“Build a Logistics Company with Advanced Technology”
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
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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.