Journal of Transportation Management


Logistics is a major challenge for multinational corporations seeking to do business in China. Transportation and warehousing are two core activities of logistics which will have to be outsourced or produced internally by foreign firms entering the China market. This paper focuses on road and rail transportation, the primary forms of transport utilized to move finished goods, as well as the warehousing and distribution center service sector. Trucking services and costs are observed to be poor by Western standards. There is no established less-than-truckload (LTL) industry and there are limited trucking networks offering one stop shipping across the country. None the less, trucking will have to be the backbone of any distribution network in China for finished products. Rail service is even poorer. There are capacity constraints and finished goods movement is not a priority of the Chinese railways. Warehousing capacity inherited from state owned enterprises is inadequate, but new distribution centers are being built rapidly. Foreign firms need to recognize these limitations in service, capabilities and capacity in planning their distribution networks. The fragmented nature of both the trucking and warehousing sectors places a premium on the value added by third party logistics providers (3PL’s) who have the knowledge and the relationships with local trucking and warehouse firms to minimize the risk of a supply chain breakdown. The selection of logistics suppliers is the most critical logistics decision in the Chinese environment.