Spend Matters: Live From China (Sixth Dispatch)

A Few Random Observations

It has been a year since we've been to China, but in that time, so much has changed. Last year, standing atop a high floor in a Shanghai skyscraper, you could see construction cranes as far as the eye could see in every direction. But this year, most of the cranes were gone from Shanghai. At first, we thought this signaled a slowing of the Chinese building boom. But we were wrong -- the cranes are still in China. They've just moved out of Shanghai and into the smaller (e.g., 5 million people) cities as well as the industrial areas around China's business capital. On a trip to visit a supplier in Yangzou city -- about four hours from Shanghai on a highway that passes through Wuxi and Suzhou -- we counted literally hundreds of cranes along the way. The amount of building in some areas that were still farmland last year is almost unbelievable.

But the building boom outside of Shanghai was not the only soft observation we made on this trip. What also caught our attention is how bad the pollution and air quality still is in some of the industrial towns we visited. Obviously, this visit was a snapshot of the region -- and as such, this observation was completely unscientific -- but the factory and coal burning pollution outside of Shanghai was enough to make even a Western athlete with strong lung capacity cough and choke after a day of it. Seriously, the air quality was worse than before (and reminded us more of the poor air in and around Beijing than outside of Shanghai from past visits). At Pudong airport on the way home, we had a chance encounter with a former Intel executive who after a long career in high tech had changed tracks to focus on sustainable energy. Clearly, for the sake of the health of the nation, China needs to make these investments as soon as possible.

The final random observation for today is one that many sourcing professionals would overlook (at least those without a logistics background). And that's the fact that despite the investments from DHL, Fedex and others, the mom and pop trucking industry is alive and well in China. On the highways, for every one container we saw flying down the road on a modern rig with actual tread left on its tires, we must have counted a few dozen privately owned blue trucks with un-palletized cargo strapped down with tarp that often flapped in the wind (or driving empty down the road, having dropped off its shipment). One often quoted statistic about China is that the average trucking company has 1.2 trucks. This explains the disproportionately high costs of logistics in the country, since there is no scale in the industry -- or much tread, for that matter, left on the tires of a typical blue truck that dates back to the pre-capitalist era.

This post is part of the Spend Matters / MFG.com China Sourcing series. Aptium Global's Lisa Reisman contributed to this blog entry.

Jason Busch

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