Warehousing in China – implementing a strategy
This month SmartProcurement publishes the third article in a series considering China’s warehousing options, as presented in a report by C.H. Robinson Worldwide Considering China’s Warehousing Options. This month considers the key actions in implementing a warehousing solution in the world’s second largest economy.
1. Explore and understand your options
As China continues to expand its supply chain services and implement new customs rules and regulations, the number of viable warehousing solutions and their specific capabilities continues to increase. In order to determine the best fit, organisations need to understand their options and how each solution would impact their global supply chains. Some considerations that should factor into an organisation’s warehouse selection include:
• Tax rebate implications
• Ownership of inventory
• Insurance coverage
• Customs formalities
• Complexity of operations within the warehouse
• Technology capabilities
• Unit level cost
Managing logistics operations from a third-party location is complex, which is why selecting the right warehouse solution from the beginning is imperative. When organisations bounce between different warehouse solutions, they typically accrue many additional costs. These costs can be avoided by developing a long-term, steady relationship with one warehouse provider.
2. Build a strong relationship with the warehouse provider
To successfully manage a warehouse solution, it is important to build a strong relationship with a reliable warehouse provider. Establishing trust, keeping communication lines open, and making sure there is a clear, mutual understanding of processes, goals, and desired outcomes will ensure organisations maintain visibility and control over their global warehouse operations.
3. Have a local presence
Having local employees dedicated to an organisation’s warehouse activities in China is a distinct advantage. Local resources are invaluable because they can identify and develop solutions within the local market, solve potential supply chain problems, and help companies manage their global operations with ease. Since the regulatory environment in China is dynamic, having local resources who can help organisations adapt their processes accordingly is a critical factor to the success of any warehouse solution.
4. Utilise an electronic communication process
Visibility is essential when organisations are conducting business in multiple markets around the world. Having electronic connectivity capabilities such as Electronic Data Interchange (EDI) allows organisations to connect with their warehouse, integrate their technology systems, and gain all-access visibility to their day-to-day operations, data, and processes. In addition, EDI can make an organisation more efficient by reducing costs and environmental impacts.
If the warehouse does not have these capabilities, it is important to discuss whether or not they are willing to invest in the technology necessary to support the organisation’s goals.
The global third party logistics advantage
One way that many organisations are implementing successful warehouse solutions in China is by outsourcing to a global forwarding provider or third party logistics (3PL) company to help them establish, execute, and facilitate their outsourced warehouse solution. In 2008, AMR Research found that over 90% of organisations surveyed relied on outsourced providers (3PLs, freight forwarders, customs brokers) to execute their global logistics.
However, before selecting a provider, it is important to ensure they meet the following requirements:
• Strong local market presence in China, including strategic office locations in key manufacturing regions, local onsite employees, and pre-established relationships with warehouse providers in China.
• Large, global network of logistics options, including freight services and outsource solutions.
• The ability to provide flexible warehouse solutions in China as well as North America, Europe, and other key economic hotspots.
• Non-asset based business model with the flexibility to provide the best resources to meet an organisation’s specific needs in China and other regions of the world.
• Cutting-edge technology to provide full visibility, electronic connectivity, supply chain analysis and reporting tools, ROI measurement, and process improvements.
• Thorough understanding of China’s customs regulations, laws, language, and business culture.
So, is warehousing in China right for you?
Pursuing a warehouse solution in China may be a smart move for many organisations that are looking to boost the efficiency of their global supply chains. The benefits add up: lower costs, direct shipping to end customers, better visibility, and opportunities to infiltrate new global markets – just to name a few.
However, before making the leap organisations should carefully consider all the options and resources available to ensure they find, implement, and execute the right warehouse solution.