Value-added logistic service

Providing these basic logistics services will allow a logistics provider to meet the needs of current customers. However, value-added logistics services are now appearing. Generally, the value-added service refers to those services beyond conventional service ranges or beyond the conventional service method. Innovation, unconventional solutions and satisfying customers specific needs are the core of value-added logistics service. They include several services:

Increased convenience. All the services offered facilitate procedures and simplify operations these are value-added services. Simplification is related to the consumer: the customer does not need to carry out certain services that can be externalized to the service provider. It is easier to obtain these services from a supplier. For example, a third-party logistics provider carries out a door-to-door service, provides complete operation instructions and training and maintenance for free, offers an energy-saving design or an installation, works as agents, is open 24 hours a day, automatizes orders, transfers information (using EOS, EDI, EFT) and lets consumers track the entire logistics process. These are all value-added services.

Accelerate response. Quick response has become one of the engines to trigger the development of the logistics industry. Quick response, provided through a rapid mode of transportation such as highway, air freight and so on, has been updated through providing value-added services. A third-party logistics provider can redesign its logistics distribution channels, reduce any unnecessary procedures and conduct employee training to achieve a quick response from the logistics system.

Reduce costs. A third-party logistics provider seeks logistics solutions that can reduce logistic costs. Many advanced logistics management ideas, techniques and skills can be applied in the real world, such as optimal skills, queuing theories in operations research, product management ideas, barcode technology and IT.

Extension services. Third-party logistics can provide services that extend upward to provide market survey and demand prediction, purchase and order processing, or extend downward to provide distribution, logistics consultation, logistics network design, logistic system planning and design, inventory control, loans collection, education and training, logistics system operation and supervision and so on. The extended services are mostly value-added, but they are the most difficult to operate. The ability to carry out this kind of value-added service has become a benchmark in evaluating the competitiveness of a logistics provider.

(Case study reading and question)

Value-added services in the import bonded warehouse

The products inside a bonded warehouse are equivalent to those outside of China: they do not need to go through the import procedure, and thus do not have to pay import duty, they do not need to go through the export procedure when they are later exported. During the period between import and export, the law permits the carrying out of many value-added services in the bonded warehouses. Additionally, the cost for the rent of the warehouse in China is much lower than that in other developed countries. The following example illustrates this situation.

Dongfang shoe factory in Dongguan exported a batch of sport shoes to Germany in June, 2006. Due to a slight defect in appearance (some tiny grey plastic particles stuck on the bottom of the shoe soles) they were regarded as unsuitable when the shoes arrived in Germany. The factory faced two choices: one was to entrust a local factory for second processing but the processing cost was too expensive and surpassed the commodity value. The other was to go back to China, but it would then have to go through the import and export process again. At that time, the shoes had been returned to Hong Kong with a storage cost of 500,000 yuan per month. The factory owner, Mr Xu, saw an advertisement about Sims in a harbor of Hong Kong and contacted the company for help. DCHS first transported the shoes to the bonded warehouse, which only costs 80,000 Yuan per month to rent, then organized workers to clean out the shoes and had them repackaged. Mr Xu soon found another customer and sold them to France. DCHSs successful solution was based on its advantage of an imported bonded warehouse and value-added services, and solved the customers problem.

1. What are the value-added services provided by DCHS?