From July 15 to 18, the Third Plenary Session of the Twentieth Central Committee of the Communist Party of China (CPC) was held in Beijing. The plenary meeting considered and adopted the "Decision of the CPC Central Committee on Further Comprehensively Deepening Reform and Promoting Chinese Modernization" (hereinafter referred to as the "Decision"). In the Decision, "logistics" and related terms were mentioned many times, and clearly put forward to "improve the circulation system, accelerate the development of the Internet of Things, improve the integration of circulation rules and standards, and reduce the cost of logistics in the whole society", which points out the direction for the future development of the logistics industry. This has pointed out the direction for the future development of the logistics industry.

Translated with DeepL.com (free version)

The Third Plenary Session of the 20th Central Committee of the Communist Party of China (CPC), held from July 15 to 18, 2024 in Beijing. By Yue Yuewei, Xinhua News Agency

As we all know, logistics is a key link connecting production and consumption, and the level of logistics costs is a concentrated reflection of the quality of national economic development and comprehensive competitiveness. Effectively reducing the logistics cost of the whole society can not only promote industrial structural adjustment and regional coordinated development, but also help to cultivate new kinetic energy for economic development and enhance the overall operational efficiency of the national economy.

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The Internet of Things (IoT) is based on informatization, digitization, networking, intelligence, cross-border integration and other means to achieve interconnectivity, online and offline integration, and resource and element synergy among people, things (such as machines, equipment, products) and services within the enterprise, as well as between enterprises, between enterprises and users, and between users and users. The Internet of Things has a wide range of digital connectivity, massive data collection and analysis, decision support, remote control and operation, system integration and other capabilities, which helps enterprises to enter the data-driven development stage, and promotes the power of production and distribution and consumption, efficiency and quality and other changes.

However, the author believes that the "Internet of Things" mentioned in the "Decision" is not just Internet of Things, more Physical Internet, that is, the physical Internet, also known as the "physical Internet of Things" or "Smart Logistics Network". It is also called "Physical Internet of Things" or "Smart Logistics Network". This concept was first proposed by Professor Benoit Montreuil in 2011, drawing on the operation system and principles of the Internet, aiming to build a global open, interconnected and efficient logistics network through standardized protocols and intelligent interfaces, and to realize the seamless docking and efficient circulation of global logistics resources.

A major feature of the physical Internet is its standardized protocol. This set of protocols provides a unified language and rules for the logistics industry, enabling various logistics systems to be seamlessly connected and information to circulate smoothly. This not only eliminates information silos, but also greatly improves the transparency and traceability of logistics operations. On the basis of such standardization, the allocation of logistics resources has become more efficient, and waste and redundancy have been significantly reduced.

Open interconnection is another important feature of the physical Internet. Physical Internet advocates the establishment of an open, interconnected logistics network, breaking the boundaries of geography and industry, enabling the free flow and sharing of logistics resources on a global scale. This openness and interconnectivity greatly enhances the flexibility and scalability of the logistics system, providing strong support for responding to increasingly complex logistics needs.

Intelligent decision-making is the third important feature of the physical Internet. By introducing advanced technologies such as the Internet of Things (IoT), big data, and artificial intelligence, the physical Internet is able to achieve intelligent decision-making and optimized scheduling in the logistics process. This means that logistics operations no longer rely on traditional manual experience and judgment, but are based on real-time, accurate data analysis to make optimal decisions. This not only improves the efficiency of logistics operations, but also significantly reduces operating costs and enhances the competitiveness of enterprises.

In addition, the physical Internet also has a global vision. It does not only focus on the logistics system of a certain region or a certain country, but is committed to building a logistics network covering the whole world from a global perspective. This global vision and layout can help strengthen logistics cooperation and communication between different countries and regions, enhance the connectivity and synergy of global logistics, promote the formation of a more compact and efficient global logistics system, and provide strong support for global economic integration.

So, how to build an open, interconnected, efficient physical Internet? The author believes that it can be carried out from the following four aspects.

First, strengthening standard-setting. Promoting the establishment of a common logistics agreement and standard system is the first task in building the physical Internet. A common logistics protocol and standards system will break down information silos, ensure that information between different logistics systems can circulate without barriers, improve the transparency and traceability of logistics operations, and provide a fair competitive market environment for logistics enterprises, helping to reduce operating costs and improve service quality. This requires the joint efforts of the government, industry associations and enterprises. The government should play a guiding role, the introduction of relevant policies to support the development of standards, to provide the necessary legal protection; industry associations should serve as a bridge to coordinate the interests of all parties to promote the development and promotion of standards; and enterprises should actively participate in the standard-setting process, their own practical experience and technical achievements into the standard.

