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China's escalating supply chain awareness 02 May 2008

Escalating supply chain awareness now being shown by Chinese companies as part of the nation’s all-out bid to fully exploit its manufacturing super-power status is fuelling a major swing towards the latest software tools, according to software developer and global supply chain consultant Barloworld Optimus.

At the same time, growing responsibility over carbon emissions ahead of the forthcoming Olympics is also revving-up calls for carbon reducing I.T. – a factor that has resulted in software and licensing gains three times up on last year and five times up on the previous year for the company behind world-beating software tools Optimiza and CAST among others.

As a direct result, Barloworld Optimus has already brought forward plans to open up a new Shanghai office and has expanded its Asian operations to include permanent Beijing-based consulting resources – both moves geared towards positioning the company to cope with China’s growing sophistication and all-out drive to reinforce its position as a world-class manufacturing power.

Following a recent familiarisation tour that included presentations to several major Chinese companies and the China Supply Chain Council as well as exposure at trade shows including the SITL Asia event in Shanghai, Barloworld Optimus’ Global Business Development Director Fraser Ironside says that China’s ‘obvious determination’ to ramp-up its own supply chain infrastructure, allied to major new initiatives to tackle environmental issues in the face of growing international pressure, has resulted in two years of spectacular gains.

As a result, he says, the company – with a China-based client list that already includes McDonalds, Nokia, BAT and Goodyear – is now undertaking a range of initiatives geared towards developing long-term relationships with further global clients in the region, as well as to increase the span and depth of engagements with specific plans to target the expanding number of Chinese third-party logistics companies.

 “‘Phenomenal’ isn’t too strong a word to describe the potential for expansion in China: there is massive scope for growth as the need for effective supply chain optimisation becomes more marked” he said.

He adds that chief drivers behind the company’s ambitious China expansion plans include national logistics costs running at around 20% of GDP – compared to between 8 and 10% in the US and Europe – and the recent relaxation of regulations allowing foreign 3PLs to establish wholly-owned operations in China after years of operating on a strict 50-50 joint venture basis with Chinese firms.

“Western companies now operating in China are looking to their western third-party logistics providers to offer similar service levels to those they expect elsewhere in their global supply chains.   At the same time, China is now spreading the growing wealth of its industrialised coastal regions around Beijing, Guangzhou/Hong Kong and Shanghai with its less-developed interior, encouraging ‘aggressive’ corporate investment in those regions – leading to massive expansion and development of the road network, the Yangtze River delta, the national rail network and the commercial airport infrastructure.

 “As a direct result of all this comparatively recent activity, China is now being forced to face up to the same crucial issue that sparked-off its resurgence in the first place – supply chain optimisation – and that’s where we lead the field!” he said.

Central to the company’s aggressive sales drive into China is optimal supply chain infrastructure tool CAST, which is already viewed as market-leader in Europe and increasingly in Asia…

With more than 350 licences world-wide and over 1300 trained users, the tool is used widely by third party logistics, manufacturing, consulting and retail companies to evaluate and identify different supply chain strategies, in turn leading to significant cost savings and service improvements.

In 2007, Barloworld Optimus’ APAC operation put on 50 new CAST users, with China representing 35% of the region’s turnover. 

“With increasing business sophistication in China, companies are beginning to look at their supply chains to decide the optimal approach to get their products to their customers, and they’re rapidly building up a picture of how best to locate distribution facilities. 

“At the same time, rising corporate customer expectations for more efficiency are fuelling moves towards more expensive purpose-built, highly-automated distribution facilities – with the knock-on effect of steep increases in warehousing costs as a proportion of the total supply chain cost.   Consequently, ‘supply chain optimisation’ is fast becoming operational terminology” he said.

32-year old supply chain expert Wei Li has been appointed Barloworld Optimus’ permanent Consultant based in Beijing.   Until recently Supply Chain Consultant at Barloworld Optimus’ Solihull base in the UK, the appointment represents a return to China where he worked with IBM and as Alliance Manager with UNIX (China). He holds a Master of Business Administration degree, an MSc in computing and is also a member of the CILT (Charted Institute of Logistics and Transport) in the UK.

Further appointments are also expected during the coming months, according to the company.