China’s logistics system needs to keep pace with the exponential growth in online commerce, otherwise bottlenecks and other systemic shortcomings are likely to become a daily fact of life, according to industry experts.
At current growth rates, next year’s Singles’ Day, the online shopping extravaganza intended to celebrate pride in being single, is likely to result in more than one billion packages entering into China’s domestic distribution system.
The system was already pushed to its limits. This year’s event resulted in 678 million parcel shipments, according to Chinese data company Syntun, a 66 per cent increase over last year, and phenomenal 67-fold increase in the volume of packages since 2010. The event is held each year on November 11.
KK Leung, president of UPS North Asia District said China’s custom clearance should speed up to meet the pace of cross-border e-commerce growth.
“The volume is totally different, it was hundreds of parcels one day for a local custom, but now it is hundreds of thousands a day,” Leung told South China Morning Post.
“Our target is always same day, goods coming in the morning, and get them released [from customs] in the afternoon.”
Leung said most consumer goods imported into China are subject to domestic taxes and must undergo individual parcel processing, which can be a time consuming process. This also applies to goods which are imported through warehousing facilities located in free-trade zones near shipment hubs within China.
One executive with a Shanghai-based cross-border online trading platform said in recent times custom clearance is more “mature” in terms of inspection and information management system, as it takes about 26 hours to get through Shanghai customs for most consumer goods this year, compared to 2 to 3 days last year.
While that’s a huge improve, experts were quick to point out that logistics services still have a long way to go in terms of maximising efficiency.
“Logistics costs in China amount to 15 per cent of GDP, in more mature markets such as US and Japan, the cost is around 8 per cent,” George Yeo chairman of Kerry Logistics Network, said at a logistics conference Tuesday.
He said government could help promote efficient practises by lowering road toll charges at major transport hubs.
Ministry of Transport data available in late 2014 showed that China had 162,600 km of toll roads, equal to 16 times the amount of toll roads in the US.
Mark Li, president of Sinotrans Ltd., the country’s largest logistics provider, said automation should be upgraded to help reduce labour costs.
Many processes such as sorting are still heavily depend on manual labour.
China’s online shoppers accounted for 10 per cent of total retail sales in the first three quarters of 2015.
In the expectation online commerce will continue to expand, UPS said it is planning to introduce its “access point” strategy to mainland and Hong Kong, installing lockers at office buildings, convenience stores or other chain stores. The system allows individuals to drop off shipments and pick up packages, to solve the “last mile” delivery problem.
UPS has already rolled out these services in Taiwan and Singapore.
“We will bring them to as many Chinese cities as possible, to make our customers happy,” Leung said.