Logistics inefficiencies undermine China`s competitiveness


Alysha Webb

Automotive News | 2006-12-6

SHANGHAI--I attended a seminar on logistics in China`s automotive supply chain last week and came away thinking that China had better start doing more than just build roads if it wants to maintain its competitiveness as a manufacturing base. The speakers, from Shen Jinjun, the vice chairman of Automobile Logistics Association, China Federation of Logistics and Purchasing, to Robert Strain, the director of logistics for General Motors`Asia Pacific`s supply chain group, talked about logistics inefficiencies in China. Complaints ranged from different regulations in each province to lack of standardized packaging. Logistics in China add 15 percent to the cost of an item, compared with 8 percent in developed countries, said Shen. Beijing, take heed. A few years ago, the buzz was all about "the China price." Companies rushed to set up manufacturing operations here to both serve the domestic market and for export. Now, companies are realizing the China price ain`t so low. Now the talk is about how other leading competitive countries (the preferred term to "low-cost countries" these days) are starting to look more competitive than China. The Mexico price looks good for supplying the United States. The Slovakia price looks good for supplying Europe. The Thailand price looks good for supplying Southeast Asia and someday maybe even China. The Vietnam price looms on the horizon. Suppliers are getting squeezed by automakers to cut prices. If China doesn`t improve its logistics situation, suppliers will have to reconsider if China is the best place to make low-cost components. Pictured:Alysha Webb is the China Bureau Chief of Automotive News