Supply chain management practices in China


World Bank research ( 2001 ) shows China makes more than 50 per centum of the universe ‘s cameras, 30 per centum of its air conditioners and telecastings, 25 per centum of its rinsing machines, and about 20 per centum of its iceboxs. But non many know that the nutrient industry plays a large portion in China ‘s economic system. China ‘s nutrient industry is expected to keep rapid growing and will go a chief drive force to China ‘s economic system. Harmonizing to China Daily ( 2005 ) China ‘s nutrient industry is expected to keep rapid growing over following decennary to finally go China ‘s largest industry by 2015. However, China made nutrient is under oppugning from public. The 2007 pet nutrient callback incident, the 2008 Chinese milk dirt, and many other nutrient safety incidents, raised concerns nutrient safety and have badly damaged Chinese international nutrient trades. Domestically, public has immense swearing issue toward China made nutrient. Harmonizing to China Custom after the milk dirt, foreign milk pulverization import increased 220 % in first one-fourth 2009.

Many believe SCM is the reply to Chinese nutrient safety issue. This paper is to analyze China nutrient supply concatenation direction patterns. First some relevant Literatures will be reviewed. Then the jobs with Chinese nutrient supply Chain will be presented. A SMC model is applied, followed by an probe based on participants of nutrient supply concatenation. The paper will complete with the audience and treatment for a farther research on the subject.

Literature Reappraisal:

Fink ( 1998 ) one time said “ A literature reappraisal is a systematic, expressed, and consistent design for identifying, measuring, and construing the bing organic structure of recorded paperss ” . Literature reappraisal is an of import method to analyze China nutrient concatenation, late more and more literatures were written to analyze the Chinese nutrient safety issues. More than 20 diaries are viewed to analyze the subject. And the viewed literatures are divided into three classs: supply concatenation direction, assorted types of nutrient, and SCM models.

Supply Chain Management

Morgan ( 1997 ) defined incorporate SCM as: “ the alliance of purchasers, providers, and clients and their procedures to accomplish an advanced signifier of competitory advantage. ” There are Numberss of literature tried to analyze the nexus between supply concatenation direction, organisational success, and the company public presentation. ( Green, McGaughey, and Casey 2006 & A ; Martin and Grbac 2003 & A ; Mason 2003 ) Wang and Zhang ( 2008 ) studied Chinese nutrient cold concatenation development. They pointed out that set up a comprehensive cold concatenation is indispensable to China ‘s economic system stabilisation. They besides analyzed the related issues but failed to happen the causes of those issues. Small size nutrient supply concatenation direction was exercised during Beijing Olympic game. ( Wu, Xia, Ji, Liu, Chen, Hu, and Gao 2010 ) A comprehensive modern control system was formed to supply safe nutrient for Olympic jocks. However they mentioned that this system is limited to the game, as the loss attendings of Chinese authorities and the investing is hard to spread out and keep.

Assorted type of nutrient

J. Han, J.H. Trienekens, and S.W.F Omta ( 2009 ) employ a graded random sample of 229 porc processors in eastern China to set about a partial least squares analysis and happen that incorporate information engineering and logistics direction better the quality direction patterns of porc processors. They emphasized that it is of import to set up better supply concatenation direction to work out the nutrient quality and safety issues in the Chinese porc industry. Stringer, Sang, and Croppenstedt ( 2009 ) studied vegetable supply concatenation in China, but their focal points were on the supply concatenation itself. Brown, Longworth and Waldron ( 2002 ) failed to advert the importance of supply concatenation direction in their survey on the beef industry in China. Many other literatures researched different type of nutrient supply concatenation. ( Narrod, Roy, Okello, Avendano, Rich, and Thorat. 2009 & A ; Lu, Trienekens, Omta and Feng 2008 ) many other literatures studied what the impacts are on nutrient supply ironss in China after it became a WTO member ( Chen, and Shi 2003 & A ; Huang 2002 & A ; Dong and Jensen 2004 )

SCM models

In recent old ages, a few SCM models have been developed. Global Supply Chain Forum introduced The Supply Chain Management Institute ‘s model “ it considers supply concatenation direction from a procedure position and helps exemplify the demand to see SCM from a boundary spanning position that links functional and/or organisational entities. ” ( Lambert, Cooper, and Pagh 1998 )

“ The Supply Chain Council ( 2008 ) has developed the Supply Chain Operational Reference Model for the intent of proactively patterning and measuring the relationships between the consecutive phases of a supply concatenation. ” Similarly, the Supply Chain Consortium ‘s Supply Chain Best Practices Framework ( 2008 ) provides “ a supply concatenation function ability that allows directors to understand the assorted flows that are critical to SCM ” ( Stank, Frankel, Frayer, Goldsby, Keller, and Whipple 2001 ) .

