1、July, 2001,COSCO IPO SUPPORT MATERIALS,Logistics Services Industry Environment CSFB; A.T. Kearney Analysis,Transportation and Related Expenditures by Region (2000),Transportation and Related Expenditures by Function (2000),US$ Bn,Total = US$ 3,837 Bn,Others: -1.4%,Asia(1): 2.2%,Europe: 2.6%,North Am

2、erica: 4.0%,3,424,3,837,4,389,Warehousing$304 Bn,Transport$2,204 Bn,Others$55 Bn,Shipper-Related$20 Bn,Inventory$1,102 Bn,Admin$152 Bn,CAGR 2000-2006,The Asian logistics outsourcing market is estimated to reach US$ 31 Bn in 2001 and is expected to grow at CAGR 39% over the next five years,Note:Asia

3、includes China, Japan, Honk Kong, Korea, Singapore and Taiwan Source:Bowersox and Calantone; CSFB; A.T. Kearney Analysis,Logistics Outsourcing Market in Asia - Gross Revenue (US$ Bn),CAGR (99-01) = 38%,CAGR (01-06) = 39%,The greatest opportunities for outsourcing are in transport, warehousing, and t

4、ransport management,Transport,Warehousing,TransportManagement,IT,SupplementaryLogistic Services,Purchase OrderManagement,LogisticsManagement,30%,47%,48%,85%,20%,40%,39%,76%,23%,2%,5%,16%,% of respondents outsourcing 1998 % of respondents planed outsourcing 2003,13%,8%,Outsourcing by Function,Resourc

5、e require- ments,Complexity,Note:The percentage may not add up to 100% due to rounding Source: Based on several A.T. Kearney studies, including: Worldwide study comprising 280 participants (automotive 19%, electronics 25%, retail 27%, chemicals 29%) European study comprising 500 participants (retail

6、 26%, food CSFB; A.T. Kearney Estimates,CAGR=35%,190,23,0.61,China Logistics Service Market (US$, Bn),The logistics services industry is still at an early stage of evolution in China,Characteristics,Emerging demand for outsourced logistics services Low value added services such as transport and ware

7、housing are the major type of services outsourced Traditional in-house behaviour being impacted,Fast growth of logistics user base and higher requirement for broader services Large number of services providers competing for customers and human resources Most high value added services are free and pr

8、ovided as selling points,Logistics outsourcing becomes common practice and an important lever for competition Consolidated service market with a few established market leaders Logistics penetrate in supply chain and replace traditional business models,Global logistics integrators provide one-stop so

9、lution worldwide Specialization and close cooperation among global logistics service providers Optimized allocation and integration of resources along the supply chain,Stage,Emergence,Growth,Penetration,Globalization,World Leading (US),China Today,Source: A.T. Kearney,Warehousing and Distribution,Tr

10、ucking,Rail Freight Although Heavily Used, Railway Freight Has Long Transit Times and Service Reliability Is Poor Railway Containers Are Not Compatible With Shipping Company Containers,Airline,Customs Brokerage,Courier Limited Presence of Foreign Firms As JV E.G. DHL Sinotrans Regional Segregation i

11、n Operation,Logistics Center and Freight Forwarding,Shipping,The domestic warehousing market is currently small and over-supplied with basic warehouses providing virtually no value-added services Some consolidation just started among the large warehousing companies,River transportation has declined

12、Most vessels are characterized by low speed and high energy costs,Trucking companies are only allowed to operate in restricted regions,Government has established 15 Free Trade Zones and some logistics centers are set up there Inland transportation is handled by domestic freight forwarder who is usua

13、lly sub-contracted by the international freight forwarder,Seven domestic airlines dominate regional operations Designated foreign carriers are given a maximum entitlement of 50 tonnes per week,Many customs clearing brokerage firms and considerable confusion about roles Customs clearing procedures to

14、ok at least - 1 day previously but expected to be shortened to1 hour,The logistics services industry is still at an early stage of evolution in China (continued),Source: A.T. Kearney Analysis,Transportation and related expenditures are proportionately higher in China than in most developed countries

