Excerpt from: China Supply Chain and Logistics Strategy
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| January 08, 2007 | | Are "Collaborative Supply Chains" an Alternative for China? | China’s mergers and acquisition (M&A) rules, effective September 2006, placed new restrictions on foreign companies that are carrying-out acquisitions of domestic enterprises. Based on feedback from the American Chamber of Commerce Shanghai’s HOT TOPICS SURVEY regarding the new regulations, the M&A law is perceived by 61% of survey participants to imply an effort from China’s central government to protect specific industry sectors. Roughly 30% of survey participants believed the restrictions will likely slow investment activities in their industry.
Could the ‘economic patriotism” witnessed at present in China help open the path towards radically new supply chain designs? Does the equity structure proposed by the Chinese government involving share swapping signal that the time is right to look into new organizational formats such as ‘Joint Services Companies’? As proposed by author John Gattorna, a Joint Services Company exhibits the following characteristics:
- Co-owned, co managed service company
- Pre-determined incentives and rewards based on performance
- Infusion of innovation ‘culture’ in organizational design
- Financial engineering to fund set-up and operations
The basic premise of such a supply chain business model is that needed capabilities are acquired at a particular point in time, with the organizational structure, motivation/reward systems and funding arrangements being designed to bring together various parties which possess the capabilities needed.
Comparison of Traditional M&A Program with Joint Services Company Concept
Feature
| Traditional Approach
| Joint-Services Company
| Ownership and Risk
| 100% in-house
| Jointly Owned
| People
| Bought-in Resources
| Enhanced Career Path
| Objective
| Process Improvement
| Share Price Growth
| Motivation
| Policy and Compliance
| Mutual Shared Goals
| Incentives
| Milestones
| Fusion of all Partners' Share Prices
| Funding
| 100% in-house
| Own, other Third Parties
| Focus
| Template Roll-out
| Capability at Speed
| Control
| Program Managment
| Improved and Flexible
| Future Option
| Sustain Non-Core Activity
| ROI Easier to Get
| Strategy
| Better IT
| Marketplace Leadership
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Now may be the time to re-think the way we design and manage supply
chains. Collaborative networks may prove to be a more fruitful method
for achieving effective asset utlization and improved profitability.
Logistics service providers can potentially also be included as minor equity holders in the new joint services company business model. | | |
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