Is China the future of warehousing revisited

National Retail Systems plans on opening U.S.-style automated warehouses in China to ship directly to stores in the United States.

By Bob Trebilcock, Editor at Large -- Modern Materials Handling, 9/19/2007

Is China the future of warehousing?

That was the title of a story I wrote for the August issue of Modern Materials Handling. You can read the story to see how four supply chain practitioners with experience in China answered that question.

The catalyst for that story was a “what if”: Now that China has used its low-cost advantage to become a world leader in manufacturing, what happens if it set its sights on distribution, too? After all, wouldn’t it make more sense to ship shelf-ready merchandise directly from China to stores in the U.S., rather than go through crossdock centers in Long Beach and regional distribution centers on the East Coast?

At the time, I thought it was an academic exercise: So far as I knew, no one was actually trying to distribute directly to stores in the West from China. Then, I talked to Larry Ravinett, senior vice president of logistics and supply chain solutions for National Retail Systems, Inc., a third-party logistics provider specializing in transportation and distribution solutions for the retail industry.

As it turns out, Ravinett and his colleagues have been asking similar questions.

“Among the things we do is freight consolidation, and 90% of the product we consolidate is coming from China,” says Ravinett. “So we asked: What’s the purpose of bringing all of this stuff to the U.S., touching it three or four times to send it to a distribution center and put tickets on it, only to ship it back to stores?”

NRS’s answer was to launch SinoNRS, a joint venture with China’s Sinotrans Group, the country’s largest integrated logistics provider with some 60 million square feet of warehousing space.

Operating as a true 50-50 partnership between NRS and Sinotrans, SinoNRS plans to offer retailers a solution to reduce distribution expense in the states. “Why pay five times the warehouse labor cost that you pay in the U.S., when with the right technology you can do that off-shore and send product directly to a store?” asks Ravinett. 

Ravinett says SinoNRS is working to develop Western-style DC’s with a degree of information technology and materials handling automation that is not presently being used in China. “The new buildings we’re building are based on U.S. designs,” says Ravinett. “We will have information technology, automated cross-docking and conveyor-driven distribution centers that are comparable to what we have in the United States.” 

While the DC’s are not yet up and running, Ravinett says he has retail clients that have committed to the program. “When we’re done, we’ll have the capability to bypass a DC and deliver price-ticketed items directly to stores,” says Ravinett. “Or, I’ll be able to take product that has 80% of the work done and send it to a regional DC where it can be stored for replenishment later.”

After talking to Ravinett, I still don’t know whether China is the future of warehousing.

As the panel of experts I spoke with for the original story observed, there are still timing and communication hurdles to overcome before China is a serious threat to the U.S. distribution industry. At the same time, someone probably once said that about U.S. manufacturing, too. —Bob Trebilcock, Editor at Large, Modern Materials Handling