15、 and NIEs indicating a major improvement opportunity,Total Transportation and Related Expenditures and % of GDP (2000),Note: (1) VAS: Value-added-services (2) Including packaging, admin, information services, ect. Source: Bowersox and Calantone, CSFB, IMF 1997 study; Chinainfobank; A.T. Kearney Anal

16、ysis,US$ Bn,China Transportation and Related Expenditures Breakdown by Function (2000),Total = US$ 248 Bn,US$ Bn,(1),(2),Demand Growth,In Coastal China, demand for logistics services is expected to be strong in Guangdong and Shanghai,High,Low,Hebei, Beijing, Tianjin,4,Beijing is the No. 1 air cargo

17、center in China. In addition, Beijings hi-tech industry, which needs a lot of air transportation, is developing very fast Over 80% of the volume through Tianjin port are agricultural products, furniture, metal hardware and raw materials, all being low value products. In addition, most shippers are i

18、n poor financial conditions and are very price sensitive,Shandong (Qingdao),4,Qingdao has several famous local companies, such as Haier, HiSense, Aukma and Qingdao Beer. They are more quality oriented and less price sensitive Frozen products account for 15-20% of the volume. Quality requirements for

19、 frozen products are very high in terms of timing and handling care. Hence, frozen products shippers tend to be less price sensitive and more quality concerned Footwear and garments account for significant portion. Some large customers such as Payless Shoes (No. 1 customer of COSCO in volume) requir

20、es accurate shipping time and full range of sophisticated 3PL services from P/O management, trade consulting to space booking, warehousing and transportation,Province,Logistics Demand Selected Provinces in Coastal China,Guangdong,Demand Size,5,Remarks,Major exports are processing of lower value-adde

21、d products no special requirement for logistics quality; Road transportation is convenient, often containerized in factory to reduce cost less need for warehousing/ consolidation Electronics industry is booming in Dongguan, which has some leading companies like Huawei potential large profitable cust

22、omers,Strong,Weak,Shanghai (Jiangsu, Zhejiang),5,Shanghai is the fast growing economic/ financial center in China, which has some major MNCs such as SGM, Acer, Philips, etc. They are matured customers of logistics services and less price sensitive. On the other hand, to get the deals from them usual

23、ly needs to involve high level negociation Large companies in Shanghai and nearby areas are mainly JVs of automobile and consumer electronics industry, which have high product value and lower price sensitivity,Source: A.T. Kearney field interviews and analysis,Demand Size,Sichuan (Chengdu),Have the

24、3rd largest distribution center in China, the largest population, and important heavy industry base The logistics industry there has already attracted interest of foreign large shippers like Ikea and investors including Hutchison Whampoa Located in mountain areas, road transport infrastructure is in

25、convenient, so highly relying on rail transport,Chongqing,2,Agricultural products, metal products and motor cycles, which totally account for over 80% of the export volume, are all low-value products, price sensitive and have flat growth Underdeveloped infrastructure, esp. road and rail transportati

26、on have limited foreign investments in this region. Cargoes usually transported by barges, which is the cheapest mode,Province,In inland China, the largest demand potential is in Sichuan and the Hubei/Yangtze river region,Logistics Demand Selected Provinces in Inland China,Yunnan,2,Demand Growth,Rem

27、arks,Most important export industry is tobacco, which has high profit margin, high quality requirement for logistics services, and not very price sensitive Exports for wood, wooden materials and furniture, which accounted for over 30% of export volume before, are largely reduced due to newly imposed

28、 government sanction on cutting trees,High,Low,Strong,Weak,Source: A.T. Kearney field interviews and analysis,Hubei, Yangtze River Region,3,Exports are low-value products including tobacco, cotton, chemicals and steel materials Many imports are material for JVs (e.g. Citreon and Dongfeng Cummins), o

29、f which decisions are usually made overseas Market is very fragmented and shippers generally have small scale/volume No warehouses/piling centers with modern container handling capacity and advanced IT structure are available, can be a potential development area,3,Growth in the logistics services in

