U.S. providers say logistics in China is on the right track

By Jeff Berman -- Logistics Management, 3/1/2007

BEIJING—Recent media reports coming out of China indicate that the government plans to spend $440 billion over the next 30 years on upgrading highways and railroads. That bodes well for U.S. transportation and logistics companies like Schneider Logistics and YRC Worldwide, both of which are making significant progress in setting up their own China-based networks.

Executives for both companies said that China’s planned investment should improve the limited transportation infrastructure and fragmented road networks that have made it difficult to gain supply chain visibility.

“From a ground-transportation standpoint, the environment in China continues to be highly fragmented, with limited visibility,” said Jim Ritchie, president and CEO of YRC subsidiary Meridian IQ, which offers logistics and freight forwarding services in China. “What has happened in the last 12 months is that strategies are starting to form on how to develop cooperative agreements with [Chinese] transportation providers to create more synergy in the supply chain. By linking together the same service providers along different segments of the supply chain, we are starting to get better dependability and visibility.”

Just 18 months ago, Ritchie said, it was very difficult to track freight in China from the time a shipment was turned over to a consolidator until it arrived at a port and was again consolidated into a container. But things have improved now that consolidators are working directly with suppliers, allowing service providers to monitor the whereabouts of customers’ freight.

YRC has nearly 70 of its own trucks on the road in China and is mainly involved in freight forwarding- and logistics-related joint ventures. The company currently works with 39 Chinese transportation companies and provides inland transportation services for approximately 200 shippers.

Schneider Logistics President Tom Escott agreed that supply chain visibility and reliability in China is improving. In the last 12 months, he noted, Chinese companies have been gaining a better sense of end-to-end supply chain management approaches.

“Supply chain functionality in North America includes national distribution, warehousing, and long-haul trucking,” said Escott. “These things are still evolving in China, where customer needs tend to be more localized, with smaller shipping patterns. Suddenly, we are seeing a whole evolution of thinking in the [Chinese] market about distribution and managing supply chains.”

Schneider Logistics, which opened a Shanghai office in 2005, is also involved in domestic logistics. Last month, the company received authority to set up shop as a domestic carrier and logistics service provider, making it the only North American operator to establish a domestic truckload business in China, according to company executives.