Logistics Management in China and West

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Table of Contents

Executive Summary
Introduction
Information about China
Literature Review
Conclusion
References

Executive Summary

Foreign investors have embraced the open door policy and low cost labor, existing in China to expand their businesses. In China, most international companies have spread across major cities such as; Beijing, shanghai and Guangdong regions, which provide favorable business environment for growth. Conversely, since joining the World Trade Organization, WTO, in 2002, more opportunities for Chinese have taken root.

Thus, the country boosts of; increased trading area, protection regulations and negotiation power (Yu Xia and Li-Ping, 2011).Despite of major progress achieved in supply chain management by the government, there still a need for improvement, to effectively deal with pacing globalization, evolving technology and competition granted by similar firms globally.

Challenges affecting Chinese firms have coiled around logistics management, legal environment and infrastructure. However, with legal reforms, embracing modern technology and globalization, it is definite that the logistical environment will tend to a new competitive advantage to logistics firms in the country.

Western countries have, overtime in revamping their supply chain operations. Exploring opportunities beyond their borders, embracing cost effective strategies and government support has been a driving force for their success. However, issues such as; scalability of supply chain, data security threat and natural catastrophes have slowed down their strength.

Introduction

Globalization of trade and technological progression of businesses across the world have enriched trade between countries. Strategically, this has fixed an opportunity for countries to streamline their logistics management practices to create a competitive advantage (Sandelands, 1997).

Countries have endlessly linked their supply chain to international networks to benefit from the opportunities existing within their national scope. The global networks have provided an elaborate logistics infrastructure, which has result in augmenting operational efficiency, fast product delivery and achieving the business objectives.

This paper researches on logistics and operations management in China and Western countries. The paper explores the best practices, challenges, trends and critical issues of supply chain operations and management processes existing between these two countries.

Information about China

Despite recent global recession, financial disasters, and economic downturn, China has stood as one of the most active and emerging economies in the world. This has threatened economic powerhouses of the West. However, Sandelands (1997) argues that foreign firms or investors in China have encountered logistical challenges in in terms due to a considerable level of business shrewdness in the local Chinese market.

They have cited reasons such as; un-streamlined logistics operations and management practices because of the increased or rapid economic growth, and demand in distribution ( Sandelands, 1997).

Conversely, the Chinese government, in recent times, has recognized the challenge, and has earnestly begun revamping its logistics operations and management, as a tool for strategic economic growth. This has been achieved through financing logistics firms, refining logistics infrastructures, creating a nationwide multimodal transport network and building a large-scale logistic center (Lin and Ho, 2009).

Literature Review

Best Practices

Technology is essential in streamlining supply chain activities. According to Jiang and Prater (2002), when selecting and implementing technology in supply chain operations, it is vital to define a mission critical element, and business processes. It is a wise decision to assess the needs of the customer and evaluate the need for technology in solving the customers’ need.

La Londe and Masters (1994) attests that, coming up with definite requirements may prove tough and many businesses fail to get it right. This is because most businesses dwell on identifying direct costs and savings rather than, quantifying critical elements such as; inventory and labor, and hidden costs.

When selecting technology, it is good to embrace the return on investment, RIO, as the benchmark; this ensures tangible benefits are achieved in the process (Moncrieff et al, 2003).

China has of late, incorporated technology in supply chain operations and management. The internet driven technology such as EDI is common across supply chain processing businesses in the country.

The Electronic Data Interchange (EDI) has simplified sharing of business documents such as; bills, purchase orders and invoices (La Londe and Masters, 1994). Moreover, sharing information over the EDI has enabled quick response to market demands and prediction of market changes.

The West supply chains have also efficiently utilized technology in supply chain operations. Most logistical firms have implemented technologies to simplify business processes and operations. One of the technologies creating competitive advantage for Western firms is the RFID. According to Lin and Ho (2009), RFID is a technology that improves tracking process of products, as they move from the manufacturers to the consumer.

Dröge, and Germain (1991) illustrate that best practice in material’s handling lessen touch labor, supports value-add operations and helps in handling diverse manufacturing scenarios. However, to win this best practice, materials-handling systems should be affordable besides bridging free information flow in the business, and the suppliers.

Most West logistics firms such as the US have embraced E-commerce; this has reduced the issue of material handling by creating a competitive advantage (La Londe and Masters, 1994). In the US, businesses such as Wal-Mart, Amazon, e-bay has successfully minimized material handling through e-commerce (Lieb, 1992).

