Developing the Best Supply Chain Strategy for Hong Kong – Economics Research Paper (400 Level Course)
This study is to analyze how companies develop the best supply chain management strategy for Hong Kong. We mainly focus on the methods using by companies. Other than this, we also suggest what government can do to support a best SCM. It is because the success of practicing the best SCM not only depends on company’s internal structure, but also depends on support of government.
Based on our knowledge, we try to analyze the opportunities and challenges facing to Hong Kong. Also, we show that how companies grasp the chances to develop SCM.
As there is a change of consumer value, it is a must to have a change of management. At the very beginning, consumer mainly focus on the price of goods, they intend to buy the cheapest goods no matter how difficult to get those products. Time to time, their mindsets change to focus on the qualities of products. That is the slogan ‘right time, right quality, right place’ nowadays. The qualities, customer services and convenience become the important part of considering the consumption.
Apart from this, western culture is influencing Hong Kong day by day. As the supply chain management had already been developed early in 90 century in western countries, we can see the advantages of practicing supply chain management. From knowing the benefits of SCM, the practice of SCM is inevitable in order to gain more profits and enlarge business size. Therefore, many firms and companies are trying to employ skilled persons with SCM knowledge so that they can build up a SC in their companies.
Not only company urges to develop SCM, Hong Kong government also supports and encourages Hong Kong companies to develop SCM. Frequently, HK government tries to provide some courses about SCM. These courses are much cheaper than those provided by private organization. It also builds some roads and ports for practicing SCM effectively Methodology. All information are collected by the newspaper, Internet and reference books.
Definition of Supply Chain Management Strategy
The concept of SCM strategy is not straightforward. Some elements of strategy have universal validity and can be applied to any firm, regardless of its nature. Others appear heavily dependent on the firm’s structure, culture, and economic environment. SCM strategy is a coherent, unifying, and integrative pattern of decisions. It determines and reveals the organization’s purpose of supply chain activities in terms of the firm’s long-term objectives, action programs and resource allocation priorities. It attempts to support or achieve for the firm a long-term, substantial advantage by responding properly to opportunities and threats in the firm’s environment.
A SCM strategy must be comprehensive; meanwhile, it must be break down the complex web of decisions into analyzable piece.
What is opportunity ?
Opportunity is a chance for companies to develop SCM strategy
There are 3 main opportunity for companies to develop the SCM strategy.
Hong Kong Exports Trends
Consumer and Retail Trends
China entry into WTO
1. Hong Kong Export Trends
In 1996, total exports through Hong Kong reached the level of US$ 181 billion. Though the export trade is still increasing, the growth rate has weakened to only 4% in 1996, from 21 % in 1992.
According to the statistic, the total exports in Hong Kong tend to decrease after 1997. From 1991 to 1997, the rate of increase of the exports is decrease, from 1991, +21%, to 1997, +3%. In 1998, the exports is decrease and its dollar of export is 172.3 billion US dollars because of financial crisis. Although the exports sharply increases in 2000, the percentage decrease between 2000 and 2001 is 5%. The tendency line is decrease or level.
According to the government statistic, by comparing January 2002 with January 2001, decreases were recorded in the value of domestic exports of goods to Germany (-48.2%), Singapore (-43.3%), the United States (-35.0%), Malaysia (-31.1%), the United Kingdom (-28.9%), Canada (-24.0%), the Netherlands (-16.1%) and Japan (-6.5%). On the other hand, the value of domestic exports of goods to the Mainland and Taiwan rose by 11.4% and 6.9% respectively
China is the largest trading partners. From the result above, only China increases because the economic in China is increasing strongly. Most goods are needed Hong Kong as a middleman to export the goods to the other countries before China enter into the WTO.
Since the USA, Germany and United Kingdom are the three largest western trading partners for Hong Kong’s consumer goods export industry.
The decrease of total exports is due to the competition from Central/South American, Eastern European, Indian or Caribbean suppliers of consumer goods.
