A Research on the Positioning Strategy of ZhengZhou

A Research on the Positioning Strategy of ZhengZhou
Grain Logistic Center (ZZGLC)
WANG Wenchao
School of Business Administration Henan University of Finance and Economics, P, R, China, 450002
[email protected]
Abstract: Similar to entire country’s grain logistic situation, Henan grain logistic system is also dated,
grain circulating cost is very high, which have negative impact on local economy development. Based
on National Development Plan of Modern Grain Logistics (NDPMGL), and combined with the practice
of ZhengZhou grain logistics, the paper tried to do exploratory research on ZZGLC’s positioning
strategy. The paper firstly analyzed the situation of Henan grain production and circulation, and
expounded the practical condition of ZZGLC. Then, it brought forward ZZGLC’s positioning strategy.
At last, the paper provided some measures about how to implement the positioning strategy.
Keywords: Grain logistic; Grain Logistic Center; Positioning Strategy; ZhengZhou
1 Introduction
For a long time, because of the grain in short supply, the state monopolized China grain purchasing
and marketing, the government totally controlled grain’s produce, purchase, transport and marketing.
Before 1993, grain circulation was entirely managed by State Administration of Grain. In recent years,
with the opening of grain circulation and management, grain business subject becomes diversification.
However, compared with developed country’s grain logistic system, China’s grain logistic system still
has large gap and many problems. For example, in 1950, Australian modern grain logistic system was
ready, its main features were bulk loading and unloading, bulk deposit and bulk transport (4Bs) (Ding
Jiawu, 2007). China grain circulation is mainly through gunny bag packing, which greatly increased
circulation cost, the cost takes 40% of grain price in China, such proportion in Canada is only 21%(Tan
Zelu,2003). Therefore, grain circulation cost has become the main factor restricting China grain
production and consumption, also greatly increased grain price (Chen Deming, 2008). How to scientific
design grain logistic system, reduce grain circulation cost have become an urgent problem. As the
capital of Henan province, ZhengZhou is one of the important connectors in NDPMGL, and is also a
key local grain circulation center. The paper firstly analyzed grain circulation situation around
ZhengZhou. Then, combined with NDPMGL, the paper put forward ZZGLC’s positioning strategy and
measures of positioning strategy’s implementation.
2 The Situation of Henan Grain Circulation
2.1 The Size of Henan Grain Circulation is Huge
Henan has the largest wheat production in China, its grain planting area amount to 8.93 million
hectare, including 4.94 million hectare wheat. Furthermore, Henan is also a large grain production and
consumption province, its annual grain transport quantity is about 7.5 million tons. In addition, Henan
also has more than 1000 grain processing enterprises, mainly distributed in ZhengZhou, Luoyang,
Nanyang, Luohe,etc., these enterprises process more than 10 million tons grain(Cited from: National
Administration of Grain )
2.2 Henan Grain Circulation Process
For historical reasons, small faming household is the main grain production unit in Henan, it hardly
has any large-scale mechanization, which means the source of grain circulation is small farming
household. In circulation process, farmers sell grain to grain management center or grain peddlery, the
main transport tool is tractor, grain package is woven bag. Farmers pour grain into depot, the means of
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transportation from grain management center is mainly dependent on automobile, about 2/3 of grain’s
transportation is by car, grain is packed in gunny bag in such link. Many times packing and unpacking,
loading and unloading require huge manual investment, also greatly increase grain circulation cost.
2.3 NDPMGL ’s Connecting Cities Distribution
In order to promote the reform of grain logistic system, National Development and Reform
Commission issued NDPMGL in Aug. 2007, tried to build up modern grain logistic, break the
bottleneck of grain bulk transportation. The modern grain logistic will integrate transport, storage,
distribution function etc., which is also an important junction of different transportation mode. For the
connection of local and national grain logistic system, NDPMGL selected some cities with convenient
transportation as bulk grain junction. Henan has 6 bulk grain connectors, they are ZhengZhou, Shangqiu,
Xinyang, Zhumadian, Nanyang, Zhoukou.
3 Analysis of ZZGLC’s Practical Condition
3.1 ZhengZhou is Grain Production and Exchange Centre
In 2007, ZhengZhou grain planting area was about 0.37 million hectare, total grain production
amount to 1.71 million tons, 3.78% higher than the production of 2006 (Lu, etc., 2008). Furthermore,
ZhengZhou is also an important grain exchange centre in China. ZhengZhou grain wholesale market is
the first modern grain wholesale market approved by the State Council of the People’s Republic of
China, its trading volume amounts to 43.3 million tons grain and food oil in the last 16 years, transaction
quantity is more than 60 billion Yuan(RMB), it has become China’s biggest grain wholesale market(Li
Jingmou,2006).In addition grain spot transaction, ZhengZhou’s first future transaction contract was born
in 1991, grain futures transaction developed quickly in the last 18 years. As national grain exchanging
centre, ZhengZhou grain wholesale market has contributed more and more in promoting the integration
of grain logistic resource, ZhengZhou is also become China’s grain source (Li Jingmou, 2008).