Newman ( 2009 ) proposed another supply concatenation direction model, which formed by four motivation spheres and by four degrees of supply concatenation integratings. He believes this model could assist houses to indentify the value of supply concatenation direction enterprises and their impact on house ‘s strengths and failings

Roth ‘s ( 2008 ) research focused on nutrient supply concatenation quality direction. Her six Ts model offers a deeper apprehension of the root causes and robust solutions for the nutrient safety issues. These six Ts include ( 1 ) traceability, ( 2 ) transparence, ( 3 ) testability, ( 4 ) clip, ( 5 ) trust and ( 6 ) preparation. She believes through her six Ts, nutrient safety can be expeditiously controlled.

Problems, relevant surveies and model

Tan ( 2007 ) discussed this issue in his “ the Sustainability of Food Supply Chain in China: Reappraisal and Remark ” . He emphasised that there are two chief sets of jobs within China nutrient industry. 1 ) Problems in the assorted links of nutrient supply concatenation, and 2 ) Problems with assorted types of nutrient. In this sector the China nutrient concatenation statue will be presented based on the surveies by A.T. Kearney ( 2007 ) .


The first set of jobs is highly of import as it examined the hazards in different supply links. In the first nexus, the nexus of primary production, Tan ( 2007 ) pointed out that The Chinese agricultural production procedure is lack of control, excessively much fertilisers, pesticides, and carnal medical specialty are applied, ensuing in both environmental pollution and residue of damaging stuffs in nutrient. Roth ( 2008 ) besides found this job in her research paper, “ Many Chinese husbandmans besides are non extremely educated in the usage of fertilisers, and they sometimes use pesticides and other chemicals, such as DDT in order to better harvest end product and labour productiveness ” . And more officially The U.S. Department of Agriculture has ranked China and some another states as the highest users of fertiliser per hectare in 2005. ( Calvin 2006 ) .

The nexus of nutrient processing describes the jobs during the nutrients processing. Most of Chinese nutrient processing mills deficiency of size. Harmonizing to Tan ( 2007 ) , many Chinese nutrient processing mills are near the beginning of nutrient, and are little scale mills with 10 or less employees or handicraft workshops. Food safety is another concern in this nexus. Untrained employees, bad working environments and deficiency of sanitary could ensue in nutrient safety issues.

There are three chief retail channels of nutrient in China, supermarket, free markets of agricultural merchandises, and nutrient stores. Those channels formed the nexus of China nutrient selling. Ten old ages ago Chinese households ‘ primary pick for nutrient is from free markets. This type of channel had a large potency nutrient safety job, as the review mechanism was non to the full established. Most of the nutrients from the free market were out of the range of safety supervising. Recently some sort of inspective establishments were found. Based on Tan ‘s ( 2007 ) study “ Safety supervising establishments have been established for the free markets of agricultural merchandises, but the markets are short of adequate steps, installations and forces for quality and safety cheque. ” After China joined the WTO in 2001, international supermarket giants like Carrefour opened 100s new supermarkets in China, which wholly changed China nutrient supply concatenation, supermarkets became the first pick for nutrient of all time since. The “ supermarketization ” growing rate sits at about 40 per cent yearly, and the 10s of 1000s of supermarkets in China achieved gross revenues of $ 71 billion in 2003. Despite fast growing, we all know that supermarkets have highest recognition for nutrient safety. Unfortunately in China, concealed danger of nutrient safety still exists in supermarket. For case, in 2006 Shenzhen launched a supermarket review to analyze the nutrient safety in supermarket. The review found 3.15 % of the inspected porc contained Clenbuterol Hydrochloride, a prohibited chemical. The probe besides found 6.5 % of veggies sold at 28 supermarkets and 28 husbandmans ‘ markets had inordinate sums of pesticides.