These countries are the strong competitors in the key markets of the USA, UK and Germany. The market in these three largest countries has lost a significant market share by the global competitor. Caribbean and Central America took a larger share of imports into the US. Eastern Europe and Turkey gained import shares especially for Germany. A larger proportion of British import orders went to suppliers from India, Pakistan, Sri Lanka and Mauritius.
The loss of market share because the sourcing practices has restructured the method and timing. Traditional pre-season orders are increasingly being replaced by last minute ordering budgets, with more replenishment orders being placed in the light of actual sales. Retailers should gain more flexibility to adopt the unexpected consumer trends. In these competitor can provide more choice for the USA, UK and Germany to select the products. On the other hand, Hong Kong also uses the traditional method to produce the products and goods, which is not flexibility to meet the USA, UK and Germany needs. The price in Hong Kong is greater than those competitors.
Free-trade agreements (e.g. NAFTA) between the western economics and the new sourcing regions only provide a partial explanation of the shift of sourcing patterns towards other countries including those mentioned above. Retailers’ needs for speeding sourcing and replenishment services are a more significant factor.
In order increase the competitive, the SCM strategy should be developed. The SCM can increase the goods flexibility, which can get a higher on-shelf performance and lower price of the goods. Quick response and value chain are also needed to provide a good customer services.2. Western Consumer and Retail Trends
In 80’s, quality, price and time were the main factors influencing consumers’ purchasing decisions. However, in 1990s’, the desire for convenience, constraints, upon time and greater interest in entertainment have added new challenge for the retail industry in the US and Europe. Besides consumer today focus on the financial security, health care, comfort and safety. Moreover, high tax and cost of medical care are the major expenditure. Therefore, the expenditure on consumer goods decrease due to growing expenses.
According to the 1997 Consumer Pulse Survey in the USA, over half of consumers agree that they have less leisure time now than before, while 62% admit to working longer hours now than ever before.
In 1995 consumers spent averaged 4.3 hours per month on shopping. Consumers are prefer to spend more on enjoyment than go to shopping. In Europe and other areas the trends is similar, people tends to reduce the shopping time and spend more time on other activities. Some people describe shopping as a “hassle”.
According 1997 KSA Consumer Pulse Survey Showed that 68% of consumers walk into a store with a clear idea of what they want to buy, but they run a nearly 50% chance of being disappointed.
68% of consumer enter a store with clear idea
then — 81% don’t like the style
67% not suitable size
66% price too high
59 % doesn’t fit
49 % can’t find what they are looking for
the statistic shows that 49 % of consumer want to spend money buying goods; however, the goods are not fit, price is too high, the style is not good.
Considering these changing consumers’ trends, retailers must do some policies to attract the consumers. Retailers should change their strategies to satisfy the customers needs. The strategies includes increase availability, replenish products regularly, shorten product development lead times and quick response. These strategies are the supply chain strategy. Retailers have reconfigured their supply chains in order to ensure better availability of merchandise in their stores.
Hong Kong companies no matter the exporter, retailer, supplier, should adopt these changes and meeting the consumers needs. As a result, Hong Kong companies should develop SCM in order to avoid eliminating through the competition because the consumers are the main source of income in the company.
3. China entry into the WTO
Potential Market in China
After China enters into the WTO, all walks of life will be open. Facing the large potential market foreign investors will invest lots of capital in China such as building the manufacturing industry. China Government forecast that after China enters into the WTO, the GDP will be greater 1 trillion Yuan.
The import and export in China also increase stable from 1996 to 2001.
This shows that the volume of imports and exports in China will continuous increase because the entry into the WTO. After entry into the WTO, all countries are treated as fair as possible. The regulations in exports and imports will less than before. The quota of imports and exports will decrease.
In order to perform the fairness in the WTO, China will break down business who are monopoly. The foreign investors can wholly have a company.
