Moving East: Optimising Your China Supply Chain Strategy

2017 saw the fastest economic growth in China for two years, signalling a wealth of opportunities for automotive, retail, and players from other industries looking to reach and engage new consumers around the world.

Optimising the supply chain strategy around China’s logistics challenges is key for businesses looking to capitalise on the country’s exciting market conditions.

But China’s cultural and regulatory challenges can complicate supply chain operations. These factors increase the importance of having a strong supply chain partner to any Western company seeking to make the transition east.

Overcoming China’s logistics costs and limitations

Logistics costs are approximately twice as high in China as in Japan, Europe, and North America, driven in no small part by the country’s size and the high rate of its road toll fees. The country’s revised policies on dangerous goods in the wake of the explosions at a container storage station in Tianjin in 2015 place further restrictions on the supply chain, making it virtually impossible to store explosives, gases, flammable solids and liquids, toxic or infectious substances, corrosive substances, or radioactive substances in bonded areas or areas of high government interest.

To complicate matters, according to consulting group Reach24H there are currently no unified management regulations applicable to all modes of transportation in China. Unlike the US, Canada or other developed countries, China also has no specialised agencies established for coordinating and managing the transportation safety of dangerous goods under various modes of transportation, with each authority managing these processes separately according to their responsibilities.

Key to navigating such challenges is local knowledge of the supply chain at the planning stage. Factoring country road tolls into your budget plan ensures that transportation costs are accounted for, for example, while third-party expertise can be drawn from to navigate case-specific challenges such as the transportation and storage of dangerous goods.

Identifying the regulations specific to China’s market

One of the major barriers Western companies face when considering establishing a footprint in China is the rising cost of logistics. China’s sizable geography presents considerable risks of its own that businesses must mitigate.

The Chinese market is heavily regulated with different trading standards across cities, creating obstacles for international businesses more accustomed to operating under standardised accreditations such as ISO. Failure to comply with regional regulations can directly impact lead times and incur unanticipated costs, emphasising the heightened requirement for risk management when planning and implementing supply chains in China.

Missing rules once – even by accident – can impact businesses significantly, especially if the mistake is on imports.

Being ‘black flagged’ for 100% inspection, for example, will lead to delays and further issues. It is therefore essential that companies take the time to understand the risks and remain compliant.

There are a number of steps you can take to identify and mitigate risk in instances like this:

  • Research and monitor policy changes across regions in which you intend to operate
  • Consult with suppliers and other third parties already trading east
  • Hire logistics officers specialising in Chinese markets
  • Engage a local logistics partner with extensive experience operating across China

Moving into the Chinese market requires a substantial amount of time, relationship building, and planning. A supply chain partner with experience setting up, implementing and managing logistics services across China is an effective way to facilitate this.

Choosing a partner to optimise your China supply chain strategy

Over the years Unipart has provided many companies with the supply chain strategy, management and cultural knowledge needed to reach the Chinese market. Our local presence in China enables us to react quickly to economic and regulatory changes, providing our customers’ supply chains with the agility to respond in a timely and cost-effective manner.

Crucially, emerging technology trends like big data, AI and IoT are enabling us to anticipate logistics challenges before they become our customers’ obstacles. One way in which we help our customers achieve this is by implementing a comprehensive electronic tracking and documentation system, mitigating risk and improving stock visibility and management.

The rate of technology adoption is faster in China than in much of the Western world. Businesses operating in this space should focus on its sensible implementation if they want to maintain a competitive advantage. Our customers are already leveraging our experience in this area to develop distribution centres, smart inventory optimisation, returns management, and more.

The most successful companies in China are those best equipped to deal with constant change (be it staff, customer needs, the industry, or technology). Businesses must therefore commit to the long term, yet be quick to make decisions and adapt day-to-day.

The reality is that many Western businesses will not fully understand how China operates without first-hand experience of the country itself. Western companies can benefit by ‘walking through’ their planned supply chain with Unipart to truly understand the process, implement improvements, and meet the right connections along the way.