Delivery Dilemma
- Source: Global Times
- [21:02 August 16 2009]
- Comments
Vans of a private express delivery company in Beijing. China has a number of 45,000 private delivery companies so far. Photo: CFP
By Guo Lu
One of the fastest growing sectors in China is the express delivery service, which has an average growth of more than 20 percent in recent years. The annual output value of the sector was more than 40 billion yuan ($5.85 billion) at the end of 2008, and the number of private express enterprises is 45,000 by the end of the first quarter.
However, despite the upbeat numbers many Chinese private express delivery enterprises are struggling to survive.
One of the largest in the nation, ZJS Express Co Ltd, was lucky to have barely survived the global financial crisis and the difficulties haven't ended yet.
"It was the hardest time for ZJS," recalled the recently appointed CEO, Chen Xianbao, who replaced his brother ChenPing last October.
According to Chen, the company lost 15 million yuan ($2.2 million) in one month alone, last August, a period usually marked with high profits. ZJS's total loss was 100 million yuan ($15 million) by the end of 2008.
The hard period was still fresh in Chen's mind.
"ZJS was not able to keep its ordinary operation running at that time, let alone paying salaries," he said. "Many people quit for new jobs and the rest were waiting for their payoffs. ZJS came very near to closing down by the end of last October."
According to some Chinese media, ZJS reduced its staff by 25 percent to 15,000. It survived after Chen Xianbao quickly raised 100 million yuan from the company's board. In order to save more money, he cut the labor costs from 50 million yuan ($7.3 million) to 30 million yuan ($4.4 million). In all, Chen trimmed 35 percent of the company's costs by controlling labor and operating costs.
Many of ZJS's counterparts weren't able to ride out the hard times. Cai Jing, vice-president of China Federation of Logistics & Purchasing (CFLP), told the Global Times that many small-and mid-sized delivery companies went bankrupt last year due to the sluggish economy.
Cai didn't simply blame the international logistic companies such as UPS and DHL for the situation.
"The problem is Chinese private express delivery companies have shortcomings. They are small in scale, and lack the network advantage. And the long-term problems, such as scattered, disordered operations have remained unsolved," Cai pointed out.