3.2 ZhengZhou is an Important Transportation Hub
ZhengZhou is a transportation hub of railways, highways, and aviation. ZZGLC is also surrounded
by many highways and railways. Beijing-Guangzhou and Lanzhou-Lianyungang railways join at
ZhengZhou. Its north railway station is the largest train marshalling station in Asia and its east railway
station is the largest transshipment station for part-load goods in China. Lanzhou-Lianyungang railway
runs across ZhengZhou east district, which is adjacent to ZZGLC. Through special railway of state
national grain strategy storage, ZZGLC is directly connected with national railway system. Furthermore,
state highways No. 107 and No. 310, Beijing-Zhuhai, Kaifeng-Luoyang,LianyungangHuoerguosi,ZhengZhou-Anyang,ZhengZhou-Shirenshan,ZhengZhou-Jiaozuo express ways plus 18
other highway routes form a well-established network of highway transportation, the advanced high way
transportation system makes ZhengZhou become one of the seven transportation hubs in China.
Convenient transportation provides a strong base for ZZGLC.
3.3 ZZGLC is an Inseparable Part of National Grain Logistic Plan
ZhengZhou is the center of China in geography, also has convenient transportation network, and
these conditions lead to it has very important position, especially for Huanghe-Huaihe-Haihe plain’s
grain circulation. Huanghe-Huaihe-Haihe plain’s grain circulation increases quickly, its grain circulation
volume will reach 28 million tons in 2015, which means 10 million tons higher than that of last year
(Cited from NDPMGL). As a regional central city, ZhengZhou is a connector of regional and national
grain circulation system, it is also a regional grain distribution centre, therefore, ZZGLC should
strengthen distributing function.
3.4 ZZGLC Has Gotten Local Government’s Strong Support
Both Henan and ZhengZhou authority have strong support to ZZGLC. In 2005, Henan province
government issued Developing Layout of ZhengZhou Modern Logistic Centre (2006-2010), tried to
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promote the ZhengZhou logistic industry’s fast development. In Apr. 2007, ZhengZhou Grain Bureau
put forward some suggestions about building ZhengZhou grain logistic park, the suggestions have been
approved by local government, the government layout certain land in east district for grain logistic park.
ZhengZhou also promised further policy support in many aspects, such as land transfer, infrastructure
construction, tax, administration fee etc.
4 ZZGLC’s Function Positioning
4.1 Huanghe-Huaihe-Haihe Plain’s Grain& Food Oil Distribution Center
As regional central city in Huanghe-Huaihe-Haihe Plain, ZhengZhou has strong economic radiation
capacity. There are vegetable, fruit distribution center in ZhengZhou, they have certain influence to
surrounding area. However, there is still not any large scale grain distribution centre, because grain and
food oil have similar target market and circulation direction, if ZZGLC focus on such products, it not
only can make up a market spacing, but can achieve economics of scale and scope economy effect.
4.2 Integration of Grain Deposit, Transportation, Processing, Distribution
ZhengZhou east district has marked out special land for ZZGLC, the land is adjacent to
Lanzhou-Lianyungang railway and special railway of state national grain strategy storage. ZZGLC has
convenient traffic and provide grain transfer service for grain enterprise, also has bulk grain distribution
function, all these require corresponding deposit, processing function. Accordingly, the logistic center
should design and build special grain depot and grain processing area, such facilities are helpful to both
ZZGLC’s development and grain enterprises’ business. Therefore, with the bulk grain exchange as the
locomotive, ZZGLC will integrate grain deposit, transport, processing, and distribution.
4.3 Modern Grain Information Centre
As we all know, modern logistic centre is also an information center, only with enough information,
does it can improve logistical efficiency. Grain logistic centre also requires plentiful information to fully
utilize its equipment. ZZGLC should fully utilize modern information technology, periodically release
information about the Central Plains area’s grain transportation volume, direction, and grain price et.,
also issue international grain spot transaction and futures exchange information, try to improve its status,
reputation and influence.
4.4 Deep Grain Processing Industrial Agglomeration Centre
In China, the proportion of grain extractive and deep processing is no more than 30%, but, such
proportion is more than 70% in many developed country, therefore, China’s grain extractive processing
industry has large potential (Hongzhiqiang,2006) . In the last 10 years, ZhengZhou’s grain extractive
industry developed fast, has cultivated many famous grain enterprises, such as Jinyuan Flour, Shenxiang
Flour, Yuhua Flour, Baixiang Food, Sanquan Food, Synear Food etc. By providing corresponding
service to such companies, ZZGLC can promote the industrial agglomeration in grain processing
industry. At the same, it can also provide raw material supply, product circulation and other necessary
service, help grain enterprise reduce cost.