The nexus of nutrient logistics is another concern. This includes two types, bringing and storage. China faces the deficit of cold concatenation. Moriarty ( 2008 ) claimed “ There is no existent incorporate distribution capableness. For case, there is no cold concatenation system of refrigerated trucks, warehouses and retail infinite that can vouch cool temperatures for meats, veggies, vaccinums and similar merchandises ” . Harmonizing to a Grand Logistics study ( 2009 ) China has non yet formed the nutrient cold concatenation system. The study shows more inside informations state of affairs, presently about 90 % meats, 80 % of aquatic merchandises, and a batch of milk and soy merchandises are still mostly in the absence of cold concatenation. It besides points out that the nutrient industry ‘s development chiefly depends on the development of cold concatenation. From my ain experiences, fresh milks are barely available in China ‘s supermarkets. Most of available milks are made with preservatives to maintain the freshness. Except transit, there is no easy reply for the China ‘s nutrient storages excessively. Tan ( 2007 ) aggressively indicate out “ The volume of nutrient warehouses is non large plenty, the warehouses are non moderately distributed, and the size of the warehouses is by and large excessively little. ” Although Moriarty ‘s ( 2008 ) claim was non wholly right, he did stress the importance of a cold concatenation for nutrient supply concatenation. As in the absence of cold concatenation, nutrient waste is terrible. The supply concatenation waste is the biggest concern in this nexus, the nutrient wastes, from unqualified transits and deficient storage, are tremendous. Tan ( 2007 ) claimed that in 2002, the nutrient loss during transit in China is no lower than 75 billion US dollars. He even found that 70 % of the retail monetary value of those perishable groceries like seafood and dairy merchandises is used to counterbalance the lading harm during circulation. Regardless of the genuineness of this determination, the nutrient waste in this nexus worth more attempts to analyze on how to optimise this nexus of the supply concatenation, in order to cut down or even extinguish the nutrient waste from conveyance and storage. Cold concatenation is the solution for nutrient waste during this nexus, Research Report of Chinese Cold-Chain Logistic Industry ( 2009 ) shows that if a comprehensive cold concatenation establishes, shelf-life of the trade goods can be improved by one crease, tantamount to the gross revenues clip of the trade goods in the supermarkets. It besides concludes that if the shelf-life of the nondurable goods can be extended three times, the losingss of the supermarkets can be cut down by 30 to 50 per centum.

A study shows that approximately 40 % of the domestic makers for merchandise quality control considerations, the more willing to self-refrigerated logistics operations ; but there is still 60 % of the companies want professional cold-chain third-party logistics services. Such as cold drinks, frozen nutrient companies largely want to partial and full outsourcing of logistics operations ( Grand Logistics 2009 )

Relevant surveies:

From A.T. Kearney ‘s analysis ( 2007 ) , for an efficient national distribution web in China, more than $ 100 billion will be required in supply concatenation investing. A.T. Kearney believes it is the solution to repair the nutrient safety procedure in China, but require corporate actions.

The turning nutrient safety concerns in China have changed Chinese consumers ‘ behaviours. Harmonizing to CIES nutrient safety study ( A.T. Kearney 2007 ) , in 2005 merely 57 % Chinese consumers willing to pay premium for safe nutrient with big premium merely 6 % . But merely 2 old ages subsequently, the figure increased to 83 % with big premium about 15 % . More and more people are willing to pay more for safe nutrient. And more than 95 % of Chinese consumers rank nutrient safety as really of import. This really provides a great chance to set up a national terminal to stop supply concatenation. By enhance the nutrient safety along will bring forth $ 33 billion benefits per twelvemonth, as the turning Chinese in-between category populations are willing to pay 5 % premium for safe nutrient. Other benefits like cut down nutrient waste are even higher. Roth ( 2008 ) argued “ The deficiency of information engineering and captured cognition causes the trail to acquire murkier with each hand-off along the supply concatenation ; and it opens the door for misrepresentation and other timeserving behaviours. ” If a comprehensive supply concatenation direction applied in China, those state of affairss can be easy controlled.

