The time is right for companies to review and optimise their current supply chain configurations, says Fraser Ironside, business development director for network design at Barloworld Optimus. According to Ironside, supply chains in China have historically always been unreliable, with organisations building their supply chains based on ensuring market penetration and product availability.
Highly fragmented distribution centre configurations were driven by infrastructure constraints and the dominance of local players.
However, he said that this is already beginning to change, due to recent substantial investments in China’s infrastructure and the entry of foreign-owned 3PLs.
Although China remains a low-cost economy, logistics spending reached 21.3% of GDP in 2004, compared with approximately 9% of GDP in Europe and the US.
Nevertheless, the move from decentralised distribution centres operating at low cost and on short contracts to better and more centralised facilities will reduce this figure, and Ironside expects that China’s logistics companies will provide similar levels of service as those in Europe and the US.
He also predicts that within a few years, next-day delivery for ex-stock product will become the standard service offer for top-level customers, while the acceptable service time for make-to-order products will drop from the current eight to ten days to just two or three days.
Network modelling is not something that can be carried out once every five years, says Ironside. Changing infrastructure and new trends make network modelling an ongoing process if companies are to benefit from the most efficient supply chains achievable in the regions in which they operate.