“Build a Lo­gis­tics Com­pany with Ad­vanced Tech­nol­ogy”

China's Foreign Trade (English) - - Contents - By Wang Lili, Liu Xin­wei

In July, 2015, the first freight plane of Jilin Dongchen In­ter­na­tional Lo­gis­tics Co., Ltd. set off suc­cess­fully from Changchun Longjia In­ter­na­tional Air­port, with Moscow as the fi­nal des­ti­na­tion. Dongchen In­ter­na­tional Lo­gis­tics Co., Ltd. be­came Jilin’s first lo­gis­tics com­pany run­ning cross­bor­der e- com­merce and lo­gis­tics co­op­er­a­tion. It also sig­naled the open­ing of Changchun- Moscow freight air­line.

Cross- border e- com­merce is a new con­cept emerg­ing with the de­vel­op­ment of net­work. The cargo is able to sell cross bor­ders through net­work and cross- border lo­gis­tics ser vices, which trans­forms the for­eign trade model and pat­tern. The “In­ter­net + trade” will pro­vide a very good op­por t unit y for Chi­nese com­pa­nies to en­ter the in­ter­na­tional mar­ket, ex­pand for­eign sales, stim­u­late do­mes­tic de­mands and pro­mote in­dus­trial and trade up­grad­ing.

As the “Belt and Road” strat­egy was raised, how could a cross-border lo­gis­tics com­pany in­cor­po­rate the na­tional strat­egy into its busi­ness op­er­a­tion and stand out in the fierce com­pe­ti­tion? China’s For­eign Trade in­ter­viewed Zhang Yan, chair­man of Jilin Dongchen In­ter­na­tional Lo­gis­tics Co., Ltd.

Go­ing out of the North­east China

Zhang Yan en­tered lo­gis­tics in­dus­try in 1998, two years af­ter grad­u­a­tion from col­lege. He worked with a com­pany in Dalian to op­er­ate “Jincheng” lo­gis­tics brand. Zhang Yan cre­ated his own brand “Dongchen Lo­gis­tics” in 2012, and the rapid growth of his com­pany is based on ac­cu­mu­la­tions in the pre­vi­ous decade.

“North­east China is tra­di­tional heavy in­dus­try base with ad­vanced heav y in­dus­tries. The lo­gis­tics busi­ness, es­pe­cia l ly out­bound lo­gis­tics, fea­tures huge de­mands for the trans­port of in­dus­trial prod­ucts. The cross- border lo­gis­tics have very com­pli­cated process but sin­gle prod­uct va­ri­ety. The busi­ness will sur­vive by fo­cus­ing on one prod­uct

— In­ter­view with Zhang Yan, chair­man of Dongchen In­ter­na­tional Lo­gis­tics Co., Ltd.

only. How­ever, the growth of the com­pany de­pends on the sus­tain­able com­pet­i­tive­ness, some­times in­volv­ing cost re­duc­tion and shrink­ing mar­ket op­por­tu­ni­ties. Achiev­ing growth in the lo­cal re­gion will be very dif­fi­cult.” said Zhang Yan.

Zhang men­tioned that when the Dongchen Lo­gis­tics was founded, he had in­tended to ex­tend his busi­ness out­side North­east China. At that time no­body would think of such close con­nec­tions be­tween the con­cepts of “In­ter­net +” and “cross-border e-com­merce” and the lo­gis­tics com­pany. “I just wanted to start up a lo­gis­tics com­pany with ad­vanced tech­nolo­gies and high added value.” he said.

At the be­gin­ning Dongchen started co­op­er­a­tion with CNPC (China Na­tional Petroleum Cor­po­ra­tion), a com­pany with its an­nual rev­enue reach­ing tril­lions. The co­op­er­a­tion was not smooth. In 2012, Dongchen trans­ported a set of petroleum fa­cil­i­ties to Chuan­qing Oil­field, a sub­sidiary com­pany of CNPC. It was China’s first im­ported set of ro­bot fa­cil­i­ties, with its value sur­pass­ing 200 mil­lion yuan and the trans­porta­tion fee reach­ing more than 20 mil­lion yuan. Dongchen dis­patched more than 60 ve­hi­cles to trans­port the fa­cil­i­ties to the des­ti­na­tion.

In 2013, Dongchen signed con­tract with Tian­jin Da­gang Oil­field, an­other CNPC sub­sidiary, to trans­port 6 of its drilling fa­cil­i­ties to Iraq. Zhang Yan over­saw the whole trans­porta­tion process and he still re­mem­bered each de­tail of that jour­ney, as that was the first time he got in­volved into war. It took four months to prepare for the project and a whole year to fin­ish the de­liv­ery. An­other lo­gis­tics com­pany work­ing with Da­gang Oil­field spent 12 mil­lion U. S. dol­lars on the ware­house fees, which is far more than the cost of drilling fa­cil­ity, while Dongchen per­formed the de­liv­ery on time ac­cord­ing to the con­tract.

