Executive Briefings

China: Bringing Your 'A' Game to Your China Supply Chain

Analyst Insight: Leading companies doing business in China - both sourcing and selling to the local market - are revamping their supply chains to minimize costs and empower their growth agendas. China is leading the world economy out of its current recession, and executives are looking to supply chain improvements to fuel their own company's comeback.

Five to 10 years ago, just being in China was enough to reap the benefits of the world's highest growth market - and workshop to the world. Times have changed and the intensity of market competition mandates that Western management bring their "A" game to remain competitive. This is especially true for Western firms that are exploring more ways to optimize their supply chains in cost and performance. A few areas of focus are:

• Realigning hastily built supply chains with new market realities and the company's growth strategy - Leading firms have rethought their supply chain structures and realigned them to the new market realities. Research done by Amcham-Shanghai indicates that those firms pursuing an aligned dual strategy (both exporting from and selling to China) perform at a higher profitability than those that do not.
• Streamlining logistics - China hubbing is becoming more prevalent as firms exporting from China attempt to optimize costs by smart consolidation in China, moving or even eliminating some of the U.S. domestic distribution costs. Hubbing may also be combined with bypassing the distribution center and utilizing direct-to-store transportation solutions to gain even more efficient logistics.
Global Trade Management (i.e., using IT applications that automate international documentation and customs compliance for shipments that cross borders) - These systems enable supply chain processes that support decisions concerning the routing of goods, the total costs and trade financing, and can save companies millions in logistics costs.

The Outlook

In 2010, China will be back at full throttle on both the domestic and export market fronts. The latter will evolve as the West begins to fully recover, supporting a rebound in China's export activity.

Ensuring that a company's supply chain remains competitive in this fast-paced market will be a priority focus for Western management. To do this, companies need to bring best practices to their China supply chain.

Five to 10 years ago, just being in China was enough to reap the benefits of the world's highest growth market - and workshop to the world. Times have changed and the intensity of market competition mandates that Western management bring their "A" game to remain competitive. This is especially true for Western firms that are exploring more ways to optimize their supply chains in cost and performance. A few areas of focus are:

• Realigning hastily built supply chains with new market realities and the company's growth strategy - Leading firms have rethought their supply chain structures and realigned them to the new market realities. Research done by Amcham-Shanghai indicates that those firms pursuing an aligned dual strategy (both exporting from and selling to China) perform at a higher profitability than those that do not.
• Streamlining logistics - China hubbing is becoming more prevalent as firms exporting from China attempt to optimize costs by smart consolidation in China, moving or even eliminating some of the U.S. domestic distribution costs. Hubbing may also be combined with bypassing the distribution center and utilizing direct-to-store transportation solutions to gain even more efficient logistics.
Global Trade Management (i.e., using IT applications that automate international documentation and customs compliance for shipments that cross borders) - These systems enable supply chain processes that support decisions concerning the routing of goods, the total costs and trade financing, and can save companies millions in logistics costs.

The Outlook

In 2010, China will be back at full throttle on both the domestic and export market fronts. The latter will evolve as the West begins to fully recover, supporting a rebound in China's export activity.

Ensuring that a company's supply chain remains competitive in this fast-paced market will be a priority focus for Western management. To do this, companies need to bring best practices to their China supply chain.