Forbes Picks up on China's Challenges

It always brings a smile to my face when I read an article in a mainstream -- read non-industry specific trade -- publication that picks up on specific Spend Management topics that a general business audience should know about, but often does not. And it makes me even happier when I read one of these pieces and unexpectedly see a friend and expert not only quoted, but featured as the subject matter expert. That's what happened when I opened the virtual pages of this Forbes article which takes a look at the challenges of logistics and supply risk within China. In the piece, AMR's own Mark Hillman is interviewed by a Forbes columnist with a strong perspective on the subject matter as well.

What are some of the more interesting tidbits that I found in the discussion? For one, the cost of China toll roads is one. According to the piece, "One factor that impacts heavily on Chinese logistics is the cost of moving goods through the many road tolls. Trucking a 40-foot container from Beijing to Shanghai can cost as much as $400 in tolls (along toll roads). The alternative is non-toll roads and endless congestion." Another is China's mounting garbage problem: "Part of becoming a major manufacturer and a nation of consumers is the dreadful increase in refuse production. China now produces 190 million tons of trash a year, and that outdistances even the U.S."

Later in the interview section of the article, Mark does a good job summing up some of the factors that drive the total cost of doing business in the region: "The major impacts of China sourcing are increases both in lead times and in lead time variability, which often leads to a requirement to stage more inventory at various levels of the supply chain to buffer against that increased variability, and that activity eats away at the cost benefits of the procured supply. One client of ours uses the rule of thumb that 'if the cost difference of a part that I am considering for China sourcing is not at least 30%, I don't even consider it, because the cost benefit will usually be negated by inventory, freight and expediting costs and reduced agility for my supply chain.'" And that's not even quantifying less tangible risk elements such as raw material shortages or price hikes, supplier financial viability issues, or the IP risks of doing business in the region.

Jason Busch

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