Strategic Supply Chain Emerging as Competitive Advantage for China-based Companies

China-based companies increasingly see strategic supply chains as a key competitive advantage, according to the PwC Global Supply Chain Survey 2013. Of the China-based supply chain executives surveyed, 46 % say their supply chains are now viewed as a strategic asset by their companies, which is in line with responses from global participants.

 

The survey also highlights how the financial performance of China-based firms equals - and in many cases exceeds – that of their global counterparts. Based on earnings before interest and tax (EBIT) performance and revenue growth, firms in China have an average EBIT margin of 14.2% - more than that of mature market firms (11.2%) and those in emerging markets (13.7%).

 

The China portion of the PwC survey was conducted in conjunction with the Greater China Chapter of the Supply Chain Council.

 

“That companies in China are already reaching and even bettering the financial performance of their global counterparts is impressive,” says Craig Kerr, PwC China Consulting Supply Chain Leader and co-author of the report. “Even in those aspects of supply chain management where there is still some room for improvement, many of these firms in China have identified the key issues and are implementing appropriate policies to address them.”

 

Other areas where companies in China are performing well include their inventory management performance (8.8 inventory turns per year), which was slightly above
the global average (8.4) and significantly ahead of the emerging market average (7.8). Meanwhile, Chinese companies’ delivery performance (86%) fell slightly short of their global counterparts (90%), the survey finds.

 

The survey also noted convergence in global and Chinese supply chain practitioners’ outlooks. Both participating groups identified reducing costs, managing profitability, meeting increasing customer requirements, and preparing the supply chain for volume flexibility as the most important trends in 2013.

 

However, while Chinese participants identified meeting increasing customer requirements as the most important trend this year, global participants felt that reducing costs could prove more significant.

 

Views about major issues faced this year also differ between supply chain executives in China and those globally, according to the survey. Of the top seven supply chain issues noted in the survey, global supply chain executives identify maximising delivery performance and minimizing cost as their two priorities. By contrast, their counterparts in China prioritise maximising volume flexibility and responsiveness and maximising delivery performance.

 

As a result, and to address issues around volume flexibility and responsiveness, China-based supply chain executives tend to focus on end-to-end supply chain planning and visibility and on how to involve partners for capacity reservation.

 

In contrast, global supply chain practitioners are placing more emphasis on flexible internal capacity and shift models as well as on payment structures, the survey says.

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