A similar position is made by Johnson ( 2008 ) . He found that “ despite rapid development it is difficult to do money in China and that a common belief in China is that the “ ultracompetitive concern environment ” means companies can non last without interrupting the regulations. Companies that do use good concern patterns are seen to be at an economic disadvantage, the study said. One manner to better safety would be for providers to follow comprehensive supply-chain-management patterns that allow tracking of nutrient from production to the tabular array in a crystalline manner ” Tan ( 2007 ) found that much nutrient is produced illicitly in unaccredited workshops without basic healthful conditions. Various impossible hurtful nutrients escape governmental supervising and come in the market. He believes this is the primary beginning of insecure nutrient in China.


The Supply Chain Best Practices Framework is chosen, as it provides an incorporate construction for specifying, mensurating and bettering supply concatenation procedures. The model establishes an end-to-end position that applies to all entities take parting in extended, inter-company supply ironss, including vendors/suppliers, makers, distributers and end-user clients.

Research design:

As the clip bound, and research from a long distant is comparatively hard, telephone interview would be the best research attack. The research marks are from throughout the nutrient supply concatenation in China. As the Supply Chain Best Practices Framework is applied, happening people work for different integrants for the interview is of import. These interviews are from

  • Beginning: famers
  • Brand: nutrient processing companies
  • Shop: logistic company and warehouse
  • Deliver: nutrient conveyance
  • Market topographic point: free market, supermarket

22 calls were made in entire ; merely five people were willing to make the interview. The sample figure is little. And it needs to indicate out that the interviews deficiency of deepness. Most of the phone interviews merely lasted for a few proceedingss. A set of inquiries was prepared for the telephone interviews.

Interview recalls:

I foremost telephone interviewed a fish famer from Hubei state, named Liu Guofu. He told me that most of his fish go to the free/wet market, where his married woman will assist him to sell. He mentioned that there were some supermarkets approached him before, but he turned them down. When I asked him why, he laughed and said “ supermarkets ‘ offers were excessively low, the net income border is really little. I would instead sell angle in free market. I do hold a truck, my transit costs are low. ”

But non every famer every bit luck as Liu, for those without their ain transit, they have to cover with the supermarket or nutrient companies, which can roll up nutrient from their doorsills. Wu Ailian, another interviewee, is a potato husbandman from Hubei state. She mentioned that she had contract with a Wuhan murphy bit company. During the crop clip, her murphy will be collected by the company. The transit used to roll up murphy is non ain by the nutrient company, but with a logistic company ‘s logo on. Unfortunately, the general director of this nutrient company did non desire to hold the interview.

In order to go on the research, I found a similar nutrient processing company in Wuhan. The gross revenues director Luo Xuejun, from Wuhan Yijiang Food Company, told me that their company was found in 1997. About two old ages ago the company successful established an inter – organisational supply concatenation system, they even use a SCM package to supervise the supply concatenation flows. He refused to state me how much the company benefits from the supply concatenation direction in pecuniary term, but did reference that the system saved a significant sum of nutrient wastes during the conveyance and storage. He claimed the company has its ain trucks and a big cold nutrient warehouse merely outside Wuhan, but deficiency of refrigerated trucks. Finally, Luo expressed that in Wuhan even in whole China the nutrient industry, companies have high defensive agencies to each other, and they tend to vie instead than work together. The coaction of whole industry is difficult to set up. This can be one of the biggest jobs for organizing a comprehensive supply concatenation direction within the nutrient industry. As A.T. Kearney ( 2007 ) demonstrated that to set up a national and terminal to stop supply concatenation direction requires full coaction from each participant of the industry.

The 4th interviewee, named Chang Jiaren, is the service manager of Wuhan Today Logistic Company, which is a in-between size logistic company. The company ‘s chief client is Zhongbai Warehouse. The latter is a big supermarket group based in cardinal China ; it has more than 140 subdivisions in cardinal China. Chang told me that because Zhongbai Warehouse has grown excessively fast, the supermarket ‘s logistic system is overloaded. So Zhongbai Warehouse outsourced portion of its logistic to his company. The logistic company pull off the physical flows like conveyance nutrient from distribution Centre to supermarket subdivisions. Supermarket merely cares if they can present the nutrient to the right topographic point at right clip. The quality and nutrient safety is non their chief concern. Ivanaj and Masson Franzil ( 2006 ) defined logistics as “ the direction and control of physical and informational flows, either by internal agencies or by outsourced agencies along a concatenation from the input to the end product embracing all the operations of conveyance, stock, fabrication, packaging, distribution and so on carried out for the client ‘s satisfaction and in optimized public presentation conditions for the company. ” It is clear that Zhongbai Warehouse ‘s position on logistics differs from Ivanaj and Masson Franzil ‘s position.

