I’ve recently learned a lot more about China’s warehousing market, thanks to new research and talking with experts who know the score in the Asia.

The two main things that I want to pass on today:

1) China’s warehousing market, still booming and becoming more sophisticated, continues to roll on oblivious to the global recession. This is good news for the global economy.

2) For western companies doing business in China, or those planning to do business there, operating challenges and market entry considerations need to be tackled first and foremost. This is a step that cannot be skipped, or else companies will find themselves in a quandary due to cultural differences and government rules and regulations.  

Right now, China’s warehousing industry is entering its growth phase and offers optimal potential for western companies to step in and create value for their companies.  Specific-use warehousing and distribution centers are under investment everywhere in China - cold chain, pharmaceuticals, dangerous goods, auto, tobacco, etc.

A good resource for learning the latest trends and assessing potential opportunities, as well as gaining perspective on key end-use sector development, is the new webinar Special Briefing on Opportunities in China’s Warehousing Market.  Featuring Asia business strategy expert Steve Ganster, the webinar highlights results from a six-month research project conducted by Tompkins International in China.

Check it out at your convenience if you’re interested in learning more about China’s booming warehousing market.

Go!Go!Go!

Jim

 

More Resources 

Watch the Webinar: Special Briefing on Opportunities in China's Warehousing Market

The China Business Blog and Podcast

Podcast: Forecasting Business and Investment in China for 2010

Photo Credit: Jurvetson 

I’ve spent a lot of time analyzing the cyclic recession/recovery process over the last two years. As a result, I’ve uncovered a way to harness that cycle and advance the value of an organization’s supply chain.

Underneath all the predictions and analysis about economic recovery, there’s an independent cycle of evolution that presents major opportunities for improving value in a supply chain. I call this cycle the Supply Chain Value Contribution Cycle (SCVCC), and it includes four phases:

• Phase 1: Reduction
• Phase 2: Redesign
• Phase 3: Drive Growth
• Phase 4: Transformation

For details on how the four phases work and a real-life example of how a convenience store is improving its retail supply chain value, see my new article on SCVCC.  You can read it here.

Go!Go!Go!

Jim

More Resources 

Four Phases to Evolve the Value Proposition of Your Supply Chain

Photo Credit: Mescon 

If there is one silver lining from the Great Recession, it is that companies are creating new business and supply chain strategies based on lessons learned. 

But as I thought about this, I began to wonder how companies' supplier relationship management outreaches have been affected, and what that impact means long term for industries in which interactions between organizations and their suppliers were already strained.

 

It is likely that during the past 18 months or so, companies have been focusing on critical business needs instead of how they are getting along with their suppliers. I am certain that economic conditions have forced companies to make decisions that have negatively impacted these important connections.

 

If the good feelings and dealings have slipped away, how do you get back on track? First, begin by assessing the damage – is the relationship neglected, dampened, broken or severed? Then, take strong steps to address what is really wrong with supplier bonds.

 

In the recent Supply Chain Consortium Executive Briefing, Supplier Relationships: Picking Up the Pieces, co-authors Justin Brown and Bruce Tompkins outline some of the best steps to take in order to mend these relationships. 

 

So how has the recession affected relations with your suppliers? What type of damage control are you doing? 
 

Go!Go!Go!

Jim

 

 

More Resources 

Executive Briefing: Supplier Relationships - Picking up the Pieces

Article: Supplier Relationship Management: It Takes the 'Big R' to Win Global Sourcing Game

Podcast: Supply Chain Partnerships and Supplier Relationship Management in Asia (Listen or read the text transcript)

You might assume, and rightly so, that adding safety features to something would result in a clear outcome: fewer accidents. 

However, due to the nature of risk management, the outcome in this situation (and any other when trying to mitigate risk) could actually end up increasing risk. 


For example, there is the case of what happened when a portion of taxicabs in Munich were newly equipped with much safer anti-lock brake systems (ABS). The anticipated outcome was that the ABS taxis would have fewer accidents. But the actual outcome was no change in the rate of accidents for the ABS taxis versus the non-ABS taxis. Although the city of Munich tried to manage risk, the result was not what they intended.


A detailed study discovered that the taxi drivers who had the ABS had become inferior drivers, because their brakes were better. They braked harder, they tailgated, and they merged more aggressively. Accidents were not reduced by the use of ABS, but rather allowed the drivers to drive faster and more recklessly without increasing their rates of accident. 


The result of risk management in the case of the taxicabs in Munich is an illustration of the concept of risk homeostasis. At the most basic level, the phrase risk homeostasis is the idea that changes made to reduce risk may actually increase risk. In essence, risk management can itself be a risk.


Risk homeostasis can also work to decrease risk when an increase in risk was anticipated. As an example, in the late 1960s, Sweden changed over from driving on the left-hand side of the road to driving on the right. As you might think, it was projected that this switch would increase risk and create a higher rate of accidents. But, the opposite proved true. Drivers compensated for the increased risk by driving more carefully. Accidents dropped the year after the switch, before eventually returning to their prior levels.


Due to my interest in supply chain consulting, I began wondering how to apply the concept of risk homeostasis to supply chain risk – which I view at its highest level as dealing with supply risk and demand risk. 


Supply Risk:

As an example of supply risk, I have seen a procurement-oriented approach that focused on contract conformance and supplier performance, and along with the core supplier concept, resulted in consolidation of suppliers. But this, due to the financial viability of the supplier, resulted in greater risk, not less. 


Risk homeostasis teaches us to consolidate, but not to go too far, or risk reduction may beget an increase in risk. 


Demand Risk: 

Working to increase forecast accuracy is typically seen as a good tool to reduce demand risk. But what happens in situations like now, when we come out of recession, is that the historical basis of the forecast is no longer valid. (For more on the uselessness of forecasts during this recession, see my earlier post, “The Forecast: Cloudy with a 100 Percent Chance of More Useless Forecasts.”)


