TRIGGER 2

Problem:
Finding solutions for outbound logistics functions in the competitive international market.

Learning Objectives:
What are the main competitive advantages?
How to develop your outbound logistics functions?
Things to consider when adapting to Chinese market. 

Keywords:
Cultural differences, 
e-commerce, 
speed, 
equality, 
outbound logistics functions,
international trade 

What are the main competitive advantages?

Quality advantage is the most fundamental objective, it is the foundation for the others. It is also the most visible aspect of the whole supply chain. Symptoms of quality problems are, e.g. unavailability of a product, defects and late deliveries. Problems like these are visible to the end customer, and have a negative influence on them, and weakens the customer loyalty. 

The speed advantage, some customers don’t want to wait, they are also prepared to pay extra to get their product quickly. 

The dependability advantage, a company needs to tell the customer, when they will receive their product, or service. Delivery dependability measures how successful the company has been in meeting those promises. 

The flexibility advantage, must be capable of changing what it does, according to the market and demand. (Harrison, A. and Van Hoek, R, 2002 p. 15-17.)

Comparative advantages, it is generated by a firm’s ability to produce a good or service at a lower cost than its competitors. This generates better margins on sales. (Investopedia, 2018). 

You should constantly be aware of new trends that could potentially affect your product, e.g. new technology. Think of your target market, you should know exactly who is buying your product/service and know how you can better their life. Competition, is more than just similar companies to yours, but also anyone who could meet the customers need. (Amadeo, K. 31.10.2017.)

‘’ To be successful, you need to be able to articulate the benefit you provide to your target market that's better than the competition. That's your competitive advantage.’’ (Amadeo, K. 31.10.2017.) 

You should reinforce this in every communication with your customers, e.g. in your advertising, public relations, sales aids, your storefront and employees (Amadeo, K. 31.10.2017).

How to develop your outbound logistics functions?
Outbound logistics = definition: The movement of material associated with storing, transporting, and distributing goods to its customers.

Ways to improve your warehouse efficiency and reducing costs are, e.g. by controlling inbound and outbound fright, incentive pay, simplify processes, reduce touches, reduce costs, (less steps= fewer touches= lower costs), develop your staff, inbound supply chain, voice enabling technology, consider a third party and continuous improvement process. (Barry, C. 2.2.2017.) 

Have a plan. It should be customer focused. 

Track the progress of the truck. Get help from a third party (PLS Logistics services, 2018). 

Leverage your predicted volumes to reduce price. When it comes to an effective logistics strategy, you should start practising demand-driven logistics. Sales and operations planning is the most important thing to understand. (Pontius, N. 13.1.2018.) 

When it comes to logistics planning, it is very important to ‘’ acquire an experienced logistician who has great interpersonal skills, is well connected to the logistics/supply chain world (a CSCMP member of course!), is a proven leader, and has solid financial acumen’’ (Pontius, N. 13.1.2018). 

The logistics system:

You should focus on integration of all logistics functions and distribution operations, to improve both customer service levels and keep costs under control (Moerkens, L.A.P. and Pollock, W.K. 21.2.2018).

Integration of all logistics functions: 

First, you need to create a forecasting function that is an integral part of the business planning process. The forecast gets input from, and must work closely with; marketing, sales, manufacturing, distribution and senior management. 

Distribution operations:

Consists of the following functions; order management, warehouse operations, outbound transportation and inventory management. 

Based of these functions, business processes and tools are in place, and actions can be taken to improve customer satisfaction and lower the logistics costs. These improvements should be focused on, accuracy and consistency of the process output and speed of the process. 

How to approach the problem; verify the customer requirements, track the competition’s performance, have an internal assessment conducted, create an improvement plan and implement your plan. (Moerkens, L.A.P. and Pollock, W.K. 21.2.2018.)

(Moerkens, L.A.P. and Pollock, W.K. 21.2.2018)

Things to consider when adapting to Chinese market. 

Intense competition, corruption, business etiquette and language are some of the obstacles that can be faced (Kermeliotis, T. 21.10.2011). 

Their culture and etiquette, since it's a big part of China. You should also understand that procedures in China will take time, patience and money.

You should build a strong local team. You should relocate some of your employees, or find a strong, experienced group to represent your company. Something you should realize, is that you’ll never get a deal done, without basing yourself there. It could help to surround yourself with some local talent, who could help you break deals, someone who understands the culture and can help with the language barrier, for those who doesn’t understand Mandarin, as well as someone who understands the complexity of the market. The only way to ultimately be successful, is by putting together a good team. (Kermeliotis, T. 21.10.2011.)

You should research the Chinese market. China is far from a homogenous country, and it has a balance between being modern, and traditional, which both should be respected. Like mentioned earlier, you should research the Chinese market, before anything. This will help you successfully adapt your offering to local preferences. 

You should understand the complex legal environment. The business law in China, is a fairly new field, and is constantly evolving. ‘’ The state heavily regulates foreign investment and getting approval from the authorities is a crucial first step for all businesses.’’ (textmaster). If you want to establish yourself in China, you have several legal options to choose from, e.g. representative office, equity joint venture or cooperative joint venture or wholly foreign-owned enterprise. 

You should also take a closer look at the Chinese tax system, administrative requirements and intellectual property laws, before taking any steps into China. 

