Integrated Fulfillment in Today’s China

As part of its entry terms into the World Trade Organization, China agreed to open markets and services that had been protected from global competition. One such area was logistics - a sector with huge potential to spur business growth. From a supply chain perspective, however, the road to high performance in China is still riddled with challenges. Underdeveloped infrastructures, fragmented distribution systems, insufficient technology and onerous regulations are just some of the challenges. Given these barriers, supply chain mastery will separate success from failure among companies doing business in China. High Performing Supply organisations generally strive for an integrated end-to-end presence, with high levels of coordination, standardization and visibility; essentially managing Logistics as an “Integrated Fulfilment” process. But as far as China is concerned, traditional logistics - transportation and distribution - is the most important hurdle. This chapter provides an overview of China’s Integrated Fulfilment sector and includes practical advice for foreign companies - both small and large - that are planning to establish an effective presence in China or are looking for ways to improve their distribution system efficiency. We discuss the impact of World Trade Organization (WTO) entry on China’s distribution and logistics sector, key trends in the sector, the risks of operating in China that remain even after WTO entry, and strategic recommendations for companies entering China. China’s attractiveness as an investment environment for multinational corporations (MNCs) in a variety of industries - such as consumer goods, retail, automotive, electronics, and telecommunications - is well known. However, the country’s underdeveloped transportation infrastructure, fragmented distribution systems, limited use of technology in the Integrated Fulfillment sector, dearth of logistics talent, regulatory restrictions, and local protectionism combine to hinder the efficient distribution of domestic and imported products, and thus reduce returns on investment. The barriers have increased the cost of doing business in China and have restricted consumers’ choices.