However, the relatively slow development in the economy presented China's market with significant opportunities and the chance to reposition itself within the established structures, to understand the challenges of the market and customers, and to orient itself to them.
China is still the manufacturing centre of the world, but the Chinese economy has witnessed a significant transformation in recent years. Labour-intensive industries have moved to south-east Asia, mainly due to sharply rising wages (by up to 200 %). Considering the shortage of labour with the required skill levels and the increasing labour costs, Chinese companies are appreciating and adopting automation far faster than experienced in Europe or the USA in the past. It is significant that Chinese companies are taking over larger, well-known European brands in the Logistics industry, which will also bring some interesting challenges and options: not just for China, but also for the global market.
In keeping with expectations, the middle class in China will see substantial growth. By 2020, the number of people in this social class is projected to reach 300 million. This trend will also lead to change in the Chinese economy, which up to now was very strong in terms of exports, but will now develop into a strong domestic market. Up to 10 % of Chinese people travel overseas annually. Chinese airlines in particular are benefactors of this, but there are negative consequences too: the airspace is completely overloaded and delays have become the norm.
Online shopping is increasingly becoming part of everyday life. Forecasts show that in 2020, 891 million Chinese citizens will make more than twice as many online purchases than in 2015. This will amount to approximately 2.17 billion US dollars, which equates to 26.7 % of total retail sales. In order to meet the challenges that online retail poses to intralogistics, Chinese companies are focusing on automation. For a large eCommerce customer SSI Schaefer constructed one of the largest distribution centres in Asia. With an area of 140,000 m², this fully automated warehouse is equipped for up to 600,000 picks per day: a future-proof response to the online boom.
In Singapore, the government is also pursuing similar strategies. The aim is to increase productivity. Hence, companies are being encouraged to reduce low-wage work and strive for a higher degree of automation. These measures increase the demand on intralogistics. At a height of 44 m and with 62,000 pallet storage locations, SSI Schaefer created the largest and tallest high bay clad warehouse in the region for a local third-party logistics provider. For a drinks manufacturer that also operates in the e-Commerce market, SSI Schaefer implemented a system with 13,000 pallet storage locations in a 42-m high rack clad warehouse. All this demonstrates just how rapidly automation is gaining ground in Asia.
In Hong Kong and Thailand too there is increasing interest in semi-automated and fully automated solutions. Following a period of many years in which a high rate of manual warehouse operations has prevailed in Asia, companies are now placing increasing value on the fast profitability of dynamic system solutions. They recognise that the increased productivity even with a basic conveying routing systems for order picking, will allow them to rapidly see a return on their investment. For now, it can be assumed that this trend will continue over the coming years and automated solutions will be in higher demand in the future.
Brian Miles, Regional Managing Director (APAC, Middle East, Africa) at SSI SCHAEFER, has been living and working in Asia for many years and writes articles on the opportunities and risks in the Asian market for UPDATE.