Qiao Liang

Deputy General Manager of Beijing Xianglong Assets Management Limited Company, China

Road Transportation Development Promotes Improvement of Integrative Efficiency of Goods Transportation Enterprises
Road transportation is an important part of the integrated transport system and a basic service industry of China's national economy. It plays a crucial role in economic development. The development of the road transportation and related logistics industry is of great significance to carry goods in urban and rural areas, facilitate the people's work and life, and expand employment in the society. Road transportation enterprises can also play a role in promoting the national economic development by improving the comprehensive efficiency and profitability level of the other companies.

I. China has the conditions for the development of the road transportation industry
China's State Council, in the “Opinions of the State Council concerning Accelerating the Development of the Service Sector”, proposed to give priority to the development of transportation. The establishment of the Ministry of Transport of China including air, water, land and urban public transport as well as postal express functions provides political and system related basis for the development of road transportation and modern logistics.

The national road network construction of 5 south-north roads and 7 west-east roads has basically been completed with a length of 3’600’500 km, of which 53’400 km expressway (ranking second in the world). The access rate of towns to roads is up to 98.54%, that of villages up to 88.15 percent, providing an important support for the development of road transportation presenting the “door-to-door” advantage of this transport mode.

The implementation of the new national road transportation hub planning, the improving of road transport terminal infrastructure and the creation of modern transportation networks as well as integrated transport systems have laid a solid material foundation for the development of road transportation.

According to a communiqué issued by the National Bureau of Statistics, in 2007 the total freight transport output of our country (not including: Macau, Hong Kong and Taiwan Province) was 22.53 billion tons carried with an increase of 10.7 percent. 16.28 billion tons were carried on the roads, an increase of 11 percent, accounting for 72.26% of the total freight volume.

The total tkm output of freight transport in 2007 was 9’918’050’000’000 tkm representing an increase of 11.8 percent; of which by road 1’125’760’000’000 tkm, an increase of 15.4 percent, and accounting for 11.35 percent of the total tkm output.

The data show that road transportation is an indispensable mode integrating efficient transport systems, and is the main mode of short-distance transportation; when the road conditions allow, it also can be transformed into a major factor of long-distance transportation. It plays an irreplaceable role especially in the emergency and special situations.

II China's economy demands and drives increased efficiency of road freight transportation
China has actively participated in economic globalization since opening to the outside world and its national economy has rapidly developed; the GDP has increased to 3.01 trillion US dollars (24.6619 trillion Yuan) in 2007 from 1’400 billion dollars in 1978. The foreign trade reached 2.1738 trillion US dollars in 2007 and has climbed to top three from the ranking of 32nd in the world.

The transportation, storage and postal industry realized a yearly added value of 1.3649 trillion Yuan, accounting for 5.53 percent of the GDP. China's rapid economic development drives and is driver by the development of enterprises, including road freight transportation and warehousing logistics enterprises.

Based on the overall development trends and other conditions, within a long period in the future, China will still maintain a relatively high development growth rate and the overall efficiency of the road freight transport enterprises will increase in parallel with the growth of China's economy.

The improvement of the road network conditions and the technological advances of transport vehicle manufacturers, make the speed of freight transport vehicles significantly grow. The current speed of transportation has reached 60 ~ 100 km; the use of tippers and tankers, pallets and forklifts has increased the efficiency of the road freight transport vehicles by 2 to 4 times.

Highway technical standards are also improving, including the improvement of the road surface and evenness, the gradual improvement of road traffic safety facilities, the technological progress of vehicle proactive and passive safety devices and the use of GPS and other related technology, which make important contributions to increasing the safety of road freight transportation.

In short, the road transportation industry is a basic industry and service sector in China's national economy. It has been played an increasingly important role in the process of economic development. The road transportation industry has been transformed from a traditional to a modern service industry, and in essence, the road freight transportation industry is there to offer modern logistics services and transit through its integrated logistics service enterprises. This is a strategic focus of the national economic development in a new era.

III. The role of enterprises in improving the overall efficiency of road freight transportation
From the development process of the road freight transportation of China, the road freight transportation enterprises benefit from the support of the state’s policies. Their productivity level, operational efficiency and transportation security have been improved. However, the role of internal factors of the enterprises is to continue to enhance further overall transport efficiency.

1. Road freight transportation enterprises need to establish efficient operations in line with modern economic development
In a modern logistics system, transport services are not any more limited to the traditional transportation, but more attention is paid to the quality of transport services and extension of service functions. The integral logistics process includes commercial activities, transportation and information.

