Third party logistics in China
If you’re a massive organization like Amazon or Alibaba, your capacity to penetrate international markets exceeds that of the vast majority of smaller companies looking to do the same. Of course, most organizations aren’t Amazon or Alibaba.
Luckily for Small and Medium Sized Enterprises (SME) looking to break into international markets- China’s trillion-dollar ecommerce market, for instance – third-parties can often help fill gaps that larger companies would otherwise fix by vertically integrating. Third-party logistics solutions, specifically, can help fill some of the most crucial gaps.
What third-party logistics in China (3PL) can do:
A 3PL can fulfil one or more of the following duties:
- Warehousing and storage;
- Inventory management;
- Freight distribution;
- And shipping.
The right 3PL partner does all of those for various organizations in a manner that saves time, money and headaches for a global brand entering the Chinese e-commerce market.
Who is using 3PL’s in China?
The definition of small and medium sized enterprises varies by country, thus specific aggregate data regarding their usage of 3PL’s are hard to come by. What is clear, however, is that 86% of American Fortune 500 companies leverage 3PL’s in their logistics or supply chain. And given the potential for cost savings related to partnering with a 3PL provider, it’s not hard to see why SME’s would lean on them as well.
Three reasons why SME’s should leverage 3PL in China:
- Warehouse and logistics expertise
- Local expertise
- Limiting overhead
- Let the experts do what they’re good at:
Order fulfilment in a warehouse is so much more than grabbing things off shelves and putting them in boxes to be shipped. Any small or medium sized business owners who believes that should disabuse themselves of that notion quickly.
The attention to detail and tedium that comes with warehousing and logistics requires a specialized and dedicated team. Simply put, any organization that thinks it can add managing a warehouse to the already full plate of growing a brand and business in a new market is in store for a rude and costly awakening down the road.
Fortunately, 3PL partners are experts who know how to optimize warehouse management and operations, allowing organizations to focus on driving market growth. 3PL warehouses are full of professionals who can determine the most effective and efficient way to ship product.
Let the locals do local things
Growing business in China is quite different than doing business in the rest of the world. While businesses following the classical Western model of business law are accustomed to roughly the same set of legalities and practices, the expectations that China’s consumers have are considerably different from those of The US, Europe or Australia. This shouldn’t be cause for concern; rather it’s a case for leveraging local expertise provided by 3PL partners in the market.
The right partner will know how to navigate the logistics and operations to avoid headaches and save money. Understanding elements like proper registration at the border, facilitation of duties, and identifying which ports are best for a shipment are part of what differentiates the better 3PL partners from the average ones.
We don’t need that, do we?
The deep pockets possessed by big companies are a luxury that most SME’s could only dream of.
This is why limiting costs is especially crucial for smaller enterprises. Leveraging third-party logistics in China will save you on one massive cost: leasing warehouse space. Finding the right property, staffing the property, and maintaining it are all costly necessities for an organization looking to own its own warehouse.
Though having complete control over a space can be appealing, the objective costs often outweigh subjective feeling of control.
So, what now?
An ounce of prevention equals a pound of cure, and being proactive in finding the right 3PL partner is much more valuable than scrambling to find one once it’s too late.
Here are some questions to ask when determining which of the many 3PL companies is the right fit for your business:
- How long has the 3PL partner been operating in China?
- Where are their operations located?
- What is their costing and fee structure?
- How secure is their facility? Is the warehouse bonded and insured?
- How comprehensive is their suite of services offered?
By one estimate, the global cross-border B2C ecommerce market will be worth more than $4.8 trillion USD by 2027.
Thanks to technology, SME’s are positioned to take a sizeable slice of the opportunity that e-commerce in China presents. Though third-party logistics in China are no panacea, they are currently, and will increasingly so, become a major part of the equation.