Copyright Journal of Commerce, Inc.
Journal of
Commerce - JoC Week
September 18, 2000, Monday
SECTION: SPECIAL REPORT1; Pg. 29
LENGTH: 768 words
HEADLINE:
Waking from a nightmare
BYLINE: By Gene Linn
BODY:
China has discovered logistics, and not a
moment too soon.
Currently, the typical distribution center in China is
a shipper's nightmare. Truckers unload their goods in these relics of the
centrally planned economy and wander around hoping to find a broker with cargo
for the backhaul. Far from home, in unfamiliar territory, they fail 44 percent
of the time, according to Chinese statistics. Goods at the centers are handled
by slow, labor-intensive means, guided by an equally laborious system of phone
calls and faxes.
To improve supply-chain management, the nation's
Ministry of Communications has launched a seven-year program to build 45
distribution hubs. The ministry will fund half of each hub, with the rest of the
financing coming from local governments. Private Chinese or foreign investors
also may participate.
The centers will be linked at www.TransOnline.com,
an Internet portal officially launched in August by the Ministry of
Communication's Research Institute of Highways and Winsan (China) Investment
Group of Hong Kong.
""The model is similar to Germany's, with all goods
going to a major logistics hub to be shipped to a smaller center,'' said Balendo
Lo, assistant to the chairman at Winsan.
The first of the 45 new
logistics centers opened in March 1999 in the northeast city of Shenyang. It
uses advanced warehouse management systems, including automated conveyor belts
to sort and move Michelin tires from a local plant. ""They can load a 40-foot
container in five minutes. It's very impressive,'' Lo said. The new hubs also
provide cold storage and customs- clearing services.
Lo said China-based
foreign manufacturers account for some 85 percent of the goods handled at new
centers in Shenyang, Tianjin and a handful of other cities. ""By removing
distribution operations from their own companies, they reduce costs 15 percent
to 20 percent and avoid a lot of headaches,'' he said.
Aside from the
primitive state of old-style distribution centers, one of the biggest headaches
is the trucking system. Three-quarters of China's 4.17 million trucks are
owner-operated. The individual truckers and small companies have no connection
to logistics information networks and vary widely in reliability.
That
is where the TransOnline plans to come in. The new system includes the Freight
Information Exchange System developed by the Ministry of Communications. This
standardized program allows shippers, carriers and other parties to communicate
throughout the country. A ""smart card'' provides identification for approved
drivers, improving security. A commercial vehicle- positioning and
cargo-tracking system provides an inexpensive way to locate individual trucks
with reasonable accuracy.
Eventually TransOnline expects to offer a full
range of logistics service applications, including third-party logistics
outsourcing services.
However, foreign logistics executives are far from
ready to concede the field to TransOnline and the Ministry of Communications.
Jeffrey Bernstein, chairman of the AmCham-Shanghai trade and logistics
committee, said it is probably a ""pipe dream'' to propose a sophisticated
control network for the highly fragmented and inefficient trucking industry. And
he questioned whether the Ministry of Communica-tions has the capability to
administer the website and logistics hubs.
TransOnline ""is a symptom of
a bigger situation,'' said Bernstein, who is also Shanghai-based general manager
at Emerge Logistics. ""The government is trying to figure out how to cope under
WTO.'' China's expected entry into the World Trade Organization will provide
more opportunities for foreign logistics firms.
China signed an
agreement with the United States last year stating that "" service suppliers
related to distribution,'' storage and warehousing companies, freight forwarders
and road and rail transport firms all may enter joint ventures upon China's
accession to the WTO.
The agreement also sets a schedule for allowing
majority foreign ownership of joint ventures and for an end to all restrictions.
To receive these concessions, America will have to approve Permanent Normal
Trade Relations status for China. PNTR was passed by the U.S.
House of Representatives and is expected to be passed by the Senate and signed
by President Clinton.
In the meantime, Bernstein said, it is
questionable how many foreign companies will invest in the Ministry of
Communications centers. ""You don't want to get into bed with the government and
find out a year and a half later you can get what you want on your own anyway,''
he said.
LOAD-DATE: September 19, 2000
