While the experts at NASA recently worked on Hubble, many supply chain folks here on Earth have been, and continue to, work on hubbing – most notably hubbing in China. Although hubbing is not rocket science, there is definitely a science to it.
Most everyone in America now knows China’s importance to global trade. However, as I’ve mentioned frequently here, a lot of companies are still learning the best way to handle trade and sourcing with China.
For more efficient logistics in China, many have started using centralized hubs in which products from multiple suppliers or origins are accumulated to create larger shipments to be sent to a single destination.
A recent survey report on The Growing Interest in Logistics Hubs in China, written by Greg Hazlett and Valerie Bonebrake, two of Tompkins Associates’ logistics experts, notes current data trends and advises companies on building their supply chains in China.
A few summarized pieces of advice given by seasoned hubbing companies in the report include:
Do your homework beforehand. Prior to getting started in China, understand the logistics and production requirements; Chinese companies may not have the support, technology, and expertise needed to meet your expectations. Traveling there can give you a better understanding of how supply chains work in China. Furthermore, face-to-face relationships are important in the beginning of your set up and will be a foundation for years to come. And seeing yourself as a Chinese entity can help you overcome challenges from trade practice discrepancies and culture differences, which also may be unique to various regions within the country – knowing the background and having strong communication are critical. Talking with other companies who have led the path to China and successfully implemented their supply chains there can also help you minimize mistakes and potential roadblocks.
Use an experienced LSP. It is best if your LSP is experienced, understands your objectives, has great growth resources and people in China, and has worked side-by-side with your supplier. Also, to increase the visibility of your products, use full-capability LSPs with order management programs. Additionally, this may seem like common sense, but be sure to work with a good consolidator and source from reputable companies. This is not a good place to cut corners. It could lead to trouble down the road. Further, as with any freight vendors, whether domestic or international, ask a lot of questions to find good resources. Request detailed billing documents to learn how freight costs are impacted by subtle differences in shipment characteristics. You may also save of headaches and expenses if your vendor offers more than one service.
Have a good supplier management program and quality inspection process in place. Establishing partners to help with your partners can help. That is: having a third-party quality control partner can help you keep tabs on your products in China. These third parties can also help establish better communication between your company and the supplier, and an experienced partner with common goals can help secure the best pricing and terms on your behalf. But, in order for the third party to know your values and needs, it is important to provide detailed specs and establish a system for quality control inspection.
Have people from your company reside in China. To a greater extent, having someone directly from your company on the ground in China is important in order to keep relationships and quality assurance. When doing business in China, it is critical to build those relationships.
These are all great points, but I would like to point out one of my favorite pieces of advice from the report is, "Do not plan on perfection. Things can and will go wrong. Plan for these challenges." This is so true! (And, might I point out, very Apollo 13.) And note the key word in all of this is "plan." Without a strategy (and, as I have constantly stressed, good relationships), you are more likely to be confronted with many challenges when doing business in China.
For more hubbing tips and trends, read the report, or to learn more about Western business in China in general, below are a few resources.
Caught Between the Tiger and the Dragon (Book)
How to Build Better Relationships in China (article – Supply Chain Quarterly)
China Business Blog and Podcast
ON THE FRONTLINES: DOING BUSINESS IN CHINA (DVD)
Pharmaceutical / Medical Products Industry in China (Web site)
Asian Sourcing Cost Reduction (podcast)
It Takes the Big "R" to Win the Global Sourcing Game (article)
Go!Go!Go!
Jim