Supply chain professionals being tasked with establishing or managing small parcel networks in Asia report being pleasantly surprised by the coverage and competition from the major parcel carriers. That said, there are some major differences between managing a small parcel logistics networks in Seattle and Shanghai.

Tom Stanton, international supply chain analyst at consulting group AFMS in Portland, Ore. says the three major parcel carriers—UPS, FedEx and DHL—are all investing heavily in the Asian markets, particularly China. He says the three are competing for reputation and market share in Asia just as fiercely as they do in the U.S., but from perhaps different positions.

Stanton says DHL has been in Asia the longest and the company claims to have as much as 38% of the market and combined the big three hold about two-thirds of the market. All are investing and growing dramatically in Asia. UPS is building a new hub at Shanghai's international airport. UPS reported more than 20% overall business growth in China in the third quarter of 2007, with intra-Asia trade representing the fastest growth.

FedEx aims to begin operations at a $150 million hub in the southern city of Guangzhou in December 2008.

Most recently, DHL announced in November it was spending $175 million to build its North Asia Hub in Shanghai at the Shanghai Pudong International Airport, due to open in the second half of 2010. The hub will be DHL's sixth in Asia, and will be able to handle as many as 20,000 parcels and 20,000 documents an hour, the company said.

In a Bloomberg interview, Jerry Hsu, DHL's president of Greater China, said DHL may form a domestic air-cargo venture with a local carrier. The company has held talks with a number of airlines and drawn up a shortlist based on their hubs and gateways, he added.

Beyond the three major small package players, TNT Logistics and APL Logistics may be the only other names recognizable to U.S.-based supply chain managers. The rest of the market is filled in by local and regional Asian firms covering short shipments between factories or businesses.

"In my opinion, a U.S. company trying to set up a network in China has a lot of reason to go with one of the big three for their small parcel networks in China," Stanton says. "You increase the leverage of your volumes in the business and the various discounts you qualify for. And when UPS, DHL or FedEx looks at delivery cost, they are driving a bigger engine than a local delivery firm that will get it there at a low cost, but gives you no data or visibility about the shipments."

Leif Holm-Anderson is director of transportation and trade compliance for electronics distributor Arrow Electronics in Melville, N.Y. and agrees that DHL has a stronger presence in Asia than U.S.-based buyers may expect. Arrow uses a lot of small parcel for inbound shipments from electronics suppliers in Asia to its regional distribution centers. He says while coverage is a bigger factor in carrier evaluation in the Asian markets than in the U.S., rate structures and service levels are still the biggest factors in evaluating a carrier. That applies to both the household names as well as the local Asian carriers.

"Many of the local Asian carriers are actually trucking companies functioning as a courier for our boxes from one location to another, not really small parcel delivery specialists," Anderson says. "But they seem to provide a good service level."

Both Stanton and Anderson say the best way to establish a relationship with the right small parcel carrier in Asia is to collect accurate data on your shipments and share as much of that information with the carriers as possible. While this is good practice in all small parcel contracts, it's especially crucial in Asia, where price breaks and coverage may vary more depending on the maturity of the carrier's network.

Stanton points out that on a cultural level, many of the managers at the parcel carriers in China may be younger than those shippers are used to seeing in the U.S. But with the level of education in China growing dramatically, it's the younger professionals that often have the best training.