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Procurement from China increases transport costs over more local sourcing.
The cost of ocean transport from China to the US can be $2,500 - $3,000 per container. Airfreight increase transport costs dramatically so it is important to ensure that delivery schedules are given sufficient lead times to overcome delays/problems.
A report by Aberdeen Research and E2Open found that 42% of companies surveyed had lead times of greater than 60 days, and 89% of respondents that had the highest logistics costs also had the longest order lead-times.
A poor transport infrastructure combined with a myriad of import and export requirements means most multinationals operating in the country rely on shipping and logistics services suppliers. This has created great opportunities for companies such as UPS who in 2001 obtained the right to operate direct cargo services from the US to China .
UPS focuses equally on serving multinationals operating in China and local businesses, in part, through its JV partner Sinotrans. UPS marketing director Edward Choi says, "There's a huge group of mom-and-pop shops where business is still done by phone and fax. But it's an important market sector we can't ignore. They feed up to the big distributors, that in turn feed the multinationals." |
