Taking a random walk down… Cargo Street in Guangzhou
By George Zafirov | 3PL News
With the ever increasing domestic consumer spending in China, the quest of global brands to penetrate the local market has become relentless. Setting up a proper distribution network can be a great challenge in any country, but it is an even more daunting task in China. Such an enormous and diverse territory inevitably forces supply chain experts to devise multiple regional strategies, each of them specific for local circumstances.
Hong Kong is a great spot with a unique set of advantages, most notably its suitability to serve the broader Asian market, not just China. Its status as a Special Administrative Region of China makes it perfect location for a global supply chain hub in Asia, however, last-mile distribution network in China would still require multiple regional hubs.
On a regional level inside China, most supply chain analysts would consider three main regional distribution hubs – Guangzhou for the South, Shanghai for the East and Beijing for the North. While that group leaves out the vast territories of Western China, it still covers the most developed regions of the country, where the majority of the consumer spending takes place.
Apart from its location, each of these three cities has many interesting peculiarities. If your business depends on the Central Administration and is has to do with the government, then you need to be in Beijing. Shanghai, on the other hand, dominates the East. China has always wanted to build it into an international hub for finance, trade, and shipping. The recent Pilot Free Trade Zone development is considered a testing ground for reform potentially on a national level. The benefits of Guangzhou, however, might not be so well known, especially when you take into account that Hong Kong is just next door, along with the rapidly developing neighboring city of Shenzhen.
The Southern Gate
Guangzhou is the real Southern Gate of China. Its history as a maritime trade center is over 2,200 years long, and today it is the third largest city of China. As a core city of the Pearl River Delta, Guangzhou is also a preferred location for many large multinational companies for their deployment in Mainland China. Located in the heart of an economically flourishing area, Guangzhou is also a very beautiful city.
With regards to supply chain management and logistics capabilities, Guangzhou has a well-developed infrastructure, which has established it as a first class gateway city. Guangzhou Baiyun International Airport is the second busiest airport in China (18th in the world!) and serves as an international airline hub. The Guangzhou Port, the largest comprehensive port in South China, is the world's 7th largest port in terms of container throughput, reaching over 350 ports worldwide. The region has a modern land transportation network as well.
Guangzhou is the base of powerful industrial clusters, specifically in the fields of auto, petrochemicals and electronic information. Other sectors, such as finance, wholesale & retail, logistics, exhibition and tourism are also well developed.
One of the most unique features of the city is its wholesale markets, also known as "commodity malls". Being among the largest of their kinds in China, they specialize in product categories, including aquatic products, audiovisuals, tea, leather products, textiles and garments, hotel supplies, cosmetics, auto accessories, IT products, toys and gifts, and many more. The nearby cities are well known for their specialization in manufacturing these types of goods, and many of them find their way to the global markets via the commodity malls in Guangzhou.
The apparel malls, for example, attract thousands of importers from all over the world, including many from Russia. As soon as the buyers complete their shopping tour, they can walk down the street to meet with local freight forwarders, who can take care of the shipment of their cargo to Russia. The freight forwarders are experts in providing a various value-added services; expedite shipment, insurance, etc. Once they collect the cargo from the buyers, they turn to wholesalers (usually located on the same street but on the high floors of the building rather than on the ground level shops), who consolidate the shipments and negotiate better rates for the resulting larger volume. Common routes are trucking, rail, and occasionally sea freight. Air freight options are also always available for the high-value cargo. It’s all about the balance between expediency, rates, and expertise in handling customs at the Russian border.
In recent years the methods of operation have changed in order to adapt to the new market conditions. Some Russian buyers have moved closer in, establishing trading companies in Guangzhou, while others use local agents to do their purchasing. Freight forwarder have also become more aggressive in competing for business, and now provide more services, such as repackaging, for example.
The Importance of Flexibility
Guangzhou plays a significant role in the Chinese economy and is a major supply chain hub in Southern China. Naturally, it plays an important role in the supply chains of all businesses, which target the consumers in that region. When global brands set up their supply chain infrastructure, they have the option to either establish their own facilities, or partner with local logistics service providers for warehousing and distribution.
The OYM Logistics Alliance, a fast-growing global network of independent warehouses, has hundreds of members in this part of China, and can assist local and international companies with the setup of their supply chains in the region.
One of the key business benefits of using a local warehousing and distribution provider, rather than building your own distribution facility, is the flexibility that comes with that option. As the global economy is becoming more dynamic, business needs evolve at an ever increasing rate – companies change their product lines, target markets, suppliers, operating procedures, etc. When the logistics requirements of a business change, it is much easier to simply find another service provider that meets those new requirements, rather than establish a new distribution facility with new specifications.