Supply Chain Expertise and Technology Blog by TMC, a division of C.H. Robinson

The Insane (China) Supply Chain

China

Albert Einstein is quoted as saying: “Insanity is doing the same thing, over and over again, but expecting different results.”  The quote can be re-phrased as follows to describe managing supply chains in China: “Insanity is managing your supply chain the same way in every region, over and over again, but expecting the same results.”

As we manage through these challenging economic times, companies that never (truly) focused on emerging markets for growth are now looking to China. Even those companies that are well established in China are reinforcing their presence in the country.  

If you’re not convinced that China should be an important item on your strategic agenda, here are some statistics from a report titled “Urban World: Cities and the Rise of the Consuming Class” published by the McKinsey Global Institute that might persuade you otherwise.

  • China by itself will account for 28% of global growth from now to 2025; the next largest regional driver of growth is the United States/Canada with 10%.
  • Demand for floor space, municipal water, and ocean containers in China is double that of almost every other region in the world.
  • The country’s economic transformation is occurring at 100 times the scale of the first country in the world to urbanize – the United Kingdom – and at ten times the speed.

Some 94% of this explosive growth will occur in cities. From 2007 to 2010, three more Chinese cities attained “megacity” status (a population of at least 10 million people), and lesser known cities such as Foshan are well on their way to joining this super league of urban centers by 2025.  To put that in perspective, Chicago is the only city in the developed world expected to reach ten million in population by the same time.  So how does a company approach “The Middle Kingdom” in terms of the market intelligence and management tools available to help unlock its vast growth potential?

Intensive market research is obviously needed to help drive your sales and marketing strategy. In addition, it is wise to utilize supply chain management technologies to carry out optimization studies and create network analysis scenarios.

A transportation management system (TMS) with a global reach should be in your toolbox. Managing logistics costs and ensuring process efficiency across supply chains are major challenges for foreign (and domestic) companies competing  in Chinese markets.

A special kind of TMS is needed to meet these challenges; one that is global in scope, but can also be customized to the demands of local territories or municipalities. A Control TowerTM solution is one example of such a TMS (for more on this see my post Control Tower TM for Freight Management Catches the Global Train).

Don’t underestimate the importance of a TMS with tiered capabilities. China is a highly complex market domestically, but is also a major global player. It’s crucially important, therefore, that a TMS can operate effectively on both levels. The system must have the flexibility to manage supply chains from global, regional, country, and city perspectives.

Another important feature of this class of TMS is that it integrates people with technology. By people I mean power users; TMS experts who are intimately familiar with the analytical capabilities of the system. In addition, these specialists are seasoned transportation managers with a deep knowledge of China’s ever-changing logistics map.

The business processes that underpin the TMS must be nuanced in the same way. Processes that are particularly important include:

  • An order optimization program to improve payload, reduce costs, and decrease carbon footprint.
  • Automated shipment tendering to ensure that the right carrier is booked at the right price on every shipment.
  • Exception management features to improve on-time delivery performance and achieve continuous improvement.

Companies that believe they can simply transplant all of the supply chain management methods and technologies they use in other regions to China and succeed are in for a rude awakening. They may even find that their supply chain is restrained by a figurative straight jacket and certified insane!

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