Supply Chain Management in China Erick Li Department of Management Sciences City University of Hong Kong Presented to Cyber Transportation Logistics Conference SCM in Paradigms Summary Q&A China Three-stage view Three-flow view Paradigms of Supply Chain • Two major paradigms of SCM – Three-stage view • Procurement, conversion, and distribution – Three-flow view • Financial, information, and product flows SCM in Paradigms Summary Q&A China Three-stage Financial flows view Information Three-flow flows view Product flows Supply Chain Management in China • Financial flows – Domestic • Cash transactions are still very common. • Banking services are improving. • But firms have the tendency to pay as late as possible. – Slow A/R turnover. • Very limited credit-rating services Supply Chain Management in China • Financial flows – International • CNY is not freely convertible. – Department of foreign currency regulation – Underground banks – Payment process hampers financial flows, eventually slows down product flows. • Increasing demand for better payment solutions and supplier/buyer certification agents. Supply Chain Management in China • Information flows – IT infrastructure is weak • ERP or SAP are pricey. • Decision Support Systems are rarely adopted. – Employees prefer to use Chinese in communications • Use phone, fax, not email. • Seal business deals over dinner tables or in golf courses Supply Chain Management in China • Information flows – Intellectual Property protection is weak • Forged brands • High staff turnover reduces investment in on-job training • However, Hong Kong has restrictive laws and regulations on Intellectual Property protection and can server as a knowledge hub. Supply Chain Management in China • Information flows – Low level of trust among supply chain partners hamper information sharing. • Win-lose perspective when dealing with suppliers • Low level of visibility over inventory and demand • Lack of process standardization and data transparency Supply Chain Management in China • Product flows – Domestic logistic providers • Major role is to complement International logistic providers. – Licenses limit the areas where a logistic provider can provide services. – Small truck fleets, no Distribution Center, service quality varies from firm to firm. Supply Chain Management in China • Product flows – International logistic providers • Most of them are state-owned. • Rely on domestic logistic providers to transport goods inland. • More foreign investors come in this sector. Supply Chain Management in China • Product flows – Infrastructures • Electricity and energy shortage • Sea ports – HK seaport faces strong competitions from mainland ports. • Airports – HK airport edges mainland competitors on International connectivity. Supply Chain Management in China • Product flows – Infrastructures • Roads – Subpar, fragmented, but growing networks. • Rivers – Congestions in some areas caused by » Height limitation of bridges » Small inland ports and high demands » Drought Supply Chain Management in China • Product flows – Distribution channels are inefficient, fragmented, and costly. • No national distributors but a plethora of small and medium-sized local wholesalers. • Too many nodes in supply networks. SCM in Paradigms Summary Q&A China Three-stage Financial flows view • Regulation • Infrastructure Information • HR factors Three-flow flows view Product flows Summary • Regulations – Business Licenses – Currency – Environmental protection • Closed loop supply chain – Labor laws • Firms in coastline close and move inland Summary • Infrastructures – Subpar transportation networks • Recent ice storm looms many problems – Almost non-existed e-Commerce capability Summary • Human Resources – Not attractive to college graduates – Weak professional identity – Problematic performance measures and incentives – Low awareness of the benefits of scientific supply chain planning and execution Thank You! Questions?
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