The Chinese mainland's ever-growing manufacturing industry needs stronger logistics support, which is a "must" in the fiercely competitive commercial world, according to a Hong Kong Trade Development Council (TDC) report.

Mainland factories are currently spending up to US$270 billion on logistics, including inventory carrying and transportation costs, said the report released in Hong Kong Tuesday.

It said that many mainland logistics firms are not quite up to the mark and that their Hong Kong counterparts are better equipped to cater to the "enormous" mainland market.

TDC's Assistant Chief Economist Dickson Ho said that "Few Chinese domestic firms understood the concept of modern logistics, which is a fast-paced, multi-faceted, value-added supply chain service for business-to-business (B2B) on a worldwide scale. This opens new opportunities for Hong Kong's logistic sector."

"Virtually all of that expenditure is incurred in-house with only about 3 percent placed with third-party logistics service providers (3PLs), a much lower percentage than in developed markets," Ho said.

However, the situation is expected to change and the 3PL market is set to grow much larger over the next 5-6 years. The report said mainland firms are also beginning to see the need to outsource their supply chain activities to specialist 3PLs whose services include warehousing and transportation, supply chain management, distribution and inventory management.

Ho said the mainland is vast and the opportunities open to Hong Kong logistics firms differ from region to region. By far, the Pearl River Delta region provides the best opportunities. It is also the easiest market for Hong Kong firms to enter.

(Xinhua News Agency April 7, 2004)