For its next major push forward China has got to get its logistics right. And it is doing it through desperately needed improvements to the transport infrastructure and the use of tehnology to control the movements of goods. With some of the bigger companies the logistics within the company are already world class.

Benz-DaimlerChrysler is showing the way with its factory in Beijing by introducing just-in-time methods which, in turn, depend totally on efficient logistics within the company and among its suppliers.

In 2006, BeijingBenz-DaimlerChrysler Automotive Ltd (we will call it BBDC becaue life is to short) opened an all-new state-of-the-art factory in Beijing to build Mercedes Benz E- and C-Class sedans, as well as Chrysler’s best-selling big-grilled 300C sport/luxurymobile.

The idea was to have a totally modern factory using enterprise resource planning for just-in-sequence production. This is a step in the just-in-time process.

BBDC went to two companies for electronic solution — SAP and Seeburger. The result was the first fully integrated automotive supply chain management infrastructure in China and one of the most advanced systems of its kind in the world. (And, by the way, some snazzy vehicles which are world class.)

When you make a move like this it is complicated beyond measure. For not only must you make it work in your own factory you need to implement a form of the system throughout the supplier network, down to the smallest local suppliers.

James Hatcher, managing director at Seeburger Asia Pacific, using the acroynm EDI for electronic data interchange as if it were part of daily speech, said, ‘EDI is not widespread in Asia, but it was mandated by Daimler Chrysler to optimize BBDC’s supply chain. The project therefore had even more challenges than a typical EDI implementation.’

BBDC used Seeburgerhandle business-to-business integration. Seeburger established a strategy to EDI-enable 100% of BBDC’s suppliers which must have been a task and a half. But it was done on time and was readywhen the plant opened in mid-2006.

That is making sure that machines are made with the right parts ready at the right time and is to be applauded.

The next major step is to see that the completed goods — in this case vehicles — can be moved to their final destination at the lowest cost and highest speed. This is the main problem facing the logistics industry of China and government and industry are working together on it at the moment.
Source: Supply Demand Chain

Before we get lost in the total alphabet soup which so bedevils Supply Chain Managment it is good to know that VMI, which concerns us here, is Vendor Managed Inventory , Warehouse Management Systems is WMS, Distribution Requirements Planning is DRP, Electronic Funds Transfer is EFT, Enterprise Resource Planning is ERP, Just-in-Time is JIT, Material Requirements Planning is MRP, POS is Point-of-Sale, Total Cost of Ownership is TCO, Vendor Managed Inventory is VMI and Warehouse Management Systems is WMS.

There are many, many others but these are the ones likely to appear in your term paper.
Knight Electronics provides OEM (original equioment manufacture) customers on-the-ground presence in China. So, in effect, they become the company in China.

Knight Electronics has now opened a vendor-managed inventory warehouse in China.
Bob Knight, president of Knight Electronics, said, ‘Our VMI warehouse provides our OEM customers with a presence on-the-ground in Asia, so they don’t have to manage the hassles of shipping, inspections, and delivery times from the United States or Europe to Asia

‘Our customers’ products can be manufactured in China and shipped directly to their Asian customers, reducing inventory, shipping and inspection costs while increasing profit margins.’

In other words the company provides all the services a large company establishes itself on the ground for a large amount of money. For OEMs the VMI warehouse will help reduce large capital outlays for large quantity shipments, provide a point for Asian site inspection, reduce travel time and expenses, solve communication problems, remove a risk associated with quality issues, and solve the logistics problems of shipping, payments and return of defective products. Which is what we said earlier.
Source: EMS Now

This is a short summary of an article on logistics which is well worth further study. Indeed, it is a major study of logistics in China, the problems, the opportunities, the solutions. The link is at the end of the article under ‘Source’.

With its entry into the World Trade Organization, China agreed to open up product and service markets that had been protected from global competition so far. China’s 11th Five-year Plan (2006-2010) for the service industries states as two of its top priorities transportation and modern logistics development.

For this reason, the government of China has made substantial investments in upgrading its transportation infrastructure over the past decade and will continue to do so in the future. However, China’s logistics infrastructure is characterized by fragmented supply and distribution systems, insufficient technology application and many bureaucratic obstacles. Moreover, rivalry among local governments creates trade barriers between provinces and adds to the complexity.

Recently, the Chinese transportation and logistics market has been growing at an enormous rate. From 2002 to 2005, more than half of all logistics service providers have reported a yearly growth rate of more than 30 percent. This growth is promising, but the delivery performance is far from being efficient. In China, logistics often make up 20 to 40 percent of the cost of goods sold, compared to just about 10 percent in the United States. Viewed comparatively, China’s logistics spending as a percent of gross domestic product (GDP) is twice that of the United States.

This inefficiency might be partly due to the fact that in China several hundred thousand logistics companies exist, compared to only about 7,000 in the United States. As a result, no logistics service provider offers nationwide distribution service or has more than about 2 percent market share.

Authors: Prof. Dr. Christopher Jahns is rector of the European Business School (ebs), Oestrich-Winkel, Germany, and executive director of the Supply Management Institute SMI in Wiesbaden, Germany. Roger Moser is director of SMI International Network, Shanghai. Martin Lockström is director, SMI China, Shanghai.

Source: Supply and Demand Chain Executive

A London-based industry research and analysis firm, Transport Intelligence has just published a new survey, China Logistics 2006. It was created by interviewing over 230 senior professionals representing a cross section of logistics users and providers with operations in China.

According to the survey:

• 68 percent of respondents from logistics companies believed that outsourcing was having a ‘noticeable’ or ‘major’ impact on their businesses.
• 76 percent of respondents said that the majority of their outsourced logistics business was derived from multi-national manufacturers with the remainder being generated by locally based Chinese companies.
• 48 percent of respondents indicated that they outsourced none or just some of their logistics, pointing to the extent to which the trend could still develop.

Chief Analyst, John Manners-Bell said, ‘Out-sourcing will be the defining trend behind the growth of the Chinese logistics industry over the coming few years. . . . The greatest potential lies with domestic Chinese shippers rather than multinationals which have been amongst the earliest adopters. However competition for this business will be fierce as domestic logistics companies are now increasingly seen as a viable alternative to western and Japanese providers.’
Source: Logistics Management

A new survey by Transport Intelligence called China Logistics 2006 suggests massive potential exists in the Chinese logistics market for integrated contract logistics companies. The survey came from interviews with over 230 senior professionals representing a cross section of logistics users and providers with operations in China.
According to the survey:

• 68 per cent of respondents from logistics companies believed that out-sourcing was having a ‘noticeable’ or ‘major’ impact on their businesses.
• 76 per cent of respondents stated that the majority of their out-sourced logistics business was derived from multi-national manufacturers with the remainder being generated by locally based Chinese companies.
• 48 per cent of respondents indicated that they out-sourced none or just some of their logistics.

Chief Analyst, John Manners-Bell commented: ‘Out-sourcing will be the defining trend behind the growth of the Chinese logistics industry over the coming few years. Our survey has identified that increasing numbers of manufacturers and retailers are looking to out-source to integrated logistics providers due to cost advantages as well as their greater understanding of local markets and regulations. The greatest potential lies with domestic Chinese shippers rather than multinationals which have been amongst the earliest adopters. However competition for this business will be fierce as domestic logistics companies are now increasingly seen as a viable alternative to western and Japanese providers.’
Source: Transport Intelligence