Shang Erbin/Wen

Since the General Office of the Communist Party of China Central Committee and the General Office of the State Council issued the "Action Plan for Effectively Reducing Logistics Costs in the Whole Society" in November 2024, relevant departments have issued supporting documents in different fields, and provinces, regions, and cities have formulated local implementation plans or task lists, forming a situation of central local linkage to promote the implementation of the plan. This includes: the National Development and Reform Commission and the Ministry of Transport issuing the "Implementation Plan for Logistics Network Construction", systematically promoting the construction of a modern logistics system consisting of "channels+hubs+networks"; The Ministry of Transport, National Development and Reform Commission and other ten departments jointly issued the "Guiding Opinions on Improving the Comprehensive Transportation System of Modern Urban Agglomerations", promoting the construction of a modern urban agglomeration comprehensive transportation system that is smooth in internal and external connections, convenient and efficient, safe and reliable, intelligent and green, and collaborative governance; The Ministry of Transport, the National Development and Reform Commission, and eight other departments jointly released the "Action Plan for Implementing Multi modal Transport to Break Through Blockages and Checkpoints (2026-2030)", focusing on improving the construction of the multimodal transport system at major freight nodes through "one point, one policy"; The Ministry of Transport, the Ministry of Industry and Information Technology, and eight other departments jointly issued the "Action Plan for Accelerating the Cultivation of Leading Transportation and Logistics Enterprises and Enhancing the Service Guarantee Capability of Industrial Chain and Supply Chain", providing strong support for serving the modern industrial system; The three provinces and one city in the Yangtze River Delta jointly issued the "Action Plan for Improving Logistics Quality, Increasing Efficiency, and Reducing Costs in the Yangtze River Delta Region", and cross provincial and municipal cooperation to break down regional barriers, etc. However, it should also be noted that some deep-seated contradictions and problems in the development of the logistics industry have not been fully resolved, mainly in the areas of poor multimodal transport connection, scattered entities, uneven factor guarantee, inconvenient cross regional and cross departmental collaboration, and sustained "internal competition". Coupled with the objective constraints of industrial structure, the reduction of logistics costs in the whole society has shifted from simple and direct reduction of logistics link costs, such as transportation costs, warehousing costs, operation management costs, etc., to a systematic breakthrough stage of infrastructure optimization, supply chain improvement, digital and green transformation, and the reduction of logistics costs in the whole society has entered the second half of deep tackling.

01: Cognition | Deviation and Misconceptions

Reducing the overall logistics cost of society is equivalent to lowering the logistics process cost. The direct manifestation of logistics costs is the cost of each logistics link. For example, in the past decade, although per capita income and living costs have increased significantly, the prices of the most direct road transportation and warehousing services have decreased, and the prices of express delivery and urban distribution services closely related to life have also decreased. It is difficult for logistics industry enterprises to dominate the production time, quantity, flow direction, service requirements, etc. of each logistics link. In most cases, it is determined by the seller or buyer of goods or product transactions, and cannot be determined by logistics service providers. In the highly market-oriented and relatively surplus service supply logistics industry, the cost control of the vast majority of logistics links has been achieved very well, and the cost reduction space of direct logistics links is already very limited.

A higher proportion of total logistics costs to GDP compared to developed countries means higher logistics costs. We often compare the total logistics cost to GDP ratio of over 13% with 7-8% in European and American countries, and conclude that China's comprehensive logistics cost is too high and there is still 5-6% room for cost reduction. This comparison is one-sided and unreasonable. The distribution of resources, industrial layout, and economic structure in China are significantly different from those in developed countries in Europe and America. When converted to per 10000 US dollars of GDP, there is a multiple difference in the number of tons of goods shipped and the number of ton kilometers of goods transported. The high proportion of logistics costs in China's GDP is due to the incomplete layout of logistics facilities and low efficiency of the logistics system, as well as the impact of differences in resource distribution, industrial layout, and economic structure. The rent for a regular standard warehouse is about 10-25 yuan/square meter/month in China and about 30 US dollars/square meter/month in the United States. The cost of express delivery is about 0.8-1.0 yuan/piece in China and about 1.5-2 US dollars/piece in the United States. Compared to the cost of a single logistics link, there is not much room for cost optimization in China's logistics link. The optimization of logistics costs should focus more on non single link scenarios such as system cost reduction, system cost reduction, structure cost reduction, technology cost reduction, and mode cost reduction.

