Excerpt from: China Supply Chain and Logistics Strategy
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| March 22, 2007 | | Balancing Global and Local Capabilities | It is important to work with 3PL suppliers to encourage the development of mutually beneficial relationships. Maximizing value with 3PL suppliers in China is more than trying to get the best price. Rather, it is about sustaining value by working closely with 3PLs to develop cost-effective solutions while also participating in ongoing reviews of services and processes to help drive continuous evolution of the supply chain.
There are many significant benefits associated with improved alignment and integration between your organization and your 3PL including: 1. Ensuring reliable and accurate delivery to customers 2. Clear operational goals plus simplified and standardised processes 3. Accurate requirement specification to 3PLs, etc.
However, unique challenges to 3PL supplier engagement in China include:
1. Continued consolidation in industry
Consolidations in the industry are increasing. Mergers and acquisitions (M&A) involving logistics companies in China have been on the rise since 2005. Growth through acquisition leads to a lack of cohesion within the organization. Larger 3PL organizations that have grown organically may offer better service.
2. Global suppliers not always the strongest in China
It is important to find the right-sized 3PLs which are large enough to provide the level of service required, yet small enough to focus on your customer’s needs. Depending on the situation, local Chinese 3PLs may be more competitive than the global 3PLs. Global 3PLs in China oftentimes lack in-house capabilities and may operate through Sino-foreign joint-ventures and subcontract relationships. Sino-foreign joint-ventures offer a number of significant advantages. Foreign companies can leverage on the Chinese partner’s relationships with local governments, local market knowledge and domestic facilities and transport networks. However, large global 3PLs in China may not necessarily be managing their joint-venture partners or subcontractors effectively. Under such a scenario it may be beneficial to work directly with the local 3PL.
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