Since we have reduced forecast error during the recession, we falsely believe we do not need to check the forecast as we come out of the recession. 


We then wind up with unanticipated levels of supply and demand in the market. For example, there is a huge global shortage of electronic components that presently exists because of forecast error, which means companies in these industries aren’t able to fill orders.


Risk homeostasis is at work here, as we reduced risk by reducing forecast error, but this false sense of confidence when the market shifted actually resulted in higher risk.


All of this boils down to something many of us learned a long time ago, even before we learned the phrase risk homeostasis. Addressing risk in one aspect of the supply chain may very well increase risk elsewhere in the supply chain. When attempting to manage risk, always use your experience and judgment to evaluate not only the positive consequences, but also the negative. 



More Resources 

Article - Inventory Management: Proper Planning Can Lead to Big Improvements

Article - Top 40 Risks in Outsourcing 

Article - Flexible, Adaptable, Redundant and Secure: Strategies for a Resilient Supply Chain 

Global Supply Chain Services and Risk Management

Supply Chain Best Practices

Photo Credit: Peyman

We’ve been talking a lot about the ups and downs of the economy lately. Who hasn’t?

And we all got a rush of adrenaline the other day as thestock market plummeted nearly 1,000 points, only to reemerge moments later toeveryone’s relief. With murmurs that the quick drop could have been caused bysimple human error, many of us are left wondering where the catch points are inthe system.

We all have stories (but probably not on this large of ascale) of a time when simple human error caused a company (or personal) crisis.When these types of events happen, they remind us that organizations need tothink about where Newton’sLaw does not apply: that is, the situations when a small action equals a monstrousreaction.

As of this writing, those investigating the brief stockmarket panic are focusing on atechnical error that may have caused a domino effect of computerized automaticselling. But whether it was the fault of human or computer system error, itlikely involves a mismatch of rules between the two.

In a recent blog post by DavidMeyers on the SupplyChain Information Technology Perspectives Blog – AnIdiot Proof System -- or Maybe Just a 'Bubba' Proof One? – he discusses thenecessity of “idiot proofing” your supply chain systems to stave off these kindsof catastrophes. Check out David’s insight, and don’t be caught off-guard by“Bubba.”

More Resources

Supply Chain Information Technology Blog

Download the White Paper Evolution to World Class Inventory Management

Photo Credit Katrina Tuliao

I know some fathers who are never happy with their child’s report card.

Consider this lecture from a dad to his fourth-grade son, Johnny: "Well, Johnny, you went up in five subjects and down in none, but you still have one A-, one B+ and two Bs on this report card, and I really do not see you putting all your effort into being a straight-A student." Wow! What a total clown. This would be a great opportunity for praise, recognition and yes, even some celebration, but instead, it boils down to a critical review and a disappointed Johnny. How stupid is this?

It is the same with our economy and its report card. What I am hearing these days is a lot of complaining, moaning and groaning about the economy. I hear about Greece, unemployment, the Yuan, early Easter, good weather, Washington’s attack on Wall Street, slam dunk comparisons on year-over-year comparison because last year was so bad, etc. It might as well be Johnny’s dad talking.

Let’s look closer at the most recent economic report card: capital spending is up; retail spending is up; first quarter earnings are up; the Leading Economic Index is up; the Index of Leading Indicators is up; factory output is up, and CEO optimism is up. Economists and companies alike have underestimated the economic turnaround (click here to see the New York Times article, "Consumers Help Drive U.S. Economy to 3.2 Percent Growth Rate," for more on this subject), as well as the impact that consumers can and have had on recovery.

Then why all the pessimism? In my opinion, there are really only three issues that need to be grasped:

1. The US consumer is spending, and this is a good thing. I have said for well over a year now that the US consumer was the key to putting the recession behind us and returning to growth. This is happening.

 

2. Unemployment is not good, but as we all know, this is a lagging indicator. The unemployment numbers are only important if you are looking backwards, not forwards. By the time unemployment returns to acceptable levels, the recession will be long gone, and growth will be fully embraced.

 

3. The confidence of company leadership in the recovery is the key issue that will impact whether we have an OK recovery or a great recovery. There is no doubt that we will have a good recovery; it is happening now. But the confidence of leadership in the recovery is what is holding us back from a great recovery. Let me give two examples:

 

A. Electronic parts shortages: Due to the lack of Comeback Planning by electronics component manufacturers, there exists today a significant shortage in key components. This is having a major impact on the consumer products and fast moving consumer goods, high-tech and automotive industries, as well as retailers of these products. Electronics component shortages are resulting in unfulfilled demand, thus slowing the recovery.

 

B. Retailers with empty shelves: Due to the lack of Comeback Planning by many retailers, they are not replenishing their inventory in the retail supply chain, and their levels of lost sales are high. Customers are leaving stores empty handed. These lost sales are resulting in customers buying less, thus slowing the recovery.

Back to my point: Leadership needs to take hold of their return to robust growth and have confidence that the recovery will be great to ensure that we move from a good recovery to a great recovery. I know, Greece, unemployment, the Yuan… Yet we need to get past this and realize that not taking market share now will result in companies missing out on the Great Comeback.

I see a robust recovery coming, and so my recovery will be robust. Where is your firm? Do you want to be like Johnny’s hapless dad and complain about the recession, or do you want to celebrate a great recovery? I think it’s time to move forward with confidence.

More Resources

Download the Executive Briefing on the Great Comeback

Download the white paper: "Sourcing and Selling in Challenging Economic Times: How Retailers Should Re-Think Their Operations and Methods" 

Photo credit: Brad Holt