Outsourcing To China - Infrastructure And Transportation Challenges

Outsourcing to China Transportation and Infrastructure Challenges During Outsourcing Operations to China

D a te : 1 0 / 1 5 / 2 0 0 9 B h a vin G a n d h i B h a vin . G a n d h i@ live . co m M o rriso n U n ive rsity

1

Contents qInfrastructure challenges qCost challenges qElectricity problems qCopyrights issue qCommunication challenges qTransportation challenges qAir freight qExpress packaging qLogistics outsourcing qRail qRoads qBureaucracy

qConclusion qQuestions 

2

Infrastructure challenges qOld belief about China’s outsourcing qChanging landscape in China qNext big wave qChina’s increasing exports qPressure on existing infrastructure

3

Cost challenges qWhat cost challenges? Isn’t China cheap? qHow China can maintain its low pricing? qExample: Metal stamping press

qChallenges for Managers qBig start-up cost qExample: IGT’s China office

qLonger time to establish outsourcing center

4

Electricity problems qExposing company’s supply chain to disruptions qWhat happens in crunch time qExample: Christmas time with 0.8 million Dell Laptops to produce

qEconomy grew faster than power capacity qInvestigate local energy situation qPlan for supplemental generators 5

Copyrights issue qLack of law enforcement qCopycats capturing domestic market qExample: Clone of iPhone

qMNCs should be careful about which technologies they share qOne might create its own competitor qRole of Chinese Government

6

Communication Challenges qAsian say “Yes” to almost everything qAsians are afraid of giving incomplete answers qProposed solutions qFind out key people to interact with China’s resources qKnow how to avoid getting answer “Yes” qAsk right questions while communicating with them qSet expectations so that, if problem occurs, they

7

Transportation challenges qVarious challenges in China’s logistics qCompanies forming joint logistics partnership qExample: BMW, Audi, Chrysler creating “coreteam”

qWestern firms (UPS and DHL) ramping up qWestern Entrepreneurs filling the gaps qEconomy continues to outstrip the growth of logistics 8

Transportation challenges (contd..) qAir freight qRapid development q2nd largest domestic air freight market after USA qAirports expansion is the key

qExpress packaging q40% compound annual growth qParcel industry broke all the records qWestern companies like UPS and FedEx jumping in

9

Transportation challenges (contd..) qLogistics outsourcing qGrowth in China’s third party logistics (3PL) companies qHeavy domination of state owned enterprises

qRail qGeared to move people but not goods qGovernment’s plan qPrivatization may help q 10

Transportation challenges (contd..) qRoads qBest network concentrated around coastal cities qVast government investment but bias towards east coastal areas qInternal barriers imposed by government

qBureaucracy qTransportation market is highly regulated in the world qSlowly opening up to outside competition qOther controls

q 11

Conclusion qGlobalization/outsourcing is the future qDo your homework before thinking of outsourcing qEstablishing relationships with local companies will help qTransportation system is growing faster but gaps still persist q 12

Questions? Contact Information: Bhavin Gandhi [email protected] www.bhavingandhi.com 13