Second, strengthen technological innovation. Technological innovation is the core driving force to promote the development of physical Internet, and the application of advanced technologies such as Internet of Things, big data, artificial intelligence and so on will bring unprecedented changes to the logistics industry. Increased investment in the research and development of these technologies can not only enhance the intelligent level of logistics operations, but also achieve the optimal allocation and efficient use of logistics resources. At the same time, strengthening cooperation between industry, academia and research is also an important way to promote technological innovation. Through the cooperation of industry-university-research, it can promote the rapid transformation and promotion of technical achievements and shorten the distance of scientific and technological achievements from the laboratory to the market. In addition, University-Industry-Research cooperation can also cultivate more talents with innovative spirit and practical ability for the logistics industry, and provide a strong talent guarantee for the sustainable development of the industry.

Third, improve the infrastructure. Logistics infrastructure is the material foundation to support the development of physical Internet, strengthen the construction of logistics infrastructure, not only can enhance the coverage and operational efficiency of the logistics network, but also provide more convenient and efficient services for logistics enterprises. This includes the construction of more complete warehousing facilities, upgrading the carrying capacity and intelligent level of transportation means, and strengthening the construction of logistics information platforms. In addition, promoting the development of multimodal transportation is also an important aspect of improving logistics infrastructure. Multimodal transport can realize seamless docking and efficient synergy between different modes of transport and improve the overall efficiency of logistics operations. The government should increase support for multimodal transportation such as sea-railway intermodal transportation, river-sea intermodal transportation, and public-railway intermodal transportation, encourage enterprises to carry out multimodal transportation business, and promote the transformation and upgrading of the logistics industry.

Fourth, strengthen international cooperation. The development of physical Internet cannot be separated from international cooperation and exchange. Strengthening cooperation with international organizations and relevant countries to jointly promote the development and application of physical Internet will help improve the overall level of the global logistics industry. By sharing experience, exchanging technology and jointly formulating standards, the common progress and development of the global logistics industry can be promoted. At the same time, international cooperation can also provide a broader market space for the development of physical Internet. As global trade continues to expand and deepen, the demand for the logistics industry will continue to grow. Strengthening international cooperation will help the physical Internet to be more widely applied and promoted globally, and inject new vitality into the synergistic development of the global logistics industry.

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The purpose of accelerating the development of the Internet of Things is to reduce the cost of logistics for the whole society. Therefore, the "decision" once again proposed to reduce the cost of social logistics.

Before the discussion, we need to clarify the concepts of "social logistics costs" and "enterprise logistics rates", and to clarify the difference between the two, it is important for the development of effective logistics policy, promote the efficiency of enterprise logistics and realize the reduction of social logistics costs. It is of great significance for the formulation of effective logistics policies, the promotion of enterprise logistics efficiency and the realization of the reduction of social logistics costs.

Social logistics cost is a macroeconomic indicator, refers to a country or region in a certain period of time, in order to complete the total cost of logistics activities, reflecting the overall efficiency of logistics activities in a country or region and the cost level. It covers the costs arising from the physical flow of goods in various fields such as production, circulation and consumption, including transportation, storage and management fees, as well as the costs arising from the logistics process, such as capital consumption, wear and tear of goods, insurance and so on.

Enterprise logistics rate is a micro-economic indicators, refers to the enterprise in a certain period of time, in order to complete its production and operation activities in the logistics activities of the logistics costs paid for the proportion of total sales or total cost of the enterprise, a direct reflection of the efficiency of the enterprise's logistics activities and the ability to control costs. The height of the enterprise logistics rate is affected by a variety of factors, including industry characteristics, enterprise scale, product structure, supply chain management level, logistics technology application.

Data show that China's total social logistics costs accounted for the proportion of GDP from 21.4% in 2003 to 14.4% in 2023, but compared with the proportion of 8% to 10% in developed countries such as Europe and the United States, there is still room for further optimization. Reducing the logistics cost of the whole society is not only an important measure to improve the efficiency of economic operation and promote high-quality development, but also an inevitable requirement to build a new development pattern and realize Chinese-style modernization.

In addition, factors such as the high proportion of secondary industry, unreasonable transportation structure, low standardization of the whole logistics chain, the level of digital intelligence to be improved, and poor supply chain synergies are the main reasons for China's high social logistics costs. To address the problem of high social logistics costs in China, it is necessary to start from many aspects, through a series of reform measures to reduce logistics costs and improve logistics efficiency.

