Material Handling Businesses Need to Build Dual Strategy in China

April 22, 2008
Integrate sourcing from China with product sales in China and make Asia part of your overall global supply chain and customer base says Tompkins CEO.

At the 2008 North American Material Handling Show now in progress in Cleveland, Jim Tompkins, CEO of Tompkins Associates, and Steve Ganster, senior vice president with Technomic Asia (a division of Tompkins Associates), addressed China's changing business climate. "The smartest move that material handling and related companies can make is to adopt a dual strategy," says Tompkins. "Now, it is all about 'globalization' instead of 'China-fication.'" Tompkins Associates designs and integrates global end-to-end supply chain solutions.

Companies should develop operations in China that export back to the U.S. as well as sell to customers within China, says Tompkins. "Integrate sourcing from China with product sales in China and make Asia part of your overall global supply chain and customer base," he adds. This dual strategy also recognizes the growing middle class in China, currently estimated at 100 million. Opportunities for sales and distribution will expand as the middle class continues to grow.

Western companies require "competitive intelligence" in their Asian business strategies in order to be successful, however. "It is a mistake to assume that what works in the U.S. States or Europe will work in China," says Ganster. "People, thought processes, how technology is viewed, and even the different terrain must be considered when establishing China as part of the global supply chain."

Ganster also points out that Chinas material handling industry has grown aggressively due to continued construction and industrial expansion. "Material handling equipment sales have increased 25-30% a year over the last four years," he notes. "And the opening of China's logistics market will provide a huge opportunity for suppliers to the warehouse industry."

On the other hand, the country's level of technology (including WMS) is still in the embryonic stage, with only about 5% of warehouses in China reporting that they have sufficient IT systems. "Many Chinese companies are writing their own WMS programs that are not built to international standards, and this will only add to their difficulties in globalizing," Ganster says.

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