Logistics and Distribution Innovation in China: Part II

A closer examination of the Chinese logistics model reveals 10 areas brimming with future opportunity.

Editor’s Note: This is Part Two in a two-part series. You can read Part One here.

Certain innovative logistics practices in China may be valuable indicators of future practices in the Western world as e-commerce and urbanization become more prevalent.

In terms of speed, the demand for fast delivery is growing. A recent report by Forrester Research found that nearly six in 10 North American Internet users aged 16–27 said same-day delivery would make them more loyal to a retailer’s brand.

While continuous operations of urban sorting facilities could be adopted by Western logistics companies in some areas, the ability of Chinese companies to deliver same day is greatly enhanced by the advantage of dynamic, low-cost labor.

A few logistics companies dominate the delivery market in the west, China has more than 35,000 delivery companies battling for packages and a large contingent of temporary workers.

[Image: Ivan Bandura/Unsplash]

New business models

The new business models prevalent in China – logistics profit centers, pan-industrial firms and online-to-offline – are not as common in the West.

It should also be noted that the drivers of China logistics innovation like Alibaba are making their way to the West.

However, Alibaba’s attempts to establish a beachhead in the U.S. also highlight the difficulty for Chinese companies to replicate their success outside of China.

We propose that much can be learned from China’s innovative logistics practices. However, U.S. companies are also tapping into new innovations to address new market demands.

Competitive advantage 

As in China, much of the change is prompted by the growth in e-commerce and urbanization.

While the U.S. companies may not have support equivalent to businesses in China, examples of new approaches focus on building flexibility and new offerings through access to resources (either owned or outsourced).

For example, Harry & David opened  20 pop-up stores for the 2018 holiday season. The intent was to increase their retail footprint for the biggest gift-giving time of the year.

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Sticking to traditional logistics and distribution practices will not help pursuit of competitive advantage

It has long been a common practice for vendors to utilize temporary distribution or fulfillment prior to peak demand periods. Temporary capacity is secured without long-term capital investment.

For example, Jet.com (owned by Walmart) is attempting to leverage its brand to cater to affluent, urban consumers (Stambor, 2018). Their e-commerce site features images and products tailored to the location and preference of customers.

Their intention is to build relationships with their customers and foster “brand love.” They have selected city dwellers as their primary target with a goal of being the first online retailer to successfully sell both food and general merchandise.

[Image: JaCZhou/Getty]

Just as in China, sticking to traditional logistics and distribution practices will not help pursuit of competitive advantage.

The aforementioned examples illustrate innovative business reactions to consumer trends. They also represent important managerial implications for business and considerable potential for academic research.

With that in mind, here are 10 topics that warrant further examination:

Collaborative Distribution

With the emphasis on speed and escalating customer expectations, is ride sharing (combining shipments) a good option?

Customer Experience

E-commerce make it easy to attract customers, but it is just as easy to lose them. Online access makes it easy to shop around and switch.

Customer Expectations

Whatever customers wanted in the past, they want more now. This particularly relates to communication (adequate information and quick answers), but it relates even more to speed. Today’s customers measure delivery times in hours rather than days.

Relationships

A significant amount of logistics and supply chain management research has examined the buyer-seller relationship, but it is almost universally centered on business-to-business relationships. Sellers cannot ignore the ultimate consumer. This opens many avenues for B-2-C research in an e-commerce environment.

Big Data

How can we use analytics to better understand consumer responses and expectations and predict what is ahead?

Small and Medium-Sized Business

Big retailers are laser focused on e-commerce customers and creating a relationship. But what about their smaller counterparts? Will they meet the new market demands – or face a significant disadvantage?

Last Mile Delivery

Researches devote ample attention to the last stage of the supply chain. However, there is still much to explore, including urban logistics challenges, the impact of new technologies and the influence of new transportation regulations.

Emerging Technologies 

How can connecting technologies like blockchain coupled with new platform-based business models enable the integration of small logistics entities by digital entrants?

Talent

Supply chain talent acquisition and management continue to be critical issues. How can companies most effectively use contractors and temporary workers?

Adaptation

How can the traditional high-efficiency, closed logistics ecosystems of the West adjust to open systems that allow for great adaptability?

An exciting time for logistics 

Undoubtedly, many other topics are relevant, and more will emerge with ongoing environmental and market changes.

This is truly an exciting time to be in the logistics industry – and to be a logistics researcher. Forces like e-commerce and urbanization will continue to drive more changes in the global logistics ecosystem.

How will you adapt?

This article is (c) Emerald Group Publishing and permission has been granted for this version to appear on Longitudes. Emerald does not grant permission for this article to be further copied/distributed or hosted elsewhere without the express permission from Emerald Group Publishing Limited.

You can find the original article here.

[Top Image: Hannes Egler/Unsplash]

Alan Amling is Vice President of Corporate Strategy at UPS. He previously oversaw marketing efforts for UPS's global logistics and distribution services.

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Patricia Daugherty is Debbie and Jerry Ivy Chair in Business and Professor of Supply Chain Management at Iowa State University.

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