DC Velocity - Digital 2018

Special Delivery

C ountless high-quality products that enrich our lives are made in and sourced from China every day. Chinese exports range from the lowest-tech toys to the highest-technology computer electronics. Yet for every successful sourcing experience in China, there is more than one disappointment or complete failure. So, the question is, “Why are some companies so successful at managing supply chains in China, while others are not?”

The answer is rooted in the fact that successful supply chain management in China depends on very different principles and practices than in the West. Companies that don’t understand and adjust to those differences invite problems. To help supply chain managers recognize and understand how to adapt to those differences, this article offers a four-point formula for successful supply chain management in this dynamic country, which will inevitably play a critical role in future global trade.

DECODING THE DIFFERENCES

At the most fundamental level, China’s commercial envi-
ronment is still young; China has been deeply engaged in
Western-like commerce for little more than two decades.
The principles that Western businesspeople take for grant-
ed are not ingrained throughout Chinese business yet.
Some simple “rules,” such as not substituting materials
in customer-specified products without prior customer
approval, don’t have the same intuitive acceptance in China
as in the West. Companies that try to manage suppliers
without understanding this and the many other differences
they will encounter almost inevitably experience disap-
pointment. Decoding the differences, however, is not an
insurmountable challenge, but it takes patience, curiosity,
and a disciplined approach to supply chain management.

Suppliers as capable as the best in the West can be found in China. At the same time, suppliers that would not be able to find a single customer in the West because of their substandard quality, delivery, and support performance can still survive in some segments of China’s market. How can this paradox coexist in today’s global and increasingly transparent marketplace? In the West, the absolute quality difference between excellent and poor suppliers is actually small. The broad pursuit of continuous improvement throughout the supply chain drives acceptable quality standards forward, and the competitive environment has eliminated suppliers that don’t keep pace.