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China's logistics enterprises must establish an efficient quality control system before they can get in on the fast and lucrative development of the domestic logistics industry, experts have said.

Such a system will mean that customers will be reassured that their commodities are safe in transport and that they can check the whereabouts of their products at any time in the process.

"Without such a system, domestic enterprises will have little chance of competing with foreign logistics companies," said Wang Derong, president of the Beijing Logistics Institute. He is also the executive president of the China Communications and Transportation Association.

An expert who has done research in the industry for 20 years, Wang stated that domestic companies are losing customers in competition with foreign companies or joint ventures because of the lack of quality control systems.

"Domestic companies sometimes offer prices as much as 20 per cent lower than those of foreign competitors for cargo delivery, but still fail to get contracts," Wang said, citing his recent research in South China's special economic zone Shenzhen.

The major reason they fail to get customers, Wang said, is that they cannot guarantee they will deliver the customers' products safely and on time. Foreign companies, on the other hand, offer high-quality and transparent delivery systems that reassure their customers.

China now has more than 100,000 logistics enterprises, and their market volume is expected to reach 240 billion yuan (US$29 billion) this year. The volume is expected to exceed 1,000 billion yuan (US$120 billion) by 2010.

Wang said that most domestic logistics enterprises concentrate on short-term profits while neglecting the development of efficient information and qualify-control systems.

The logistics industry accounts for 9 to 11 per cent of the gross domestic product in developed countries like the United States and European countries, while in China the figures are between 17 and 22 per cent.

"The higher percentages mean that lots of value is wasted in inefficient storage, transport and distribution processes," Wang said. So improving the information network and quality control in the industry is an important way to upgrade the overall progress of China's economy, Wang suggested.

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