Excerpt from: China Supply Chain and Logistics Strategy
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| October 30, 2006 | | Aligning the Supply Chain with the Chinese Customer | Companies no longer compete along the static four walls of the firm, but rather competition occurs between supply chains. Therefore, it is becoming increasingly inefficient and ineffective for companies to separate their supply chain and marketing strategies. The supply chain has become the central nervous system of the business and will become an integral part of marketing planning. Segmenting and aligning customers with tailored supply chains based on buyer behavior is the ideal path towards the elimination of under-servicing and over-servicing of customers.
Many multinational companies originally set up operations in China in order to take advantage of low cost exports. However, as the buying power of Chinese consumers increases, multinationals are focusing increased attention on selling in the domestic market. The majority of foreign companies selling in China lack the comprehension of the unique buying behaviors of their customers in China.
According to John Gattorna, author of ‘Living Supply Chains: How to mobilize the enterprise around delivering what your customers want’, customers can be segmented globally according to a dominant set of behaviors. A global supply chain can thus be integrated and aligned with the local customer.
Thus, the first step in your global supply chain planning would involve understanding and segmenting the unique behaviors of your target customers in China. MNCs selling in China typically lack local understanding of the subtleties and complexities of the Chinese consumer. Differences in attitudes, world views, linguistics, motivations, etc., strongly influence behavior.
Classic supply chain problems are thus intensified. It can be argued that the problems of inventory management, forecasting errors, and the challenges of gaining entry into sales and distribution channels can all be largely attributed to a mismatch between supply chain and marketing efforts. Supply chain planners need to gain more insight into how customers buy their products in China in order to provide the service levels they desire.
Specific research methods need to be further investigated and applied to “demand chain” planning in China. In particular, the application of ethnographic research is on the rise, with the success of its use by the Chinese PC manufacturer Lenovo being one example. | | |
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