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2011 International Conference on Economics and Finance Research IPEDR vol.4 (2011) © (2011) IACSIT Press, Singapore

Logistics Barriers to International Operations: A Case Study of Japanese Firm in China

Lanfeng Yu
Faculty of International Communication Gunma Prefectural Women’s University Gunma, Japan e-mail: yu@gpwu.ac.jp Abstract— The aim of this paper is to capture the specific logistics problems and the new challenges that Japanese firms face in their operations in China, and to identify the key factors influencing the development of effective logistics management. The analysis is based on a case study of a Japanese firm that manufactures its products in China and sells in the Japanese market. The findings show that establishing logistics functionality in China is the key for maintaining low prices. The critical challenges in procurement: quality, cost, and delayed delivery are seriously affected by logistics problems. The logistics barriers Japanese firms encountered in China have been changing; however, regulatory restrictions and local protection regulations still remain the most critical problems. Meanwhile, some new issues: a rise in logistics costs, local labor costs, and a shortage of human resources are becoming major concerns. Keywords-international operation; logistics management; case study; China

The Chinese government has begun to formulate logistics as a strategic industry and invested heavily in improving infrastructure, such as nationwide multi-modal transportation networks and large-scale logistics centers. The logistics barriers foreign firms encountered in China have been changing, and some new challenges have become concerns for the Japanese firms. This study aims to capture the specific logistics problems and new challenges facing Japanese firms operating in China, and to identify the key factors influencing the development of effective logistics management. II. LITERATURE REVIEW A number of researchers have studied logistics problems facing foreign firms in China from various aspects. Carter et al. (1997) conducted a survey to identify the logistics barriers that U.S. firms encountered in China. They found that logistics barriers were present in all aspects including purchasing, transportation, order processing, warehousing, inventory control, and import/export services. They indicated that logistics barriers to international operations were partially the result of internal inefficiency, rather than a large scale problem. Developing reliable suppliers can reduce the severity of those problems. Ta et al. (2000) surveyed Singapore-based manufacturing firms in China and found that particular transportation problems were more serious than others. They concluded that the type of transport mode and ownership of transport services could affect the level of satisfaction for transportation in China. Zhang (2001) provided a case study on supplier management of joint ventures in China, and indicated that one difficulty facing JVEs was trying to simultaneously maintain quality levels while reducing costs by purchasing materials locally. Hong et al. (2004) concluded that there was an increasing trend for firms to outsource logistics services in China, especially in the area of logistics information system management and logistics system design. Easton (2003) indicated that China’s supply chains were costly, inefficient and unreliable. In addition, the infrastructure and operational paradigms restrained economic development and limited the performance of local and foreign companies. Zhang & Goffin (1999) identified four major problem areas: 1) recruiting and training employees, 2) supplier delivery, 3) quality output, and 4) achieving an effective business culture

I.

INTRODUCTION

Foreign Direct Investment (FDI) to China has increased rapidly in recent years. In the 1990’s, many foreign firms shifted their manufacturing base to China to utilize the cheap labor costs. Since China joined the WTO...
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