During the past decade, experts have pointed out that China needs to improve its supply chains in order to be more efficient and reduce operating costs. Since 2006, the Chinese government changes the laws for the Chinese-based exporters and as a result, companies from other countries had to raise consumer prices to counter the economic impact.
Companies in the United States have a close relationship with Chinese suppliers. This way, they try to adjust their operations to face the challenges exposed by the lack of effectiveness and efficiency showed by numerous Chinese companies. They sometimes need to raise prices and adjust their portfolios to keep things balanced. All these situations have caused other countries to change suppliers and move to more reliable sources, like Vietnam.
This lack of efficiency in the way the supply chain is managed has a terrible impact on China’s economy, given the fact that nowadays the world is facing a global recession and only companies who are able to cut their expenses and still offer outstanding products and services, are the ones who are prone to “survive”.
Chinese companies need to focus on improving their sourcing process, transparency, technology, and distribution chain in order to remain competitive in a market that is already crowded with similar companies. Here, David Kiger will give some tips that could help improve Chinese supply chain.
Adjust You Supply Sources
Many companies in the United States and other countries with strong economies are moving their operations to Vietnamese or Indian suppliers. Usually, these suppliers fail to meet all their needs but have implemented better supply chains. A good way for Chinese companies to improve their supply chain is by adjusting their supply sources.
It is obvious that any company needs to obtain supplies from different companies. But, it is not that obvious that the inefficiencies of these suppliers may affect your own company and make it inefficient as a result.
For this reason, it is crucial for Chinese companies to support their logistics processes and exploit their infrastructure. They need to invest in experienced people, technology, and better processes in order to reduce logistics costs and time in a short period of time. This investment may seem outrageous at first, but it will generate more profits since Chinese companies will save more money and will be able to work for more customers.
Think of China as a Hub
A great way for Chinese companies to have more efficient supply chains is by finding more suppliers within the same country. This will make logistics more efficient, costs will be reduced, and production won’t depend on one supplier who is thousands of kilometers away from such a vast and rich country.
Chinese companies should see their country as a hub, from which anything can be shipped and distributed to different centers inside the country. This can work as a great way to reduce costs, unify technology, and establish a general set of terms and conditions that can benefit anyone in any given industry.
In the end, seeing China as a great hub will help other countries enforce their trust in Chinese suppliers and the economy will inevitably grow. Perhaps, there is no need to have only one hub, there can be numerous centers from which to obtain and ship supplies from and to other Chinese companies and abroad.
A Crystal-Clear Supply Chain
Chinese companies should look for ways to improve their transparency. This means having an open relationship with other companies, letting them know where their product or supplies are during the transportation period, where things are storage and what is the current stage of goods.
The supply chain needs to be transparent in order to provide enough information to customers so they can make their own decisions and be prepared for what may happen. This transparency also allows the buying companies outside of China to predict possible market trends and propose effective strategies to face them.
In order to have a transparent flow of information that can be shared with others, Chinese companies need to set and follow rigorous rules and protocols to handle and share data. Everyone involved during the supply chain process should be able to report what is going on in real time. This way, there will be no surprises and possible damages will be controlled within a short period of time.
It is all about visibility that can help companies organize and generates trust at the same time. A good way to achieve that is by using technology and keep an eye on every single individual involved along the supply chain, such as supplier, transport carriers, and service providers. The important thing is that in the end, the person who will have the full understatement of what is going on will be the customer, with an end-to-end visibility of each process.
* Featured Image courtesy of Martin Abegglen at Flickr.com