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

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.

By ·

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, 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. Contact Jeff Berman

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!

Article Topics

China · FedEx · ParcelResearch · UPS · All Topics
Latest Whitepaper
Six Ways Cloud ERP Supports Rapid Innovation
Kenandy is a new approach to ERP that lets you and your team focus on driving innovation, creating new product lines, and expanding your customer base even as you improve your business operations.
Download Today!
From the November 2016 Issue
The third time is the charm for this U.S. manufacturer on the hunt for a third-party logistics (3PL) provider that could successfully combine transportation services and technology capabilities under one roof.
Warehouse & DC Operations Survey: Ready to confront complexity
2016 Quest for Quality Awards Dinner
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly email newsletter!
Latest Webcast
Best Practices: How to Efficiently Leverage APIs to Increase Your Net Income
Both legacy and modern technology leaders agree that leveraging API connectivity is critical in keeping up with the pace of a world that demands not only speed and agility, but also a deep level of visibility. During this session a panel of technology and industry experts discuss impact APIs can have on annual net income and market capitalization.
Register Today!
EDITORS' PICKS
Logistics Management’s Top Logistics News Stories 2016
From mergers and acquisitions to regulation changes, Logistics Management has compiled the most...
Making the TMS Decision: Ariens Finds Just the Right Fit
The third time is the charm for this U.S. manufacturer on the hunt for a third-party logistics (3PL)...

Motor Carrier Regulations Update: Caught in a Trap
The fed is hitting truckers with a barrage of costly regulations in an era of scant profits....
25th Annual Masters of Logistics
Indecision revolving around three complex supply chain elements—transportation, technology and...