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Day breaks in china’s logistics industry

day breaks in china's logistics industry

MENTION logistics, and perhaps a busy port comes to mind. We may then recall how Rotter­dam was unarguably once the world’s busiest port, for 40 years. Yet, in just a few years this logistical crown was usurped by Singapore, among the most thriving of countries in Asia. How is the logistic industry going on in the Chinese market? Find out in Ruben’s latest article published on China Today “Day Breaks in China’s Logistics Industry”!

The term “logistics” was first coined in 1927 by U.S. scholar Ralph Borsodi. Yet logistics services actually originated in military usage, and logistics has since come to play a major role in today’s global supply chain. Among all types of logistic services, however, third-party logistics (TPL) first started in the 1980s in the United States. This business ex­panded by 20 percent each year over the following 20 years. And then TPL in the European countries swiftly came up from behind.

The world was, to a large extent, then soon surprised by the rapid develop­ment of the logistics industry in China. Though the industry was exposed to a negative economic environment from 2008 to 2009, during which the world suffered the financial crisis outbreak, it was somehow a wakeup call for inter­national logistic companies, to the fact that Asia, or more specifically China, is where the future of the industry lies.

What’s going on in the industry in Europe and the U.S.A., as compared to China’s current TPL development? There are apparently many differences.

Enormous Investment in an Emerging Industry

In terms of logistics infrastructure, since most business is done through ocean freight, differences may be il­lustrated by comparing the amount of investment in port infrastructure in China and Europe. After China officially became a WTO member in 2001, inter­national TPL rushed into the Chinese market. A huge investment in China’s TPL has since been evident. In the year 2002, there were only about 10,600 quay berths, yet by 2011-2012, they had almost tripled to 31,000 (2013-2017 Chi­na Port Logistic Industry Analysis and Prediction Report data). The amount of investment has continued to increase each year. For example, after gaining great rewards in 2011, the Logistics Management Department of Liaoning Province decided to invest RMB 20 bil­lion in port infrastructure in 2012.

Since Europe became involved in the logistics business earlier than Asian countries, as regards both infrastructure and operation of the logistics industry, European countries have achieved great­er maturity. Their investment should therefore not increase as rapidly as in China. However, through specific invest­ment in either channels or bridges to solve small problems, certain cities like Hamburg and Antwerp are still among their greatest ports in Europe. More­over, investment in further development never stops in Europe. Rotterdam, as the best port in Europe, absorbed €10 billion (about RMB 80 billion) in invest­ment from government and corporations from 2006 to 2013. And despite being the best in Europe, development of this port has never stopped.

Toward Lower GDP Costs

Observing the logistics costs in per­centage terms of GDP in China and in some developed countries, we see there is still much to improve in China’s logis­tic systems. Logistics costs refer to the costs of transporting and storing prod­ucts, as linked with charges for transpor­tation methods including train, truck, air and ocean transport. Other logistics costs include fuel, warehousing space, packaging, tariffs and duties.

In 2011-2012, logistics industry costs as percentage of GDP were: U.S.A. – 10.5 percent, UK – 10.6 percent, Neth­erlands – 11.3 percent, and Japan – 11.4 percent. In 2011-2012 in China, logistics industry costs as a percentage of GDP was about 18 percent – 8 percent higher than in developed countries (China Lo­gistics Club data). Further explanation is required here: lowering such costs as a percentage of GDP is more profitable for businesses. This is because logistics ser­vices do not add value to the process. To be specific, the faster and more efficient you are, the more money you make dur­ing the process. Unfortunately, an in­creasing number of logistics companies in China are still struggling for higher profits.

Yet, it is worth mentioning the case of Qingdao, a city doing so well in logis­tics that it sets a good example for other cities in China. In 2008, the cost of lo­gistics in Qingdao was only 9.8 percent of GDP, comparable to developed coun­tries. The city mainly developed its port, supplementing airfreight and rail trans­port. It has thus focused on its specialty – ocean freight. In this regard, reduction of logistics costs requires companies to specifically focus on an industry and of­fer proper logistics services at the same time.

Clear Norms and Standards Required

There is a famous saying among the Chinese, “Nothing is accomplished with­out norms and standards.” This works in the logistics industry, too. Logistics management standardization refers to national regulations and standards in the industry, the assortment of types and sizes of companies, the business process, and so forth. To manage an industry well, to a large extent, entails a well-established management system.

The United States was the first coun­try in the world to organize a national logistics management department – the National Council of Logistics Manage­ment (CLM). In the 1980s, rules and regulations (around 1,200 terms) were drafted for airways, waterways, railways and highways, which ensured the qual­ity of logistics services in the country. It is the same in Europe. DHL, Kuehne & Nagel, DSV, Panalpina, CEVA – all these companies are excellent performers in the market. The key reason is that peo­ple know what they are doing every day and why they do what they do. Everyone is clear about standards and norms.