The imperfect logistics infrastructure system leads to high logistics costs. This is a phased and structural proposition. The competent departments at all levels have successively issued many support and assistance policies for the construction of the national logistics infrastructure system, promoting the construction of the national logistics hub network system, the construction of the national cold chain logistics base network, and providing policy and financial support for many projects such as city and urban agglomeration chain reinforcement and strengthening. They have also promoted the entry of railway dedicated lines into enterprises, parks, and ports, and promoted the development of multimodal transport and one-stop business, providing basic support for the rapid improvement of the logistics infrastructure system and the reduction of logistics costs for the whole society. However, while the hardware of logistics infrastructure has been improved, there are still many shortcomings in the construction of logistics infrastructure software that urgently need to be strengthened. There is still great room for improvement in the efficient and orderly coordination between different transportation modes, industries, and departments. Overall, the shortage of logistics infrastructure resources and logistics service resources has been basically resolved, and even surplus has emerged. The shortage of logistics resources and insufficient capacity only exist in local areas and routes. The old era where logistics resources would form market capacity and market opportunities no longer exists.

02: Logic | Persistence and Return

The core element that determines market prices is the supply and demand relationship. How to meet, change, and create the supply and demand relationship, such as the replacement subsidy policy introduced to enhance consumption, the tax rebate policy introduced to encourage exports, and the reverse invoicing policy introduced to promote the standardized development of digital freight platforms. The logical difference between the planned economy and the market economy at the industrial level lies in the pricing rules of products and services. The planned economy is priced based on cost+profit, and the market economy is priced based on supply and demand. This logic is vividly reflected in the development of e-commerce, live broadcast, cross-border import and export, the Internet and other emerging business scenarios today, and is gradually accepted by the society. However, the traditional pricing thinking based on cost+profit is still deeply rooted today, and there are many cognitive biases and contradictions between it and the market thinking mode based on supply and demand pricing in various traditional scenarios, which to some extent affects policies, measures, and implementation. Over the past forty years of reform and opening up, remarkable achievements have been made in various aspects of economic and social development, and a unique development model and environment have been formed. It is an important historical task to deeply understand the fundamental logic of industrial development and return to the essence of industrial development.

Generality. The market plays a decisive role in resource allocation. Firstly, the market mechanism is the foundation, regulating the production, circulation, and consumption markets through price, supply and demand, and competition mechanisms; Secondly, enterprises are the main body, and they operate independently and are responsible for their own profits and losses; The third is to ensure market operation and maintain market order through the rule of law; The fourth is government macroeconomic regulation and intervention in the market (such as fiscal and monetary policies); The fifth is openness, utilizing global market resources.

Differences. Firstly, due to differences in social systems, the socialist market economy with Chinese characteristics is dominated by public ownership, with multiple forms of ownership developing together. The state-owned economy controls the lifeline of the national economy, including key areas such as energy, transportation, finance, and national defense; The Western market economy is dominated by private ownership, and the means of production are mainly controlled by large enterprise groups and private capital, making it more sensitive to market demand opportunities. Secondly, socialism with Chinese characteristics emphasizes the role of the government in coordinating and allocating resources in macroeconomic regulation, strategic planning, major infrastructure construction, and industrial guidance; The Western market economy emphasizes spontaneous market regulation. Although the government may also rescue and regulate the market, government intervention often lags behind.

