Chongqing Logistics takes long way to car giant Nuggets Logistics
Chongqing Changan Minsheng Logistics (Group) Co., Ltd. is currently ranked second among domestic automotive logistics service providers, just behind Shanghai International Automotive Logistics (Pier) Co., Ltd. Shi Chaochun, the executive vice president of the company, recently shared his insights in an interview, expressing great optimism about the future of the logistics industry. As one of China’s top four automakers, Changan has always had a massive demand for efficient logistics services.
In the past, Changan’s logistics operations were fragmented, with different departments managing material supply, vehicle delivery, and spare parts distribution separately. This led to high costs and inefficiencies. After the 2001 joint venture with Ford, the need for modern logistics became more urgent. With no suitable third-party provider available, Changan decided to take matters into its own hands. In August 2001, Changan partnered with Minsheng Industrial and American Meiji Logistics to establish Chongqing Changan Minsheng Logistics (Group) Co., Ltd.
According to Shi Chaochun, this move brought several key benefits. First, it significantly improved the speed of logistics turnover, reduced capital occupation, and lowered financial costs. The introduction of efficient, door-to-door logistics services enabled timely supply from all supporting manufacturers, and spare parts inventory dropped dramatically. Over the past two years, Changan's annual car production doubled, yet spare parts and inventory costs fell from 250 million RMB per month to over 15 million. The average working days for liquidity also dropped from 152 to 55 days.
Second, the logistics restructuring helped reduce the group’s institutional setup and management costs. Third, by outsourcing non-core activities, Changan could focus more on R&D and production, enhancing its core competitiveness. Finally, as an independent entity, Changan Minsheng Logistics has become a profitable business, with an estimated annual return rate of over 15%.
In developed countries, logistics is known as the “third profit source.†Economists define it as follows: the first profit source comes from sales, the second from cost reduction in production, and the third from cost savings achieved through efficient logistics. In today’s competitive market, where supply often exceeds demand, companies that can tap into this third profit source gain a significant edge.
Changan’s sister company, Tenghui Group, a major cement producer in Chongqing, has also embraced this concept. By acquiring large-scale facilities and expanding its production capacity, Tenghui has become one of China’s top five cement manufacturers. Previously, its logistics needs were met by external transport companies, but results were unsatisfactory. To better control costs, Tenghui followed Changan’s example and established its own logistics system.
Similarly, Loncin Group, a long-time player in the motorcycle industry, has recently expanded into logistics. Its logistics arm plans to serve motorcycle manufacturers, leveraging its largest steel market in Chongqing to provide efficient steel distribution for motorcycles and related businesses. With thousands of motorcycle and component companies in the region, Loncin’s push into logistics shows its ambition to capture value from the "third profit source."
However, despite these efforts, many companies still rely on internal logistics systems, which fall short of the standards of professional and socially integrated logistics. True modern logistics—third-party logistics—has not yet taken off in Chongqing. Third-party logistics involves outsourcing logistics operations to specialized companies, allowing them to leverage their expertise, technology, and scale to offer more efficient services while reducing costs for their clients.
FAW-Volkswagen was one of the pioneers in China, establishing a nationwide network of third-party logistics centers for spare parts. This model has proven effective in improving efficiency and competitiveness.
To enhance Chongqing’s logistics capabilities and improve the investment environment, the city must accelerate the development of third-party logistics. It’s time to shift from self-sufficiency to collaboration, creating a more efficient and competitive logistics ecosystem.
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