First, optimize the industrial structure, reduce logistics costs from the source. Industrial structure is one of the important factors affecting logistics costs, promote the optimization and upgrading of industrial structure, and vigorously develop high-tech, high-efficiency, high-quality emerging industries is a fundamental way to reduce logistics costs. By reducing the logistics demand for low value-added products, all parties can reduce the logistics burden from the source. At the same time, increasing support for high-tech enterprises, promoting technological innovation and industrial upgrading, and improving the technological content and value-added products are also effective means to reduce the logistics cost per unit of product.

Second, improve the transportation structure, the development of low-cost transportation mode. Transportation structure is unreasonable is one of the important reasons for the high cost of logistics, to promote "public to iron" "public to water", to increase the proportion of rail freight and waterway freight, is to reduce the cost of transportation is a key initiative. Railroad and waterway transport has the advantages of large capacity, low energy consumption and low pollution. By optimizing the transport structure, we can reduce the long-distance and high-energy road transport, thus reducing the overall logistics cost. At the same time, we have also observed that the excavation of artificial canals to connect China's Yangtze River, the Pearl River and other major waterways with east-west lateral trends, thus forming a vertical and horizontal inland waterway navigation network like a highway network, and improving the coverage and connectivity of the waterway transportation network are also important guarantees for reducing logistics costs.

Thirdly, strengthening the standardization of the whole logistics chain to improve operational efficiency. The standardization of the whole chain of logistics is an important way to reduce logistics costs. By establishing a logistics standardization system covering the whole chain and the whole process, including standards for packaging, loading and unloading, transportation, warehousing and other aspects, we can improve the transparency, predictability and stability of logistics operations. This will not only help reduce logistics costs, but also improve logistics efficiency and service quality. At the same time, it is also an important task to promote the standardization of logistics by strengthening the connection and coordination between standards and solving the problems of cross-duplication and contradiction between different standards.

Fourth, to enhance the level of digital intelligence to create a smart logistics system. With the rapid development of information technology, digital intelligence has become an important engine to promote the transformation and upgrading of the logistics industry. By promoting the digital intelligence of the entire chain of the logistics system, we can achieve the goals of commodity digitization, procurement digitization, fulfillment digitization, operation digitization, etc., and open up all links in the logistics chain. This will not only help improve logistics efficiency and effectiveness, but also reduce logistics costs and time costs. At the same time, strengthening the construction of logistics information platform, real-time sharing and querying of logistics information is also an important means to enhance the level of logistics digitalization.

Fifth, to build a unified national market and promote the free flow of logistics resources. Building a national unified market, promoting the unification of market infrastructure rules and regulations, fair and uniform market supervision, and connecting market facilities to a high standard, is a key initiative to break down market barriers and promote the free flow of logistics resources. By unifying the rules of market access, supervision and exit, we can break local protectionism and form a fair and competitive market environment. At the same time, strengthening market supervision and fair competition, and combating unfair competition is also an important guarantee for maintaining market order and reducing logistics costs.

Sixth, improve the infrastructure and enhance the ability of logistics operations. Strengthening the construction of logistics hubs, warehousing facilities and other infrastructure, and improving the national backbone logistics network system of "hub+channel+network" is an important way to enhance the operational capacity of logistics. By optimizing the layout and process design of warehousing, we can reduce the cost of warehousing and time costs; by strengthening the construction of logistics hubs, we can improve the clustering effect and scale effect of logistics operations. At the same time, promoting the modernization and intelligent upgrading of logistics facilities is also an important means to enhance the efficiency of logistics operations.

Seventh, we will promote the development of multimodal transportation and reduce transit costs. By strengthening the synergistic connection between different modes of transportation and improving the ratio and efficiency of multimodal transportation, we can reduce the number of transit links and costs and lower the overall cost of logistics. At the same time, improving the multimodal transport organization mode and management mechanism, and promoting the normative and standardized development of multimodal transport are also important guarantees for improving the efficiency and service quality of multimodal transport.

In short, to reduce the cost of social logistics is to promote the transformation and upgrading of the logistics industry is the only way. Through the implementation of a series of reform measures such as optimizing the industrial structure, improving the transportation structure, strengthening the standardization of the whole logistics chain, enhancing the level of digital intelligence, building a national unified market, improving the infrastructure and promoting the development of multimodal transportation, logistics costs can be effectively reduced, logistics efficiency and service quality can be improved, and strong support can be injected into the high-quality development of China's economy. (The author Chen Xiaoxi is the head of One Chain Consulting Service Center, and the author of "Supply Chain Reconstruction" and "Digital Intelligence Logistics")