According to Manuj and Sahin (2011) having a supply chain that provides a customer with product customization, and diversity through extra value services, is having the best practice that is efficient. That is, does precisely what a customer demand (Manuj and Sahin, 2011).

In Spain for example, it is a compulsory for a business to examine its operations with an updated records of yesterday’s challenges as well as forecasting on future improvements (Dröge, and Germain, 1991).

Challenges of supply chain management in China and the West

China has experienced some challenges in supply chain management for some time. This, to a larger extend has affected supply chain businesses in the country. The challenges have waterlogged various aspects of supply chain management; warehousing, transport, purchasing, inventory control, order processing and import/export services.

According to Jiang and Prater (2002), these barriers have arisen because of the internal inefficiency. For example, Jiang and Prater (2002) draw that most manufacturing firms in China have been facing major challenges in transport and ownership of transport services.

These challenges have affected the level of contentment in providing transport services. In his survey, Dröge and Germain (1991) explored challenges facing Joint Ventures in China; he noted that there was a challenge in upholding a simultaneous quality level, whereas decreasing costs by purchasing resources locally.

Unique Features of Supply Chain

The models of the logistics and supply chain are closely related. Supply chain underpins all the roles and activities tied in fulfilling a customer’s request. These activities include; manufacturing, transporting, warehousing and supply of raw materials and the (Yu Xia and Li-Ping, 2011).

The role of a supply chain entails a seamless flow of information, transformation and delivery of goods from raw materials stage through to the end user. The major reason that fixes the success of a supply chain is the process of integration among buyers and suppliers, the system that links partners and the market thoughtfulness on the base of information rather than inventory.

Supply Chain has salient features, which makes it unique in succeeding its tasks. One of the features is inventory management.

This feature enables a firm to track and manage supplies of raw materials and constituents needed for production, finished or completed goods to accomplish open sales orders and spare parts needed for field service and sustenance. This helps in minimizing waste, storage costs and frees up the firm for other vital purposes (Jiang, 2002).

Order management is also another unique feature of a supply chain. Order management backs in speeding up the execution of the whole process of order to delivery cycle by making firms to productively produce and track sales orders (Ip et al, 2011). This facility also creates dynamism in scheduling supply delivery, to accomplish a demand and heighten a speedy generation of pricing and product alignment.

Globalization has made companies to expand tremendously, taking up opportunities existing in foreign lands. Logistics, a management feature connected to supply chain simplifies coordination of copious warehouses and transport routes strengthening on-time delivery performance creating customer satisfaction (Yu Xia and Li-Ping, 2011).

Besides, logistics management helps to achieve customer product visibility and shows how a completed product, stored and distributed, irrespective of the volume of facilities or associates engaging.

Forecasting and planning is also a unique feature connected with supply chain. With this feature, firms can precisely forecast customer demand, and strategically plan procurement and production practices accordingly. This can reduce unplanned purchases of raw materials, minimize manufacturing overruns and decreases the need of storing excess completed goods.

Trend of Supply Chain in China and the West

The internet has transformed the way business is transactions are done. Virtually, all business processes are utilizing information technology to achieve a competitive advantage in business processes. The objective of supply chain management is to reduce the time in mitigating the customer requirement and reduce the cost of supply. The growth of internet and its usage in China has surged of late.

According to Yu Xia and Li-Ping (2011), internet users in China increased by four million during the first half of 2001. A report by China Internet Network Information Centre, funded by the government confirmed that 26.5 million people uses internet in China (Goh and Ling, 2003). With internet access and emergence of e-commerce over the internet, customers can place

Most supply chain businesses in the West embraces commercial transaction online. Thus, the E-commerce adopted aims at reducing the volume of goods between producers and retailers whereas increasing direct deliveries between manufactures and end users (Yu Xia and Li-Ping, 2011).

The online technology has created a multifaceted system of the whole logistics system, which is able to manage small and medium-sized shipments to many customers (La Londe, and Masters, 1994).

Critical Issues of Supply Chain

The products of Chinese’s companies are widespread worldwide; their penetration has been because of cost-effective pricing. However, critics have alleged that, most of the products do not meet the international threshold demanded in the world market. The Chinese employs shortcuts in producing a product; hence, this compromises the product quality (La Londe and Masters, 1994).