30、dustry in China will mainly be driven by continued macro economic growth and increased propensity to outsource logistics,Growth Driver,Implication,The Chinese economy is expected to grow at CAGR 7% over the next five years. Increased international and domestic trade will drive demand for logistics s

31、ervices,Public policy and spending supports improvements in Chinas logistics infrastructure, providing opportunities for further expansion of logistics service providers. Capable foreign service providers are limited in business scope by regulation, and their full entry after WTO will drive the indu

32、stry toward international best practices,There is increasing interest among China-based enterprises in outsourcing for logistics services. Overseas businesses are extending their supply chains deeper into China,The fast growing market in online B2B transactions provides an additional market segment

33、for logistics services,Favorable Growth Outlook for the China Logistics Services Industry,Favorable Macro Economic Outlook,Public Policy and Spending,Increasing Interest in Outsourcing for Logistics Needs,Growing IT and E-Business,1,2,3,4,Source: A.T. Kearney Analysis,The Chinese economy is expected

34、 to grow at CAGR 7% over the next five years,Source: Chinainfobank, A.T. Kearney Analysis,Projection of Chinas GDP Growth and Structure (RMB, Bn),Continuous growth in GDP indicates a robust and fast growing macro economy, providing opportunities for sophisticated logistics service providers The econ

35、omic structure will be continuously optimized and upgraded Logistics is directly correlated with the manufacturing industry, therefore growth of secondary industries will lead to the growth of logistics services Improved services industries will also have a positive impact on the logistics sector Im

36、proved supportive services such as legal, accounting, etc. Improved telecommunication capabilities,Remarks,Secondary: 7%,Tertiary: 9%,CAGR (01-06),Total: 7%,Primary: 3%,13,367,9,560,Favorable Macro Economic Outlook,1,Demand for logistics services comes from both international and domestic trade,Sour

37、ce: Hong Kong Trade Development Council Research; Chinainfobank,Demand for Logistics Services,More International Trade,More Domestic Trade,International trade International trade has sustained the global economic fluctuation and kept fast growing in the past 5 years It is projected to grow at a CAGR

38、 of 7.5%, with total trade value reaching US$ 680 Bn in 2005 Exports Expected to rise by an additional 2.4% per year over the first five years of WTO entry Share as world exports is projected to rise from current 3.5% to 7.3% in 2005 Imports Projected rise of US$ 21.3 Bn after WTO Projected annual g

39、rowth rate will be marginally faster than export,Domestic Trade CAGR of retail sales of consumer goods in the “Ninth 5 Year” was 11% Positive outlook due to continuously growing purchasing power Development of chain stores Sales revenue of chain store corporations has experience double digit rise fr

40、om 1997 Multinational chain stores have been aggressively improving their presence in China market Inter-city trade Currently more than 50% of the foreign industrial and retail firms distributed their products in more than 50 cities Inter-city trade will be frequent after WTO,Favorable Macro Economi

41、c Outlook,1,The State Economic and Trade Commission has established a master plan for developing logistics services in China,State Economic and Trade Commission Logistics Industry Trade Plan,Source: Business Alert China at ,30 Pilot Centers,Inter-regional Networks,Supply Chain Systems,Select suitabl

42、e enterprises in various key cities to establish 30 pilot logistics and distribution centers,10 National Enterprises,About 10 specialized key enterprises with national logistics and distribution networks will be developed,Realign assets to form inter-regional, inter-sector and inter-ownership logist

43、ics and distribution networks,Efforts will be made to explore the possibility of using 3PL and distribution enterprises to build supply chain systems, and to bring facilities and services of logistics companies closer to advanced international standards,Public Policy and Spending,2,A wide array of g

44、overnment supported logistics infrastructure development programs are under way across China,Source: Chinainfobank,Examples of Government Initiatives to Improve Logistics Infrastructure,A number of national logistics centers are under construction, with reasonable size, standardized operation, and m