As for Chinese logistics standards, of course companies must follow rules from the Ministry of Commerce, the Ministry of Transport, and the General Administration of Customs. However, these are all very general rules. And al­though there are local logistics organiza­tions in China, for example, the China International Freight Forwarders Asso­ciation being one of the biggest, such or­ganizations have yet to devise specific rules. There are thus no detailed rules and regulations for Chinese logistics companies to follow.

In this regard, I have two sets of ad­vice for Chinese logistic organizations. Firstly, I would recommend that Chinese logistics organizations, especially local ones, cooperate with each other by hold­ing events and networking activities. In this way, logistics organizational net­works would expand effectively. Through merging local logistics organizations toward a larger scale, amalgamation could approach the level of international logistics organizations. Another point is to increase standards for companies wishing to join logistics organizations. Normally companies who are members of the organization are given logistics certificates. I think if China divides the certification system into the three levels of basic, good and excellent, some truly fine logistic companies would be more willing to join such organizations.

Market Segmentation

As client needs may vary quite signifi­cantly, logistics services could be divided into many types: by industry, geographic region, product, clientele, time duration, service, and interest return. In freight forwarding, for example, the basic ser­vice is transport from port to port. Other companies offer added-value services – transport from door to door. The market is thus based on service type. Market segmentation among big international companies in Europe is fully developed. They offer services for ocean imports and exports, containers, contract logis­tics, and so forth. Customized services have become one of the core ideas for running businesses in today’s world. Moreover, there are logistics companies offering services to only one or a few select industries, such as in automotive and consumer products, or chemicals.

Development in China’s logistics mar­ket segmentation is still at entry level. At the beginning, a lot of logistic companies provide the same services. Problems ap­pear at a later stage when profits begin decreasing at a rapid rate. Companies, therefore, have to think about how to make the pie bigger before getting their slice. A few of the better logistic com­panies, such as COSCO Logistics and CNPL, are performing well through the market segmentation process, based on geographic region, industry type, as well as the size of client companies.

The point of comparing the industry in China to that in Western countries is not to let everyone down. Though there are disadvantages for China right now, with the above improvements, business will get better sooner or later. There is no doubt that, during the past decade, the development of the logistics industry has been amazing.

When the Netherlands was still king of the logistics industry, Asian ports and logistics companies were left far behind. China took but a few years to catch up, and then take the lead. With the coun­try’s rapid economic growth, I am con­fident that China will unleash a logistics industry gold-rush in the near future. RUBEN VAN DEN BOER is RMG Selection consultant.

Robert on Easy FM Round Table show talking about Job Market



CEO of RMG Selection, Robert Parkinson, joins Easy FM Round Table show to talk about Job Market as well as the findings of the “2013 China Talent-flow Survey (TFS2)” released by our company. He also answers listeners’ questions about job-hunting career planning. In general, we have four topics in this show: 1. China Talent Report 2. Job Hopping 3. First job of college graduates 4. Changing jobs after a long holiday. Click here to find more information : http://english.cri.cn/4926/2014/01/23/1561s809663.htm 


