Excerpt from: China Supply Chain and Logistics Strategy
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| July 04, 2006 | | Determining Optimal Distribution Center Location | Some companies with recently established distribution operations in China had undertaken a supply chain modeling exercize in order determine the ideal distribution center location in China. However, a number of errors were made by these companies which included:
Working with purely data analysis focused supply chain modeling providers: Supply chain modeling is both an art and a science. Modeling is not a stand alone exercize to be undertaken using strictly quantitative data requirements. It equally or more important to focus on the qualitiative measures such the logistics and operational issues which would be faced under various scenarios.
Working with a modeling solution provider that lacks a local presence: We learned from one multinational in China a number of large mistakes made in the selection of DC location. The decision for the DC location was taken solely on the basis of computer modeling, without the real world on the ground input which could have prevented these mistakes.
Supply chain modeling in China is more than quantitative analysis. When deciding on a DC location some of the following factors should be considered:
Logistics
Weather conditions, ports, lead times, taxes, documentation issues, duty structures, etc.
Operationl Issues
IT infrastructure, availability of technical staff, utilities infrastructure, MNC friendly locations, availability of support industries, etc.
Legal and Tax Issues
Repatriation of profits, foreign investment, legal frameworks, etc.
Suppliers
Supplier locations, experience working with MNCs, categories such as raw materials, finished goods, etc.
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