German companies in China turning to Chinese logistics subcontractors

International logistics subcontractors are under pressure in China: They are facing increasing competition from Chinese providers who are expanding their market share with German companies on the basis of improved services. Recent years have seen some Chinese logistics subcontractors significantly increasing customer satisfaction in the shipping and warehousing segments as well as supply chain monitoring, in contrast with their international competitors. These are the findings of a study for which PwC surveyed 200 German companies operating in China.

German customer satisfaction with their Chinese logistics providers in the shipping segment is increasing. Satisfaction was up 7% compared with the last PwC survey in 2011 and down 8% for international logistics providers.

“These should be a warning sign for international express contractors in particular. That’s because customers who are satisfied with Chinese logistics subcontractors in the world’s biggest logistics market form a good basis for successfully penetration of the European and US markets too” says Dietmar Prümm, Head of Transport and Logistics at PwC.

Logistics competence developing in some segments

The German companies surveyed said that logistics subcontractors’ expertise and skills had improved on average across all sectors in some segments. These included safety standards, risk management and specialised storage. Quality management, staff qualifications and hygiene standards, however, had declined. But these findings vary considerably depending on the segment the companies belong to.

Trade and retail companies: Logistics subcontractors are far more able to meet trade and retail companies’ requirements for safety standards than in 2011 (+13%).

Machinery: In this segment, fewer companies are now giving a high score to logistics providers’ performance (–6% compared with the last survey).

Automotive: In this sector the increase in high performance scores given to logistics companies on risk management (+12%) was higher than the average for all companies surveyed (+5%).

Summary of other findings from the analysis:

Potential for expansion on digitalisation: One in four companies gave the highest score on digitalisation to logistics companies on the Chinese market. A majority (58%) of those surveyed gave middle to low scores for their ability to analyse data, programming knowledge and use of modern media.

Back to their own fleets: Companies are again increasingly returning shipping services in-house, withdrawing contracts with external providers. The share of companies with their own fleet is up 22% in the automotive sector and 6% in the machinery sector.

Shortage of qualified staff: German automotive and machinery companies in China are finding it increasingly difficult to recruit qualified personnel for their logistics functions. Retail companies are an exception: 82% are recruiting sufficient personnel for their logistics departments.

Little movement on environmental protection: Just 8% of German companies in China are submitting CO₂ reports on their activities in the Middle Kingdom. Although half of the companies expect their environmental protection activities to increase over the next two to three years, this is not reflected in their own plans.

About the study: The PwC study “Deutsche Unternehmen in China – Logistikprozesse im Wandel” (German companies in China – logistics processes in transformation) is based on a recent survey of 200 German companies operating in China, with the findings compared with data from 2011.