UPS moves to China
By Bryan Hartman
Why China?
• 2004 GDP Growth of 9.5%
– 8.2% in India, 4.6% in S. Korea
• 94 Million Internet Users in China
– All potential customers
• US export to China increasing
– 1999 = 45,000 tons
– 2001 = 73,700 tons
– Increase of 28,700 tons or 57 Million Pounds
Chinese Growth
• SME = Small or Medium Enterprise
• Survey of 1,200 Asian SMEs
• Chinese SMEs
– 62% will increase employment
– 71% expect higher growth in 2005
– 86% see transport/logistics as important
– 74% see consumer goods as important
– 62% think Supply Chain Efficiency is lacking
Mainland China Shipping
• Partnership with Yangtze River Express
• Goal – “reach every address in China”
• Government is building 26,000 miles of
new highway. Every city of 200,000+ will
be connected
• SMEs not entering China
– 65% do not trust Chinese government
UPS Offers
• What Chinese employees seek…
– Education
– Health Insurance
– Overtime
– Less meetings
• Brand Name SMEs can trust
Air and Freight Shipping
• Typical Air Shipment
– High value to weight ratio
– Short Lifespan items
– Legal, Medical documents
– Computer Disks
– Spare Production Parts
– Luxury Goods
• Shipment spends ½ of its time in
warehouses
Opportunity
• Opportunity in China’s Emerging Economy
– Chinese Discretionary Spending Increases
(luxury items)
– Market Reform (legal docs)
– Increased technology manufacturing
• Spare Parts and computer disks
UPS Solution
Population and Airports
Mainland China
Planes, Flights, and Hubs:
• Currently 48 weekly flights
– 24 Shanghai
– 12 Beijing
– 12 Hong Kong
• The Future is now (expansion in 2005)
– International Hub in China (2007)
– 23 regular hubs
– 1,400 UPS Trucks
– 3,500 Chinese Employees
Competition
• Fed Ex, DHL, and China Post Office
– Fed Ex moving Asia Hub to China
– Fed Ex has been shipping in China for longer
– In 2001 China Post Airlines had only intra-
China express delivery service. (head start)
Political Risk
• Chinese Government
– Legislation to make China Post Office
regulatory body of express shipping.
– Forced by WTO to allow private express
shipping
– 81% of SMEs view gov’t instability as reason
to stay away from China.
Obstacles and Answers
• Demand for UPS Services
– Market Maturing increases demand
• Chinese Infrastructure
– Gov’t highways
• Fierce Competition
– Establish more Hubs and faster transport
• Government Issues
– Pressure from outside