China, Logistics, Maglev, Me and.... Woweee
Driven by increasing air pollution in China, as well an increasingly demanding industrial and retail sector, an e-commerce air-filter opportunity window has opened for the Columbus based air filter manufacturer Columbus Industries. My GAP team is visiting China to conduct a feasibility study for this new opportunity. The logistics and legal aspects are important and complicated pieces in the assessment of a go-to-market strategy for an imported product such as air-filters in China.
I am a member of the Logistics team. Logistics is a totally new arena for me as I come from a technology background. However, a series of meetings and research regarding logistics in China has given me a huge amount of information I’d like to share in this blog. I would like to give the disclaimer that there isn’t a multi-step process for this understanding and "acing" of logistics in China. Rather, it is pure experience and one key asset - a native knowledge of Chinese. Tadaaa!! Yes, it is very important to be fluent in Mandarin – writing and speaking. We set up most of the meetings in China via communicating in Mandarin.
I visited three logistics firms: SanXun (small scale), Kerry Logistics (medium scale) and FedEx (Large scale). Although the three firms differed in scale and presence, there was one common theme: all of the firms displayed a great willingness to analyze our needs. Many times the representatives shared a great amount of added information and gave us helpful suggestions. It was through one of these conversations that we learned about the two types of warehouses that can be employed for our client's business needs. What is a warehouse? It may seem simple in theory, but I learned there is much more to it in practice.
Warehouse – A place where all the goods/products are stationed by the logistics firm and are under their authority and supervision. There are basically two types – Bonded and Non-bonded. The bonded warehouse treats your product as if it is ‘in transit’. Therefore, the taxes are levied only when the product/goods are sold. In the event of uncertain demand or some assembly processing needed, bonded warehouses are recommended. The bonded warehouses do not have economies of scale on higher SKU’s in stock.
To our astonishment, the representatives at all the firms shared a huge amount of information on two other fronts as well: marketing and legal. It helped me learn a lot more and clear a myth – It takes a lot of meetings to do business in China. But with the right tools: a "nee-hao", a Chinese-speaking friend, scale of business, and 60 minutes, you learn a lot.
I now know that the logistics industry is the backbone of the Chinese economy and this country truly exhibits its prowess in it. What else could explain the Maglev train (they whisk by at a speed of 300 km/hr, no kidding), the other amazing trains, and, to an extent, the budding logistics firms here. I have appreciated how the logistics industry in China is structured and delivers. In essence, it is just how they greet you when you go to meetings – no troubled waters here!