Logistics Hub Transformation: How to “Rebuild Regional Supply Chains”?

Recently, at the 2022 (11th) Yunlian Summit, Dong Zhonglang, a partner at Yinshan Capital, delivered a keynote speech titled “The New Ecosystem of Logistics’ Three Transformations.” He noted that digital intelligence, new energy adoption, and intelligent technologies are reshaping the future of the entire logistics industry.

“Reconstruction” is the defining theme of the future development of the logistics industry, encompassing five key dimensions: the reconfiguration of industry‑wide factor combinations, the redefinition of logistics industry boundaries, the rethinking of infrastructure roles, the restructuring of industry cost structures, and the reshaping of regionalized supply chains.

(implicit Dong Zhonglang, Partner at Shan Capital, at the 11th Yunlian Summit in 2022. At the lecture venue)

So, how exactly should the “restructuring of infrastructure roles” and the “regionalization of supply chains” be put into practice?
The following are the main points of this article:
1) Reviewing several representative hub-redevelopment projects in recent years, it is evident that production‑service‑oriented logistics hubs have become the mainstream approach to transformation. However, these efforts have largely remained at the conceptual stage, with few successful implementations.
2) The primary reason for the difficulty of transformation is that regions have fallen into an “industrial trap,” mistakenly equating their industrial base with an industrial advantage, which has led to misallocation of resources.
3) Against the backdrop of the pandemic becoming endemic, the rise of new market entrants, and the reshuffling and relocation of industries, the model for production‑oriented hub parks should be grounded in a more objective, grassroots‑focused, and professionally rigorous systematic review and assessment, while integrating resources from multiple stakeholders and proceeding within one’s means.

Phenomenon: Rebuilding core hubs is easy to conceptualize but difficult to implement.

1.1 Multiple regions are advancing the construction and upgrading of core hub centers.
Following the successive release of a series of key plans, including the “14th Five-Year Plan for Building a Modern Circulation System,” the pace of developing large-scale logistics hubs has accelerated. On July 4, Shenzhen unveiled a plan to build seven gateway‑type logistics hubs and 30 urban transshipment centers; on July 29, Taicang announced its intention to develop into a port‑based national logistics hub city; meanwhile, five cities in Anhui were approved as national logistics hub‑bearing cities, with Wuhu designated as a port‑based hub and Hefei as a land‑port‑based hub, both now included on the national construction roster...
Judging from regional plans, in addition to developing large-scale logistics hubs, cold-chain logistics, cross-border logistics, and integrated supply-chain logistics have also become key areas of focus. Building on the consolidation of regional warehousing, transportation capacity, and other resources, various regions are leveraging emerging players to enhance supply-chain efficiency and drive the industrial transformation and upgrading of their endowment‑rich sectors.

1.2 Leading domestic logistics enterprises have suddenly become the key drivers of transformation.
Of course, it is evident that, with current real estate development policies becoming increasingly stringent—particularly in areas such as tax treatment and operational efficiency oversight for logistics properties—and as supply-chain flexibility and rapid response have become the norm, regional stakeholders are placing greater emphasis on integrated warehousing and distribution solutions and on building agile, resilient supply chains.
Meanwhile, when it comes to attracting investment for logistics‑hub development and transformation projects, regional governments tend to favor growing, locally rooted logistics firms over international, pan‑network‑wide real‑estate developers. Although these local players may lag behind in financial resources and development expertise, they possess deeper operational know-how and have substantial demand for efficient, state‑of‑the‑art logistics infrastructure.
1.3 While each transformation path features its own innovations, few have achieved successful implementation.
Reviewing several landmark hub‑redevelopment projects in recent years, it is clear that both the government and real estate developers have reached a consensus: no longer to pursue purely real‑estate‑focused development. The prevailing direction of transformation centers on integrating industries to create end‑to‑end supply chains—for example, Guangzhou and Shenzhen partnering with cross‑border logistics, Sichuan and Chongqing with cold‑chain networks, and the Jiangsu–Zhejiang region with automotive parts and electronics sectors.
But some have a “theme” yet lack detail; others fumble as they go along; and still others have already ended in failure.

