Reliability, cost issues affecting logistics

High costs and low reliability among local providers are hampering the domestic logistics industry, according to a report on logistics services in China released on Wednesday.

The report, based on a survey by the Global Supply Chain Council and supported by CEVA Logistics, polled 177 professionals who work on supply chains in China via an online questionnaire.

Some 49 percent of the respondents replied that high costs and low reliability were the biggest problems with China's logistics industry.

The survey also found that 62 percent of respondents identified the top supply chain objective this year as reducing logistics costs.

Some 34 percent of respondents reported dissatisfaction with outsourced logistics services. Within that group, 64 percent said unsatisfactory experiences were related to low service levels and professionalism.

Problems related to information technology, prices and the ability of providers to adapt to particular circumstances were also sources of dissatisfaction for respondents.

There was no overall trend in expectations for costs. The survey revealed a small majority of respondents (about 20 percent) expected logistics costs to remain the same in the coming year, while another 20 percent expected changes.

The average cost of logistics as a percentage of sales was 12.5 percent, the survey found.

"In China, the cost of logistics accounts for about 18 percent of GDP, which is nearly double that in the US and in most European countries, so logistics costs must be reduced to keep a competitive edge," said Martin Thysen, executive vice-president, China, CEVA Logistics.

The logistics service industry in China is still fragmented and maturing, said Thysen.

For logistics providers, it is essential to avoid waste by improving supply chain plans, information technology systems and warehouse management, according to Thomas Pan, managing director in North Asia for Menlo Worldwide Logistics.

The survey revealed the main criteria for selecting a logistics provider in China was price.

Some 73 percent of respondents cited competitive prices as being a critical factor in their choice.

Some 45 percent said reliability was important. Other significant factors influencing selection included proactive client notification of problems - cited by 25 percent of respondents - and personalized services, cited by 18 percent of respondents.

Respondents felt that the main priority in 2012 for companies was to focus on outbound logistics, including supporting customers, clients and resellers in China, the rest of Asia and abroad.

Some 49 percent of respondents chose outbound logistics as their priority for this year.

In the East China region, many manufacturers are experiencing falling export orders and trying to secure increasing domestic orders. Thus, their logistics needs may shift from shipping and cargo to ground transportation, said Ye Haiyun, manager of Chanyun Logistics in Hangzhou.

wuyiyao@chinadaily.com.cn