In May of 2006, the consultancy Barkawi, specializing in after sales services and logistics, jointly with DHL Logistics and in cooperation with the China Supply Chain Council (CSCC) created the first study of service logistics in China. The strategies of over 180 companies were evaluated according to customer requirements.
Topics such as efficiency of infrastructure, logistical services, outsourcing, IT systems and data management in service logistics from the high-tech, electronics, medical engineering, and automotive industries were taken into consideration. The study compares the different procedures of the companies, derives current trends from it and offers optimization recommendations in the area of service logistics.
Chinese customer requirements scarcely differentiate from customary high market standards in Western Europe, specifically in economic centers such as, Shanghai, Beijing or Shenzhen. The need for high-quality services like short-term part deliveries within two to four hours, competent call centers, general Tracking and Tracing and subsequent Supply Chain Event Management, complete stock visibility, multi-vendor stock management as well as TPR (Third party Repair) is comparable to western countries. Nevertheless, this high standard of service remains unfulfilled in China, even in the above mentioned economic centers.
Moreover, these requirements have no opportunity to be fulfilled in more rural regions due to clearly underdeveloped infrastructure. The study reported that 60 percent of the companies therefore use multi-level distribution channels to reach their customers adequately. For this reason, appropriately higher stock costs must be absorbed.
Contrary to the rapid and steady growth in customer requirements, low prices are the top priority for Chinese companies when it comes to outsourcing. Outsourcing partners are therefore selected less for the scope and level of their service than for cost reasons. In the field of transport, where DHL, Exel, EMS and UPS are among the leading service providers, outsourcing potential is almost fully tapped (up to 95%).
Warehouse outsourcing is likewise well developed but still has a potential for development left.
The result is similar for IT systems and data management too. Only ERP (Enterprise Resource Planning) systems use standard products, whereas companies in China tend to use home-grown solutions for CRM (Customer Relationship Management) and APS (Advanced Planning Systems) tools.
Uniform standards are not common practice here yet at least. Data preparation for controlling spare parts logistics is still not sufficiently developed and as such offers clear potential for optimization.
In light of the conclusions drawn by the Chinese service parts logistics study, management consultants Barkawi have drawn up recommendations for action for the Chinese market. The strategy proposed by Barkawi involves companies actively formulating service requirements, if appropriate together with customers, and defining a distinct product portfolio. They should fall back on proven methods and measures used in western markets to prevent mistakes that have already been made elsewhere. As a specialist in after sales services and logistics, the management consultants also recommend horizontal and vertical cooperation between companies. Linking up with companies from other industries and also in part with competing companies opens up the possibility of combating some of the basic deficits in infrastructure and management in service parts logistics in China.
Barkawi is an international management consulting company with proven expertise in After Sales Services and Logistics. Barkawi supports global aftermarket organizations in developing service strategies and achieving operational excellence. Barkawi focuses on technology-driven industries such as Industrial Machinery and Components, High-Tech and Tele-communications, Railway Technology, Aerospace as well as Automotive and Medical Technology. Customers include large multi-nationals with capital intensive and logistically complex business models, such as DaimlerChrysler, Deutsche Bahn, Deutsche Telekom, Electrolux, Fujitsu Siemens Computers, Linde, Lufthansa, Nokia, Philips, Siemens, Sony Ericsson and Volkswagen.
About the China Supply Chain Council
As an independent non-profit organization, the China Supply Chain Council provides supply chain executives with knowledge and skills through educational events, business intelligence and benchmarking. Every year, the Council organizes and supports more than 50 events in China and communicates with 10,000+ senior executives from leading companies to optimize their value chain.