There are lots of logistics issues in China for a foreign company, but the major problem is about domestic transportation. Actually, for most companies, domestic transportation means road transportation, since railway is still operated by Monopoly SOEs, which is difficult to for foreigners to use, and the air transport is too expensive. Facing the reality of low efficiency, low reliability and information black hole on road transportation, people have to understand trucking industry in China.



Trucking market: millions independent players


Recently TNT just merged HOAU, one of the biggest LTL companies in China. HOAU has about 1 billion RMB revenues, comparing to the total market, they take 0.1% of market share. There are several “big” trucking companies in each province, but the total revenue of Top 100 companies is definitely less than 2% of China market.


Therefore the major players are small one, not big one. There are three types of player in the trucking value chain: “ Specialized Line”, the companies who provide LTL services for one or two particular lines, like Shanghai to Guangzhou. “load matching”, which is the broker between trucks and customers or “specialized line”. “Truck owners”, who buy 2-3 trucks and hire 5-6 drivers, seeking load from load matching brokers ,“Specialized line”, and running all over the China.


There are about 100,000 “specialized line” companies, 1million “load matching” brokers and 3 million truck owners. This kind of fragmental structure creates a critical issue for shippers, lack of information. That means if you are a shipper, it is very hard to know who the reliable carrier is, what the current market price is, and where your cargo is. Even you have only one tone of cargo needed to deliver from Beijing to Shanghai, you will find over 500 very similar looking carriers who may tell you very different prices, and of  whom 99% trucks don’t have GPS.


Most 3PLs in China don’t have truck assets and LTL network , and 70% of their business come from managing road transportation for big clients like P&G and Philips. Because None of MNC logistics mangers want to take the risk and difficulty for dealing with huge number of “specialized line”, brokers and truck owners directly.


Dramatic price fluctuation of trucking services: up and down over 200% within one month


Although big shippers sign a fixed trucking price with 3PLs, the real market price in China is changing dramatically eachday. Different region and different season will have totally different price. For example, in February 2006, the price of  FTL ( 9.6 m length truck) from Guangzhou to shanghai was about RMB15,000 while in the mean time, it only cost RMB6,500 from shanghai to Guangzhou. In the following month, FTL price for the same truck from Guangzhou to shanghai went down to 6,000, and the return line went up to 8000.


The reason of huge price fluctuation is dramatically changing demand. For example during spring holiday, one week cargo volume is 10% of whole year. And the small players who are major resources of the market, don’t have any buffer to balance. So the price exactly reflects the demand changing.



Marketplace for trucking: cargo hub and information platform


Public cargo hub in each city, especially major cities play a very important role in China trucking industry, which is a place for  “specialized line”, brokers and truck drivers to meet each other. Thus in China , cargo hub is always called “ cargo market “. Drivers park the truck into the hub, walking around hub and visiting the brokers’ small office one by one to seek load.



In recent years, internet starts to change the way of communication in trucking industry. Now over 20% of players use internet to exchange cargo Load and truck information. One of the best load matching website is www.peihuo.cn. There are over 100,000 brokers and truck owners using this website to match truck and loads, and they finish over 1 million deals every week on this load matching platform. The company who is running this website, China way Ltd., now also provides more related information for shippers, like trucking market price and carriers database,  letting people who purchase the trucking services know how much they should pay and which carrier they can choose.


MNC 3PLs MUST DO: purchasing trucking services directly


As a 3PLs operating in China, even a MNC giant like TNT, UPS, direct purchasing trucking services from “specialized line” or truck owners is the trend, since it will cut the cost by 50% , so start to learn how to deal with them is a MUST DO thing.