Issue: Misjudging corporate competitiveness or industry vitality

Most cities adopt a transformation strategy centered on a single, regionally competitive industry, and they repurpose existing hubs to meet both the demand generated by current use cases and the latent needs for space and supply-chain services—nothing inherently wrong with this approach.
The question is how to define “leading industries.”
2.1 The enterprise lacks sufficient “strength” to cultivate a high-quality supply chain system.
To be more concrete, take the automotive industry in the Yangtze River Delta—Jiangsu, Zhejiang, and Shanghai—as an example. Because the automotive supply chain follows a typical upstream‑downstream model, component suppliers typically locate their plants in concentric rings around the OEMs, with higher‑tier suppliers situated closer to the OEMs.
As a result, automotive‑related manufacturers are concentrated in the Jiangsu–Zhejiang–Shanghai region, with Shanghai serving as the central hub—dominated by vehicle OEMs, particularly those in the new‑energy sector—and sprawling across multiple locations throughout the Yangtze River Delta. While many county‑level areas host hundreds of such suppliers, only a handful can truly claim an “automotive industry advantage” and justify developing large‑scale logistics hubs anchored in this sector.

1) In the short term, low‑value manufacturers lack both the demand for and the willingness to pay for high‑quality supply chains.
By comparison, while the Yangtze River Delta’s automotive industry exhibits frequent collaboration and pronounced spillover effects, the relative importance and value of individual players within the supply chain have been steadily declining, and there are significant disparities in market coverage and gross margin potential. Tier‑1 and Tier‑2 component suppliers tend to cluster around Shanghai, with Suzhou and Jiaxing serving as their primary hubs, whereas generic‑purpose component manufacturers often establish plants in locations such as Yancheng, where land‑acquisition thresholds are relatively lower.
Automakers and core component suppliers not only attract downstream suppliers to cluster in the region, but also generate more sophisticated and higher‑standardized demand for logistics services. This creates favorable conditions for nurturing large‑scale supply chain service providers and, in turn, spurs substantial demand for high‑grade infrastructure.
By contrast, most generic components have relatively low value added. Compared with logistics service quality and network coverage, manufacturers place greater emphasis on price and do not impose stringent requirements on infrastructure—such as in-house warehouses or sorting hubs.
2) In the long term, low‑value and generic components face the risk of being squeezed out or even directly replaced.
Against the backdrop of the pandemic becoming a new normal and the ongoing trend of industrial relocation—particularly the disruptive impact of emerging players in the new‑energy sector on the traditional automotive industry—the survival space for low‑value‑added suppliers has been significantly squeezed. If component manufacturers in a given region lack both scale economies and high value‑added capabilities, establishing a large‑scale automotive‑parts logistics hub would not be a prudent strategy.
For example, Ningbo’s automotive industry, despite the presence of Geely, lacks a sufficient number of core component suppliers. Focusing solely on auto parts and attempting to redevelop the hub into an integrated auto‑parts supply‑chain center would pose significant challenges to both inventory management and long-term profitability.
2.2 The industry’s vitality is gradually waning, and post‑transformation logistics demand may be entirely different.
The industry life cycle is an evolutionary process that every industry undergoes, progressing from growth to decline. To break the impasse and achieve restructuring or upgrading, the supporting frameworks required may differ dramatically.
1) The value of specialized markets in the apparel supply chain has weakened.

Take Guangzhou’s footwear, apparel, and luggage industries, for example. In the past, the commerce sector has enjoyed robust growth, with numerous commercial hubs in Baiyun District wielding significant influence both nationally and internationally. Meanwhile, the local footwear, apparel, and luggage industries have grown rapidly, complementing regional networks and specialized logistics enterprises.
However, in the era of new retail, the importance of traditional trade centers and specialized wholesale markets in the distribution chain has been steadily declining. Sales and profitability of “white‑label” products have been significantly impacted, and shipment volumes on regional networks and dedicated routes have also dropped markedly.
2) The industry life cycle depends on brand innovation and the continuation of international markets.
Many of Baiyun’s footwear, apparel, and luggage products are manufactured in OEM facilities for international luxury brands, with processing techniques that often command higher unit prices than those of the luxury goods themselves. In terms of manufacturing capabilities and quality control, the company enjoys a distinct competitive edge.
As these OEM factories transition toward brand‑driven supply chains, Guangzhou’s Baiyun District—beyond its highly efficient, cost‑effective logistics infrastructure—needs an integrated supply‑chain model or platform akin to SHEIN, or one with a truly global outlook.
This platform helps small brands and traders achieve deep market penetration nationwide while addressing surging warehousing demands; it also supports local brands in expanding into cross-border commerce. By enabling domestic brands to assert greater influence over global supply chains, it further shields local enterprises from excessive internal competition in the domestic market.

