Subscribe to our free, weekly email newsletter!


Parcel shipping: FT report suggests UPS is prepping to roll out domestic service in China

By Jeff Berman, Group News Editor
October 08, 2010

Taking steps to keep pace with its global rivals, UPS is aiming to set up domestic service in China, according to a recent Financial Times report.

According to the FT, UPS recently submitted an application for a domestic license to the China State Post Bureau, a local regulator, in order to offer shippers in China domestic next-day delivery service and second and third day delivery products.

UPS spokeswoman Sock Hwee Tan told LM that the application progress is still ongoing at this point. She also said that UPS has offered domestic services in China to shippers on a contract basis since 2005 and has been looking at adding other domestic services there since that time.

UPS International President Dan Brutto said in the FT report that the Chinese market could be as large as 5 million packages per day, compared to its 2009 tally of 1.2 million packages per day for its entire $2.1 billion domestic international segment.

The report also hit on other incentives for UPS to set up shop in China, including an estimate from market research firm IBIS World which estimates the Chinese courier market is a $9 billion per year annual business, with 60 percent of its volume domestic, and is expected to double in size by 2015.

While UPS’ Brutto pegged the Chinese market at 5 million packages per day, Doug Caldwell, president of ParcelResearch, said it may be closer to 7 million and that China is already the second-largest domestic market behind the United States.

In terms of the competitive landscape in China, FedEx launched domestic operations there in 2007 by introducing domestic service within China to more than 19 cities. And by 2008, this next-day delivery service expanded to more than 40 cities with second-day delivery service reaching shippers in more than 200 China-based cities. In the first half of 2008, FedEx opened 12 new locations in China, with six in Beijing, five in Shanghai, and one in southern China.

A FedEx spokesman declined to comment on the company’s daily volumes for domestic business in China for competitive reasons.

DHL and TNT also have presences in China, too, as well as some large, China-based carriers, including SP Express and EMS, the parcel division of state-owned China Post. There are also thousands of small, local delivery companies, of which many use bicycles or mopeds and have very low rates.

“Competition in this market is fierce,” said Caldwell. “FedEx had to lower their rates on four separate occasions in 2009. In addition there are some trade barriers. The new China postal law gives China Post a monopoly on letters and documents. The private carriers can deliver inbound and outbound docs, but not intra China. The private carriers can deliver inbound and outbound docs, but not within China. In addition, foreign airlines can’t operate within the country. FedEx uses OK Airlines to fly packages. All the carriers follow Chinese business customs, and normal pickup and delivery is Monday through Saturday. This could shape up to be a battle royale.”

From a strategic standpoint, Caldwell said entering the China domestic market is a ‘no-brainer’ for UPS, said Caldwell, as it already has huge volumes with incoming and outgoing international parcels in and out of China and within the intra-Asia market. 

As an example he cited the delivery of electronic items like an iPad or cell phone whose parts come from various regions within Asia like South Korea, Taiwan, Vietnam, and Singapore, among others. These parts coming from these areas to China where they are then assembled, which is a process that needs to be heavily coordinated and has short lead times and a short shelf life in regions where they are exported to like the U.S. or Europe.

“Coordinating all these movements is extremely time-critical…if you don’t have everything, you cannot put the item together,” said Caldwell. “UPS is good at that and already moves things in and out of China, so it makes sense they can move things within China as well.”

What’s more, Caldwell speculated that China volumes will surpass U.S. volumes within the next ten-to-12 years or sooner and will become the largest country by parcel volume in the world.

About the Author

Jeff Berman headshot
Jeff Berman
Group News Editor

Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. .(JavaScript must be enabled to view this email address).


Subscribe to Logistics Management magazine

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your
entire logistics operation.
Start your FREE subscription today!

Recent Entries

Intermodal units, at 278,767 containers and trailers were up 6.7 percent compared to the same week last year and marks the third best week for intermodal ever recorded based on AAR’s data.

LM Group News Editor Jeff Berman recently conducted a wide-ranging interview with Bobby Harris, President and CEO of non asset-based 3PL BlueGrace Logistics about various aspects of the freight transportation market.

It’s small, but senior brass at YRC Worldwide will take it. After nearly seven years of continuing losses in excess of $2.6 billion, the parent of the nation’s second-largest LTL carrier posted a narrow net profit in the third quarter ended Sept. 30.

As was the case for the second quarter, third quarter earnings results for publicly-traded less-than-truckload (LTL) carriers are again strong. Signs of solid earnings results from carriers that have posted earnings to date include tonnage increases, gains in weight per shipment and average daily shipments, higher yield, and revenue per hundredweight.

While the holiday season is known to bring good tidings and cheer to all, it may also come with another thing that is not so pleasant: higher rate freights. That was the thesis of a commentary written by Mark Montague, industry pricing analyst and chief market-watcher for DAT, a Portland, Ore.-based subsidiary of TransCore.

Article Topics

News · UPS · FedEx · China · ParcelResearch · All topics

Comments

Post a comment
Commenting is not available in this channel entry.


© Copyright 2013 Peerless Media LLC, a division of EH Publishing, Inc • 111 Speen Street, Ste 200, Framingham, MA 01701 USA