Scalability of supply chain management in China is also a major issue. The issue has made it difficult for the government to scale down the supply chain harmonizing local, national and global needs.

Thus, the gap that prevails between the national and international standards and local implementers is a challenge in which firms in China and the “Made in China” trademark is falling. The issue of scalability as not only affected consumers, supply chain and policy makers, but also it has become an economic threat for China.

Besides, global standards demand higher standards, enforcement, supply chain traceability, compliance monitoring and product testing. This has increased direct proportion to the daily reports of concerns of safety and health issues with Chinese’s products (Goh and Ling, 2003).

Whereas, cohesive national and international regulation’s structure provides a solution for china’s supply chain, the Chinese government does not have the regulation system and the necessary financial muscles to fix such a system instantly.

Many West firms have cited security breaches as a significant issue in providing supply chain services (Lieb, 1992). The apprehension towards arguing an operational infrastructure and granting its security has been a major obstacle for supply chain firms. For example, in US, the data theft at Amazon poses a security threat for firms operating in the United States.

Most Western firms, experiences logistical delays or interruptions, this is a result of equipment failures and delays. Disrupting factory’s distributions channels because of natural disasters such as natural catastrophes and geopolitical issues have been cited has the potential issues affecting the West. Other issues such as pricing and raw material availability are also notable in West supply Chain (Lieb, 1992).

Conclusion

Effective supply chain operations and management demands best practices in; planning, implementation and use. When a company lays a good foundation using the aforementioned elements, it is likely to empower its business activities and enhance its competitive advantage. Conversely, business can reduce costs, surge productivity and provide a boost to their business.

China of late has emerged as the best destination for supply chain operations. This has been granted because of technology, availability of raw materials and increase in foreign investment. However, despite some challenges, such as; strict government regulations, global competition and infrastructures, its services have been improving day by day.

On the other hand, the West has aimed at reducing pressure on its supply chains practices by making use of technology, outsourcing some of its supply chain activities. This has positively helped in reducing costs whereas increasing productivity and accruing return on investment.

References

Dröge, C., and Germain, R., 1991. “Evaluating Logistics Management Information Systems”, International Journal of Physical Distribution & Logistics Management, 21, (7), pp.22 – 27

Goh, M., and Ling, C., 2003. “Logistics development in China”, International Journal of

Ip, W.H., Chan, S.L., and Lam, C.Y., 2011. “Modeling supply chain performance and stability”, Industrial Management & Data Systems, 111 (8), pp.1332 – 1354

Jiang, B., 2002. “How International Firms Are Coping with Supply Chain Issues in China”, Supply Chain Management: An International Journal, 7, (4) pp. 184- 188.

Jiang, B., and Prater, E., 2002. ”Distribution and logistics development in China”, International Journal of Physical Distribution & Logistics Management, 32, (9) pp. 783-798.

La Londe, B. J., Masters, J. M., 1994. “Emerging Logistics Strategies: Blueprints for the Next Century”, International Journal of Physical Distribution & Logistics Management, 24, (7), pp.35 – 47

Lieb, R., 1992. “The use of third party logistics services by large American manufacturers”, Journal of Business Logistics, 13 (2) pp. 29-42.

Lin, C-Y., and Ho, Y-H., 2009. “RFID technology adoption and supply chain performance: an empirical study in China’s logistics industry”, Supply Chain Management: An International Journal, 14, (5), pp. 369-378.

Manuj, I., Sahin, F., 2011. “A model of supply chain and supply chain decision-making complexity”, International Journal of Physical Distribution & Logistics Management, 41, (5), pp.511 – 549

Moncrieff, R., Gailius, S., and Ibarra P., 2003. “A Snapshot of Best Practices in Supply Chain Management”, Handbook of Business Strategy, 4, (1), pp.261 – 267

Physical Distribution and Logistics Management, 33, (3), pp. 866-917

Sandelands, E., 1997. “Strategic logistics management”, International Journal of Physical Distribution & Logistics Management, 27, (2), pp.73 – 142

Willersdorf, R. G., 1990. “Adding Value through Logistics Management”, Logistics Information Management, 3 (4), pp.6 – 8

Yu Xia, T., and Li-Ping, T., 2011. “Sustainability in supply chain management: suggestions for the auto industry”, Management Decision, 49, (4), pp.495 – 512

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