Putting logistics at the heart of commerce [GCTL Insights Magazine (China)]
(GCTL Insights Magazine (China) Via Acquire Media NewsEdge) SHANGHAI, Apr 14 (GCTL) - After years of delivering parcels, business documents and university applications between China and the rest of world, major international carriers have changed their tactics to offer more upgraded services such as the conveying of healthcare products, precise parts for aircraft manufacturers and high-end foods in China's fast-growing express delivery market.
Many of these opportunities come from China's soaring economy and application of information technology, as well as the changing population structure between urban and rural areas, which have pushed the country's express delivery sector to a further division among more sophisticated and segmented markets.
Frederick Smith, chairman and chief executive officer of FedEx Corp, said FedEx has found new market growth points in China's high-end manufacturing industry, such as providing timely delivery of airplane parts and industrial equipment from developed markets to China, as well as expanding its facilities for health-related products at its Shanghai international hub.
As the operator of the world's largest cargo airline, FedEx has continued to work with Shanghai Airport (Group) Co Ltd to establish an upgraded international express and cargo hub in Shanghai, China Daily reported, citing industry sources.
After its completion in 2015, the new hub is expected to more than triple the capacity of the current FedEx facility in Shanghai, allowing it to process up to 36,000 documents and parcels per hour.
"Expanding our hub at the Shanghai Pudong International Airport is a strategic move for FedEx. The new hub will add more services and help facilitate growth in international trade, most notably between eastern China and the rest of the world, especially with emerging markets," Smith said.
Supported by mature air and maritime transportation facilities, and a large number of factories in the Yangtze River Delta region, Shanghai's foreign trade volume surged to more than $39.95 billion in 2013, up 8.5 percent on a year-over-year basis, according to the Shanghai municipal government.
With an investment of more than $100 million, the new hub in Shanghai is a major step in an ongoing growth plan to expand the FedEx network and service offerings throughout the Asia-Pacific region.
"We have also found there is a growing demand for fast and efficient international express services between Chinese manufacturers and foreign buyers, especially in emerging markets such as Africa, the Middle East and South America," said Smith.
FedEx has already assisted computer giant Lenovo Group Ltd to boost its global PC sales in Africa, where the PC producer has encountered the same fierce market competition formed by foreign rivals such as Dell Inc and Hewlett-Packard Co as in other parts of the world.
Smith said having a good partner to deliver critical parts, technical solutions and expensive laptops is the key to ensuring that the Chinese companies can have good service behind their products.
"FedEx has a number of business partners from China that need to load their goods onto cargo flights in its hubs in Shanghai, Beijing, Dubai or Paris to deliver them to different destinations throughout the world," he said.
The company has a fleet of 649 aircraft and more than 100,000 vehicles to deliver more than 10 million shipments a day. It also has more than 300,000 employees and contractors serving more than 220 countries and regions across the world. In China, it has more than 9,000 employees and operates in excess of 110 service stations.
In the meantime, United Parcel Service Inc, the world's largest package delivery company by revenue, is also looking to maintain an upper hand in China's rising delivery market for healthcare products and is planning to add another 14 inner-city express services in the country this year.
It opened a specialist facility in Hangzhou, the capital of Zhejiang province, to handle shipments of medical products last year. The facility consists of 22,000 square meters of storage space and is designed to meet the demands of specific storage of medical devices, biologicals and pharmaceuticals, as well as the distribution needs of different pharmaceutical companies.
Scott Davis, chief executive officer of UPS, said expanding to the healthcare logistics field means the delivery company can now extend its industrial chain from distribution to upgraded warehousing and storage services. It also wishes to have a presence in the bulk freight of healthcare products by offering cheaper solutions for its clients.
UPS opened its first Asia medical products facility in Singapore in 2011, and has followed that with the opening of three additional facilities in Hangzhou, Shanghai and Sydney.
"To capture the growth in consumer demand for healthcare, as well as catching the opportunities from China's e-commerce boom, the online demand for healthcare products will undoubtedly surge over the next five years. We believe that logistics is critical to the success of e-commerce in this market," Davis said.
UPS had expanded urban express services to 19 first- and second-tier cities in 2013 and expects to reach 33 cities by the end of this year. The company operates 208 weekly flights connecting China to the US, Europe and destinations across Asia.
"Our healthcare logistics service will be connected with inner-city express services in the future along with a rise of our domestic capability in China," said Davis.
As the US companies step up their activities by setting up more air routes and cargo hubs in China, Deutsche Post DHL hasn't just relocated two giant pandas more than 8,000 km from Chengdu to Brugelette, Belgium, using a Boeing 767 freighter aircraft operated by DHL Express in February, but also bankrolled new strategies to retain and grow its market share from China-Europe trade by railway.
DHL Global Forwarding, the air, rail and ocean freight specialist of DHL, formed a new partnership to develop rail forwarding services on the China-Europe rail route with a preparatory committee of the United Transport and Logistics Co in March.
UTLC is expected to be established later in 2014 as a joint-venture partnership between OJSC Russian Railways, JSC National Co Kazakhstan Temir Zholy and State enterprise Belarusian Railway. It will operate as an integrated provider of logistics and container rail transportation services between Europe and China.
Steve Huang, CEO, DHL Global Forwarding China, said the potential for rail freight growth between Asia and Europe is huge but to grow it successfully requires high-level partnerships and efficient network operations.
"Our partnership leverages both groups' strengths to accelerate the development of rail forwarding services on the China-Europe-China route with UTLC providing all rail services in Russia, Belarus and Kazakhstan and DHL providing third-party logistics and door-to-door delivery," Huang said.
DHL introduced the first temperature-controlled China-Europe rail service to undertake the fast-rail connection between China and Europe in January. The service starts in Chengdu and runs along China's West rail corridor to DHL's intermodal hub in Malaszewicze and Lodz, Poland.
The service will provide an all-year multi-modal shipping solution for temperature-sensitive European products, such as Dutch dairy products and French wine, to China, which was previously unable to use the fast and cost-effective transcontinental West rail corridor, especially during winter and summer.
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