45、odern facilities,Coastal Large Cities - Logistics Center,Inland Areas - Road/Railway,Modern third party logistics and distribution base Its main body will be linked to 7 railways and hundreds of railway transit points Expected to serve for the dispatch of over 90% of daily necessities in the city Al

46、so serve eastern China and the whole country,Shanghai Commercial Logistics Center,Public Policy and Spending,2,High way density will grow to about 1650 km/10000sq.km in year 2005 Invest RMB 270 Bn to upgrade railway infrastructure,New railways, electric railways, highways, expressways are in phase:,

47、Interviews with SOEs and foreign invested enterprises in China indicate a relatively strong interest in outsourcing logistics services,Source: A.T. Kearney field interviews and research,SOEs usually have own warehouses and trucking divisions, therefore, they demand less warehousing, transportation a

48、nd other related value-added services. However, in face of increased competition, SOEs have a growing interest in outsourcing logistics Foreign invested enterprises have the highest requirement for logistics services in terms of range and quality. These companies are extending their supply chains in

49、to China - replacing middle men who used to get China origin cargo to the port. MNCs will be looking for logistics services companies in China to help them fill the void Import/export companies have the least demand for logistics services providers, because most of these companies also provide trans

50、portation, customs clearance services, etc.,Remarks,% of Respondents with Interest in Outsourcing Logistics Services (2001),Increasing Interest in Outsourcing for Logistics Needs,3,China-based companies have a positive attitude towards purchasing advanced logistics services and quality, speed, and p

51、rice are the most important purchasing criteria,Note:(1) Survey by the China Warehouse Association (2000) Attitudes and preferences for distribution of 450 large and medium-sized enterprises (2) The responding enterprises deal in electrical home appliances, electronics, foodstuffs and chemicals for

52、daily use Source: Chinainfobank, China Warehouse Associate, A.T. Kearney filed interviews and research,7%,22%,26%,29%,44%,52%,64%,75%,Looking for distribution services,Prefer transportation companies,Use general logistics agents,Prefer trunk line services,Looking for new logistics agents,Hire third

53、party agents,Hope that new logistics providers will provide comprehensive logistics services,Looking for modern logistics companies,Interest in Logistics Services Survey Results (2000),Logistics Services Purchasing Criteria - China,0.88,0.81,0.79,0.77,0.68,0.91,0.91,0.93,Network,Documentation,Reputa

54、tion,Info Tracking,Professionalism,Price,Service Speed,Service Quality,Relative Importance,High,Avg. = 0.82,Increasing Interest in Outsourcing for Logistics Needs,3,Low,Online transactions provides an additional source of growth for logistics services,Source: Research Report of China E-Business Asso

55、ciation and Network Evaluation Center, Apl. 2001,Growth of Online Transaction in China (US$, Bn),B to B (US$, Bn),B to C (US$, Bn),CAGR (00-04) B2B: 53% B2C: 167%,Growing IT and E-Business,4,Industry - Public information platform Reducing cost and overlap in investment, information share Customers/s

56、hippers Standard bar coding system, easier for outsourcing Better facilities to communicate with service providers, easier to manage and supervise Service providers - Intranet Cost reduction from higher efficiency Better service quality, because of internet/intranet enabled real-time cargo tracking,

57、 etc. Broader service range, e.g. trade consulting,Current Industry Initiatives,2. Service Demand,Customers are increasingly demanding high value logistics service solutions, requiring global reach and advanced supply chain management capabilities,Service Demand - Global Trends Traditionally, cost r

58、eduction has been the main reason for companies to outsource logistics Today, customers are increasingly demanding more advanced services and end-to-end solutions “Demand-Pull” logistics requires the logistics service providers to be flexible and to control a large part or the entire supply chain Le

59、ading logistics service providers are developing logistics one-stop-shops - from raw material sourcing to delivery of finished goods Customers are increasingly interested in contracts with both fixed and variable pricing schemes - based on risk sharing The opportunity for risk-sharing contracts is considered to be greatest in transportation and inventory management Service Demand - China Trends In the China market, logistics demand is s