Source: http://english.cri.cn/4926/2014/01/23/1561s809663.htm 


China Dream Sours for Foreign Companies- Financial Times

Government investigations and state media exposés targeting foreign investors have become a regular feature of the country’s business landscape By Tom Mitchell in Beijing The “Chinese dream” articulated by China’s new president, Xi Jinping, is fast becoming a nightmare for some of the world’s most powerful corporations. Mr Xi’s speech, on his accession to the presidency in March, hinted at a more assertive approach to match China’s economic power – and since then, government investigations and state media exposés targeting foreign investors have become a regular feature of the country’s business landscape. Public officials say this simply reflects broader efforts to tackle bad practice, but some executives complain that foreign groups appear to be encountering particularly heavy scrutiny under the new leadership. Those suspicions were reinforced this week, when the powerful National Development and Reform Commission fined six baby formula manufacturers $110m for anti-competitive pricing policies. Five of the six companies were well-known multinationals including Mead Johnson of the US, Danone’s Dumex unit and New Zealand’s Fonterra group. This first high-profile enforcement of Article 14 of China’s 2008 anti-monopoly law, which bans companies from imposing retail price floors for their products, came just weeks after an explosive police investigation into bribery by staff at GlaxoSmithKline, the UK pharmaceuticals group. None of the milk powder companies is challenging the NDRC’s penalties, and GSK has said some of its employees may have violated Chinese law. Other investors in China have had to fend off state-media campaigns accusing them of lesser sins such as quality control failings and poor customer service. Apple’s chief executive, Tim Cook, made a high-profile apology on April 1 for “misunderstandings” and stressed his company’s “immense respect” for China. State media had accused the company of “greedy” and “incomparably arrogant” behaviour, citing complaints about substandard after-sales service for Chinese customers. Volkswagen recalled 380,000 vehicles because of gearbox problems highlighted by an investigative report in March by CCTV, the state broadcaster. For some executives, the critical drumbeat in the five months since Mr Xi and his premier, Li Keqiang, formally took power has been too intense to be dismissed as a coincidence. “They may have found something against these [foreign] companies,” said one lawyer who defended a multinational targeted in the NDRC’s baby formula investigation. “But what about the Chinese companies?” “As a government official, going after state-owned companies is difficult,” adds Steven Bing, an analyst who previously worked in China for several western pharmaceutical groups. “So if you want to make an example of someone to fix the system, you target the foreign companies.” Chinese government officials reject suggestions that there has been a co-ordinated effort to gang up on foreign investors. On Thursday, the NDRC denied that its investigation into pricing practices in the baby formula market was coloured by anti-foreigner bias. In a statement on its website, the commission dismissed such speculation as “groundless” and welcomed the “important” role played by foreign investors in China’s economy. The government’s defenders point out that a Chinese company, Biostime International Holdings, paid the highest fine in terms of percentage of annual revenues, equivalent to 6 per cent of turnover. Illinois-based Mead Johnson paid the largest fine assessed: Rmb204m ($33m), or 4 per cent of its China unit’s turnover. The anti-monopoly law allows the NDRC to impose fines ranging up to 10 per cent of a company’s annual revenues. Two foreign companies, Nestlé’s Wyeth Nutrition unit and Meiji Dairies of Japan, were also included in the NDRC’s probe but were not penalised. Some observers believe that the action against foreign companies is merely part of a much bigger government campaign. “I wouldn’t say the anti-foreigner bias is as strong as some people might think,” argues Veronica Lockyer, a competition lawyer with Orrick in Shanghai. “There are often other motivations in the background for anti-monopoly enforcement.” Chief among these is the government’s determination to assuage public discontent over the high price of essential goods and services, especially as an aggressive propaganda campaign attempts to foster the idea that every citizen has a stake in Mr Xi’s “dream”. As Robert Parkinson, at recruitment company RMG Selection, says: “The cost of living in Beijing is just crazy for younger workers.” Spiralling healthcare costs are of particular concern to the government, and many suspect this is a factor in the criminal probe into alleged bribery and corruption by some GSK employees. The NDRC is separately conducting a review of pricing practices in the pharmaceutical sector. The high cost of foreign milk powder brands also makes them an easy target. Demand and prices have soared in the five years since tainted domestic formula products killed several babies and made thousands more sick. Some lawyers also point to a long but quiet build-up in pricing and other anti-monopoly investigations that targeted both foreign and local companies and predate the Chinese leadership transition. Before these investigations, enforcement of the 2008 anti-monopoly law had focused on asserting Chinese regulators’ right to weigh in on the world’s biggest merger and acquisition agreements. Glencore is selling a Peruvian copper mine, which could fetch about $5bn, as a condition for Chinese clearance of its merger with Xstrata. “Previously the anti-monopoly law was all about merger law and merger filings,” says Ms Lockyer. “But there were signals last year that something else was going to happen. The NDRC in particular had an increase in its personnel. It was a sign that it was beginning to flex its muscles.”

Read the origional version at: http://www.ft.com/intl/cms/s/0/4c9d9f06-00bd-11e3-8918-00144feab7de.html

The Bull is Back! Why Hiring People Currently without a Job might be a Jolly Good Idea – Business Tianjin

To my great relief, as the owner of a recruitment firm active throughout China, 2013 is looking like it’s going to be a good year: The Europeans seem to have adverted the ‘nuclear’ scenario being touted last year of a multi-country Euro exit (there are even positive noises about Greece’s economy now); the Britons and the Germans seems to be talking sense over the EU budget; the stock markets around the world have rallied so far in 2013; Obama is pursuing a growth agenda alongside encouraging data coming out of the US and there seems to be increasingly and repeatedly positive news about the state of the Chinese economy; albeit with simmering concerns over local government debt.

We can, therefore, take comfort in the fact that there is at least some good news for the average white-collar professional working in China (unless you’re a banker), as the renewed confidence in the economy translates into greater hiring numbers; particularly in mission critical / demand-creation roles. I would expect this confidence to grow quite considerably in Q3 & 4 of 2013. So with this likely need to hire, I’d like to offer a different perspective on taking on hiring individuals who are currently not in work.

