When German logistics consultancy Bearing Point set out to study the nature of sourcing in China earlier this year, it found a direct link between business success and in-house supply chains. Some 60% of successful companies manage their own logistics or use a dedicated contractor, while only 25% of less successful firms choose this approach.
By sheer numbers, China is the most important sourcing location in Asia but the average 9.6% of total spending companies allocate to sourcing is less than in Malaysia and Taiwan, which both sit at 15%.
As supply chains become global rather than local, companies often pick up one piece here and another there but then have to find the best, and cheapest, way to put the puzzle together.
This can be expensive. Shipping partial containers carrying just one part of a product is much more expensive than transporting pre-processed container loads that don’t require unloading and assembly at their final destination. Until late last year, that’s exactly what companies had to do.
A change in customs regulations, which is slowly being implemented at ports across China, may have a big impact in supply-chain costs.
Shanghai’s Wai Gao Qiao port and the Yantian facility in Shenzhen have already been upgraded from free trade zones to bonded logistics parks (BLP). Although not a bonded logistics park, Shekou – Shenzhen’s other port – is also benefiting from a rule change that allows companies to amalgamate shipments inside a Customs Supervised Zone.
The new rules allow companies to bring containers from different countries, process them together with made-in-China products and ship the merchandise abroad in a single container. "This is changing international trade rules for companies that export a lot from China or other countries," said Hans Ohlhaber, China/Asia director for TransAccess Solutions.
In addition to the shipping itself, moving quantities that are less than a container full incurs a wide range of extra costs associated with packing and unpacking containers at every step of the supply chain.
"It is very costly because you have to pay for the loading, the packing, etc," Ohlaber said. The new rules cut down on these costs by allowing exporters to consolidate multiple shipments. "This is one of the big advantages."
Add to that the cost of processing merchandise in, for example, Hamburg, and the price of a football kit or a toy with multiple parts rises considerably. "If they ship to the EU directly, it would be 10 times the cost," Ohlaber said.
According to Bearing Point, parts and assemblies are the most important sourcing category in China and make up 60% of products sourced here.
To date, bonded logistics park are not operational across the board. Rather they are opening up as local governments determine how best to implement regulatory changes sent down from Beijing.
"As usual, it is being implemented gradually. It depends on the local governments and what they want to do," said Marcus Liegandt of logistics provider Dachser.
With different rules in different regions, companies still have to find the shipping routes that allow them to streamline their supply chains the most. As rules change the options may become more plentiful.
"Each region has particularities that benefit each industry," Liegandt said.
For now, however, the changes are unlikely to make a big impact on the traditional advantage enjoyed by the Hong Kong port as a transport hub. But with more central points available to process shipments the result may just be lower costs at the end of the line.
"If the rules are implemented the way we interpret them, it can save money," Liegandt said.