Case 3 - Supply-Chain Management Logistics in China

The importance of the trade relationship between China and the United States has been
steadily rising. In 2000, China was fourth on the list of the top ten U.S. trading partners,
following Canada, Mexico, and Japan. Its trade volume with the United States has since more
than quadrupled ($94 billion to $408 billion), making it America’s second largest trading
partner and supplanting Mexico, which historically has held the number two spot. However,
some analysts claim that these figures are not market-optimal, pointing to China’s
inadequate transportation and monitoring infrastructure as a continued impediment to
international trade.
The government of the People’s Republic has been paying attention. China has budgeted $440
billion over the next 30 years, earmarked for upgrading highways and railroads.
This is good news for U.S.-based logistics and transportation companies, such as Schneider
Logistics and YRC Worldwide, both of which have started to aggressively develop China-based
networks. Both companies believe that China’s planned investment should improve supply-
chain management in the country, which has long been plagued by antiquated infrastructure
systems, fragmented road networks, and limited transportation alternatives.
Jim Ritchie, president of YRC, states: ‘‘From a ground transportation standpoint, the
environment in China continues to be highly fragmented, with limited visibility.’’ However,
logistics providers, encouraged by Beijing’s promised infrastructure investments, have sought
to develop cooperative agreements with Chinese transportation suppliers in order to
create greater potential synergy in the supply chain. For example, Ritchie remarked that a
year ago, it was almost impossible to track freight in China, from the time it was dispatched
to a consolidator, until it arrived at port and was loaded back onto a container. However,
since YRC has developed direct working relationships with suppliers, the company has been
able to better monitor the whereabouts of its customers’ cargo. YRC has also dispatched 70
of its own trucks on Chinese roads and has developed 39 joint ventures with local
transportation companies, allowing them to provide inland transport for approximately 200
shippers.
Schneider Logistics President Tom Escott also believes that supply-chain reliability in China is
improving. According to him, Chinese companies are gradually gaining a better understanding
of end-to-end supply-chain management. ‘‘Supply-chain functionality in North America
includes national distribution, warehousing, and long-haul trucking,’’ said
Escott. ‘‘These things are still evolving in China, where customers’ needs tend to be more
localized, with smaller shipping patterns. Suddenly, we are seeing a whole evolution of
thinking in the [Chinese] market about distribution and managing supply chains.’’ Schneider
Logistics opened its first Chinese office in 2005. It recently received government authorization
to establish itself as a domestic carrier and logistics service provider, making it the first (and
so far only) North American operator to establish a domestic truckload business in China.
Considering the enormous size of the country’s consumer market, its WTO accession, and the
gradual liberalization of its government’s attitudes toward trade, China is positioned to enjoy
economic expansion well into the future. Planned improvements to its supply-chain
infrastructure are likely to remove one of the key remaining barriers on the road to prosperity.
In your opinion, what is said in the case above that “China
has allocated budget for
upgrading highways and railroads” and “logistics providers have sought to
develop cooperative agreements with Chinese transportation suppliers” can
represent key to business logistics? describe based on three concepts?

Sources:
Jeff Burman, Logistics Management (March 2007): 22; John J. Coyle, Edward J. Bardi, and C.
John Langley, Supply Chain Management: A Logistics Perspective, 8th ed. (Mason, OH: South-
Western College Publishing, 2008); ‘‘Foreign Trade Statistics—China,’’ U.S. Bureau of the
Census, http://www.census.gov/foreign-trade/balance/c5700.html#2009,
accessed October 22, 2009; ‘‘Top Ten Countries with Which the U.S. Trades,’’ U.S. Bureau of
the Census, http://www.census.gov/foreign-trade/top/dst/2009/08/balance.html, accessed
October 22, 2009; ‘‘Moving Goods in China,’’ McKinsey & Co., February 2002,
http://www.mckinsey.de, accessed October 21, 2009.