Successful 3PL Outsourcing in China

The Challenge of Managing Multiple 3PLs

Outsourcing to 3PLs in China is not a simple exercise. Companies may find that their outsourcing arrangements are not meeting their expectations. Effectively developing and managing 3PL outsourcing relationships in China requires having the capabilities to identify, evaluate, select, and manage multiple 3PL relationships. The need for outsourcing as a core competency is particularly evident in China since there are no 3PLs offering a true nationwide service. There are more than 700,000 logistics enterprises registered in China. Most of these are small and medium-sized operators. The largest providers have less than a 2% market share and tend to operate on a local or regional level. According to the China Economic Review, Wal-mart China requires 15,000 suppliers to service ~60 stores as compared with Wal-mart US which services 3,800 stores with only 61,000 logistics suppliers. In order to avoid outsourcing problems companies in China need to work with their partners to: Gather relevant data Clearly identify business objectives, desired outcomes, and potential risks Agree on business principles and roles and responsibilities early during discussions Agree on business outcomes and link service level agreements to outcomes

Obstacles to foreign entrants in China's logistics market may be gone, but regulatory barriers still loom large