Persist and return. One is to adhere to a proactive government, effectively allocate resources, strengthen the hard environment of logistics infrastructure, and enhance the policy, order, and market soft environment for the development of the logistics industry. If the competent department issues a document and the regulatory department punishes it, enterprises will illegally profit and have opportunities to take advantage of it, and the inefficient and disorderly operation of the market will continue; The second is to adhere to market driven development, fully stimulate market potential, develop effective markets, and solve problems and challenges in the development of the industry through the healthy, orderly, sustainable, and efficient development of the logistics market; The third is to return to market logic, respect market rules, reduce costs through a reasonable layout, complete functions, smooth and efficient logistics infrastructure system, achieve cost reduction through improving logistics service quality and efficiency, stimulate potential cost reduction through digital intelligence empowerment and green development, and improve industrial and supply chain efficiency through industrial integration.

03: Cost Reduction | Insight and Transition

Reducing logistics costs for the entire society is not just about lowering logistics costs. In today's logistics market, the logistics cost reduction that can be achieved by a single enterprise and the logistics cost reduction that can be achieved through cooperation between enterprises can be achieved by relying on the enterprise's own operating power. To reduce the logistics cost of the whole society, attention and efforts should be paid to cost reduction scenarios that cannot be achieved by a single enterprise's own capabilities, as well as cost reduction scenarios that cannot be achieved by traditional models and technologies. With the continuous introduction and implementation of various supporting policies, the logistics infrastructure conditions and logistics market development environment have been greatly improved, and initial results have been achieved in reducing logistics costs for the whole society. This effect is not only the result of reducing logistics costs, but also the result of policy driven, optimized transportation structure, and industrial structure upgrading.

Reducing the overall logistics costs of society requires top-level design. Logistics is a fundamental industry that guarantees the bottom support for the circular operation of the national economy. It is a strategic industry that is related to the stability of the industrial chain, supply chain, and national economic security. It is a leading industry that supports and leads the development of industries such as production and manufacturing, commercial circulation, and the operation and development of the economy and society. Reducing the logistics costs of the entire society is not only the responsibility of the logistics industry, nor is it solely the responsibility of the logistics regulatory authorities. It requires government promotion, departmental collaboration, top-level design, system planning, and implementation of target responsibilities. It requires a comprehensive layout and implementation of the project to reduce the logistics costs of the entire society from the perspective of optimizing industrial layout, enhancing industrial cluster synergy, rational layout and division of labor of logistics facilities, upgrading the logistics supply chain system, and establishing a transportation market methodology system.

Reducing the logistics costs of the entire society requires new paths such as extending the industrial chain, reconstructing the supply chain, and optimizing the system. Logistics services cover a wide range of industries and are an integral part of economic and social operations. At the policy level, it involves multiple departments and management coordination. At the market level, the operating entities are diverse, the management difficulty is high, and there are multiple steps and extensive lines. At the enterprise level, the entry threshold is low and the competition is strong.Faced with the challenges of the internal and external development environment in the new era, reducing the logistics costs of the whole society requires a re examination and systematic formulation of executable, implementable, and effective technological routes and methodologies from the perspective of economic, social, and industrial development, technological progress, and future trends.

Reducing the overall logistics costs of society requires continuing to break through the breakpoints and bottlenecks between departments, industries, and the entire logistics service chain. The current policies, regulations, and systems are mostly formulated and implemented according to the management department and industry, and the relevant management, operation, supervision, and operation system regulations are also the same. Although great achievements have been made in breaking through bottlenecks and obstacles in recent years, the "last mile" and some hidden obstacles of breaking through bottlenecks and obstacles are still arduous tasks with enormous potential value. For example, there are issues with railway dedicated lines entering enterprises and parks where the results and expectations of some projects are far from satisfactory, and the proportion of rail sea (water) intermodal transportation is still not high. This is due to both incomplete policies and poor coordination.