Recommendation: Effective industry analysis + objective competency assessment

3.1 Avoid trying to cover everything; being “all-encompassing” but “not in-depth”
When most regions are unsure where to prioritize, they opt for “no clear focus.” They choose whatever market segment is currently hottest as their thematic priority. As evidenced by planning documents across different locales, cold-chain logistics, cross-border trade, and integrated automotive‑parts supply chains have already become the three indispensable pillars of logistics hub transformation.
However, as regional and national boundaries become increasingly blurred and the trend toward a “unified national market” gains momentum, a comprehensive yet superficial approach to transformation can easily render projects ultimately useless.
For instance, in the very first batch of the “National Logistics Hub Construction List,” Zhejiang emerged as the biggest beneficiary—yet Hangzhou was conspicuously absent. The reasons behind this are multifaceted; one key factor is that, despite integrating all four major hub types—land‑port, air‑port, trade‑oriented, and production‑oriented—and boasting unrivaled overall strength, Hangzhou falls short of Zhoushan and Yiwu when assessed on a per‑category basis.
3.2 Avoiding Industry Traps: Having a Foundation Does Not Equal Having an Advantage
As a derivative of commercial flows, the regional logistics industry ecosystem is heavily reliant on the scale, growth potential, and prevailing supply-chain models of local manufacturing and commerce. With numerous instances of industrial restructuring and disruptive supply-chain reconfigurations, downstream logistics service providers are increasingly affected in terms of network deployment, facility requirements, and product design—factors that directly shape the overall architecture of regional logistics hubs.
This is why we need to integrate industrial and value chains, and, in light of both industry‑specific shifts and the emergence of new market forces, reshape regional supply chains. Having an industrial DNA does not necessarily mean having vitality—this is a point that warrants particular emphasis, especially in the context of the overarching restructuring of China’s industrial landscape.
Low‑value‑added players are trapped in price wars, while traditional business models face pressure from new market entrants, leading to a sharp decline in market share. These dynamics, in turn, dampen upstream firms’ demand for warehousing, distribution centers, and supply‑chain services. If regional industrial advantages are assessed solely on the basis of the sheer number of relevant enterprises—and if planning adjustments are made accordingly—infrastructure projects will inevitably confront challenges related to underutilized capacity and profitability.
3.3 Reconstructing the regionalized supply chain: state-owned enterprises, real estate developers, and logistics providers are all key players.
Although logistics companies are highly proficient in operations, most of them still come from a purely logistics‑focused background. For those in the industry, transforming a logistics hub—whether it involves conducting industry research, refining implementation plans, or designing investment‑attraction strategies—presents significant challenges. Added to this are the cumbersome pre‑project procedures and documentation required for government‑related approvals, as well as the long‑term cash‑flow commitments tied to post‑implementation asset management. Securing a single leading enterprise is unlikely to establish the hub’s full functionality; instead, it calls for collaboration with local state‑owned enterprises to co‑develop a comprehensive hub platform.
Of course, the same holds true for developers and regional governments. Transforming a regional logistics hub requires systematic, multi‑perspective, objective, and on‑the‑ground industry research, as well as access to robust resource pools and dedicated channel networks. In terms of hub operations, collaboration with leading domestic supply‑chain players can help integrate diverse resources; while maintaining a clear understanding of one’s own capabilities, this should be balanced with professional market insights and undertaken in a manner that aligns with available resources and strategic priorities.