DC GD69# 6I H:6# - Wallenius Wilhelmsen Logistics

in China, Jonathan Woetzel says,
is inevitable.
“It’s driven by urbanisation, with
a vast pool of surplus labour entering
rowth
the market and increased income and
demand. With a 40-percent savings rate, and a 40percent
investment rate, there is little else that China
can do but grow.”
Woetzel sees few immediate economic challenges
facing the country.
“Most of the issues are concerned with the country’s
longer-term plans. China is now putting into
place many of the structures for the future, such
as its health care system, its physical infrastructure,
its environmental plan, education, and so on
– the things that will shape the country for the next
century.”
The automotive industry is an important part of
the growth. Automobile production grew by 22 percent
in 2007, according to the China Association of
Automobile Manufacturers, mostly due to expansion
of the domestic market. It is also an industry that is
very much shaping the country’s thinking for the
future.
“The automotive industry employs a significant
number of people, and creates export revenue to some
extent. It has symbolic importance, because this is an
area where China expects to build a global presence.
But it also drives petroleum usage, and the government
is concerned about petroleum imports.”
of the automobile and other
industries is logistics – and here is where the story
gets more interesting. Because many suppliers remain
small – and national logistics firms have not yet
emerged – the situation remains fragmented.
“This makes it difficult to manage the supply
chain, because it is harder for these smaller producers
to adhere to product schedules and quality levels.
We saw these kinds of infrastructure bottlenecks
when unseasonable snows in China in early February
shut down transportation.”
Woetzel adds, however,
that the physical
transportation infrastructure
on the whole
is good, with much
improved ports and roads
(although rail remains
problematic). The problem
in logistics, again, is
fragmentation.
“If you consider
the idea of a national
logistics company,
remember that many of
the big manufacturers remain government-run, with
each establishing its own logistics company,” he says.
“They, as a result, can’t serve each other, when in fact
they should spin off logistics as a separate entity to
gain scale.”
points to as a success in overcoming
the logistics problem is Yum!, the parent of
the KFC food chain.
“They are a billion-dollar business in China today because
of their ability to serve their stores. They invested
in their own logistics capabilities, where elsewhere
they would probably partner with someone else.”
For other companies thinking about entering
China, Woetzel draws from the title of his latest book,
Operation China: From Strategy to Execution.
“Today, entering China is much more of an execution
game. It used to be that just showing up was
enough, but the standards are much higher today.
A company must have a sense of the best practices
globally, then apply them in a way that is suitable for
China. Execution means being ready to manage a lot
of less-well-trained people, and to reward them for
learning.”
this China observer see as the
myths about today’s China?
“That everything is so different; that you can run
your China operations from somewhere else; and that
you can experiment here without commitment – that
you can succeed without looking at the actual situation
in China.”
While most of the big global companies already are
in China, Woetzel says competition will only increase,
especially from local companies.
“I think we can expect new local entrants representing
new industries. China is moving from textiles and
toys to more complex machinery. The key, again, is
execution – getting goods to consumers, and building
a talented workforce.”