Excerpt from: China Supply Chain and Logistics Strategy
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| December 22, 2006 | | Need for Network Optimization Varies by Market Segment |
Competitive Markets Predominate
Many multinational companies in China are selling in the very competitive marketplaces in which customer loyalty is low and the main concern is to increase volumes and distribution channels. Markets are established and growing and customer service is oriented towards providing distribution speed, with a high unpredictability of demand. Logistics service providers are chosen based on speed.
Companies operating in such markets may not have placed a priority on the use of supply chain optimization tools due to the unpredictable nature of their customer demand and the intensive orientation towards speed and growth in the market.
Stable Markets Emerging
The need for supply chain modeling and optimization tools is becoming a more practical necessity for some multinationals in China that are competing in more stable markets where their customers order regularly from stock and seek reliability and consistency in service levels. Demand in their markets is more predictable, and the business orientation is more towards providing efficient and predictable service at a low cost. As these companies begin to work with logistics providers providing nation-wide service, the ‘National Stablizers’ mentioned in my previous posts, it is becoming more feasible to use a software model which can assist in assessing various strategic scenarios and their impact on the performance of the network.
Need for Supply Chain Optimization Modeling Grows
In order to model and optimize the supply chain, data on costs,
capacities, volumes, and constraints in the network needs to be
captured. Companies selling in stable markets in China may now be ready to utilize supply chain network optimization tools for the following reasons:
- Logistics service providers with nationwide and integrated services
- Reliable logistics service on a nationwide basis (1 day from RDC to customer)
- Infrastructure has improved rapidly
- Maturing IT capabilities of 3pls
- Multi-nationals more mature in China market
- Supply chain data more readily attainable
- Supply chain professionals more plentiful
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