Finding the right local partner. It’s pretty difficult to step into the Chinese market on your own. You should try to find the right local partner for your company. This might not be easy though, but it can help your company to avoid common pitfalls, as well as adapting to the market faster, then without a partner. This will help you to start understanding the culture, and the market much faster, as well as the understanding of regulations. 

Some industries that are considered sensitive or strategic, requires you to partner with a Chinese company. Industries, like alternative energy, biotechnology, and advanced industrial machinery. 

Understanding and attracting Chinese consumers. The Chinese prefer international brands, which have a certain identity as a status symbol. You still need to fully adapt you offering and consider the Chinese culture and their values, e.g. deciding if you should translate your brand name, adapt your marketing channels, and if you should create advertising that matches the consumer needs. 

Adapting your management style and learning to negotiate. The way the Chinese manage is much different, to the other regions in the world. You should avoid arrogant behaviour and showing emotions. It is important to build trust, and to focus on having a positive dialogue. Structure and clear goals are also important, as well as putting the interest of the group above those of individual. (TextMaster, 18.5.2016.)  ‘’ Negotiation in China is like a balancing act between: showing restraint and patience, respecting the hierarchy, never allowing the other party to lose face, making group harmony and consensus a priority’’ (TextMaster, 18.5.2016). 

It’s very important to acknowledge the culture differences. You should also acknowledge that platforms like Instagram, Facebook and Twitter are band in China, so you should use their own platforms, e.g. WeChat and Weibo. They also have limited the use of google. You should also understand how the platform Baidu works. (Rainier, 4.12.2017.) 

You could consider expanding first to the North American Chinese market, before entering the Chinese market (Ning, L. 5.11.2014.).

E-commerce= the business of buying and selling goods and services on the internet

E-commerce in China vs the West. Customer service, product research and trust (Web presence in China, 19.5.2017).

The differences between the Chinese and western e-commerce. Shopping makes the Chinese very happy. They naturally use all different channels for shopping, 75% of Chinese shop online weekly, compared to the global 21%. Chinese people love a good bargain, but now a day it’s not as important. 82% of Chinese consumers said that product availability is more important than price, and 100% said that it’s more important that start using new technology to improve the shopping experience. The Chinese are more demanding. In China counterfeit, shoddy and unsafe goods are all too common, as well as internet fraudsters. Because of this, Chinese people need more assurance during their online shopping experience. They rely on what their friends tell about a product, or what they read on social media. 90% of e-commerce in China is done in an online market-places, vast collections of the virtual shops of thousands of independent merchants supported by third-party service providers such as parcel-delivery companies. The Chinese are very into brands, and they recognize luxury brands as status symbols. (Spelich, J.W. 13.2.2017.)

Sources:

Amadeo, K. 31.10.2017. What is competitive advantage? Three strategies that work. The Balance. URL: https://www.thebalance.com/what-is-competitive-advantage-3-strategies-that-work-3305828 Accessed: 21.2.2018.

Barry, C. 2.2.2017. 10 ways to improve warehouse efficiency and reduce costs. Multichannelmerchant. URL: http://multichannelmerchant.com/blog/10-ways-improve-warehouse-efficiency-reduce-costs/ Accessed: 21.2.2018. 

Harrison, A. and Van Hoek, R. 2002. Logistics and the supply chain. Logistics management and strategy. 

Investopedia, 2018. Competitive advantage. URL: https://www.investopedia.com/terms/c/competitive_advantage.asp Accessed: 21.2.2018. 

Kermeliotis, T. 21.10.2011. Doing business in China: five tips for success. CNN. URL: https://edition.cnn.com/2011/10/21/business/china-business-investors-culture/index.html. Accessed: 21.2.2018

Moerkens, L.A.P. and Pollock, W.K. 21.2.2018. A structured approach to logistics improvement. S4growth. URL: http://s4growth.com/publications/Articles/2.cfm Accessed: 21.2.2018. 

Ning, L. 5.11.2014. Three tips to help position your brand on the Chinese market. Multilingual. URL: http://www.latmultilingual.com/three-tips-to-help-position-your-brand-on-the-chinese-market/ Accessed: 21.2.2018. 

PLS Logistics services, 2018. Logistics management best practices. URL: http://www.logisticsmgmt.com/wp_content/pls_wp_best_practices_092915.pdf Accessed: 21.2.2018

Pontius, N. 13.1.2018. Logistics strategies for businesses: 23 experts share tips on how to develop a winning logistics strategy (or improve your existing one). Camcode. URL: https://www.camcode.com/asset-tags/how-to-create-a-winning-logistics-strategy/ Accessed: 21.2.2018. 

Rainier, 4.12.2017. What you need to know when marketing to China. Hire media network. URL: http://www.hiremediagroup.com/things-to-consider-about-chinese-market/ Accessed: 21.2.2018. 

Spelich, J.W. 13.2.2017. 7 differences between Chinese and Western consumers. Multichannelmerchant. URL: http://multichannelmerchant.com/blog/7-key-differences-chinese-western-consumers/ Accessed: 26.2.2018. 

TextMaster, 18.5.2016. 5 key factors to succeed in the Chinese market. URL: https://www.textmaster.com/blog/5-factors-success-chinese-market/ Accessed: 21.2.2018. 

Web presence in China, 19.5.2017. Ecommerce in China vs. the west: the top 3 differences. URL: http://web-presence-in-china.com/2017/05/ecommerce-china-2/ Accessed: 26.2.2018.