The concluding interviewee Xia Shuang is a subdivision director of Zhongbai Warehouse in Wuhan. Xia has worked for Zhongbai Warehouse for more than 8 old ages. He experienced many major alterations of the company. Take his shop for illustration, at first, approximately 5 % of nutrients were damaged during conveyance, and supply bringing frequently tardily than agenda clip. If one type of trade good was sold out, it took yearss to replenish. The information flow was highly slow. But after China Joined WTO, ZhongBai created a grow miracle. It expanded quickly merely merely the size, but besides the acceptableness for invention. Harmonizing to ChuTian News ( 2010 ) ZhongBai Group opened 20 new supermarkets in 2009, the one-year sale gross increased 25.4 % to a sum of 10.5 billion RMB. Xia said now his shop everything is connected with compute. The computing machine connected to boulder claies which records nutrient flows and sends informations to headquarter, following forenoon the nutrient will be delivered on clip to replenish the shop and keep a sufficient degree of trade good in the shop. So nutrient waste is minimized and out-dated merchandises are rare in his subdivision. He told an interesting narrative happened merely one month after ZhongBai introduced a complex supply concatenation direction package, one twenty-four hours there was a blackout, all computing machines were down, but they had to go on service clients without computing machines record the flow. When the power backed on following twenty-four hours, they found out that they have to shut for one today to screen out the lost records, because without them, the distributing Centre was unable to bringing refills as they had no thought what needed to be sent.


Although some nutrient companies and supermarkets have established certain grade of supply concatenation direction, a national broad terminal to stop supply concatenation direction is still mostly losing. Rural nutrient concatenation deficiencies of order, nutrient waste and nutrient safety is considered as critical state of affairs. Collaboration is desperately required. Recent 2008 Chinese milk dirt provides us with an insight expression at the Supply concatenation direction patterns in China nutrient industry. For a long clip the beginning of the toxic cyanuramide remains unknown. Without a nutrient supply concatenation direction, the hints of cyanuramide are hard to happen. Finally official did establish the beginning with the aid from some chemists. “ It is non known where in the supply concatenation the cyanuramide was added to the milk. The chemical is non water-soluble and must be assorted with formaldehyde or another chemical before it can be dissolved in milk. ” ( Wong 2008 )

Research restriction:

The interviewees are all from Hubei state and its capital Wuhan, and harmonizing to A.T. Kearney ( 2007 ) Wuhan is merely a tier 2 metropolis in the national nutrient supply concatenation. If usage this piece of research to stand for China, the research would be weak. Many of ideal interviewees were unwilling to take the interview. And for those who did, appeared wish to stop the interview as fast as possible except Xia Shuang from Zhongbai Group. So the interviews deficiency of deepness. This is besides the job for many other who wish to research Chinese market, as deficiency of imperativeness freedom in China. Some people feel uncomfortable with aliens interview them.

Decision and treatment:

This research applied the Supply Chain Best Practices Framework to analyze the Supply concatenation direction patterns in China nutrient industry. Despite the research restriction, the paper provides a full image of the China nutrient supply ironss. It is chief concern is how the supply concatenation direction could work out the Chinese nutrient safety job. And the paper besides tries to happen a criterions baseline of the China nutrient supply ironss.

Tan ( 2007 ) claimed “ with the advancement of economic development and rise of people ‘s ingestion affordability, the influence of the demand side on nutrient safety and quality would go stronger, and the market order would better under the force per unit area from the consumers. In certain sense, it is the consumers themselves who chose what grade of nutrient safety ” nevertheless I believe nutrient safety is human ‘s cardinal right, no affair what degree of economic system is.

The farther research should concentrate on acquiring more information from more Participants of China nutrient supply concatenation national widely.


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