The implications of Chinese globalization for the logistics industry

By John Manners-Bell*, Editor and CEO, Transport Intelligence, UK

The next ten years will see a seismic shift in the balance of power in global supply chains caused by the development of Chinese manufacturers from low cost suppliers of cheap goods for foreign original equipment manufacturers into global brands in their own right.

This shift has been largely prompted by the Chinese authorities who have encouraged companies to migrate up the value chain. This is sensible in an economic environment where inflationary pressures are making it increasingly difficult for Chinese manufacturers to compete on cost alone.

This has major implications for the associated logistics market. Bringing a Chinese brand to Western consumers will mean that these companies will increasingly take control of their supply chains. They will establish distribution networks in North America and Europe and in some cases have already done so. This is a long way from the factory-gate strategies that they all pursued in the 1990s.

Haier is perhaps the best known of these emerging brands. It now not only manufactures in China but in Italy, the US and in various countries throughout the developing world. Where Haier led many are following: Lenovo, Huawei, ZTE, Tsingtao, Datang Telecom and China Telecom are just a few of the most expansive.

Why is this development so important? Simply put, a wave of Chinese companies will enter Western markets in need of downstream logistics services.  This is not necessarily a completely new phenomenon – in fact in Europe, Haier signed a contract with CEVA Logistics as long ago as 2008. However, the trend will gather pace and logistics service providers will need to be aware of this change in customer profile if they are to take advantage of the opportunities it offers.

Moreover there are deeper reaching consequences for the structure of the global logistics industry. As Chinese manufacturers spread their brands and supply chains throughout the world, there would be a natural inclination to use Chinese logistics providers to facilitate this growth. If this is the case, Asian providers could force a new wave of consolidation through mergers and acquisitions to expand their global reach making the logistics market look very different in the coming years.

Interested in reading more about the key issues affecting the industry? Download the Logistics and Supply Chain Industry Agenda Council Final Report or read the report below.

*John Manners-Bell is the Editor and CEO of Transport Intelligence. He is a member of the World Economic Forum Global Agenda Council on Logistics & Supply Chain

GAC Logistics Supply Chain Report 2010-11