Domestic Logistics Value Up 15.6%

154541 Resource 94086 93210 94146 1167817699672 1201212502973 Controlled Strategic Issues Facing Future China Supply Chains (1 of 5)

Impact of oil prices on the cost-to-serve

Issue #1: Impact of Oil Prices Oil price increases will affect the cost-to-serve customers, thus negatively influencing the performance of your China supply chain. A rise in oil prices may ignite higher energy input costs for manufacturing and fuel costs for transportation. This is a strategic issue both for companies selling in China as well as those sourcing for export. According to ChinaDaily.com, transportation costs have witnessed a remarkable rise due to energy price hikes and domestic logistics expenses have increased 13.7 percent from the same period last year. It is critical for companies with supply chains in China to remain aware of changes taking place in their markets in response to oil price hikes. In order to avoid, or at least delay a rise in your cost-to-serve, companies are advised to closely watch for changes in the buying behaviors of their customer segments and adjust their supply chains accordingly. For companies distributing in China, consolidation of orders and shipments will become more of a necessity. Warehouse receiving practices of customers will need to be adapted towards larger, less frequent deliveries. Companies operating a Just-In-Time manufacturing and distribution model may be required to add more DCs to their network, improve inventory management, and carry more inventory. For companies sourcing in China,  higher transportation costs may offset gains from lower labor costs in China. Recommendations: <ol><li>Measure transportation costs at every step in the supply chain </li><li>Assess methods for improving service levels and reducing costs </li></ol> 9 application/xml false china sourcing china supply chain china transportation china trucking china warehousing global logistics global supply chain inventory management supply chain strategy Domestic Logistics Value Up 15.6% China Transportation Cost Increase: China Daily Dec 12, 2006 http://www.chinadaily.com.cn/bizchina/2006-12/12/content_756491.htm Energy's impact on the supply chain During the next two decades, higher and more volatile oil prices may force changes in today's standard supply chain practices http://www.mmh.com/article/CA6398603.html International Energy Outlook 2006 World energy consumption is projected to increase by 71 percent from 2003 to 2030. http://www.eia.doe.gov/oiaf/ieo/highlights.html Mozilla/5.0 (Windows; U; Windows NT 6.0; en-US; rv:1.8.1.11) Gecko/20071127 Firefox/2.0.0.11 127.0.0.1 127.0.0.1 Establish 208.105.4.154 false true false false true 187565 false false true false false false true 94086 blog blogsite/ChinaSupplyChain/web