Supply Chain Challenges in Chinese Logistics Industry
A supply chain refers to a network of organizations that are involved in various processes and activities that create value to consumers (Chen, Sohal, and Prajogo 2186). Logistics is the process of planning, implementing, and controlling the effective movement of goods from the point of origin to consumption to meet the needs of customers and corporations (Xiang 1). Supply chain management is considered an essential factor for organizations to acquire competitive edge. Globalization and trade liberalization have led to the development of China’s economy. China is considered to be the world’s manufacturing center and has become an engine of Asian growth and increased geopolitical significance (Zhang and Figliozzi 179). China plays a key in the developing global supply chains, and its main export destinations are the USA, the European Union, Hong Kong, and Japan. This paper examines supply chain challenges in the Chinese logistics industry.
One of the main challenges facing the Chinese logistics industry is the condition of the nation’s transport infrastructure. Firms in the region have raised the issue of inadequate incorporation of transport networks, information technology, warehousing, and supply equipment. Areas outside the major economic centres experience low quality logistic sector, which is incompetent with diminutive technological proficiency (Zhang and Figliozzi 183).
Although efforts have been made to upgrade the transport infrastructure, China’s transport infrastructure is still inadequate to fulfil the high demand created by its booming economy. Congestion and delay in shipments are common at Chinese seaports because of inadequate space. Many congestion problems in port areas have been initiated by highway construction and transport bottlenecks. Outdated infrastructure and inadequate highway networks linking the established coastal regions to underdeveloped inland provinces intensify rail and river congestion, as more firms are moving inland to benefit from minimal labor costs (Zhang and Figliozzi 183).
Lack of a Nationally Integrated intermodal transport network
There is poor communication and harmonization between the Ministry of Communications, Ministry of Railway, and Civil Aviation Administration that control highways, railways, and airways, respectively. Local regulations also inhibit the creation of logistics and transport corporations with a comprehensive national network. It is very hard for China’s small shipping firms to conduct their business beyond its regions’ borders because of local protectionism. China lacks national trucking firms, and the majority of trucking companies are small scale or family-based operators with restricted service and they do not travel outside regional boundaries (Zhang and Figliozzi 184).
Entrenched Regulation and Local Protectionism
Despite reduced national level regulations since China joined the World Trade Organization (WTO), local governments still create bureaucratic and political barriers to safeguard local companies or products and stop entry of outside competitors. Municipal governments compete for logistics centers and infrastructure. Local protectionism focusses on maximizing local economic development, employment, social stability, and tax revenues, instead of effective use of regional resources or the establishment of an integrated national transport network. Local benefits and economic growth have promoted the replication of logistics parks and transport infrastructure in municipalities that are closely located (Zhang and Figliozzi 184).
Underdeveloped Warehousing Service
Many China’s warehouses were constructed as single-storey brick buildings with low ceilings, poor lighting, insufficient sprinklers, poor temperature control equipment, and poor dock levelling. High rates of spoiled food and perishable goods are caused by lack of controlled temperature warehouses and untrained management. Manual labor is preferred because it is abundant and cheaper than the use of mechanized warehousing amenities and the cost of training workers. Assembling in warehousing is rarely carried out and most order picking and packing are conducted manually (Zhang and Figliozzi 185).
The Chinese enterprises should get closer to the market and factors of production, create a great China market, and develop integrated production and market management of supply chain innovation. The industrial policies should create a global competitive business environment, unify administrative convenience measures, and improve infrastructure and multi-functions.
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Chen, Jie, Amrik S. Sohal, and Daniel I. Prajogo. “Supply Chain Operational Risk Mitigation: A Collaborative Approach.” International Journal of Production Research 51.7 (2013): 2186-2199. Business Source Complete. Web. 4 Aug. 2016.