The statistic also shows that the consumer power in China is very strong. We can predict that the consumer power in China market will increase strongly after China enter into the WTO.
Hong Kong challenge
The tradition position in Hong Kong has changed. The goods do not need to go into Hong Kong and then go into the China. After entry into the WTO, goods can directly flow into China.
Hong Kong Opportunity
The logistic in China are still at the beginning stage whatever the software and hardware. In logistic, the warehouse facilities, distribution center, road, port and airport are not efficiently run. The people who are lack of knowledge of logistic and SCM.
Hong Kong can focus on the SCM which provide a effective and efficient way to distribute the goods and the value chain to have a quick response in customer, supplier and consumer.
The future road for Hong Kong is to develop an efficient logistic network in China in order to increase re-export volume between China and other countries. Hong Kong can reply on its good import and exports relationship and logistic network to China and foreign countries act as a stepping-stone for foreign companies to invest in China. Since Hong Kong has a effective airport and port the goods can flow into the Hong Kong and distribute to other regions in China.
To face the huge consumer market in China, Hong Kong companies can act as the agent of foreign products and help the products to go into the China market successfully because Hong Kong has a good experience and relationships in China market. As a result, it should have a good marketing concept and strategy and good SCM strategy to maintain a good services to satisfy the customer needs.
Firstly, Hong Kong businessmen have silo thinking, many information is available in each supply chain members, but they are reluctant to share it due to a lack of trust and a fear that the information will be revealed to competitors.
Secondly, different facilities in the supply chain may have different, conflicting objectives. For example, manufacturers’ objective of making large production batches typically conflicts with the objective of both warehouses and distribution centers to reduce inventory. As a result, conflict management in interorganizational relationships is becoming increasingly difficult to manage.
Thirdly, there is communication problem in the supply chain. Supply chain members come from different area of the industry and come from different country. Since the different cultures, languages and specific knowledge, it is difficult for them to communicate and cooperate.
Fourthly, there are not enough trainee and infrastructures in Hong Kong. Supply chain management is still a new concept for many Hong Kong businessmen. It is essential to provide a number of professions in SCM . But it is costly for businessmen to take a course. Also, the infrastructures are not enough. There is traffic jam during peak hours in Hong Kong.
Fifthly, SCM increase the cost of transportation. To apply the JIT and get a zero inventory, increasing frequency of transport inventory is needed. As a result, the transportation cost is increased.
Sixthly, Hong Kong faces a strong competitor. Hong Kong ports and logistics services providers are recognized as having the edge in SCM operations experience compared with their mainland counterparts. Shanghai and Guangzhou, will become more competitive with Hong Kong within the next five years. They had been making steady progress in building up their information technology and transport infrastructure. China’s State Economic and Trade Commission data indicate the market is worth about 100 million Yuan (about HK$93.76 million). With its gigantic manufacturing base and domestic market, China’s import and export traffic through the Pearl River Delta, as well as demand for third-party logistics services will grow by leaps and bounds. And admission to the World Trade Organization was accelerating infrastructure development programs.
Seventhly, the ability to control outsource suppliers is diminished.Many companies are shifting the control of their reputation to outsiders. The outsourcing phenomena may have come into vogue to offset the rate and magnitude of corporate downsizing. But, if critical components of the company’s core competency have been outsourced, their competitive resiliency is compromised. As the external environment continues to place pressure on companies, the ability to control outsource suppliers is diminished.
Eighthly, HK companies have a week security in Internet. According to a research made by Productivity council in 2000,many companies in HK do not have a strong security in computer. In the three thousand interviewees, 76% out of three thousand interviewees just use the base Internet security technology like antiviral software and password. To develop a supply chain management system, many advanced IT to several aspects of its business including its allocation of resources, process control, product distribution, procurement and online sales are needed.
