SCM 90

Most multi-national companies have some sort of presence in China and now large to medium size companies are testing the waters.  Check out this great blog on business in China-they list key considerations when setting up your supply chain in China. 

• Market placement: most of the country’s population is focused in a relatively small geographical area.  This is good news for economies of scale but getting from one city to another may be a challenge.
• “Gray” financial and legal system: the rule of law is typically a secondary factor in doing business here.  The key to success in this issue is guanxi which in the US equates to strong social networks to cut therough the red tape.  This is why many companies starting business here join forces with an already established Chinese company.
• Autocratic government: companies don’t know if they’ll be able to turn on the lights the next day…the government may deem it necessary to use that power elsewhere.  We saw this happening this summer when Beijing and all of its businesses were unilaterally shut down during the Olympics.  This caused major inventory issues for the company I worked for during that time. 
• Rapid change: in addition to the government issues, the economic climate in China changes daily.  The growth is rapid and consumer tastes are growing more sophisitcated every day (read more SKUS and shorter lead times). 

All this said, if you’re looking to go global it’s almost foolhardy to not stick your toe in the China waters.  Just know that there are great differences from western style business processes and SCM practices.

“Where’s that piece on collaborative project design?” Gilmore barked at Cliff Holste, SCDigest’s material handling editor.

”Almost done,” Holste said. ”I should have it by tomorrow, …er.. soon!” Holste responded.

Finally ending the tension, Gilmore said to the group, “I suppose you will all be expecting the entire day off tomorrow? Well, the supply chain will still be moving in China, you know. But I guess we can catch up with it Friday morning. Fine – the full day off for the lot of you!”

SCM Future:
“There are two paths to the supply chain of the future,” said the ghost grimly. “One is harder, but gets you to there much faster. The other is easier, but the journey is much longer, and the toll is very steep.”

A cheer erupted from the small group. In fact, to Gilmore’s consternation, they immediately packed up and went home with amazing alacrity.

“A merry supply chain Christmas to you Ebenezer!” Connie Venema yelled as she walked out the door.

Ebenezer harrumphed, then called sales VP Jason Stegent in Houston just to make sure he was still on the job. “After all, Houston’s an hour behind,” Gilmore thought. “It’s barely four o’clock there.”

Stegent was in his office, and Gilmore asked for the daily call report before officially giving him Christmas day off too.

“I’m thinking it may be hard to get a hold of sponsors,” Stegent reminded him.

Finally Gilmore himself gave it up for the night, headed for home, and enjoyed a pleasant Christmas Eve dinner with his family. As always, they were riveted by his annual holiday discourse on the role of supply chain in the product economy, the special supply chain challenges of the Christmas shipping season, and other interesting SCM topics.

When he was finally finished, he smiled and looked around warmly at his family, knowing how much they had enjoyed the talk. They sat quietly, breathing in the glory. “What’s supply chain again?” one of the kids finally asked.

“How can people not know supply chain!” Gilmore bellowed. “It ought to be taught in the high schools! Where do you think all this stuff comes from?” he asked, pointing to a healthy pile of presents under the tree.

“The store?” one of the kids answered. “Amazon.com?” ventured another.

“Bah humbug!” Gilmore responded. “Read Supply Chain Digest. Get educated!”

It was around midnight when Gilmore finally went to bed, after doing a last check of the news wires for any breaking supply chain stories. Not long after he drifted off to sleep, he awoke with a start at a loud noise. Next to him, his wife was still sound asleep, but there at the end of the bed was a strange ghostly presence.

“I am the ghost of supply chain past!” it said. “Come with me.”

Soon, the two were soaring in the air over the countryside, and there in the heavens, the entire supply chain was visible to them both – accompanied by music.

“The BeeGees?” Gilmore asked. Yes, it was the 1970s, and what the ghost displayed to him looked so strange. Every purchase order and invoice was being sent by US mail. He could see large mainframe computers churning out green screens of the most basic software applications, little of which had much to do with supply chain. Warehouse workers were tracking inventory with cards in a shoebox – and the stuff wasn’t moving very much. Factories were cranking out products based almost solely on utilization and unit costs and what was best for the plants. Looking inside these companies, you could see departments like purchasing and marketing and manufacturing and distribution all marching largely to their own drums, occasionally sending typed memos to each other about what they were doing, or complaining about how the others were goofing them up.

“This is kind of scary,” Gilmore said. “Why are you showing me this? We are well past this era.”

“Not far enough!” the ghost answered.

The next instant Gilmore was back in bed. He again drifted to sleep, only to be awoken by a second ghost, who looked suspiciously like present day SCDigest friend Gene Tyndall.

“I am the ghost of supply chain present.” he said. “Follow me.”  Soon again, Ebenezer Gilmore was whisking through the sky.

“This is much better!” Gilmore said. He could see products moving very fast, not just across the US, but across the entire globe. There was technology, lots of it, and software was optimizing this and that. Products flowed rapidly through distribution centers, managed by workers scanning bar codes and even reading RFID chips while using mobile terminals. He could see Lean factories and S&OP meetings and even some CPFR.

“Now this is supply chain!” Gilmore said to Tyndall, ..er.. the ghost. “Look again!” said his guide.

Rubbing his eyes and looking a second time, new aspects of the supply chain were revealed that had not been visible before. He suddenly saw retail stores with lots of stock-outs, and many weeks of inventory in the pipeline, though much less was really needed. As S&OP meetings concluded, he could see the impact of those meetings dissipate as processes moved further down the supply chain to execution. There were vast quantities of information flying here and there, but just a fraction of it being captured and used to make better decisions. Software applications weren’t communicating well. There were opportunities for cross-company collaboration being missed all over the place. Many companies were even missing opportunities to collaborate on their own internal freight moves. My goodness, few DCs were even receiving ASNs from their own plants!

“This is a strange vista you show me ghost,” said Gilmore. “I am not sure whether to be pleased or disappointed.”

With that, he was back in bed, and soon enough, a third specter entered.

“I assume you are the ghost of supply chain future?” Gilmore said, and the presence nodded. Off again they flew, but soon they came to a fork in the sky.

“What is this?” Gilmore inquired.

“There are two paths to the supply chain of the future,” said the ghost grimly. “One is harder, but gets you to there much faster. The other is easier, but the journey is much longer, and the toll is very steep.”

“Your destiny is to fly with me tonight along each path, and recount to your readers both journeys.”

So, I flew for the rest of the night, and saw both routes. As morning dawned I was back in bed – not tired, but pleased with the mission I had been given.”