A Comparative Study of Third-Party Logistics in Mainland China and Hong Kong (Notes and Comments‪)‬

The last decade has witnessed dynamic changes in business logistics requirements. However, firms, or logistics users, often lack the competence to operate logistics activities internally while facing increased global competition and higher customer expectations; thus an increasing number of companies are outsourcing their logistics activities to third-party logistics (3PL) firms so that they can concentrate on their core competencies (Sanders et al. 2007: Vaidyanathan 2005) and achieve competitive advantages by providing customers with superior services (Arroyo et al. 2006: Sum and Teo 1999). In particular, developing countries, such as China, India, and Mexico, have seen the emergence of 3PL outsourcing (Wang et al. 2006). As the largest emerging economy in the world (Zhao et al. 2006), China has become a global manufacturing center with its rapid economic boost of a nearly 10 percent annual GDP growth in the last decade (National Bureau of Statistics 2007). To take advantage of its immense market potential and low-cost labor, multinational and transnational enterprises have moved their production into China. The rapid expansion of manufacturing industries has led to a rapid growth in the logistics industry. The total amount of social logistics increased, with an average annual growth of 23 percent during the 10th Five-Year Plan (2001-2005) period (Badham and Sense 2006), 24 percent in 2006, and 26.2 percent in 2007 (Logistic Information Center of China Federation of Logistics and Purchasing 2008). In 2007, China's logistics contributed about RMB 1.7 trillion of added-values, 17.6 percent of the added-values of the servicing industry, with a year-to-year increase of 20.3 percent (Logistic Information Center of China Federation of Logistics and Purchasing 2008). With the agreement that China would open up the logistics market at the end of 2005, China's accession to the WTO in 2001 set its logistics industry to grow even faster as well as to bring competition challenges from global players. The intensifying competition of the logistics market has forced mainland China 3PL providers to improve customer service and operation efficiency to promote their business performance. Many mainland China 3PLs have set to adjust their strategies to improve competitiveness.