Definition and categorization of 3PL

Third-party logistics service providers (‘‘3PL providers’’) typically specialize in integrated operations such as warehousing and transportation services which can be scaled and customized to meet customers’ individual needs based on market conditions, including the demands and delivery service requirements for their products and materials. 3PL providers target particular functions within the supply chain management process such as warehousing or transportation.

The advantages of outsourcing logistics to 3PL service providers include low capital commitment, cost savings and flexibility. First, there is no need for a warehouse or transportation facilities if a company outsources its logistics function, thereby reducing the company’s required capital commitment. Secondly, 3PL providers are more knowledgeable and have superior expertise in logistics, which can efficiently reduce the overall costs of logistics. Thirdly, 3PL providers can offer higher flexibility in terms of geographic distribution and the provision of other value-added services that companies are incapable of providing for themselves.

Market sizes of China’s logistics and 3PL industries

The logistics industry in China has continued to develop at a steady pace, driven by China’s growing economy, people’s rising income levels, the rapid expansion of the e-commerce industry, as well as recent improvements in logistics infrastructure. China’s total logistics revenue increased from CNY6,068.3 billion in 2011 to CNY7,900.0 billion in 2016, with a CAGR of 5.4%. With the gradual acceleration of China’s economic growth, and further penetration of logistics services into lower-tier cities in the years ahead, China’s total logistics revenue is expected to reach CNY9,280.0 billion by 2021, with a CAGR of 3.3% from 2016 to 2021.

As an emerging segment in the logistics industry, the 3PL market has shown a strong growth performance in the past five years. The manufacturing industry in China has been gradually transforming itself towards a more quality-focused approach. Therefore, there are now higher requirements placed on the logistics process. On the other hand, an increasing number of foreign manufacturers who were used to outsourcing their non-core operations such as logistics were setting branches in China. Thus, the total 3PL revenue in China increased from CNY616.4 billion in 2011 to CNY1,199.2 billion in 2016, representing a CAGR of 14.2%.

In the forthcoming years, the operation and management systems of the 3PL industry is expected to become more intelligent. This trend will help improve demand for 3PL services, as traditional companies, including state-owned enterprises, is expected to place more and more trust in the service quality of 3PL providers. China’s total 3PL revenue is expected to reach CNY 1,886.6 billion by 2021, with a CAGR of 9.5% from 2016 to 2021.

The post Third-party Logistics Industry in China first appeared on CRI Report.

From three stages of “the first kilometer”, “circulation” and “the last kilometer”, cold chain equipment industry, corresponding to the pre-cooling equipment, cold storage equipment, refrigerated trucks/refrigerated container transport equipment, “the last kilometer equipment” and so on, of which cold storage and refrigerated trucks are the core of the equipment links. The first and the last kilometer links are the large part of the potential space.

Second, there is no scaled commercial demand for the pre-cooling facilities.

China’s pre-cooling preservation rate of only 30%, much lower than the 95% of Europe and the United States. Supply and demand both disperses largely. It is difficult to form leading large-scale enterprises. There is no demand for scaled commercial equipment at this stage.

The market size of cold storage equipment is about CNY 6 billion. Entering a stable growth stage, the future development of automation has large potential. Cold storage capacity was expected over 100 million cubic meters in 2016, when cold storage market valued CNY 20 billion, of which about 6 billion for refrigeration equipment. It is expected that the scale of the cold storage market will be CNY 20 billion per year in the next five years, and the automation level of three-dimensional cold storage may be the investment direction. Among them, Dalian Refrigeration and Yantai Moon monopolized in the competition.

Third, the market size of refrigerated trucks is CNY 8.5 billion, of which CNY 3.4 billion is from refrigerators.

It’s expected that the CAGR of refrigerated truck market is 10.5% in the next 5 years, which is expected to develop toward the light, multi-temperature and electric fields. The reserve number of refrigerated trucks was 93,400in 2015, which was equivalent to the growth in the United States or Europe one year; The growth per capita was only Japan’s 1/10; The market size of that was more than 8 billion CNY/year. It is estimated that the market size will reach 15 billion CNY/year with the CAGR of 11.8% by 2020. However the mature cooling technology and the fierce market competition both lead to the poor profit of the standardized products.

Related reports:

Research Report on Cold Chain Logistics Industry in China, 2017-2021

CRI estimates that in 2016 in China, over 130 million tons of goods were transported and distributed via cold chain logistics and the market size was over CNY 130 billion.

Research Report on China Cold Chain Logistics Industry, 2016-2020

Cold chain is an uninterrupted series of harvest, processing, packaging, storage, transport and sale activities which maintain a given temperature range. It is used to help extend and ensure the shelf life of perishable products.

The post China Cold Chain Logistics Industry Keep Steady Increase in 2017 first appeared on CRI Report.