March 2012 | Commentary | 3PL Line

5 Ways to Excel in China

Tags: Supply Chain Management, China

Angela Yang is managing director, Penske Logistics Asia
86-21-6327-8566

China and the wider Asia-Pacific market present an incredible opportunity for businesses seeking to manufacture products, source suppliers, or tap into end markets and sell products to consumers. But a strategic business shift into China takes careful consideration, especially when it comes to supply chain, warehousing, and distribution decisions.

Here are five strategies for successfully managing your supply chain, warehousing, and distribution operations in one of the world's fastest-growing economies.

  1. Adapt to local regulations. Many companies significantly underestimate the complexity of China's government regulations, and often lack much-needed local guidance.

    Enlisting the help of a supply chain solutions provider familiar with operating in China allows shippers to focus on their core competencies, customer service, and top-line growth. While they may still encounter challenges, cultivating the right service provider relationships can help shippers adapt to changing laws and regulations.

  2. Navigate customs rules. Ensuring compliance with Chinese customs regulations demands good planning and data management practices. Proper documentation is critical, as is complying with China's Harmonized System Code.

    For example, quantity count errors on shipping documents can cause significant problems. List the incorrect number of items too often, and customs officials will not hesitate to inspect and detain your shipments for an extended period. They may also flag and needlessly detain future shipments due to poor reputation. As a result, your company and customers may miss out on valuable sales and opportunities.

  3. Understand just-in-time and data integrity. China is a rapidly developing marketplace, with new cities, roads, and infrastructure under constant construction. So, running a just-in-time operation takes on a slightly different meaning than in the United States.

    When transporting goods via Chinese trucks, which are typically much smaller than U.S. trucks, transit time may increase because capacity is limited and roads are not well-developed or maintained. A traffic delay caused by an accident in the United States can divert drivers for a few hours; in China, a major road disruption can translate to delays lasting several days.

    GPS capabilities are also not as robust, and obtaining updates on shipment progress is still largely a manual process. Thankfully, cell phone signals are very strong throughout the country, as mobile devices greatly exceed landline phones.

  4. Embrace cultural differences. The Chinese work culture is more personal and younger than in the United States. Many companies organize team-building exercises that bring workers together to learn about each other and explore ways to serve customers more effectively.

    This personal approach also applies to doing business with carriers, customers, and vendors. Sometimes, it takes longer to do business in China because of the getting-to-know-you phase. Not understanding and respecting this cultural difference can be perceived as insulting or overly aggressive, and may result in lost business and relationships.

  5. Know logistics costs. Logistics costs represent an estimated 20 percent of China's gross domestic product— double the percentage of the U.S. GDP they make up.

Thanks to continually developing professional services, a maturing workforce, and a business-friendly environment, logistics and distribution operations in China are rapidly becoming more manageable.