.
Islamabad Invests In Logistics
The government of Pakistan's capital city, Islamabad, recently announced a focus on increasing supply chain efficiency by improving its logistics and warehousing facilities.
Doing so will help the country support its economic momentum, Islamabad's Prime Minister Shaukat Aziz recently told a delegation of executives from Kuwait Gulf Link Holding, one of the region's largest port and logistics groups.
Islamabad's infrastructure must keep up in order to sustain the 6 percent to 8 percent economic growth Pakistan achieved during the last four years, said Aziz, who noted the need to build quality infrastructure to improve the area's productivity, efficiency, and competitiveness.
As part of the ambitious plan, Islamabad is linking its ports to China and Central Asia through rail and road exchanges, and is expanding its road connections to China. Upon completion of its rail and road networks, Pakistan will provide the shortest route to China and the Central Asia region, Aziz noted.
These broad-based economic reforms have drawn keen interest from area businesses because they make Pakistan a more promising area for global shippers.
UPS Ups the Delivery Ante
In the largest expansion of its international shipping portfolio in more than a decade , UPS will now offer three daily time-definite delivery options to and from 30 of the world's most active trading markets.
The three delivery options are: UPS Worldwide Express Plus, which guarantees delivery by 8:30 or 9 a.m.; UPS Worldwide Express, for guaranteed delivery by 10:30 a.m. or noon; and UPS Worldwide Saver, which guarantees end-of-day delivery. The new services take effect on Jan. 1, 2007, and are supported by UPS' visibility technology.