In 2013, Dongchen started co­op­er­a­tion with Shengli Oil­field to pro­vide lo­gis­tics ser­vices for its project in Ta­jik­istan. Co-founded by Dongchen Lo­gis­tic com­pany and China-ta­jik­istan Oil Com­pany, China-ta­jik­istan oil project was reg­is­tered in Dan­gara De­vel­oped Zone and mainly pro­vided crude and re­fined oil trans­port ser­vices for the oil re­fin­ery in Dan­gara.

Cross-border e- com­merce

Loc ated i n the Chaoyang Eco­nomic De­vel­op­ment Zone, Changchun Dongchen Lo­gis­tics cov­ers a floor space of 30,002 sq.m. and has more than 30,000 sq. m of mod­ern stor­age cen­ter. The of­fice build­ings oc­cupy a f loor space of 2,160 sq. m. Dongchen lo­gis­tics is the deputy- di­rec­tor unit of Jilin Lo­gis­tics and Pro­cure­ment Coali­tion and ac­quired CAAC (Civil Avi­a­tion Ad­min­is­tra­tion of China) A- grade freight sales agent qual­i­fi­ca­tion in De­cem­ber, 2012. In 2014, it ac­quired 4A lo­gis­tics qual­i­fi­ca­tion.

But there were also re­grets for Zhang Yan. He said, “I missed two op­por­tu­ni­ties to en­ter ex­press de­liv­ery in­dus­try. The first was in 2000 and sec­ond in 2008. Peo­ple came to me to de­velop the ex­press ser­vices, but his pro­posal was re­jected by me.”

The ex­press in­dus­try un­der­went rapid growth from 2006 to 2008, start­ing up an ex­press com­pany would need 500 thou­sand cap­i­tal. To­day a pro­vin­cial agent needs to pay 100 mil­lion agent fee. Zhang Yan started to think about his busi­ness model trans­for­ma­tion.

Af­ter in­ves­ti­ga­tion and care­ful con­sid­er­a­tion, Zhang de­cided to start cross- border e- com­merce busi­ness in 2013. Dongchen’s cross- border busi­ness went into trial and for­mal op­er­a­tion in May and Sept. of 2015 re­spec­tively. It started co­op­er­a­tion with Cainiao Net­work, Alibaba. On July 17, 2015, the first freight flight from Changchun to Moscow set off suc­cess­fully. “By the end of 2015, we have op­er­ated 16 flights and now the busi­ness is sta­ble.” Zhang Yan said. Dongchen has been treated by the

Af­ter in­ves­ti­ga­tion and care­ful con­sid­er­a­tion, Zhang Yan de­cided to start cross-border e-com­merce busi­ness in 2013.

Ta­jik­istan gov­ern­ment as strate­gic lo­gis­tics part­ner.

Start new flights, de­velop new projects

2015the Dongchen. gov­ern­men­tMa, team tra­di­tion­alTheOn chair­ma­nis to an dis­cuss co­op­er­a­tionDe­cem­ber.of­fi­cial of­fi­cials lo­gis­tic­sof in­vest­men­tAlibaba im­prove­men­twith31, in­vited busi­ness2014, Alibabaand projects Jil­inJack his for of in in ef­forts,per­mit Alibaba. Changchun.of DongchenSo off Dongchen­line With op­er­a­tion re­ceived mul­ti­lat­er­alis the from first­the cross-bor­derof Jilin Provincee- com­merceto co­op­er­ate com­pany with Aliba­ba­time. with the short­est pe­riod of

As a Rus­sian lan­guage ma­jor, Zhang Yan also stud­ied in Rus­sia dur­ing col­lege and he ac­quires rich knowl­edge about Rus­sia. That is why he started the first flight from Changchun to Moscow. “I think this is the rea­son why Alibaba chose us. Most of our or­ders came from Rus­sia.” He ex­plained.

Ac­cord­ing to Zhang Yan, the cross-border e-com­merce does not set limits to the va­ri­ety of trans­ported goods. The ma­jor fac­tor im­pact­ing its de­vel­op­ment is un­equal com­pe­ti­tion. “Chi­nese cus­tom clear­ance is quite sim­ple and smooth, but things are to­tally dif­fer­ent in for­eign coun­tries. In for­eign coun­tries, the user and payer shall be the same per­son, which is a ma­jor ob­sta­cle for the de­vel­op­ment of cross-border r e-com­merce. Rus­sia is very strict on this.” Zhang said.

