China must avert supply chain crunch

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The DP World Hong Kong terminals are busier than ever. (Les Stone / DP World)

While beneficial to billions of people, the China trade surge has created unprecedented complexity, additional costs and potential choke points in thousands of international supply chains that touch the country, according to Brian Lutt, president of APL Logistics.

Lutt recently warned delegates at the Transpacific Maritime Asia Conference in Shenzhen that these challenges will be magnified as China looks to spread wealth beyond the coast.

"Getting products to market from China quickly, reliably and cost-effectively already keeps logistics providers and their customers up at night," said Lutt. "But the main production and consumption zones are still clustered in the east of the country. So, the challenges we face today will be multiplied many times once China's vast hinterland is unlocked."

The APL Logistics president commended the Chinese Government's forward planning, fast decision-making and committed program of investment with regards to transportation infrastructure.

"While the rest of the world failed to anticipate the speed of the production shift and build sufficient capacity, China has put money and minds to the task of staying ahead of trade demand growth. China has recognised that transportation infrastructure is closely linked to its future economic and social prosperity," said Lutt.

He added that China had been particularly successful in developing its container ports, but pointed out that China's 11th Five Year Plan (2006-2010), outlines ambitious initiatives to develop its roads and railways. There are, for example, plans to introduce dedicated container traffic corridors and double-stack trains throughout China in order to expedite the flow of products within the country and the east coast for export.

However, Lutt warned building infrastructure is only part of the solution to China's challenges.

"From a container logistics perspective, this additional road and rail capacity must be matched by precise connectivity with ocean transportation and other value-added logistics services. Without this connectivity and integration, supply chains will falter."

Lutt was keen to highlight the opportunity China has to draw on the knowledge and expertise of international transportation and logistics players to create a world-class and highly integrated inland transportation system to match its ports.

China's outsourced logistics industry, already valued at around US$140 billion, is set to grow substantially as China's supply chain moves further inland.

"Players who have a range of ways to take products from China's interior and transport them quickly to domestic or international destinations, while completing all the value-added logistics services along the way, are set to make the biggest gains," said Mr Lutt.

He outlined to the conference several strategies that companies are implementing in China to achieve supply chain connectivity, reliability, speed to market. These included time-definite ocean-truck services that offer speed to market with the guarantees of airfreight, but for regular shipments not just emergencies.

"Previously, many companies were opting for high-cost airfreight, whereas we can offer a viable airfreight alternative by guaranteeing space and highly synchronising shipping, terminal and truck movements," concluded Lutt.

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