Among them, the commercial activities represent the driving force, the information process provides for guidance, and the transport operation is the tool of mobility. An in-depth understanding of the relationship between modern logistics, transport and the role of the enterprises in the transport efficiency is of very high significance for the establishment of operations in line with modern economic development and market orientation as well as a demand driven service industry.

China’s road transportation enterprises are undergoing a reform and they are endeavoring to understand the current market situation and development orientation. The enterprises' operations and resources as run by the management are there to meet customer demand. Through establishing the right operational concept in line with of the modern economic requirements, it is possible to maximize efficiency and meet customer choice and acceptance.

2. Road freight transportation enterprises need to establish their organizational system in line with their own requirements for efficient operations
A modern enterprise system develops an efficient organizational and management system. The organizational system is the framework and the management system is a source of enterprise vitality and efficiency because obviously high efficiency originates ultimately from the operating organization and the operations themselves. Created under the planned economic system, Chinese road transportation enterprises are endeavoring now to build a modern enterprise system by transforming, restructuring or reorganizing the operational structure. In the mean time, they establish a modern road transport network and achieve economies of scale and intensive operations using scientifically solid and standardized management tools.

3. The safe operation of road freight transportation enterprises needs modern management and appropriate networks
Only when the enterprises dispose of the right scale of operations, will they achieve better efficiency and effectiveness of their production and marketing processes, which also cover technology, human resources, R&D, operating management and other aspects of operations so as to ensure safe operation and service quality.

Enterprise management directly impacts on marketing capabilities, internal cost management and core competitiveness factors of the enterprise, as well as the improvement of business network. Tools available:

1. Providing operational efficiency and coordination through the use of information technology;
2. improving the safety factor, using high-tech equipment and means to ensure safe operation and minimizing the inherent high-risk characteristics of road transportation;
3. reducing logistics costs, applying large-scale procurement to increase the bargaining power towards suppliers;
4. establishing brand awareness, unified brand, brand publicity and expanding the brand effect on the market;
5. Utilizing resources to achieve “1 +1 > 2”.

Therefore, the road transportation enterprises should raise their complex efficiency by developing their services from the traditional road freight transportation services by using their comparative advantages related to available transportation tools of the enterprise.

If you own transportation equipment of more than 100 tons of loading capacity, it is bound to carry bulk and equipment; you own a business network throughout the country you should use it to run part load express services and multimodal transport. You should run refrigerated transportation for participating in the food processing business. For the provision of the above-mentioned individual services, the enterprises also need to own the necessary transportation, storage and communication equipment and facilities.

Road freight transportation enterprises should raise their efficiency to develop the integrated logistics services. The orientation of development has two phases: first, to become bigger through mergers, reorganization of assets and a relatively loose chain franchise, integrating resources, establishing service network with broad coverage and low cost and providing the basic standardized functional services; secondly, to be professional, aiming at a specialized demand segment or customers, providing integrated and individually customized service as a whole, using competitive advantages. An efficient combination of logistics operations can also help to become the provider of the complex supply chain solutions.

4. Typical cases
Rapid economic growth in China demands / leads to the rise of a modern logistics industry.

According to the state statistics department's forecast, the added value of logistics has reached 1.1132 trillion Yuan in 2007 increasing from 225.7 billion Yuan in 1991 through an annual increase of more than 10%. It shows that China is now at a period of rapid growth of demand for logistics, and this period will also remain for a fairly long period of time. The manufacturing enterprises transform their existing business processes by integrating production and the purchase of raw materials as well as product sales, distribution and transportation, and other aspects, while reducing their inventory and the amount of funds used. They promote modern logistics technology and the development of professional logistics enterprises, and use the services of this industry.

The transport and logistics subsidiaries owned by Beijing Xianglong Property Management Limited liability Company run a transport service for moving large transformer substation equipment in the whole country, using special transportation facilities, as well as for moving equipment like Bridge culvert, “Box-girder” for road construction and the Beijing high-speed railway. In 2007, the business revenues of super-large freight transportation reached RMB 40 million Yuan rising 12 times compared to the revenue of RMB 3 million Yuan in 2003.

Furthermore, “Shanghai Volkswagen North China Parts Depot Distribution Center” is a company we have developed to handle the outsourced business of Shanghai Volkswagen. It is a service project integrating “planning, transportation, warehousing and distribution”. To enable more efficient operation of this project, our enterprises have established the transport, distribution and loading centers in Beijing and Shanghai to resolve the trunk movement and timely delivery of spare parts from Shanghai to Beijing.

