Hidden costs in the Chinese supply chain

When it comes to global sourcing and global trade, India and China inevitably are contrasted more than they are compared. In such discussions and debates, India is usually criticized for its 19th century infrastructure that appears better designed to letting cows wander than moving modern cargo efficiently and cost effectively. But China faces a large number of infrastructures challenges of its own. I recently came across an article that calls out some of these infrastructure challenges and costs to doing business in the region. For example, did you know that "Logistics costs in China are 18 percent of its GDP, compared with just 10 percent for Europe and North America"?

China's rapidly growing automotive supply chain -- whose quality has picked up tremendously in recent years -- is not immune to logistical constraint. As a result, "cost savings from low labour and parts" are "being offset by high logistics costs" in many cases. In my view, whether you're looking to China from a global sourcing perspective or to create localized supply chains to serve the regional domestic markets themselves, it's absolutely critical to consider logistics and infrastructure expenses in your total cost calculations.

Jason Busch

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