Back to List
Dealing with Supply Chain Technology Requirements in Chinas Developing Market
Today, Third Party Providers (3PLs) are going beyond their traditional core competencies to provide scaleable technology solutions and in a global context garner customer input to galvanize innovative global processes. This case study focuses on working with customers to create new protocols for success.
By David Griffith
Using the successful operations model of a supply-side just-in-time support hub in relatively developed markets like Singapore or Malaysia, our company was asked by one of the worlds leading technology companys to apply the same operational methods to support a new production operation in China. The goal was to replicate the operations at or near the new production site in China.
This is an example of how the third party logistics (3PL) industry is beginning to mature beyond simply leveraging balance sheet items beyond enterprise core competencies. In this case, the firm was looking for critical expertise and technology.
Research and customer requests are indicating that 3PL customers are interested in achieving additional benefits beyond the balance sheet. These 3PLs are extending themselves to bring essential components of their supply chain expertise to supplement the core competencies of their customers. In todays market, companies are looking for their service providers to bring stable, viable and scalable technology solutions that enhance operational productivity. It helps reduce the need for customers to invest their own dollars to establish internal supply chain functions.
This research and these requests are positive for the 3PL service provider and even for the Lead Logistics Provider (LLP) who are contracted to manage or control several outsourced service providers for firm supply chain. However, this trend does not come without challenges, particularly in developing markets.
There are three challenges to overcome when taking a proven 3PL solution into a developing market:
Each of these challenges and the stage of progress in the socio-economic development of a particular market influence how a supply chain solution should be designed, executed and operationally managed. Outlining the nature of each challenge will provide a backdrop for discussion regarding how to identify important success factors for implementation, management and measurement.
Elaborating on the example where the operation was replicated into China from a more stable market illustrates the infrastructure, expertise, and cultural challenges and some of the associated gaps.
One of the key ingredients of the ongoing operation outside of China is a sophisticated data interface between the customers planning system and the 3PL WMS. It allows both companies to be responsive to production schedule capacity requirements relative to available material in the warehouse. The warehouse operation is structured as a vendor-managed-inventory (VMI) environment that required our company to communicate in near real-time with both the customers supplier base (both inland and off-shore to its production plant) and its production facility in a 24-hour shift schedule.
As the implementation project moved from the planning to the solution-development phase, the project team (composed of business and technology leaders) needed to be extremely careful in identifying the unique market requirements for China. Even though the solution was to be replicated from an existing operation, it was important to customize it for the new local market. The initial operating procedures and systems development guidelines took into account the need for local language content for functional sections of the warehouse system.
The systems configuration and facility layout were leveraged from the existing operation. Additional system-to-system and user-acceptance testing schedules and scripts were created to help mitigate any operational start-up gaps. The user-acceptance testing turned out to be the most critical part of this projects success. The test scripts used were specifically written to account for the identified cultural and language differences anticipated in the operational processes. Within the testing cycles, systems modifications and process changes were identified and made to improve the operations effectiveness as prescribed and to be measured by the customer.
The launch of the operation was successful for the customer. It became readily apparent however, that the skill level in some key positions could not be sourced locally. This required ongoing support in the first year from external resources, putting a burden on the previously defined labor model from a cost and teamwork standpoint. The operations group recognized that they had to invest the necessary training resources and effort in several key positions in order to bring the skill set up to a sustainable level for a successful operation.
The setup of a global communications network with suppliers and customers who were mainly non-Chinese language speaking, was another major hurdle faced during this type of duplication of tried-and-tested models in a developing market such as China. The linguistic barrier, coupled with differences in time zone and work culture, proved to be daunting in the startup phase of this project.
Diligent evaluation, planning and implementation are required when attempting to leverage technology and business processes in developing markets. Even with the best efforts for assessment, the implementation process needs to have flexibility built into the project so that adjustments could be made to accommodate the markets real conditions. Adjustments made through the findings of the user-acceptance testing process, and experienced back-up support for the initial launch and first periods of sustained operation, resulted in a successful operation for our company and the customer. The customer has a multi-country outsourced operation on a common operating platform and a common systems interface that allows for clear performance measurement and operational agility and our company manages the customers market demand changes and give near real-time visibility to its supplier community from a common technology base.
A 3PL that makes investments and has this expertise can provide localized management teams empowered to develop in-depth skill sets are which are critical to success in developing countries like China. A deep understanding and respect of cultural and national habits enables 3PLs to adapt to developing markets. Couple that with 3PLs employees ability to tap into its global network pool of expertise and experience, and you have the ingredients for success for global supply chain solutions.