Traditionally, there has been an assumption amongst many executives that those not in work are in some way tarnished, and therefore to be avoided (I know this having talked about it to thousands of clients over the last 15 years in many different countries). An assumption that their lack of work is in somewhat related to poor performance either directly or indirectly, and ‘they’ are therefore ‘best’ avoided. Maybe a reasonable assumption in a developed economy, not so here!

Let me present to you the current scenario in mainland China, and then some reasons why it might just be the best thing you’ve ever done to hire someone who’s not working:

Firstly, the Chinese situation at present: The ratio of cost of living to income amongst affluent, educated professional people is just about the highest I have seen anywhere in the world. What I mean is this, although yes, food prices have risen of late, the cost of food, particularly when consumed in restaurants, is tiny compared to the average professional’s income. You can eat well, with wine for CNY 200, (USD 30) whereas the same would cost you 4 times that in major western cities. My car (a ‘full-sized’) costs me CNY 400 to fill up in Beijing, whereas in London my (by comparison) tiny VW Polo costs me CNY 600 to fill up (and it’s tank is half the size!). Taxes, when you factor in indirect taxation, are much lower in China than in most European countries.

You get the picture, if you don’t have an army of Children in international schools in China, the cost of living is cheap; and even more for the many Chinese who invested in down-town property developments 10-15 years ago for a 20th of the current prices, when the developers were enticing people to pool their family money (and so created a slew of dollar millionaires in the process). And then there’s the family. Chinese people are very skilled at sharing their wealth within their extended families to facilitate property purchases and other investments; there is a group attitude to wealth creation, and it often seems to have worked to many families’ advantage.

So, what does this mean for the jobs market? Well it creates a quite unique situation, on the one hand, you have a lot of people who could live very cheaply yet live in premium property, often without a mortgage, and still maintain a very nice standard of living (particularly in respect of time spent on things like fun, travel, exercise and the family etc); and yet on the other hand many of these people are skilled, highly educated and in demand in the jobs market. It’s a perfect storm in many senses, and the result is that ‘taking a career break’ becomes a perfectly acceptable thing to do, sometimes almost encouraged because the immediate need to put ‘bread on the table’ and pay the mortgage just simply isn’t there as it is in most middle-class families in the western world. The strain of ‘career-breaks’ and ‘having a rest’ on employers is compounded even more by those families who espouse the Confusionist values of ‘balance’. ‘Having a rest’, which would be an anathema to those addicted to the US-style rat-race, is quite a normal concept here, because simply put, most middle income people can afford to.
So, here’s my advice to employers, and a few reasons why hiring people who aren’t currently at work, might just be a jolly good idea: Often people with a job who look around for other jobs don’t do this for the most laudable of reasons: lack of performance, a desire to collect offers, to get a raise or obtain ‘market worth’, or simply a lack of drive or loyalty are all reasons why it might not be a good idea to hire a currently employed person.  Conversely, people who aren’t currently in work are more likely to buy into the vision you offer, because, in a sense, they are starting afresh.
Do you really want someone from a competitor? Yes they might know what to do, but in my view, industry knowledge is over-rated in China, and in fact transferable-skills are more important to the modern enterprise so that people can deal with the very inevitable change when it comes. Also, if you offer a competitor’s employee more money to come and work for you, what happens when the next competitor does the same to you?
Hiring from different industry sectors brings fresh, new, valuable ideas and may prove to be much less of an ‘information security’ risk.
If people can afford to take their time over making their next career decision, then this assumes two things:
1. They have the financial means to support themselves whilst they’re doing this (and many people do because of the super-strength family organisation), which in turn assumes that money will not be the biggest deciding factor when it comes to changing jobs (good news for the employer).
2. They have a genuine interest in making a good decision about their future, and again from an employer’s perspective this is good news; we all want our staff to be there for the love of it rather than just the cash (or at least to some extent!).
Do we, as employers, want happy, healthy, relaxed staff; or do we want stressed-out, unhealthy, functioning alcoholics – aka – rat racers?! I don’t need to answer that one! I think the Chinese may well be on to something when we look at their take on life, and businesses can make the worst of it, or they can make the best of it.
China surely is a unique and special place, particularly for the jobs market. The normal rules of HR in the western world don’t seem to apply here, and therefore we have to truly think ‘outside the box’, or at least make an effort to understand ‘the box’ to generate anything like above average results!
Link to the article: http://www.businesstianjin.com/index.php?option=com_content&view=article&id=6177:hr-the-bull-is-back-why-hiring-people-currently-without-a-job-might-be-a-jolly-good-idea-&catid=184:2013-april&Itemid=100