1. Prof. L. G. Sprague1 China’s Evolving Supply Chain Infrastructure: A Work in Progress Dr. Linda G. Sprague, FDSI, FIOM Professor of Manufacturing & Operations Management China Europe International Business School (CEIBS)

2. Prof. L. G. Sprague2 China ’ s Evolving Supply Chain Infrastructure As China ’ s industrial output grows at unprecedented speed, the country ’ s supply chain infrastructure becomes an increasingly serious issue. For manufacturers accustomed to lean operations, new lessons must be learned about the consequences when supply variability is a fact of life. In response, governmental and private actions are underway to offer relief – at least in the long run. This presentation will trace the roots of the current supply chain infrastructure from the earliest days of the People ’ s Republic of China to the present. Examples of initiatives underway will be shown, and impediments to progress will be presented. Pre-lean lessons about dealing with these conditions will be resurrected.

3. Prof. L. G. Sprague3 Supply Chain Management: Some of the Issues * Ownership and Decision Points * Inventory Management and Control * Manufacturing Processes * Physical Flows * Information Systems and Flows * Infrastructure

4. Prof. L. G. Sprague4 Infrastructure The Foundation for Physical and Information Flows

5. Prof. L. G. Sprague5 Infrastructure Implies Legacy Geography and Geology Political and Economic Structures Previous and Present Policies Customs and their Consequences

6. Prof. L. G. Sprague6 China: 9,561,000 km 2

7. Prof. L. G. Sprague7 China’s Political/Economic Structure From 1949, a Marxist-Socialist Centrally Planned Economy September 1982: “ Build Socialism with Chinese Characteristics. ” Deng Xiaoping at the opening of the 12th CPC Congress Since 1993: “ The Socialist Market Economic System establishing a Modern Enterprise System. ”

8. Prof. L. G. Sprague8 Previous and Present Policies (1) THE SPIRIT OF SELF RELIANCE

9. Prof. L. G. Sprague9 THE FOUR MODERNIZATIONS Agriculture Industry Science and Technology Defense

10. Prof. L. G. Sprague10 Previous and Present Policies (2) PRACTICE IS THE SOLE CRITERION OF TRUTH From an essay by Hu Fuming, sanctioned by Deng Xiaoping, at the Third Plenum of the 11th Party Congress in 1978, the basis of Seek Truth from Facts.

11. Prof. L. G. Sprague11 Customs and their Consequences Recent habit patterns from a centrally- planned economic system Older habits from a legacy of Empire Management by the numbers BUT very limited numbers

12. Prof. L. G. Sprague12 Characteristics of the Current Government Hu Jintao, Tsinghua, BS in Hydropower & Water Conservancy Wu Bangguo, Tsinghua, BS in Radio Electronics Wen Jiabao, BS & MSc at Beijing Institute of Geology Li Changchun, Harbin Institute of Technology, BS in Industrial Enterprise Automation Huang Ju, Tsinghua, BS in Electric Machinery Manufacture and MSc in Geology

13. Prof. L. G. Sprague13 Characteristics of the Current Government, cont’d Luo Gan, Institute of Iron & Steel, sent to Karl Marx University (Leipzig) for BS in metallurgy Zeng Qinghong, Beijing Institute of Technology, BS in automatic control Wu Guanzheng, Tsinghua, BS in thermal measurement & automatic control Jia Qingling, Hebei Engineering College, BS in electric motor design and manufacture

14. Prof. L. G. Sprague14 China US France Population1.256 billion274 million58.7 million Size 9,560,900 km 2 9,372,610 km 2 543,965 km 2 Railways 67,524 km 212,433 km 31,939 km Waterways 110,000 km 41,009 km 14,932 km Pipelines (oil and gas) 19,093 km 609,000 km 32,292 km Airports* 40 185 13 Highways: Current: 55,000 km 79,091 km 9,900 km + 2010 completion: 35,500 km with >3047 m of paved runways China’s Physical Supply Chain Infrastructure Today

15. Prof. L. G. Sprague15 China US France Population Density: people/km 2 13129108 Railways (km) per 1000 km 2 72359 Population per airport31.4 mio1.5 mio4.5 mio Highways (km) per 1000 km 2 – current5.8 km8.4 km18.2 km in 20109.5 km Today ’ s Supply Chain Infrastructure, continued

16. Prof. L. G. Sprague16 National Major Arterial Highway Network (2010)

17. Prof. L. G. Sprague17 Lingang New City, Shanghai a new city within Shanghai to support the new deep water port, linking with the old port, the river system, the new Pudong airport ’ s cargo facilities, the new highway and the rail system

18. Prof. L. G. Sprague18 Lingang New City, Shanghai, continued The New City ’ s Industrial Park will provide state-of-the- art logistics equipment and services The Shanghai International Medical Zone will include hospitals, medical device manufacturers, a Clinical/ Medical Research Park and a Rehabilitation Center Shanghai Auto Industry Corporation (SAIC) will build a new production plant in Lingang Lingang New City is planned for 800,000 residents

19. Prof. L. G. Sprague19 Infrastructure: Telecommunication Telephone number in 1980: China 42108 Telephone number in 2005: China 021 2890 5160

20. Prof. L. G. Sprague20 The People ’ s Republic of China Sector Employment Workforce by sector (000,000): 19701980199020002003 Agriculture and Mining81%69%60%50%49% Manufacturing and Industry10%18%21%22% Service9%13%19%28%29% Workforce344.3423.6647.5720.8744.3 Source: China Statistical Yearbook, compiled by National Bureau of Statistics of China, China Statistics Press, Year 2004

21. Prof. L. G. Sprague21 Supply Chain Management in China: Evolution and Infrastructure Physical infrastructure is evolving rapidly but not to scale. Information systems: hardware and software are available BUT information systems depend on data.

22. Prof. L. G. Sprague22 Supply Chain Survival Tactics When lean may mean anorexic, it ’ s back to the basics: Physical Distribution Systems Warehouse Management Enthusiastic Inventory Control Traffic Departments …

23. Prof. L. G. Sprague23 Survival Tactics, Plan B 1.Stay near the coast. 2.Stick to already developed areas. 3. Outsource – but the profits won’t be yours.