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Integrated Air Express Industry and the Development of Middle and Northeast China

Integrated Air Express Industry and the Development of Middle and Northeast China. Richard Loi Senior Vice President UPS China September 9 2006. Logistics Challenges in China.

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Integrated Air Express Industry and the Development of Middle and Northeast China

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  1. Integrated Air Express Industry and the Development of Middle and Northeast China Richard Loi Senior Vice President UPS China September 9 2006

  2. Logistics Challenges in China • In 2005, total logistics cost in China is 3.4 trillion RMB, up by 12.9%, and accounts for18.6% of total GDP. Comparing with the figure of less than 10% in US, Japan and EU, China still has a lot of room to improve. • According to statistics, 50% of the retail price of the general products in China goes into logistics cost. Over 90% of the time in auto parts production are in storage, loading and transportation. • “Accelerate the development of service industry, particularly IT, finance, insurance, logistics, tourism and community services and continue to increase the ratio and quality of service industry “ – Premier Wen Jiabao, Eleventh Five Year Plan, March 2006

  3. Case Study on Global Supply ChainJesse & Frichtel

  4. Global Supply Chain and Outsourcing - Jesse & Frichtel • Jesse & frichtel is a high-quality, cost effective dental lab • It found a partner in Shenzhen for production • A real case: A Pittsburgh birde made a last-minute decision to correct the gap between her two front teeth just one week before her wedding: • Friday: impression made • Friday evening: impression shipped to UPS’s Worldport Facility in Louisville, Kentucky • Saturday: UPS customs brokerage cleared the shipment at Hong Kong, delivered to Shenzhen • Monday – Thursday: Production in Shenzhen • Friday: new set of teeth arrives at Pittsburg

  5. Jesse & Frichtel

  6. Global Trend of Air Express Industry • Globalization - “The World Is Flat - Thomas Friedman, New York Times • Breakthrough the time boundaries • Synchronized World Commerce • Real time information • Case One: A new cell phone worth 400 USD will depreciate 50% in six months. Reduction of a week’s transit time could save 8 USD loss. • Case Two: Customized Scaled Production – NikeID

  7. NikeIDCustomized Service Based on Scaled Production • Customized service • More Value-added with Global Supply Chain • Competitive Advantage with Differentiation • 100% Customer Satisfaction

  8. Air Express Industry Contributes to the Development of Middle and Northeast China • According to a study by the US-China Business Council in 2003, an unrestricted integrated air express industry can bring additional 3 billion investment to the major export industry, additional 84 billion industrial output and add 800,000 job opportunities in five years. • The study also finds out that the air express industry could help China balance the development gap between the coastal area and the inland areas. • When a company in the inland areas has the same access as a company in Beijing or Shanghai to the global express network, the advantages of resources and cost in the west area will not be offset by the higher cost and longer time of transportation. • The development of air express industry will further optimize the investment environment and promote industrial restructuring.

  9. Public Policy Environment of the Air Express Industry in China • Aviation – opening of air rights and operational coordination • Postal – A rational postal monopoly and level playing field • Customs – further facilitation in support of hubs • Multimodal – infrastructure and policy support

  10. About UPS • Largest package delivery company and leading supply chain solutions provider • 2% of world GDP (6% of US GDP) goes through UPS each year. • Serves over 200 countries and territories, covering all North America and Europe. • 2005 Revenue: 42.6 billion USD • 2005volume: 3.75 billion pieces • UPS Fleet: 268, 9th largest airline • Chartered Fleet: 309 • Daily flights: US: 1,071；International: 767 • Employees: 407,200 (Overseas: 58800； US: 348400)

  11. UPS in China • Headquartered in Shanghai • 11 customs clearance facilities • 23 branches covering over 200 cities • 21 branches of UPS Supply Chain Solutions • 40 facilities of UPS Supply Chain Solutions in mainland and HK • Over 4,000 employees Shenyang Beijing Dalian Tianjin Shijiazhuang Qingdao Nanjing Kunshan Wuxi Shanghai Xian Suzhou Chengdu Changzhou Hangzhou Ningbo Wenzhou Chongqing Fuoshan Fuzhou Guangzhou Dongguan Xiamen Shenzhen Zhongshan Hong Kong (SAR) UPS facilities Yantian UPS Supply Chain Solutions branches

  12. UPS Connects China with Asia and the World Anchorage Tokyo Incheon Beijing Osaka Europe Shanghai Taipei Guangzhou Shenzhen HK Rockford 747-100 Bangkok Newark Mumbai Clark Cebu Penang Louisville Ontario Kuala Lumpur Singapore Honolulu Jakarta • 84 flights connecting Asia and US per week • Next day delivery in major Asian cities Fiji Sydney

  13. Integrated Air Express Industry and the Development of Middle and Northeast China Richard Loi Senior Vice President UPS China September 9 2006

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