B2B e-Commerce Strategies for the Chinese Manufacturing · PDF file B2B e-Commerce Strategies...

Click here to load reader

  • date post

    08-Jun-2020
  • Category

    Documents

  • view

    0
  • download

    0

Embed Size (px)

Transcript of B2B e-Commerce Strategies for the Chinese Manufacturing · PDF file B2B e-Commerce Strategies...

  • A GXS Thought Leadership White Paper

    B2B e-Commerce Strategies for the Chinese Manufacturing Market A Guide for European, North American and Asia Pacific based Manufacturing Companies

  • Table of Contents

    1. Competing in China’s Manufacturing Market .............................................................3

    1.1 Today’s Manufacturing Industry in China .........................................................3

    1.2 China’s Manufacturing Expansion Around the World .......................................4

    1.3 China’s Open Economic Policy ..........................................................................4

    1.4 IT Investment Priorities Across China’s Manufacturing Sector .........................5

    1.5 Supporting Green Based Supply Chain Initiatives ............................................6

    2. Assessing B2B e-Commerce Readiness in China .......................................................8

    2.1 Infrastructure .....................................................................................................9

    2.2 Technical Support ..............................................................................................9

    2.3 Large Business Enterprise Application Infrastructure ..................................... 10

    2.4 Small Business Application Infrastructure....................................................... 10

    2.5 Technology Focus in China ..............................................................................11

    2.6 Current B2B Document Standards .................................................................. 12

    3. Defining a B2B e-Commerce Strategy for China ..................................................... 13

    3.1 Your Value Chain in China .............................................................................. 13

    3.2 Assessing Trading Partner Readiness ............................................................. 15

    3.3 Automating B2B Business Processes .............................................................. 17

    4. Implementing a B2B e-Commerce Strategy in China .............................................. 19

    4.1 Large Customers ..............................................................................................20

    4.2 Large Suppliers ................................................................................................20

    4.3 Small and Mid-Size Suppliers ......................................................................... 21

    5. GXS, Your Trusted Partner in China ........................................................................22

    5.1 GXS Resources in China ..................................................................................22

    5.2 GXS Experience in China .................................................................................22

    5.3 GXS B2B e-Commerce Solutions .....................................................................22

    2 • B2B e-Commerce Strategies for the Chinese Manufacturing Market A GXS White Paper

  • 1. Competing in China’s Manufacturing Market

    1.1 Today’s Manufacturing Industry in China According to the 2010 Global Manufacturing Competitiveness Index produced by Deloitte and the U.S Council of Competitiveness, the epicenter of manufacturing is continuing to shift to the emerging markets such as India and more significantly China. The manufacturing sector in China is one of the fastest growing in the world and by 2014 is poised to overtake the United States as the world’s largest manufacturing nation. Even though many countries around the world saw their manufacturing output shrink considerably during the most recent global recession, China was able to ride out the recession due in part to the large pool of low cost workers who manufacture goods at a fraction of the cost of western companies.

    Figure 1 – Size of China’s Manufacturing Sector

    Until recently the southeast coast of China has been the central hub location for many Chinese manufacturing companies. In fact, southern coastal China is often referred to as the World’s Factory Floor. Many manufacturing companies have prospered along the east coast of China, thanks in part to having a more reliable utilities and telecommunications infrastructure, close proximity to deep sea ports for global exports and the availability of highly skilled, low cost labor. The east coast of China has seen more inward investment from western companies than any other region across China.

    In 2010 China faces some tough challenges. Wages along the east coast have increased by an average of 17%, and many companies are facing strikes which are starting to impact the supply of parts to car and consumer electronics manufacturers. The higher labor costs are forcing manufacturers to establish new plants in the inland regions of China. A major advantage of this is that manufacturers will be able to once again utilize low cost labor. But more importantly, the spread of companies across the central and western regions of China will help to develop China’s domestic market and hence reduce their overall reliance on exports. Any move inland will have an effect on logistics and distribution costs—that is, of course, if the road and rail infrastructure even exists. Manufacturers will have to consider all these factors before relocating their plants.

    B2B e-Commerce Strategies for the Chinese Manufacturing Market • 3 A GXS White Paper

    Source: IHS Global Insight Note: Figures starting in 2010 are forecasts

    Size of the Manufacturing Sector In Trillions of 2005 U.S. Dollars, for: U.S. China

    ‘00 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 ‘13 ‘14 0.0

    0.5

    1.0

    1.5

    2.0

  • Foxconn is one high tech manufacturer who is partnering with numerous PC manufactur- ers in Chongqing, a western city of 32 million where labor costs are 20 to 40 percent lower than east coast towns and cities. The plan is to establish Chongqing as one of the world’s leading high tech and automotive related manufacturing hubs.

    1.2 China’s Manufacturing Expansion Around the World The main trend across the Chinese manufacturing sector in recent years has been for western companies to form joint venture operations with domestic Chinese manufacturers. This became prevalent across the automotive industry where most of the world’s automo- tive OEMs established a joint venture of some description with a Chinese car manufactur- er. This arrangement has worked well and has allowed western companies to get a foothold in a lucrative consumer market. This has also allowed Chinese companies to acquire valuable knowledge of how western companies run their plants and manage their supporting ICT/B2B infrastructures.

    Today a new trend is developing due primarily to the recent economic downturn. The growing wealth of many Chinese domestic manufacturers has led them to expand their operations and take manufacturing plants closer to key markets around the world. Chinese firms also are acquiring some North American automotive suppliers to get a foothold into the lucrative North American market.

    One of the reasons Chinese automotive companies have so far failed to enter western mar- kets is due to the poor quality and safety record of their vehicles. Geely acquired the Volvo Car Company from Ford in 2010. Since it has now acquired the leading designer of cars built to the highest safety standards, it won’t be long before this knowledge of producing safe, high quality vehicles passes across to Geely’s engineers and hence influences the design of their own future vehicles.

    Chinese manufacturing companies are also keen to establish a presence in Eastern Europe as this provides a stepping stone into the Western European market. Establishing manufac- turing plants nearer to the end consumer significantly reduces logistics and transportation costs. A good example of this is the Chinese electronics company Huawei that invested in new manufacturing plants in Hungary and Slovakia.

    1.3 China’s Open Economic Policy The most significant changes in the economic policy are being driven by China’s acces- sion into the World Trade Organization (WTO). Protectionist legislation has tradition- ally restricted foreign participation in the market. The restrictive policies are now being abandoned in favor of more open economic policies. The removal of these barriers opens up one of the largest consumer markets in the world. With increased wealth and consumer spending amongst the middle classes, China is seeing an increasing appetite for western products. Many western high tech and automotive companies are seeing significant interest in their products. For example in the automotive sector, China is the fastest growing market for luxury car manufacturers such as BMW, Audi and Mercedes.

    4 • B2B e-Commerce Strategies for the Chinese Manufacturing Market A GXS White Paper

  • The recent economic downturn saw the Chinese government pump billions of dollars into the economy thus helping to stimulate consumer spending and make the market extremely attractive for western based companies. Some observers say that the increased wealth of the Chinese middle class population is changing China from an export-led manufacturing economy to one which is consumer driven.

    WTO membership has significant implications for the domestic manufacturing market in China.

    • Tariffs and quotas—Historically, tariffs and quotas have d