On Singles’ Day, 2015, online shoppers purchased more than 700 million packages. According to research conducted by Goldman Sachs , such volume required more than 1.7 million couriers, 400,000 vehicles, 5,000 warehouses and 200 planes, topped by a ”marginal” cross-boarder delivery volume.
China logistics costs reached $1.7 trillion in 2014, compare to the US at $1.4 trillion, making China the largest logistics market in the world. According to a majority of estimates, the market should reach a staggering $2 trillion by 2020. The GDP share of logistics was 17% in 2014, which was double that of U.S. (8 percent). This is due to the relatively inefficient process in China. The western operators are still more developed and structured in their operations.
The 3PL (a third-party logistics provider is a firm that provides service to its customers of outsourced logistics services for part, or all of their supply chain management functions) market in China is very fragmented, with over 10,000 service providers competing against each other. Many of these logistics companies are SMEs (2 men and van), and only provide services in one city/province or are just covering one or two business segments.
The low market concentration should prompt market consolidation. The need for higher efficiency is the factor driving a rise in industry concentration. Over the past six years, the logistics industry in China has seen roughly 250 M&A transactions valued at over 2.5b. E.g. XPO Logistics and Alibaba Group have been actively setting up the future scene.
The high cost of logistics in China will lead to a growing demand for sophisticated, technology-driven value-added logistics services. Structural drivers, more than cyclical, back up the estimate for the uptrend in China’s logistics sector over the long term.
Key drivers for the upward trend in China are growth in e-commerce volume, manufacturers relocating production, stimulating supply chain services, increase in companies outsourcing accelerating third-party logistics (3PL), rise in value-added services translating into more profit opportunities and an upgrade of technology solutions increasing unit revenue. This is what we see in the market, top players are on the move for better solutions to increase and hold the footprint.
Some say, “Data is the modern Oil.” Smart companies have started to invest in modern technologies that provide efficiency and automation, hence increasing customer experience and process transparency for all related parties. With a high price pressure per unit cost on logistics, thought leaders are now getting equipped with tools to respond to market agility and efficiency demand.
In the end it will be all about managing data proactively.
The key is to ensure an agile and efficient data technology for the 3PL companies. This is where an integrated data technology solution from Youredi will make the difference by providing the added value to the 3PL.
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