How International Firms Insight from Industry Are Coping with Supply Chain Issues in China

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Insight from industry How international firms Insight from Industry are coping with supply chain issues in China Bin Jiang

Introduction
A recent US-China Business Council survey found that US companies cited the supply chain-related problem as a major problem facing companies operating in China. One reason for this is the restrictions placed on providing distribution services through third parties. Foreign firms are required to import products through officially sanctioned trading companies. Third-party foreign trading companies and distributors have been prohibited from direct participation in the market and from providing a complete range of trading and distribution services. Other supply chain-related problems include: . Difficulty in locating local qualified suppliers. . An underdeveloped information technology (IT) and telecommunications infrastructure. . The unreliability of the Chinese transportation infrastructure in many areas. . The high rate of damage/loss in transit. This paper addresses issues of interest to firms wishing to establish their supply chains in China. It provides a snapshot of current problems facing firms expanding operations in China and describes the practical strategies for solving these problems. Finally, it provides a synopsis of lessons learned by firms currently operating in China and future trends in the country.

The author Bin Jiang is a PhD Candidate at the Department of Information Systems and Operations Management, University of Texas at Arlington, Arlington, Texas, USA. Keywords China, Supply chain, International trade Abstract Foreign firms face many supply chain-related difficulties in China. These include China's overburdened, underdeveloped physical infrastructure; inexpert, underfunded state-owned distribution companies; an enormous, fragmented distribution and logistics sector; and regional protectionism. Additionally, foreign firms face bureaucratic restrictions that prohibit them from legally importing, selling, and servicing products in a straightforward manner. Companies are looking to strengthen their supply chains in China in an effort to leverage the country's cheap labor costs. This strengthening of the supply chain can be accomplished through three methods: the cluster approach; the use of non-Chinese 3PLs; and the use of local carriers. Electronic access The research register for this journal is available at http://www.emeraldinsight.com/researchregisters The current issue and full text archive of this journal is available at http://www.emeraldinsight.com/1359-8546.htm

Foreign firms' supply chain models in China
More and more foreign companies are entering China to leverage the country's cheap labor costs and establish long-term competitive advantages in the world's largest potential market. To be successful in the long term, foreign companies need to establish, maintain, and strengthen their supply chains in the country. This can be accomplished through three methods: the cluster approach, use of non-Chinese 3PLs, and local carriers. Cluster approach model The Chinese Government encourages foreign firms to procure more and more components from local sources (these sources include domestic component suppliers as well as

Supply Chain Management: An International Journal Volume 7 . Number 4 . 2002 . pp. 184±188 # MCB UP Limited . ISSN 1359-8546 DOI 10.1108/13598540210438926

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How international firms are coping with supply chain issues in China

Bin Jiang

Supply Chain Management: An International Journal Volume 7 . Number 4 . 2002 . 184±188

foreign entities with factories inside China). For example, if foreign firms purchase localmade equipment or components, they will enjoy preferential tax rates in China. As a result, upstream foreign firms are asking, if not forcing, their original component suppliers to enter China with them. Thus, the groups band together, or cluster, to improve their odds of successfully entering China. There are two...
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