DC Velocity - May 2011

As for barge service, the situation along the Yangtze River illustrates the issues at hand. China’s “Golden Waterway” stretch-es 6,300 kilometers (approximately 3,900 miles) through seven provinces and handles 80 percent of the country’s inland waterways traffic. River transport provides a lower-cost alternative to rail and truck movements from these regions. It is estimated that the cost of shipping a 40- foot container from Wuhan to Shanghai by barge equals the cost of moving 10 tons by truck. Another comparison of transport options along the Yangtze River shows that the cost of shipping one TEU from Chongqing to Shanghai via truck is about 6. 7 times greater than that of shipping one TEU by barge.

Using inland waterways does have drawbacks. For one thing, the trade-off for lower pricing is longer transit times: barge movement takes from 30 hours to four or five days. For another, there is the risk of unreliable water levels, which could hold up any river voyage indefinitely. Manufacturers do have the option of using inland ports for ship and/or barge calls. One of these is Nanjing—the largest inland port in China and the largest river port in Asia, with estimated annual throughput of 3 million TEUs in 2010. Other large inland ports include Wuhan, which is expected to become the second largest inland port, and Chongqing, the most significant port on the upper Yangtze, with annual throughput exceeding 1. 5 million TEUs.

LOGISTICS SERVICE PROVIDERS HESITATE

Companies that locate production in China’s interior will have to re-evaluate their existing relationships with third-party logistics service providers. It’s natural to assume that the incumbent provider will be the best choice for handling logistics in a new location. But that is not necessarily true, and companies may find it necessary to establish relationships with providers that are better positioned in inland regions.

In any event, manufacturers should first assess current and prospective 3PLs’ suites of services in the new region— these will rarely match what they can

provide in the Tier 1 coastal cities.
They should also investigate the
extent to which the multinational
3PLs rely on local service providers,
as well as the benefits and draw-
backs of collaboration with each of
them. Among the potential nega-
tives of handing business over to a
local 3PL are a lack of visibility and
reduced control over product trans-
portation and handling.

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