U.S providers bring expertise to China domestic service
YRC, Schneider put down deeper roots in an effort to help U.S. shippers overcome infrastructure and regulatory barriers.
By Jeff Berman, Senior Editor -- Logistics Management, 2/1/2006
BEIJING — China's burgeoning economy continues to attract U.S.-based transportation and logistics companies. For the most part, they've been handling international shipments through joint ventures with Chinese companies. But recent moves by U.S. providers into domestic operations signal a new phase in the growth of logistics services in China, said Evan Armstrong, president of consultants Armstrong and Associates Inc.
In May 2005, Schneider Logistics established an office in Shanghai and has since become involved in domestic logistics. And early last month, YRC Worldwide (formerly Yellow Roadway Corp.) announced plans to establish domestic trucking operations in China.
Officials at both companies say the impetus for moving into China is to create an efficient solution that will help U.S. shippers in a region that relies on outdated technology and an infrastructure that's pushed to its limit.
"Ground transportation networks in China are unsophisticated and pretty fragmented," said William D. Zollars, chairman and chief executive of YRC, in an interview. "The idea for us is to provide a much more seamless solution so we can manage shipments from end to end for our U.S. customers, and to provide opportunities for their business outreaches in China."
YRC will begin domestic operations in China with fewer than 100 trucks. The service will move products for a small group of U.S.-based customers from their manufacturing and distribution sites to the Port of Shanghai. The company's Meridian IQ subsidiary, which has offered freight forwarding and logistics services in China since 2000, will be involved in the new service.
Schneider Logistics has taken a similar approach and is starting out small. The company first established a representative office as a base for learning about the Chinese transportation market. Schneider has since been granted a consulting license and has begun advising U.S.-based companies on domestic transportation and logistics.
"I think there's more of a need for China-based domestic services centered on the huge flow of products from China to North America," said Tom Escott, president of Schneider Logistics. "The current trucking capabilities are very fragmented ... Our belief is that companies like ours understand how to efficiently move large volumes on a continental or long-haul basis, and we are evaluating how we can assist companies that want to perform that type of transportation." Schneider is now evaluating opportunities to provide such services but does not offer them yet, Escott added.
Shippers will welcome U.S. carriers' involvement in China's domestic market, Armstrong predicted. "Expanding into China makes sense for a lot of U.S. companies because China is still in the early phases, where things have yet to be standardized," he said. "Imagine trying to coordinate transportation in China if you are not sure if you are going to get a 40-foot container or a 20-foot trailer. It makes things complicated for U.S. shippers."
Having a "known quantity" on the ground that will improve domestic services will help take some of the mystery out of managing transportation in China, said Philip Darragh, purchasing manager at Webster Industries, a plastic-bag manufacturer in Peabody, Mass. "The biggest hurdle I face is inland trucking—factory to port," he said. "I need to peel that trucking business away from what I perceive to be a close network of friends and relatives in China. When I can gain some visibility, it will take away from the shipping 'black hole' I feel we often operate in."
View All On-Demand Webcasts