Interview with Dietmar Prümm, Head of Transport and Logistics at PricewaterhouseCooper Germany

China’s logistics market is booming

China has become an economic superpower in recent years. Dietmar Prümm, Head of Transport and Logistics at PricewaterhouseCooper Germany, explains how the logistics market in the Giant Kingdom has changed and what impact this has on logistics companies in Europe.

logistik aktuell: Mr. Prümm, China is the world’s second largest economy behind the United States and was the 2017 export vice world champion. What are the most important trends in China’s logistics market today?

Dietmar Prümm: After all, the country is experiencing rapid economic growth with a strong impact on the logistics market. In the past few years alone, the turnover of the logistics industry in China has grown steadily by about five percent. Now China’s government has set clear goals for the future. By investing in infrastructure – such as the initiative of the “New Silk Road” which aims at overcoming “bottleneck logistics”. Logistics in China is supposed to become more efficient, with new technologies playing a major role. For example, drones, robots, artificial intelligence and big data are being used in China to build state-of-the-art automated logistics complexes. While in Germany drones for distribution of parcels are used in presentations, but do not play a major role in delivery, drone services in China have been booming for years.

According to which criteria do shippers choose logisticians in China?

In our study update “German Companies in China – Logistics Processes in Transition”, we explored the question of how the basic conditions of logistical processes have changed in recent years. In doing so, we found that punctuality, flexibility and sufficient capacity are the top criteria for awarding contracts to logisticians in China. Our survey has shown that the customers of Chinese logistics companies rate the satisfaction and competence of their service providers in many areas more positively than they did years ago. Striking in all areas is the consistently lower rating for international service providers. Although they still receive significantly more top marks than Chinese logistics companies in many areas, the Chinese competitors are catching up.

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Does that affect the European logistics providers?

This is a development that other logisticians working in China should not ignore. They must respond to shippers’ concerns about lack of flexibility, insufficient capacity and poor quality.
Especially the rapidly expanding online trade poses major challenges for logisticians in China. China’s consumers are pioneering the use of digital technologies for online shopping. Online marketplaces are an attractive alternative for international traders and consumer goods manufacturers to enter the Chinese market. The logistics solutions are important here, because around one third of Chinese consumers consider fast delivery, especially same-day delivery, as an important factor in purchasing decisions. By way of comparison: In China, some 31 billion parcels were delivered to customers in 2016, compared to around 3 billion parcels in Germany.

What does that mean for markets on other continents?

Today, nearly 80 percent of all online orders in China are handled by six major Chinese providers. These logistics service providers have grown strongly with the booming internet trade in China and are now driving global expansion. The Chinese express logistics experts are already looking beyond borders today to challenge market leaders from Europe and the US for a global market share. They open branches, operate distribution centers and warehouses and offer many value-added services.

Do Europe’s logisticians have to fear for their hitherto leading role?

The paths to success on the world markets are many. Either by buying whole companies or shares, by owning branches in the countries or operating hubs, harbors, airports and other logistics objects abroad. The entry of new players from other sectors or startups will also change the previous competitive picture.

“#eCommerce and #SameDayDelivery: With their know-how, China’s logistics companies are also growing in Europe and North America.“

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In Germany, many have become accustomed to having a large American online retailer carry out the delivery service in lucrative regions themselves. The Chinese counterpart already operates hubs in Europe and will now expand its capacities. Chinese logistics companies are strategically expanding their way to the end customer. This will, of course, change the logistics landscape.