China’s economy has had a phenomenally successful decade. According to the International Monetary Fund (IMF), the Chinese economy was worth about $4.7 trillion in 2009, over a third of the equivalent estimate for the US. This is a huge leap from 2000 when it was just above $1 trillion, nine times smaller than the US. Chinese wealth has risen fourfold, from less than $1,000 per capita in 2000 to almost $4,000 today.
China has invested heavily in logistics, with annual revenue growth of 15 per cent last year. Government reforms and massive investments, such as a stimulus package dedicated to rural infrastructure, electricity and transportation will help expand local demand both for imports and domestic products over the next two years.
From a supply chain technology perspective, Chinese companies are still riddled with fragmented distribution systems. Most have been developed in-house and are difficult to expand and expensive to maintain. The scattered supply chain infrastructure is not flexible enough to adapt to companies’ rapid business growth, and inadequate reporting restricts data consolidation and prevents activity monitoring in real time.
China’s challenge for the next 10 years is its commercial sector. To keep pace with the growing economy and improving export markets, private investment in technology will be essential. There are a number of supply chain factors important to companies operating in China.
According to a recent report from the Aberdeen Group, Supply Chain Visibility Excellence
, 57 per cent of global supply chain companies considered visibility a high priority for improvement. Third-party logistics service providers in China regard improvement of visibility as key to supporting rapid business growth.
Demand is also increasing for industry-specific solutions. Healthcare has become a high-growth industry following the unveiling last year of a reform plan to ensure fair and affordable health services for its 1.3 billion citizens.
Leading pharmaceutical distributors and retailers need to invest in warehouse management solutions to take into account special distribution factors such as security, temperature control and traceability.
Retail is also booming in China, with its extended supply chains, including suppliers, distributors, carriers and retailers. Supply chain tools allow companies to share information up and down this extended chain so that visibility of inventory and data is made available in real-time for fast decision-making.
It is clear that in 2010 Chinese companies are serious about supply chain optimisation. There is a need for higher levels of supply chain flexibility and visibility than cannot be delivered by older technology. For all of us in the distribution and logistics business, China’s next decade will be one to watch.
Steve Smith is senior vice-president, EMEA, for Manhattan Associates