Prof. L. G. Sprague1 China’s Evolving Supply Chain Infrastructure: A Work in Progress Dr. Linda G....

Prof. L. G. Sprague 1

China’s Evolving Supply Chain Infrastructure: A Work in Progress

Dr. Linda G. Sprague, FDSI, FIOM

Professor of Manufacturing & Operations Management

China Europe International Business School (CEIBS)


China’s Evolving Supply Chain Infrastructure

• As China’s industrial output grows at unprecedented speed, the country’s supply chain infrastructure becomes an increasingly serious issue. For manufacturers accustomed to lean operations, new lessons must be learned about the consequences when supply variability is a fact of life. In response, governmental and private actions are underway to offer relief – at least in the long run.

• This presentation will trace the roots of the current supply chain infrastructure from the earliest days of the People’s Republic of China to the present. Examples of initiatives underway will be shown, and impediments to progress will be presented. Pre-lean lessons about dealing with these conditions will be resurrected.


Supply Chain Management: Some of the Issues

* Ownership and Decision Points

* Inventory Management and Control

* Manufacturing Processes

* Physical Flows

* Information Systems and Flows

* Infrastructure


Infrastructure

The Foundation for

Physical and

Information Flows


Infrastructure Implies Legacy

• Geography and Geology

• Political and Economic Structures

• Previous and Present Policies

• Customs and their Consequences


China: 9,561,000 km2


China’s Political/Economic Structure

From 1949, a Marxist-Socialist Centrally Planned Economy

September 1982: “Build Socialism with Chinese Characteristics.” Deng Xiaoping at the opening of the 12th CPC Congress

Since 1993: “The Socialist Market Economic System establishing a Modern Enterprise System.”


Previous and Present Policies (1)

THE SPIRIT OF SELF RELIANCE


THE FOUR MODERNIZATIONS

Agriculture

Industry

Science and Technology

Defense


Previous and Present Policies (2)

PRACTICE IS THE SOLECRITERION OF TRUTH

From an essay by Hu Fuming, sanctioned by Deng Xiaoping, at the Third Plenum of the 11th Party Congress in 1978, the basis of Seek Truth from Facts.


Customs and their Consequences

Recent habit patterns from a centrally-planned economic system

Older habits from a legacy of Empire

Management by the numbers BUT very limited numbers


Characteristics of the Current Government

• Hu Jintao, Tsinghua, BS in Hydropower & Water Conservancy

• Wu Bangguo, Tsinghua, BS in Radio Electronics• Wen Jiabao, BS & MSc at Beijing Institute of

Geology• Li Changchun, Harbin Institute of Technology, BS

in Industrial Enterprise Automation• Huang Ju, Tsinghua, BS in Electric Machinery

Manufacture and MSc in Geology


Characteristics of the Current Government, cont’d

• Luo Gan, Institute of Iron & Steel, sent to Karl Marx University (Leipzig) for BS in metallurgy

• Zeng Qinghong, Beijing Institute of Technology, BS in automatic control

• Wu Guanzheng, Tsinghua, BS in thermal measurement & automatic control

• Jia Qingling, Hebei Engineering College, BS in electric motor design and manufacture


China US France

Population 1.256 billion 274 million 58.7 millionSize 9,560,900 km2 9,372,610 km2 543,965 km2

Railways 67,524 km 212,433 km 31,939 kmWaterways 110,000 km 41,009 km 14,932 kmPipelines (oil and gas) 19,093 km 609,000 km 32,292 kmAirports* 40 185 13Highways: Current: 55,000 km 79,091 km 9,900 km + 2010 completion: 35,500 km

• with >3047 m of paved runways

China’s Physical Supply Chain Infrastructure Today


China US France

Population Density:people/km2 131 29 108

Railways (km) per1000 km2 7 23 59

Population per airport 31.4 mio 1.5 mio 4.5 mio

Highways (km) per1000 km2 – current 5.8 km 8.4 km 18.2 kmin 2010 9.5 km

Today’s Supply Chain Infrastructure, continued


National Major Arterial Highway Network (2010)


Lingang New City, Shanghai

a new city within Shanghai to support the new deep water port,

linking with the old port, the river system, the new Pudong airport’s cargo facilities, the new highway and the rail system


Lingang New City, Shanghai, continued

The New City’s Industrial Park will provide state-of-the-art logistics equipment and services

The Shanghai International Medical Zone will include hospitals, medical device manufacturers, a Clinical/ Medical Research Park and a Rehabilitation Center

Shanghai Auto Industry Corporation (SAIC) will build a new production plant in Lingang

Lingang New City is planned for 800,000 residents


Infrastructure: Telecommunication

Telephone number in 1980:

China 42108

Telephone number in 2005:

China 021 2890 5160


The People’s Republic of China

Sector Employment

Workforce by sector (000,000):

1970 1980 1990 2000 2003

Agriculture and Mining 81% 69% 60% 50% 49%

Manufacturing and Industry 10% 18% 21% 22% 22%

Service 9% 13% 19% 28% 29%

Workforce 344.3 423.6 647.5 720.8 744.3

Source: China Statistical Yearbook, compiled by National Bureau of Statistics of China,

China Statistics Press, Year 2004


Supply Chain Management in China:Evolution and Infrastructure

Physical infrastructure is evolving rapidly

but not to scale.

Information systems: hardware and software are available BUT

information systems depend on data.


Supply Chain Survival Tactics

When lean may mean anorexic, it’s

back to the basics:

Physical Distribution Systems

Warehouse Management

Enthusiastic Inventory Control

Traffic Departments…


Survival Tactics, Plan B

1. Stay near the coast.

2. Stick to already developed areas.

3. Outsource – but the profits won’t be yours.

Prof. L. G. Sprague1 China’s Evolving Supply Chain Infrastructure: A Work in Progress Dr. Linda G....

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