The turnaround central terminal of 15’000 square meters is established in Beijing Majuqiao freight station, which is used to process the electronic declarations system and run the distribution business with high precision and iIn accordance with the operating characteristics, the business processes, working methods and management system. Through standardizing the operations, various performance indicators were of a higher level than the customer’s requirements and are at the top of the similar businesses of Shanghai Volkswagen.

Operating indicators:

1. cancelled orders out of 320’000 operations: 360 vehicles for trunk movement on the Shanghai - Beijing Transport Route throughout the year with 18’000 kinds of inventory;
2. 1.6 million pieces were completed and distributed to the stores.
3. KPI: freight damage and lost cargo is 0.1 ‰;
4. initial order satisfaction rate was 85%; initial emergency order satisfaction rate was 96%; timely delivery rate is now 95%; intact commodity delivery rate is 99%.

Successful management enables sales volumes to grow under the circumstances of relatively unchanged cost level for the customer. The annual turnover for 2003 was RMB 150 million Yuan and the annual turnover reached RMB 310 million Yuan in 2007.

IV. The Beijing Xianglong Group is the Backbone of the Road Transport Industry in China
The Beijing Xianglong Property Management Co., Ltd was restructured in 2001，with total assets of RMB 8 billion.

Main businesses of the company are: freight terminal operations, logistics distribution services, automobile transport, multimodal transport, warehousing and container transport, over-dimensional freight transport, as well as international and domestic freight forwarding services by air, land and sea; inter-provincial passenger services, urban public transport, taxi service, and a passenger station operations; automobile services trade, used car trading, and auto auctions and disassembly.

Beijing Xianglong Group has quite complete and integrated transport facilities. At present, the Group runs seven warehouse enterprises in Beijing with a total land area of 1.3 million square meters and has more than 40 depots of a total warehousing area of 160,000 storage square meters. In addition, it has 7 special railway lines with a total length of 5’615 meters. The Group also operates 3’927 passenger and goods transport vehicles using the Global Positioning System (GPS). We own 216 motor trucks among those vehicles and all the motor trucks have a total transport tonnage of 3,520 tons.

Beijing Xianglong Group is an associate member of the China Road Transport Association holding an association vice-chairman post and it is a member of the China Affairs Group related to the International Road Transport Union (IRU). It’s the largest road transport enterprise group in China.

The Group has some of the Grade-1-qualified freight transport enterprises in China's road transport industry, as well as some among China's top 500 enterprises. It owns 2 Grade-2-qualified passenger transport enterprises, 12 subsidiaries in Beijing and over 130 business entities as well as about 28,000 employees.

2007 yearly operating revenue was RMB 10.1 billion and the total profit amounted to RMB 180 million. In 2007, a freight transport performance of 1.2 million tons, and 59’735’600 tkm was realized.

To meet our customers’ demands, we take advantage of the traditional market predominance of the enterprise group, endeavor to develop multimodal transport and "over-dimansional transport", strive to develop integrated logistics services, promote integration marketing and "one-stop" customer services, establish the integral operating model of labor division and collaboration, implement standardized business processes and provide close and convenient services for our customers.

V. China promotes the development of international road freight transportation

The Chinese Government has always been committed to the promotion of international road transport via road infrastructure construction and transport development, and it actively participates in international road transport facilitation processes. It has established the road transport cooperation mechanism in line with the principle of equality and mutual benefits. It is China's basic standpoint to develop road transport with its neighboring countries.

China has made very positive efforts to participate in and contributing to road transport cooperation under the framework of Intergovernmental Agreements on the Asian Highway Network, the Greater Mekong Sub-regional Economic Cooperation, and the Intergovernmental Agreements on international road transport facilitation of the Shanghai Cooperation Organization Member States, as well as analyzing conditions of accession to the International Convention TIR to promote Euro-Asian road transport which has won wide attention from all countries in the world and a high appraisal by the relevant international organizations.

A general opening to the outside world of China's road transport industry is taking shape. World road transport integration will facilitate the road transport enterprises to learn from each other through technical exchanges. Road transport industry will promote the industry development and improve the overall efficiency of road transport enterprises.

Global road transport needs China and China's road transport industry also needs the World. China is willing to strengthen road transport cooperation with friends from all countries and jointly promote the international cooperation of a modern logistics industry by making our contributions to the global road transport development.

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