From cheap labour to logistics competency: The next move for China?

Through a comprehensive desktop research reviewing the relevant literature and analyzing secondary data, this paper reports the current status of logistics competency in China in comparison with that of developed countries and identifying the challenges and the obstacles the industry is facing. The findings show that although logistics expenditure in China increased significantly in the last decade as a result of rapid economic growth, this expenditure is unnecessarily high (up to 18% of Gross Domestic Product (GDP) which is twice that of most developed countries) suggesting the presence of operational inefficiencies. Fragmented markets, transportation bottlenecks, regulatory constraints, and local barriers to entry are some of the major obstacles hindering the development of an efficient logistic industry leading to a continuous rise in logistics cost. Possible measures to enhance logistics competency include investment in logistics infrastructure and technologies, regulatory reform to open up market and to quicken logistics development at national level, promotion of third-party logistics (3PL), and cross organizational as well as industry-government collaboration to standardize industry practices and provide logistics information sharing platform.