The Problems And Strategies Of Developing Third Party Logistics On Qingdao Luhai International Transportation CO.LTD.

Third Party Logistics (TPL) is an operation model of providing logistics service through specialized logistics enterprises instead of the supplier. This model is characterized by a contract relationship, specialized function, systematic management, and network information. TPL emerged in the developed countries of Europe and North America in the 1980s, and its popularity in industry has risen due to its low cost, excellent service, avoidance of risk, and its improvements to competitiveness. It acquires reputations for "Accelerator" of enterprise development and "Gold Industry" in the 21st century, and becomes the new growth spot of economy. The market for TPL in China is still in its infancy, but it has huge potential. Small-and-middle-sized TPL companies are playing an ever-increasing role in China and now account for more than 95% of logistics service providers. However, most of these companies are derived from traditional companies specializing in transportation, warehousing, or forwarding. Hence, all of them are suffering from common problems such as their small scale, deficient funds, insufficient networks, backward information technology, and low-level professional service. These problems result in a wide gap between Chinese TPL enterprises and more advanced foreign TPL enterprises. The purpose of this research project is to explore ways by which small-and-middle-size TPL enterprises in China, which are facing an environment of increasing integration of global logistics resources, can improve their international status. Furthermore, this project illustrates how such companies can successfully transform themselves from traditional logistics companies to more advanced and competitive global TPL companies. Currently in the logistic research area there is a tendency to simply copy foreign logistic theory without thinking about characteristics that are unique to China. Such an approach is unlikely to be successful. This paper will address the above issues with a focus on Jiaoyun Luhai International Freight Transportation co., Ltd. (Jiaoyun Luhai). Qingdao Jiaoyun Luhai International Transportation Ltd. is a comprehensive enterprise which is engaged in transporting goods by sea, land, air, special transport service, and logistic storage. An analysis of the current TPL developments in Jiaoyun Luhai reveals that it possesses the infrastructure to provide TPL services and shows the merits of transforming traditional logistics companies into modern TLP enterprises. The benefits of such a transformation include better logistic infrastructure and equipment, more convenient and efficient warehouse locations, the establishment of a domestic logistics network with specialized facilities and services, the cultivation of long-term customer relationships as well as the experience of supplying the services such as warehouse management, transportation, processing and custom clearance. However, Jiaoyun Luhai faces many challenges to the modernization of its logistics companies. These challenges include unreasonable operation and management patterns, a very-low-covering operation network, backward information technology, faltering logistics channels, incomprehensive service function, insufficient logistics talent, and unskilled managers. This investigation uncovers six barriers to the development of TPL in Jiaoyun Luhai. Firstly, the logistics idea is backward. Luhai lacks service consciousness and a basic understanding of modern logistics knowledge. Secondly, it hasn't established an information network platform or used information systems at the level of intra-company office automation, logistic processing management, or the development of customer interfaces. Thirdly, there is an inability to manage the supply chain and an unreasonable organization of operation networks –there is an operation point but no operation network and therefore no fluency of the logistics channel. The fourth barrier is the lack of a reasonably designed logistic network. This leads to the following problems: the service coverage is not wide and can only provide services to a single or small number of other parts in the chain; logistic function remains at the level of storage, transportation and inter-city delivery but the associated value-added services such as processing and collocation are insufficient; the entire logistic chain has not been achieved yet. The fifth barrier is a lack of professional logistics personnel and salespeople. The last reason is that Jiaoyun Luhai is derived from a state-owned transportation enterprise, and it retains many management patterns of a planned economy. This has resulted in a lower level of operating efficiency that threatens to hinder the ability of Jiaoyun Luhai to transform itself into a major player in modern logistics. In spite of these serious barriers to modernization, Jiaoyun Luhai can achieve the objective of becoming a modern TPL enterprise through the application of modern logistics theory and supply chain theory, and the advanced management pattern of foreign logistics enterprises. In addition, an analysis of the TPL development environment and policy in Qingdao suggests that Jiaoyun Luhai must be "directed by market,"thereby "strengthening specialized service, broadening value-added service and innovating management patterns."It is alsoimportant to focus on the needs of the customer and to instill the mentality of consistently exceeding customer expectations. Companies must provide a high-level of service that is both comprehensive and tailored to customers'unique needs. This can be accomplished as follows: I. Update operations and adapt to modern logistics practices (a). Establish a supply chain system focusing on service. Through the supply chain system Jiaoyun Luhai can transport cargo for the customer accurately and promptly, achieve real-time management and maintain low stock levels. Such a supply chain system can improve the competitiveness of Jiaoyun Luhai, and help the company obtain stable development opportunities. (b). Clarify the types of services provided and make customer satisfaction a top priority (c). Establish excellent service and marketing and build on the theory of customer satisfaction, focus on the customer and acquire more customers with the better service II. Improve the infrastructure and establish an information network platform as soon as possible (a). Set up an information system that matches the operation process. This includes an ordering of information flow, a global supply chain resources network, a global user resources network, and a computer information network (b). Set up a GPS vehicles positioning system and a GIS electronic map system. A GSM short message system and car-mounted intelligent mobile terminal can be used to monitor the entire journey of the vehicle in real-time III. Integrate resources to ensure that the logistics channel is fluent (a). Integrate the present resources of manufacturers and existing equipment in market to increase facilities'utilization ratios according to the situation (b). Understand the customer's actual situation; obtain support and coordination of industrial & commercial companies along with other transport and storage enterprises. By making use of SCM, integrate the original logistics process ranging from the supplier to the end user to reduce the logistics cost and the capital occupancy (c). Integrate and collaborate with other small-and-middle-sized logistics companies IV. Strengthen the value-added logistics service and develop strategic alliances. Establish strategic alliances with domestic and overseas large-scale logistics companies and manufacturers through the method of joint venture, alliance, tenancy, or trusteeship. Make good use of all competitive advantages and providehigh-level comprehensive logistics services for customers V. Ensure that all logistics employees are properly trained; implement a coherent human resources strategy that focuses on the recruitment and retention of qualified employees VI. Strive to continuously improve managerial skills Observe and learn from more advanced TPL companies. For instance, the JIT (just in time) model in Haier Logistics, the SOP (Standard Operation Procedures) in BaoGong Logistics, and the "One to One"marketing model for the big customer in Cosco Logistics The results of this research project contribute to the understanding of the logistics industry in China and illustrate how small-and-middle-size logistics enterprises can transform themselves into modern TPL companies.