Cloud SCM Brings China SMEs Opportunity

Cloud computing platforms are enabling small and mid-sized distributors, contract manufacturers and component makers in China to readily and affordably adopt supply chain management (SCM) solutions. In the past, implementing such systems was prohibitively time-consuming and costly, and applications were too feature rich for the appetite of smaller organizations. Some market segments are slow to adopt the technology, although SCM solutions have and will continue to gain traction as companies look for more visibility and efficiency.

China’s rate of adoption has lagged regions such as the U.S., according to vendors of enterprise resource planning (ERP) software. Often, security concerns are the reason manufacturers resist moving to the cloud. “From a supply chain perspective, there is a real lack of [technology] standards in the industry overall,” said David Casey, executive advisor to project44, which makes an end-to-end supply chain visibility solution. “Until the industry agrees that this is the way we will go, it will continue to be fragmented. Once the standards are set, Chinese technology companies do a wonderful job of taking a best practice and implementing it at home. That would make it go quick.” 

Image courtesy: Pixabay

Image courtesy: Pixabay

At the same time, China has the potential to speed to adoption. “They can jump ahead quicker than most folks can if they focus on it,” said Tommy Barnes, president of project44. 

With its vast geography, China has the potential to benefit greatly from supply chain optimization of all kinds. “It is expensive to invest in the supply chain but omnichannel requires thoughtful action and knowledge to meet customer expectations,” said Minwen Lu,  general manager of China for Coresystems, a vendor of field service and workforce management solutions. “China must develop fast and use advanced technology to meet the requirements of consumers.”

The Chinese government is also encouraging technology adoption with its Made in China 2025. The strategic plan was developed by Chinese Premier Li Keqiang and his cabinet in 2015. The Center for Strategic and International Studies describes it as an “initiative to comprehensively upgrade Chinese industry” directly inspired by the German Industry 4.0. “The whole supply chain is important to smart manufacturing,” said Lu. “Companies have to adhere to requirements of the plan in order to get support from the government and banks. If you invest in R&D and high tech in China, you can save a lot of income tax.” 

Currently, high-tech and electronics companies in China are leading adoption efforts. “As a general rule, the most sophisticated and higher value of the product being made, the more forward-thinking people will be in terms of technology adoption,” Casey said.  

Often, in-country offerings are able to get better traction. “Smaller suppliers have home grown systems, and some have Chinese-based systems, and small to mid-sized ERP systems,” explained David Cahn, director of global marketing at Elemica, a supply chain network company. “Some are reluctant to adopt American-made platforms and products.”

Further, organizations with a global footprint, including headquarters in other parts of the world, are also more willing to try new technologies. “When we have a global supplier with a headquarters in the United States or Europe using our solution and branches in Asia, they will often adopt the same products in order to have the entire company integrated on a single platform,” said Lu. “That is our competitive advantage.” 

A small or mid-sized enterprise (SME) might be more likely to go to a smaller local company, said Casey.  “The big multinationals are going to be viewed with a little trepidation and skepticism, both from a cost standpoint and from ensuring the presence of local expertise in the China market.”

Often, what drives companies to adopt technology is a demand from their end customers. “What we see happening in that market is adoption if a customer requires it,” said Barnes.  “It could be an OEM requiring a supplier or a third party like DHL or UPS. It’s generally driven by some specific requirement rather than the geography saying let’s jump on this trend.”

“It’s not something that suppliers in China are doing to differentiate themselves,” Casey added. “They are getting forced into it.”

From a technology standpoint, SCM solutions are offering greater flexibility of approach. For example, Elemica finds that organizations that do a lot of business together often invest in the integration of the Enterprise Resource Management (ERP) systems into the digital supply network, which takes time and expense but offers a range of benefits, said Cahn. For organizations with moderate interactions (50 to 100 orders per year), many organizations choose to work through the order portal and send POs which are then translated into a format that the ERP system can translate. 

“Now, I get some benefit and you get some benefit, but we don’t have to go through integration challenges,” said Cahn.  For “the great unwashed suppliers,” who may use phone calls, faxes or e-mail to manage fewer than 25 orders per year, a supply chain network offers the opportunity to automate many of the process, he added.

— Hailey Lynne McKeefry, Editor in Chief, EBN Circle me on Google+ Follow me on Twitter Visit my LinkedIn page Friend me on Facebook

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