Sourcing, Import and Logistics

Brüel & Kjær’s sourcing stratetgy
Group sourcing manager, Henrik Jeppesen of Brüel & Kjær, opened the meeting with a presentation on the company’s sourcing set-up in China. Although the company has encountered some problems achieving the quality standards of Brüel and Kjær, the overall picture of sourcing in China was a positive one.

Sourcing in China: The Case of Arvid Nilsson A/S
Corporate sourcing manager, Lars Wiinholt of Arvid Nilsson A/S followed with a presentation on his company’s experience in sourcing fasteners from China. Employing almost 50 people in the company’s Shanghai office, Arvid Nilsson purchased roughly 25 percent of its total purchase value in China with 21 suppliers. Wiinholt insisted that the only way to gain a true understanding of a supplier was through continued physical inspection, preferably by one’s own staff. Another key point the sourcing manager stressed was the maintenance of buying power by keeping a host of suppliers and thus sustaining the ability to shift volumes of trade if suppliers fail to perform. Finally, Wiinholt touched the issue of what can go wrong in China, referring to issues such as poor-quality products, late delivery, problems with packaging and labelling. The best way to handle such situations is to confront the suppliers with the legitimate problems, but do so in a respectful way, allowing the Chinese supplier to save “face”. 

Logistics in China: The Case of Maersk Logistics, Damco China
Managing Director Steffen Schiottz-Christensen of Maersk Logistics China finally addressed his experience with logistics in China and specifically talked about the impact of the current financial crisis on the logistics industry. For the first time in a decade Chinese exports contracted in 2008, causing alarm in the central government, which reacted with the massive economic stimulus package and a loose monetary policy. According to Schiottz-Christensen, “everything that can be done, has been done” to save the Chinese economy. For logistics, the result of the financial crisis will be excess capacity for the foreseeable future, and thus oil-prices will be the only variable left to explain variation in logistics prices.

Schiottz-Christensen further stated that the main challenges in logistics reside in China, because of the highly inefficient logistical market. Poor infrastructure, poor warehousing and storage, an underdeveloped domestic trucking industry, different rail gauge across provinces, characterize the Chinese logistical market, which is desperately in need of improvement. The stimulus package addresses many of these logistical needs.

The managing director ended his presentation on a few learning points, stressing that China is a fiercely competitive market with high price sensitivity. Size matters, and entering the Chinese market must be done for the long haul and only after careful preparations have been made to understand the Chinese market.