4.5 Value-added Logistics Service Centre
Grain circulation requires many different value-added services, such as grain quality inspection,
grain sanitary inspection and quarantine, financial service, information service etc. But all the existed
grain markets still can’t provide such comprehensive service system, which also caused they are still in
low business level, their size is very small, even has not any regional influence. ZZGLC should put up
an integrated service platform and achieve the target of facilitating circulation, facilitating exchange and
facilitating transportation through convenient and considerate service.
5 The Implementation Measures of ZZGLC Positioning Strategy
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5.1 ZZGLC Should Focus on Grain Enterprise’s Demand
As we all know, ZZGLC is only a platform, its development depend on if it can attract enough
grain companies and if these enterprises can get fast development. In Apr. 2007, ZhengZhou Grain
Bureau put forward ZZGLC’s guiding ideology—government planning, market operation, integrate
resource, property diversification. Under such guiding ideology, grain enterprise is market subject,
ZZGLC should fully understand these enterprises’ demand. For understanding potencial customers
needs, ZZGLC can do marketing research, select the main grain enterprise as sample, and try to find
potential customers needs, such information will become the base of its function design.
5.2 Scientific Design ZZGLC’s Function Area
ZZGLC is not only a connector of national grain circulation system, but also a regional grain
distribution center. Its functions include grain circulation, grain processing, agricultural by-product
transfer, add-value service, etc. Consequently, ZZGLC should provide different function area, each area
has specific function, and all the functions areas cooperate with each other. The function areas design
must think about following issues: How to connect bulk grain exchange and transfer area with special
railway of state national grain strategy storage? How to join raw material transportation with grain
processing area? How to ship out the product of grain processing area? Where is proper area for
value-added service area? Does ZZGLC provide corresponding administrative area for its grain
enterprises?
5.3 Based on Practical Condition, Construct ZZGLC’s Logistic Facilities
China grain circulation cost is about 300-400 Yuan (RMB) per ton, the cost is no more than 96
Yuan (RMB) per ton in America (Zhu Mingde, 2006). In order to reduce grain circulation cost, China is
actively promote the modernization of grain logistic and bulk grain transportation, build cross-province
grain circulation system, try to realize grain cross-province circulation’s 4Bs. Based on national grain
planning and practical condition, ZZGLC’s planning should have certain prospective design, and
construct corresponding matching facility for 4Bs, which will lead it to convenient connect with national
grain circulation system (Luo Xinmin, 2005). For ZZGLC, the main cross-province grain transportation
modes are train and truck, therefore, railway and highway’s bulk transportation are very important for
ZZGLC. Truck is also an importation grain transportation mode, it is very important for ZZGLC to
scientific design’s its road system, and directly connect such road system with the free way system.
5.4 Cultivating Mainstay Grain Enterprises
Building advanced grain logistics facilities, improving the mechanization of bulk grain’s loading
and unloading, are the development direction and fundamental measures to reduce the gap between
China and advanced country in grain logistics (Cao Yonggang,2004). However, advanced logistic
facilities only solve how to distribute grain, cultivating mainstay grain enterprises will supply enough
grain or grain product and solve the cargo issues. Only with mainstay grain enterprises, can ZZGLC get
fast development. For cultivating mainstay grain enterprises, local government should do the following
works: (1) constitute preferential policy, try to promote grain enterprises’ fast development; (2) create
favorable environment for state-owned grain enterprises merger & acquisition, promote key grain
enterprises’ leaping-forward development; (3) try to increase state-own grain enterprise investment or
strive more state capital or support to its grain enterprises.
5.5 Building Modernization Grain Logistics Information Centre
The fast development of Information Technology lay a solid foundation to logistics industry
development, Internet technology especially provide directly technology support to logistics centre.
Compared with transportation industry and storage industry, logistics industry has a distinct feature
which is information technology impenetrating in all the logistic process (Chen Huaiyi etc., 2004). For
building up the information center, ZZGLC can try the following measures: set up an opening
information platform and try to attract all kinds of grain information providers; develop cooperation
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relationships with stakeholders, try to connect its platform with their information system; employ its
own journalists or workers, try to collect corresponding information; set up on-line transaction, on-line
authentication, online settlement system and other on-line system.
6 Conclusion
Erecting grain logistics centre is the demanding of national grain logistic development, and also the
demanding of regional grain circulation. ZhengZhou is an important regional city and China’s key
transportation hub. These conditions provide strong foundation for ZZGLC. However, as a large-scale
infrastructural project, ZZGLC should firstly set out its positioning strategy, the paper thought ZZGLC
should become a platform integrating grain circulation, transport, processing, information collecting and
releasing and other functions. Then, in order to put such position strategy into practice, ZZGLC should
make great efforts in the following aspects, such as understanding customer demand, designing grain
logistic facilities, cultivating mainstay grain enterprise, putting up grain information centre etc.
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