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Compare the logistics benefit gap between China and the United States

Comparison of logistics cost between China and America

The transportation cost of logistics in China is divided into road transportation, railway transportation, water transportation, air transportation, pipeline transportation, loading, unloading and handling, etc.The storage expenses in logistics costs are subdivided into interest expenses, storage expenses, goods loss charges in logistics, circulation and processing costs (including the general term for the costs of simple operations such as packaging, segmentation, measurement, sorting, marking, tag bolt and assembly, distribution costs and insurance costs).The distinction between transportation and storage costs is basically the same in the United States.

However, China and America differ greatly in the three major components of logistics costs (see chart 1).

In China, in the nine years from 2005 to 2013, the transport cost accounted for the highest of 55.3% (2009), the lowest of 52.1% (2012), and the average of 53.6%;The highest proportion of storage cost was 35.1% (2012), the lowest was 31.4% (2005), and the average proportion was 33.6%.The highest proportion of administrative expenses was 13.6% (2005), the lowest was 11.8% (2009), and the average was 12.7%.

In the United States, during the seven years from 2004 to 2010, the highest proportion of transportation costs was 64.8% (2008), the lowest was 61.3% (2007), and the average was 63%.The highest proportion of inventory carrying cost was 34.9% (2007), the lowest was 31.4% (2007), and the average proportion was 33.1%.The highest proportion of management costs was 0.4% (2009), the lowest was 0.38% (2004) and the average was 0.39% (see Table 2).

From the above, we can see that in the past decade, the average transportation cost in China is 9.4 percentage points less than that in the United States, the average storage cost is the same as that in the United States, and the average management cost is 12.3 percentage points more than that in the United States.Obviously, the proportion of administrative expenses in China's logistics costs is too large, and such a large proportion of administrative expenses makes the logistics efficiency of "management" not high.

This is supported by the following data:

From 2004 to 2012, the proportion of the total logistics cost to GDP in the United States was 8.93% on average.From 2005 to 2013, China's total logistics expenses accounted for an average of 18.1 percent of GDP.On November 26, 2013, Wang Xuanqing, deputy inspector of the Circulation Development Department of The Ministry of Commerce of China, said at the special press conference on the development of trade circulation that in 2012, the proportion of China's logistics expenses in GDP was as high as 18%, higher than the average level of developed countries, higher than brics countries, and 5 percentage points higher than India's 13%.

From 2004 to 2010, the proportion of logistics and transportation cost, inventory holding cost and management cost to GDP in the United States was 5.7%, 3.43% and 0.35% respectively.From 2010 to 2013, China's logistics and transportation costs, storage costs and management costs accounted for an average of 9.43%, 6.2% and 2.26% of GDP respectively.Through the comparison of these two sets of data, it reflects the logistics industry in China

In the second decade of the 21st century, there was an obvious "benefit gap" with the LOGISTICS industry in the United States: the proportion of logistics and transportation costs to GDP was 1.6 times that of the average level in the United States after the 21st century, the proportion of storage costs to GDP was 1.7 times that of the United States, and the proportion of management costs to GDP was 6.4 times that of the United States.

China needs to tap potential to increase efficiency and reduce logistics costs

A brief analysis of the "gap" follows.

Transportation costs.China's logistics and transportation costs are extremely high. One of the main reasons with "Chinese characteristics" is that the expenses of crossing roads and Bridges have become a heavy burden for logistics enterprises.

In 2011, the China Federation of Logistics and Purchasing conducted a survey on 62 comprehensive logistics enterprises, 46 transportation logistics enterprises and 12 warehousing enterprises. On average, the toll of transportation logistics enterprises accounted for 34% of the transportation cost, more than one-third of the transportation cost, among which 37% of enterprises exceeded 40%.On average, the toll of road and bridge for comprehensive logistics enterprises accounts for 11 percent of the transportation cost, among which 13 percent of enterprises exceed 20 percent.

According to a report by China Youth Daily in late October 2014, "A domestic express delivery company told the media that 'the cost of road transportation from Shanghai to Beijing is as high as 7,000 yuan per day'.This includes the depreciation of the vehicle, the driver's salary, the cost of fuel and road tolls.Fuel and road tolls account for 60 to 70 percent of the 7,000 yuan."That is to say, oil and tolls accounted for two thirds of the cost of road logistics transportation!

According to the data published in China Logistics Yearbook, from 2004 to 2007, China's road transportation expenses accounted for 63% to 64% of the total logistics transportation expenses, and in 2011, it was more than 60%.Although no detailed figures for road transport between 2008 and 2013 have been released, 76 per cent of cargo transport in China between 2008 and 2013 was by road.Thus, if the cost of crossing the road and bridge can be reduced, it will undoubtedly greatly reduce the cost of logistics and transportation, and greatly reduce the burden of logistics enterprises.

Custody costs.The share of storage costs in logistics costs is the same as that of the U.S., but the share of storage costs in GDP is 1.7 times that of the U.S., indicating that there is a problem in storage efficiency.The main problem is the low utilization rate of funds.Because according to the information disclosure of "National Logistics Operation Bulletin" over the years, interest expenses accounted for more than 40% of the storage expenses, and ten years ago, the proportion of this project was more than 50%.The interest expense accounts for such a high proportion, the capital can not be fully utilized, which also directly affects the logistics industry, the storage cost of the space to decline is not large.

Overhead.In the United States, the administrative costs of logistics mainly refer to order processing, IT costs, market forecasting, planning and related expenses.How to determine the overheads of the logistics industry in China is still a hot topic of discussion among accountants.Because according to the Chinese accounting system, the definition of "administrative expenses" includes a broader range of contents.In practice, "management costs" often become an all-inclusive basket, can not be included in logistics costs, it is included in the management costs.In the United States, however, experts have established a basically fixed ratio of "logistics management costs", which is four percent of the combined transportation costs and the carrying costs of inventory.The annual U.S. Logistics report also shows that from 2004 to 2010, the annual overhead of the U.S. logistics industry was just 4 percent of the total cost of transportation and inventory carrying in that year.In China, the annual management cost of logistics industry has exceeded 1 trillion yuan since 2011, accounting for 24 percent and 25 percent of the annual transportation and storage costs.If we want to measure the management cost of China's logistics industry by "American benchmark", then the management cost of China's logistics industry from 2011 to 2013 should not be 1.1 trillion yuan, 1.2 trillion yuan and 1.3 trillion yuan, but should be 180 billion yuan, 200 billion yuan and 210 billion yuan, which can reduce the management cost by as much as 83.5%.

The comparison with the United States warns us that China's logistics industry must be targeted to develop potential and increase efficiency, and vigorously reduce logistics costs.

 
 
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