Excerpt from: China Supply Chain and Logistics Strategy
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| October 12, 2005 | | Comparing China vs. US Road Trucking Cost Factors | Transportation costs can represent as much as 75 percent of a company's total logistics costs. In China, ~20% of a products price is eaten up by logistics costs. Relative logistics costs in China can reach up to 50% higher than the US.
China road transportation constitutes over 70% of domestic transportation, thus it is important to gain an understanding of costs and service levels of this mode of transport.
A thorough review of transportation contracts and rates along with shipping activity from China to the final US customer can be done in order to benchmark ground transportation and ocean rates.
Problems with China road transportation include:
- Fragmented cross-country truck service (with millions of trucking companies)
- Lack of LTL service with broad reach
- High deadhead rates (Miles and hours that a vehicle travels when out of revenue service)
- Inefficient material handling
- Higher damage rate due to poor packaging
- Overloading of trucks to reduce unit transportation cost
- Lower freight visibility /lack of tracking
- Inefficient load/unload. (Palletizing and forklifts are uncommon. Manual process takes longer time.)
- Majority of trucking companies are small scale operators
- Multimodal transport difficult since
only about 1/5th of heavy duty vehicles are containerized
China and US Trucking Cost Factors
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China
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US
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Fuel
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14-40%
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20-25%
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Toll Charges
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20-40%
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20-25%
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Driver Wages
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3-5%
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25-35%
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Costs incurred by the US less than truckload carriers are approximately at this truckload level. Of course then they charge more to haul freight to cover the costs of pickup, handling and reloading, line haul, unload and reload, and delivery. LTL costs on a per mile basis are probably 3 to 4 times the TL costs.
(All these amounts are approximate and are changing as fuel costs are on the rise.) | | |
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