Zhang Yan sa id that most for­eign buy­ers spent 15 to 50 US dol­lars on av­er­age. The out­break of fi­nan­cial cri­sis in Rus­sia last year did not im­pact much on the busi­ness of Dongchen. “The de­val­u­a­tion of f Ru­ble stim­u­lated Rus­sia peo­ple to buy things on line, es­pe­cially taobao. com.” He said.

Dongchen lo­gis­tics is only y op­er­at­ing Changchun-rus­sia flight. Zhang Yan said that they have made clean plan for the flight op­er­a­tion: the first is Changchun-europe flightt to op­er­ate im­ported prod­ucts; the sec­ond is f light from Changchun to the Amer­i­cas. Ac­cord­ing to the cus­tom sta­tis­tics, Brazil pur­chased a lot of prod­ucts from China; also, due to the weak light in­dus­try of f Brazil, its econ­omy is mu­tu­ally y com­ple­men­tary with that of China, and Brazil could trade fruits, rub­ber and cof­fee with China’s en­gi­neer­ing g prod­ucts. The third is flight from Changchun to Ja­pan and South Korea, mainly op­er­at­ing im­ported prod­ucts. It is estimated that aboutt 8 0mt of South Korea pro­duce went into Chi­nese con­ti­nent each day. The fourth is the flight from Changchun to Europe. Ac­cord­ing g to the de­sign of the “Belt and Road” strat­egy, Chi­nese pro­duce could be

trans­ported to Europe with rail­way. Dongchen plans to de­velop U.K. and U. S. mar­kets in 2017.

“These flights will de­velop a lot of branch flights. We have gained sup­port from China East­ern Air­line and all its over­seas lo­gis­tics re­sources could be shared with us.” Zhang men­tioned.

Zhang Yan said its com­pany will fo­cus on im­prove­ment of key com­pe­tency and de­velop self- owned tech­nolo­gies dur­ing 2016-2017. “Last Nov. 11, the com­pany also ex­pe­ri­enced the peak of lo­gis­tics op­er­a­tion. The au­to­matic sort­ing of prod­ucts is one of the im­prove­ment parts, and the lo­gis­tics man­age­ment sys­tem and en­gine shall also be fo­cused.”

Ta lk ing about the f ut ure of cross- border e- com­merce, Zhang Yan men­tioned its un­pre­dictabil­ity. Dongchen will or­ga­nize sev­eral rounds of ven­ture cap­i­tal in­vest­ment, “Tim­ing is in­creas­ingly im­por­tant for cross­bor­der lo­gis­tics. Back in 2012 there was no clear re­quire­ment, but now it re­quires 30 days, or even 20 days, show­ing the trend of the in­dus­try.”

Dongchen is also considering build­ing ware­house over­seas, like Jing­dong and Sun­ing. But some ex­perts have doubts about the fea­si­bil­ity of the model, be­cause the model fea­tures high risk of prod­uct pred­i­ca­tion. If one part has problem, the loss will be huge.

Zhang Yan said, “We shall work with com­pa­nies in the same in­dus­try to pro­mote in­te­gra­tion of in­dus­try chain. But we will not con­sider such co­op­er­a­tion be­fore our e- com­merce busi­ness reached 10 bil­lion yuan in rev­enue.”

In 2016, Zhang Yan also con­sid­ered work­ing with the sin­gle brand com­pany like Nan­jiren, which is the fastestchang ing O2O com­pany among tra­di­tional gar­ment brands in his opin­ion. Nan­jiren on­line busi­ness reached 5.8 bil­lion yuan in rev­enue in 2015 and now all its busi­ness has changed to on­line op­er­a­tion.

The se­lec­tion and nour­ish­ment of over­seas part­ners is also a big ques­tion. Zhang Yan stressed that in those parts of Rus­sia, where Rus­sian Post ser­vices could not cover, the de­liv­ery is very dif­fi­cult to op­er­ate. Now, the Dongchen mainly en­trusted Rus­sian Post with the un­der­tak­ing of busi­ness. Many Rus­sian com­pa­nies are copy­ing the op­er­a­tion model of Chi­nese ex­press com­pa­nies, and learn­ing Chi­nese is very pop­u­lar in Rus­sia now.

The se­lec­tion and nour­ish­ment of over­seas part­ners is a big ques­tion.

Zhang Yan, chair­man of Jilin Dongchen In­ter­na­tional Lo­gis­tics Co., Ltd.

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