04: Anti 'involution' | Predictable entanglement

The subheading itself may have ambiguity and controversy, and the regulatory authorities have recently taken various measures to promote anti "involution". The fundamental reason for the occurrence of "involution" is insufficient market demand and excess supply of logistics resources. As long as this supply and demand situation does not change, "involution" will continue to exist. We can see that the phenomenon of "involution" in today's e-commerce express delivery, road transportation, urban distribution, warehousing, and park markets has become a common occurrence. Logistics service prices that are lower than actual operating costs are not uncommon, such as road transportation, ordinary warehousing, cold chain warehousing, urban distribution, and other markets. This persistent "involution" is a double-edged sword. On the one hand, it brings a certain degree of market disorder and vicious competition, affecting the improvement of service quality. On the other hand, it also promotes and drives the upgrading of technology, products, services, and models. The logistics supply chain market has developed a group of excellent enterprises with high technical service levels, strong cost control capabilities, excellent resource integration capabilities, and outstanding innovation capabilities. Using market means to solve market problems and using a development perspective to solve development problems may be possible. It is the most effective means. Since the emergence of 9.9 yuan free shipping in the e-commerce and live streaming industries a few years ago, many administrative managers, research institutions, experts and scholars have discussed with me why this seemingly loss making business has become so popular. We have broken away from the logic of "cost+profit=pricing" based on planned economy, analyzed the market logic of satisfying, changing, and creating supply and demand relationships, and observed with the logic of value chain reconstruction. Some may not necessarily be true loss making, and some loss making businesses can bring other value compensations. It is not difficult to understand why such problems can be repeatedly raised due to the deep-rooted influence of traditional cost+profit pricing logic.Let the temple return to the temple, let the martial world return to the martial world, let the bullets fly for a while, there is no problem that cannot be solved. Rolling is a common phenomenon in the market and a normal market phenomenon. The goal and focus of anti rolling should be how to release and create demand, further create a standardized and healthy market environment, and avoid vicious market competition.

05: Afterword | Practice and Reflection on Logistics Cost Reduction

In the past two years, I have participated in the research of some logistics industry park projects, surveyed nearly a hundred processing and manufacturing, commercial circulation, logistics supply chain and platform enterprises, and conducted special research on regional logistics system optimization and industrial cluster logistics cost reduction. Through the above research and practice, I have realized several differences in the research and implementation of conventional solutions in the past:

Firstly, most of the cost reductions that can be achieved by relying on a single enterprise's own resource capabilities have been thoroughly implemented, with little room for optimization.

Secondly, reducing logistics costs requires government leadership and coordinated efforts from relevant departments, as well as systematic and systematic organization, planning, and implementation of resource capabilities.

Thirdly, there is a bias in the understanding of reducing logistics costs among regulatory authorities, industrial enterprises (logistics demanders), logistics industry (logistics service providers), research institutions, and universities, with a focus on short-term results over long-term layout, and a focus on local results over systematic and systemic breakthroughs. The space for improving logistics quality, increasing efficiency, and reducing costs from the perspective of regional logistics facility layout, division of labor, and functional optimization can still be explored in depth.

Fourthly, from upstream raw material procurement to downstream product sales and downstream processing in regional industrial clusters, from upstream raw material supply methods to downstream product sales models, from optimization of transportation channels, transportation methods, and delivery modes, and then to optimization of upstream and downstream industrial agglomeration, industrial chain extension and supply chain reconstruction can be achieved, which can bring new value to the logistics quality, efficiency, and cost reduction of regional industrial clusters.

Fifth, industry synergy to reduce costs. This includes the coordination of related industrial clusters and logistics resources with surrounding areas, the coordination of upstream and downstream demand resources of related industrial clusters within the region, the coordination optimization of logistics demand and external transportation channels in the region, and so on. For example, while planning and constructing a logistics industry park, combining the characteristics and advantages of local industrial clusters, introducing upstream and downstream resources with better synergies, and creating value through resource aggregation and integration.