US logistics services provider YRC Logistics, a wholly owned subsidiary of YRC Worldwide Inc, is strengthening its customer service capability while striving for more integration in its China operations as the country continues to be a fast- growing market.
After acquiring a 65 percent stake in Shanghai Jiayu Co Ltd last August in a bid to cash in on the country's huge market potential in road transportation, the company has developed a "complete end-to-end supply chain capability" that is essential for building its global logistics service network, according to Eric Friedlander, managing director of Asia Operations, YRC Logistics.
Jiayu is one of China's largest trucking companies with oLogistics companies scent opportunities amid crisis ver 300 trailers and more than 200 subsidiaries across the country. The acquisition, valued at $44.7 million, allows the company to connect Jiayu's ground transportation business to its freight forwarding business at JHJ International Transportation, a joint venture between YRC and Shanghai-based Jin Jiang International Holdings Co Ltd, and allows both of them to "work together and enter solutions for the same customers", said Friedlander.
Meanwhile, the acquisitions and joint venture in China offer YRC Logistics' clients freight forwarding capacity from China to gateways around the world, he said, adding that it is a unique advantage of the company to be able to offer a complete end-to-end supply chain service portfolio around the globe.
The next step, according to Friedlander, is to further integrate the company's China and intra-Asia trade as this is "a new and fast growing market" for YRC Logistics, and to continue to work on Jiayu and JHJ's customer service capabilities so they can better serve multinational companies that are quickly forming a "significant customer base" for the two.
"We think local customers are an important customer base. It's large and important," said Friedlander. "But when we expand, the new customers we are targeting are coming from the USA and are obviously big multinationals, which may want more integrated solutions with a different set of requirements," he said.
It is therefore important to develop the compliance, visibility and engineering solutions that multinationals want, he added.
China's domestic logistics market, which is extremely fragmented and dominated by mom-and-pop set-ups that have contributed to a price-focused market, may however start to see more sophistication in terms of logistics requirements. Friedlander noted.
With the economic slowdown forcing out companies getting by on small margins, there will be more consolidation in manufacturing industries, and in turn, more sophistication in terms of the companies' logistics requirements, he said.
Meanwhile, with an increasing number of multinationals coming to China, more local talent would be brought into those companies. Education, therefore, is going to "play a big role" in raising the general awareness of logistics in China.
One thing YRC Logistics has focused on in recent years, said Friedlander, has been to support university scholarship programs in logistics education, in order to raise the profile of the logistics sector in China.
"There has been big emphasis on logistics education in China in recent years. With an increasing multinational presence here, we will see more local exposure to high-level logistics positions in those companies," Friedlander said.
To capitalize on this emerging market, Friedlander said the company has sought to provide superior offerings, focusing on capabilities, sophistication, compliance and visibility.
"We are committed to continued long-term growth in the China market, as it enjoys positive year-over-year growth," he said.
But there are loopholes in the domestic market that, in Friedlander's opinion, have hampered the healthy development of the industry and may need to be improved with more educational initiatives.
He called for improved regulation. China's small trucking companies do not have a uniform enforcement environment, he pointed out. Many of them, for example, violate loading limits, with all of the potential risks that this entails.
"So one thing we are looking at is an education program and the potential to get the word out and starting to talk about how you could improve your enforcement of regulation. The approach we've taken is not just for our business, it will benefit the entire industry and China," he said.
Pollution standards are also very important in China, he said. Multinationals entering the country will be increasingly concerned about the green initiatives of their logistics service providers. In this regard, domestic companies still have a long way to go.
"For China as a whole, these are the challenges we have to face as more and more multinationals do business here. We could be a good player in the country in terms of raising those standards," he said.
An Jianghong, a logistics analyst with Beijing-based consulting firm Anbound Group, said such industrial standards and regulations are conducive to the long-term development of China's logistics industry, and may push China's domestic logistics companies into a massive restructuring and consolidation, at a time when many of them are still not competitive enough to live up to the standards.
"It also offers big overseas multinational companies the opportunity to gain a greater market share in China," he said.