Supply chain planning expert Fraser Ironside at the 4th Annual Supply Chain Modelling Forum run by Manufacturing and Logistics IT in the UK, said, traditionally, organizations operating in China have built their supply chains based on a need to ensure market penetration and product availability. Now the time has come for companies to review how they do it and save money through effective optimization.

Ironside, said, 'Historically, the supply chain in China has always been unreliable, with highly fragmented distribution centre configurations driven by infrastructure constraints and the dominance of local players. However this is already beginning to change with the entry of foreign owned 3PLs and the ongoing improvements to the road network.'

At present, although China remains a low cost economy, spending on logistics in 2004 reached 21.3% of GDP. This compares to logistics spending of approximately 9% of GDP in Europe and the US. (Note that these figures are not always consistent. Think of them as approximations. They serve a purpose in highlighting a major discrepancy.)

Matters, however, are improving. Within just a few years, next day delivery for ex-stock product will become the standard service offer for top level customers, while the acceptable service time for make-to-order products will fall from the current 8-10 days to just 2 or 3 days.

For this reason, according to Fraser Ironside, network modelling is not something that can be carried out once every five years. It has to be an ongoing process to make sure companies benefit from the most efficient supply chain possible given their specific circumstances. Getting the supply chain right can make a significant difference to the bottom line and this is particularly the case in China today.