Managing reverse logistics in the Chinese automobile industry

摘要

The evolution of China into a major investment destination has enabled the country establish itself as a dominant force in world manufacturing. It is estimated that China has accounted for a third of global economic growth over the past three years. A key consequence of this development as well as China''s entry into the WTO has been the establishment of global brands on the Chinese mainland. The automobile industry, in particular, identified the opportunity for massive growth on the basis of China''s large and relatively untapped market. Many of these organisations invested in joint ventures with local car manufacturers. As a result, new business practices and thinking has been gradually introduced into the market. The concept of logistics as a strategy has challenged previous Chinese logistics practices. While most local Chinese auto companies were familiar with forward logistics (i.e. getting products to the customer), the idea of reverse logistics (i.e. product recall and/or recycling) was relatively undiscovered until October 2004 when the Chinese government passed new regulations. The regulations obliged car makers to `repair, replace or refund'' faulty products with the result that auto recall generated large quantities of product reverse flow, a new and complex activity for the car manufacturers. While the global brands were familiar with this concept in their international markets, they had not been able to transfer the practices to China as a result of two key issues - firstly, their focus had been on growth and establishing market dominance and, secondly, operations were still largely managed by the local joint venture partners and technology transfer had been more focused on more critical activities. The research method applied was a case study examining the reverse logistics activities of one of the leading auto manufacturers in China. On the basis of the case study, this paper identifies the challenges faced by the Chinese auto industry in particular a-nd suggests ways in which these challenges can be addressed. These will be of particular interest to local manufacturers who are not in knowledge-transfer-enabling joint ventures but are still subject to the new legislation. The study also examines the role of other stakeholders in the supply chain, including suppliers and logistics operators. The problems identified by the study vary in nature and include an industry shortage of contemporary logistics expertise, the varying capabilities of companies along the supply chain (parts traceability, for example), sub-optimal logistics infrastructure and limited capability of third party logistics companies (3PL). In order to address these issues, the paper suggests a number of strategic imperatives for the industry. It is important to have efficient and effective organisational, physical and information structures as well as development of the necessary skills within organisations, their suppliers and 3PLs. The study also suggests that improvement of forward logistics is core to the ability to manage reverse flows efficiently. With regards to the industry structure, the evolution of larger 3PLs through mergers and acquisitions will not only enable upskilling, but will underpin uniformity of service delivery while taking advantage of economies of scale. To a substantial extent, some of these activities will be supported by the implementation of technological and data solutions that are central to the management of product movement in competitive supply chains