Thursday, January 19, 2006

Will your China Strategy Get Stung By ASP Technology?

“… High-performing Chinese supply-chains of the future will integrate today’s legacy and server based applications with future technologies inherent to the Internet …”

Logistics Technology in China

Infrastructure Chokepoints and Investments
FY 2004, container volume in China’s ports increased over 28% (from previous year) to over 59 million TEUS. The crush of traffic and cargo volume led to massive delays in Shenzhen, Ningbo, and Shanghai, with spill over affect in all Chinese ports (including, to some degree, Hong Kong).

Annual growth of containerized traffic is expected to be between 20 and 30 percent for the next
several years (through 2015). It should also be noted, that in 2004, China’s import/export containerized volume was over 60% of the total volume shipped in Northeast Asia (including Hong Kong), Southeast Asia, and the Indian Subcontinent. This means that every China gateway will be a chokepoint, where fast, accurate, and flexible TMS platforms will be needed to stay ahead of the cargo avalanche.

Government officials in Beijing are committed to spend 80 billion USD, over the next five years, for its “Go West” plan to develop the infrastructure network. They have also committed to expand their national rail network to 62,000 miles, from its current 45,000 mile level in the same period! Matching investments in the barge and river gateways will also keep pace.

Over the next seven years, more than a 150 new vessels will be built, with the majority of them topping the 8,000 TEU capacity. Just three years ago, the top capacity ship on the market was a measly 6,500 TEU!

Logistics Technology Blueprint for the Future
High-performing Chinese supply-chains of the future will integrate today’s legacy and server based applications with future technologies inherent to the Internet. These future platforms will have to manage the movement of product and information from origin to destination.

Collaboration across a network of trading partners, along with empowering individuals to make informed and intelligent decisions, on their client’s behalf, quickly…is tantamount to long-term success. To accomplish these goals (with speed, and reduced cost) will require a strategic technology framework that embraces multiple systems, and can readily incorporate new partners, vendors, suppliers, locations and services.

For the China market, the only way will be an ASP solution, which is the most expedient, cost-effective entry for most vendors and China focused 3PL’s. The core building blocks include:

1) A global data model, that uniquely reflects the supply-chain network, will provide a single version of “the truth” for customers, suppliers, vendors, and employees worldwide.

2) Future TMS platforms must provide the China market with distinct features and functions (not clones of what is being used in Germany or the United States) to manage shipment related tasks like booking, asset management, track&trace, freight auditing, etc.

3) The TMS platform must provide integration technology that ensures the automatic flow of critical information, which triggers processes across applications and partners.

4) The end-user experience must be one of user-friendliness, speed, and accuracy…along with after sales support that is unmatched and attuned to the China market specifically.

Finally, a Capital Consulting & Management Study this year determined that only 20% of companies that made investments in supply-chain related software in the last three years were satisfied with their return on investment!

The Chinese market is growing, and ready for more ASP solutions as they relate to TMS and logistics. Containerized export/import volumes will continue growing, over 20% on an annual basis, for the next 10 years. The Chinese government is going to spend billions of dollars to keep pace from an infrastructure perspective as well. The China client base is rich, diversified, with many industry cornerstones (3pls, ports, carriers, and vendors).

Everyone has a China strategy, but does it include easy access to all that data via an Internet based platform? Is your company willing to take the risk? Or, will it get stung by the ASP!


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