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1. Importance of German-Chinese Logistics Networks


Since China opened up to foreign investment in the late 1970s, many firms decided to relocate their supply chains to China. In 2013, Germany exported goods worth about US$ 81bn while importing goods from China of about US$ 74bn This trade balance makes Germany by far China’s biggest partner in Europe and their 6th biggest trade partner in the world. Simultaneously, China is Germany’s most important trade partner in Asia and 3rd most important partner worldwide.  Both countries commonly announce that they will continue to increase their trade volumes to US$ 220bn by 2020. The increasing purchasing power of a vast majority of the Chinese population is just one of the main driving factors for further growing ties. According to the Federal Ministry of Economic Affairs and Energy, 680 m. Chinese will have a demand for Western products, in particular German products by 2020, while today only about 200m to 300m Chinese fall into this category. Increasing business ties need to be aligned with adequate logistics structures. China’s logistics industry has gained much of importance in recent years. The government’s current 12th five-year plan stresses the development of logistics industry so as to further facilitate and support continued economic growth. The government decided to link every city with a population of over 200,000 to highways, and thereby seeks to expand its highway network to 50,000 km. Todays high-speed train network shall also be expanded with an additional 30,000 km adding to the already existing 70,000 km. Furthermore, the total number of airports is set to expand from 175 in 2010 to 230 by the end of 2015. One of the biggest airports on the planning board will be built close to Beijing. With a planned area of more than 15,000 square kilometers, the four-runway facility will be bigger than Bermuda and is scheduled for completion by 2018. However, logistics in China is still prone to a multitude of challenges that are distinct from the rest of the world and that require special attention.

2. Challenges in German-Chinese Logistics Networks

Many Western firms had to retreat only a few years after they started doing business in China. For example, the Association of German Engineers estimated that one in five German companies will pull its production out of China, as they underestimate risks associated with various factors, such as labor force, environmental rules and financial market. Failures to thrive in doing business with China have happened to some of the biggest firms in the world such as Home Depot, eBay, Google.  Home Depot, the second largest American retail store, bought into China in 2006 with 12 stores and high expectations. Misjudgments of the Chinese consumer market, however, forced them to retreat only 6 years later lying 850 works off. Ebay, the US auction platform, entered China in 2004 and lost almost the entire Market share to TaoBao, a local competitor, retreated from China after it failed to understand the specific Chinese axiology, i.e. the value of personal relationships and the retreat of Google form China was mainly forced by its refusal to abide by the governmental rules. However, there are also companies who have managed to strive in doing business with und in China, companies such as Intel, Nike or VW. While obviously no single factor can explain the success or the failure of a company in China, most of them seem to have failed to grasp how different the Chinese market is. Successful companies suggest that one of their success factors is their willingness to communicate and learn from each other. Supply chain managers who operate in China need to understand the specifics of doing business with China.

3. The Navigator for German Chinese Logistics Networks

World Map China Germany

The Kühne Foundation has thus decided to finance a research project that aims at supporting managers of logistics networks between Germany and China to successfully plan and re-configure their businesses. The project, titled “Navigator for German-Chinese Logistics Networks”, is based at The Kühne Foundation Center for International Logistics Networks, as part of the Chair of Logistics (headed by Prof. Dr.-Ing. Straube) at the Technische Universität Berlin. The project results from many years of successful cooperation between the Kühne Foundation, the Chair for Logistics and the Kuehne Chair of International Logistics Networks and Services at Tongji University Shanghai (headed by Prof. Dr. Sidong Zhang).

3.1 Building blocks of the tool

The Navigator for German Chinese Logistics Networks consist of two fundamental building blocks: (1) A logistics data library and (2)

3.1.1 The Logistics Data Library

The Logistics Data Library provides an extensive collection of logistics data relevant to successful logistics planning in China. The library seeks to provide both country and region specific data that may help in evaluating current logistics structure and planning new sourcing and distribution structures. The library will be continuously updated, yet it cannot provide real time data.

3.1.2 The Planning Tool

The planning tool in a freely, publically available, online browser based software that allows supply chain planners to map their supply chains through using nodes (suppliers, customers, DC etc.) and edges (transportation routes and operators). It allows a remote planning of the same project by multiple users. Each user can start new projects and invite other users to do a joint planning. The tool requires the user to enter data regarding location, material flow, volatility and supply chain actors. Besides visualizing existing logistics structures and relevant logistics data, the tool provides relevant logistics planning information regarding challenges in the Chinese market.

3.1.3 How the tool can support logistics planning

The process for optimizing logistics networks as suggested by Prof. Gudehus follows an iterative process derived from physics. It assumes that an optimal solution is unfeasible and thus suggests improving the network through an iterative process of optimizing its subsystems.

The process follows the logic that the logistics network has first to be analyzed, in order for managers to identify the necessary re-design measures. The Navigator for German-Chinese Logistics Networks follows this logic as it first requires practitioners to map the status quo of their supply chain, followed by a structured identification of potential challenges and mitigation strategies. This analysis process is initiated  though an array of provocative questions to the supply chain planner, as well as a framework of valuable planning information collected by the research team over the course of the project.

Through visualizing the status quo of real life logistics networks and asking strategic questions the tool aims at making the supply chain planner critically analyze his network.

Managers will be given the possibility to choose from an array of planning decisions in order to receive valuable information material. The information will be presented in a structured way that is considered a “navigational aid” to supply chain managers, as it provides cross level decision support in prioritizing and selecting network alternatives.

3.1.4 What the tool is not!

The tool is not a strategic optimization tool that automatically adjusts your network to fit an optimal solution. Other software solutions are available on the market taking account for this. This freely available browser based tool has the advantage of being easily accessible from all around the world not requiring any software to be installed on your laptop or PC. Through its design it helps to easily pool knowledge across complicated and sometimes complex network structures.

3.1.5 Anonymity

All information provided online by companies who apply this tool while be treated with complete confidentiality. No data will be published in any from whatsoever.

3.2 Overall Goal

The final results can be used across companies, branches and boarders to strategically systematize logistics planning and to find and assess innovative logistics solutions. Both countries will benefit from this project, as it supports sustainable economic relationship and welfare.

Participants in the project are highly likely to personally benefit from participation. They will be offered exclusive access to all project results, benefit from exchanges with managers from other industries and are invited to free participation in workshops in Berlin, Germany and Shanghai, China.

The project will also be the basis for a German-Chinese “Living Lab”. The “Living Lab” is our visionary idea of a software supported logistics management facility that helps supply chain managers train, innovate and cooperate together with partners, service providers, technology companies, researchers and politicians to improve their logistics networks.

4. Cooperation of Industry and Practice

The project supports supply chain planners of automobile, electronics, FMCG (fast moving consumer goods) and LSP (logistics service provider) industry in strategic decision areas. It draws on the input and exchange of ideas between practitioners and researchers. The project team regularly organizes workshops that serve as a platform of companies from the aforementioned industries to exchange their experiences in the Chinese market.



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