2004: United States BCO’s Sourcing in China: The Logistics Challenges

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NEW YORK JANUARY 2004

INSTITUTE ANNOUNCES FIRST RESEARCH PROGRAM

The Global Institute of Logistics will research how United States Beneficial Cargo Owner's (BCO's) sourcing in Southern China engineer "best in class" logistics solutions. The research will focused on the consumer products companies using the Trans Pacific Trade Lane and shipping more than 10,000 TEU annually.

China's entry into the World Trade Organization in November 2001 was the beginning of the present era of globalization. The figures for internationally traded goods between then and now show just how enormous an impact on world trade it had with an increase of over $1 Trillion over the period. This translates directly to a significant increase in container flow, China witnessed a 100% increase in container throughput from 2001-20o3.

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CHINESE FACTORIES HAVE BECOME THE WORKSHOP OF THE WORLD

Today more than 40% of America’s imports were from the overseas subsidiaries of its corporations with China accounted for about 25% of the global growth of GDP. Globally, comparative advantages are shifting rapidly, leading to the de-industrialization in North America and Europe, and a re-industrialization of Asia. Industry forecasts on low cost sourcing trends, pointed to an 18% increase in spend by Fortune 500 brands on sourcing in low —cost platforms over the 3 years , with expenditure expected to rise from 21% to 39% over the same period.

These factors are imposing a major shift in global freight flows and creating an ever- lengthening supply chain. Economic development in China had been the prevailing factor behind the growth of international transportation. The trading distances involved are considerable and this has resulted in increased demands on both the maritime shipping industry and on port activities.

As its industrial and manufacturing activities develop, China is importing growing quantities of raw materials and energy and exporting increasing quantities of manufactured goods. Consequently there had been a surge in demand for the movement of goods. The ports in the Pearl River Delta in Guangdong Province, now handle almost as many containers as the ports in the United States combined.

All indications are that this development is set to continue.

To see how the most adaptive companies coped with the logistics challenges of sourcing in China, our first research project is "UNITED STATES BCO’S SOURCING IN CHINA: THE LOGISTICS CHALLENGES" We will focus on how the US Beneficial Cargo Owners (BCO’s) from the consumer goods and retail sectors were coping with this region’s particular logistical challenges. The research program is designed to understand how BCO's are managing the logistics of global trade in this new scenario and to determine how the most adaptive are coping with its challenges.

The research will be conducted in the following context, the demands of today’s consumer for more choice, the ever—increasing security detail surrounding global trade, the highly fragmented, expensive and developing Chinese logistics market and the worsening congestion problems on the West Coast USA, and in the following environments, the internal Chinese logistics market, Portside at both sides of the Pacific Ocean.

Furthermore The aim of the study is to establish accepted best practice by the stakeholders in Sino–US trade, creating ‘benchmarks’ and to promote standard operating procedures and their adoption by other shippers. The research will identify the early adopters at brand level and lead to the accreditation of the brand deemed to have made an outstanding contribution to the development of best practice with “Best in Class” status.

The results will be published in June 2006

METHODOLOGY
GIL will deploy a mixture of primary and secondary research tools in its work. Our primary research will rely heavily on knowledge missions to the areas in which our research is being conducted. There we will use a combination of:

  • Formal/ informal interviews
  • Direct observation,
  • Participation in buying missions & logistics negotiations
  • Attendance and participation in conferences
  • Focus groups with various stakeholders

to build up a detailed picture of the environment.

RESEARCH SCOPE

1. Collect the widest possible range of viewpoints
2. Identify the key organizations, agencies and individuals
3. Create an industry wide consensus
4. Identify the benchmark operator

NOTES TO EDITORS

ABOUT GLOBAL INSTITUTE OF LOGISTICS

The Global Institute of Logistics (GIL) was established in 2003 under the Chairmanship of renowned US logistician and author Robert V. Delaney in response to the logistics industry’s call for “joined up thinking” amongst stakeholders in the global supply chain. GIL looks to resolve the challenges facing the global logistics chain of managing single transport modes, modal systems and targets which are set on stand-alone operations to create a seamless global logistics system.
A Think Tank, GIL brings together thought-leaders and thought-followers as part of a global knowledge network committed to building up the information base, best practices and standards. This, in turn, creates a platform through which knowledge is shared, best practice is adopted and trade developed. Today the Institute is a community of organizations and professionals from across the world that share a commitment to collaborating on global logistics solutions.
The Institute’s mission is to ‘Network the Global Logistics Community’

For further information, visit www.globeinst.org

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