China Tackle It's Logistics and Infrastructure Costs

At first glance, China does not seem to have much in common with its global export rival, India. If you compare China's gleaming new highways that connect much of coastal areas and the sea of towering cranes that swim across the Shanghai landscape, you'd be hard pressed to say China has a logistics or infrastructure challenge (at least relative to other developing markets). But according to an article printed in Cargo News Asia that references presentations from a recent Council of Supply Chain Management Professionals conference in Tianjin, "China's logistics costs totalled US$498 billion in 2006 or 18.3 percent of GDP (gross domestic product) compared with 9.9 percent in the United States, the executives pointed out ... The turnover of third party logistic providers increased at a rate slower than GDP growth last year. The mainland's logistics industry still lags two or three decades behind advanced nations."

For anyone who has waited nearly 2 months -- a high number, I'll admit, but certainly not out of the ordinary, even if 30-45 days is more common -- for goods produced in a Chinese factory to arrive at your facility, even a marginal improvement in delivery times will have a significant impact on lead times. Logistical efficiencies should also serve to bring down total landed cost calculations as well. And while they may never have serve to fully counter the effects of the recently announced export tax rebate reduction, they may help companies gain back some basis points after what I expect will soon be a significant rise in China export prices across a broad range of categories.

Jason Busch

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