Channel performance in China: a study of distribution centers in Fujian Province

Abstract

Purpose

This research seeks to undertake a comparative study of Chinese distribution centers (DCs) with UK DCs in order to explore the relationship between the supply chain, logistics and distribution functions, and the gap between the countries. The study has been undertaken in light of Chinese corporate standardization programs in distribution channels. The main goal of the standardization programs has been to create efficient supply chains to be able to control the flow of information, capital, product and other resources. The focus of the study was Fujian Province where the standardization program has meant that functional areas such as marketing and distribution are measured by key performance indicators (KPI), under specific evaluation keys. The study highlights benchmarked KPIs where supply chain entrepreneurship can be brought to bear.

Design/methodology/approach

The method used in this research is quantitative via a small scale sample. Questionnaires were sent to Chinese DCs in Fujian Province with additional quantitative information sought through telephone follow‐up.

Findings

The data have been analyzed and compared to UK DCs for inventory level, order lead‐times, customer segmentation, value‐added activities, and floor area utilization. DCs are a long way from internationally competitive best practice across complex product categories. This provides opportunity for entrepreneurial third party inventory storage and management. DCs also exhibits low transportation efficiency due to low vehicle loading factors, also affecting DC order lead‐time efficiency and value‐added activities. There is opportunity here for entrepreneurial activity in offering efficient (lean) and responsive (agile) third party transport services. There is also evidence of poor process management implying opportunity for the application of entrepreneurial consulting capability to resource and reengineer end‐end process chains.

Research limitations/implications

The research generalisability is limited due its small scale sample in a single Chinese province.

Practical implications

Despite a modernization program the implications of this study are that Chinese DCs are not ready for traditional international competition, but in the short‐term entrepreneurs may be able to design sustainable lean and agile supply chains that are at least as good as those in the UK.

Originality/value

The study's originality is its comparative benchmark of Chinese with UK DCs.

Citation

O'Neill, P., José Scavarda, A. and Yang, Z. (2009), "Channel performance in China: a study of distribution centers in Fujian Province", Journal of Chinese Entrepreneurship, Vol. 1 No. 1, pp. 21-39. https://doi.org/10.1108/17561390910916868