For those who've been involved in China sourcing from an on-the-ground perspective, you already know the challenges of intra-China shipping. Sure, once goods hit the water, things usually end up alright, but up until that point, the costs and potential snags you can run into are quite large indeed. World Trade Magazine, one of my favorite global sourcing publications, recently featured an article that exposed some fascinating facts about transportation with in China. In this post, I'll share a couple of the highlights from a trucking perspective, leaving the rail findings for another day.
Did you know, for example, that "China has close to 2 million trucking companies with an average of 1.2 trucks each." That's right. 1.2 trucks, on average for every trucking company. Talk about a fragmented market opportunity. But where there is potential for consolidation, companies are stepping in. Schneider National, a large North American-based provider, is becoming "the first U.S. trucking firm to receive operating authority in China" where it will do business as "Schneider Logistics (Tianjin) Co. Ltd., providing domestic transportation, warehousing, cross-docking, third-party logistics and other services." Clearly, from a total landed cost perspective -- factoring in on-time delivery and logistics costs -- there's a strong value proposition that Schneider should be able to make to North American firms buying from and selling into the Chinese market.
Of course Schneider and their competitors are not pursuing this strategy out of the goodness of their hearts. Nope. Rather, they see tremendous profit potential. The article notes that "spending on logistics and transportation now accounts for 18 to 20 percent of China's gross domestic product, compared to 8 to 10 percent in the U.S. That means trillions of dollars are up for grabs." And that, of course, is in a market where small logistics providers with 1.2 trucks will not remain competitively viable for long.