Before planning the supply chain management strategies, we should review the structure, human recourses available, technology level available, location of administration center and distribution center and the inventory needed of a company
An organization is the result of the organizing process. it refers to a group of people working together to achieve a common objective (develop the supply chain management strategies).To facilitate achievement of the objective ,a clear structure of the organization should help the people in the organization reach their objective. Organizational structure is the organization’s framework in which activities are organized and co-ordinated. Communication is a very important part in supply chain. A clear structure of the organization should fulfill the principle of chain of command and unity of command. Chain of command is the paths an order should take from the highest to the lowest levels of management. Response and feedback also travel along the same chains back up to the higher management levels. It seems that it will slow down the communication process as orders or responses have to pass through layers of management before they reach their final destinations, but using supply chain strategies it can improve the speed of communication. Besides chain of command, unity of command also is important, it means that each person reports to only one superior, it can ensure that a subordinate will get orders from only one source. If a subordinate reports to more than one superior, he may receive conflicting orders from different superiors at the same time. He will be very frustrated, as he does not know which order should be followed. So it can improve the speed of market response.
Human Resource Management
As employees are very important to the success or the objective achievement of a company so human resources planning is very important to implement the supply chain strategy. The first step is to forecast human resources requirement, for example, the talent of supply chain and the number of employee in each departments needed.
The next step is to compare and find ways to eliminate the discrepancies between the availability of human resources and the forecasting of human resources requirement. There are some ways to deal with the surplus and the shortage of employees, for example, hiring, promotion, transfer, training, and dismiss redundant personnel
If a company want to develop a supply chain system, its administration center must not located at the place where is difficult to gather information, as the most important part of the supply chain is communication, such as customers feedback and market situation. Then the distribution center and the warehouse cannot be located in the place where is inaccessible and high land cost, the reasons are the customer today require company has flexible delivery of products and the company need to lower its inventory cost according to increase the competitive power.
Technology level (hardware)
The importance of information and the supporting technology, to supply chain management is evident, determining which specific systems and application can provide a specific supply chain with the greatest benefit is very important . In the development and maintenance of the supply chain’s information systems, the technology level must be addressed. Analyze the technology level within the company is suitable for supply chain system or not. That means the company needs to computerize the system in all departments. It can improve the communication efficiency among different departments and partners. For example, the inventory level in the warehouse can be monitored and order the material in right quantity and right time.
Depend on each case, the company needed to decide that the materials are purchased from one major supplier or few suppliers. If the company chooses one major supplier, the company may have some discount and have a better relationship with the supplier. However, if the company chooses few suppliers, it can lower the risk of depending on one major supplier for example the delay of delivery or production in the major supplier. As there is a risk of delay of delivery, to avoid the stock out cost, inventory or safety stock may be needed. However the company needs to consider the feather of the product and the customer’s requirements then the company can decide the inventory level. For example, the company will not keep many perishable inventories.
Supply chain operation strategy
In the supply chain operation strategy, it involves the implementation of technology equipment and managerial skills for enhancing communication between the inter-departments that are under the same company. To take an example, the sales department can know how many products or semi-products in the inventory when they use the Internet system. It is meaningless to talk about the concept of supply chain strategy if the inter-department is lack good communication.
The second purpose of supply chain operation strategy is enhancing communication between inbound and outbound partner. In fact, many companies in Hong Kong such as Park’N shop and Johnson & Johnson have used the EDI and the EAN/UCC system. Under the EDI system, the formatted data can be transferred between the Park’N shop and Johnson & Johnson computer system. Using the EDI can reduce the paperwork which can reduce the administration cost as well as human resources. Staff can be re-deployed to other more value-added functions within the organization. And also, EDI can transfer the large volumes of commercial data between the business partner in a matter of minutes, enabling faster response and increasing ECR efficient Customer Response. Since EDI can reduce the paperwork, it can eliminate the inevitable errors resulting from manual data input. EDI also enables companies to better manage and control production, purchasing and delivery requirements. EAN/UCC system can provide unique global product identification to the business partner. It can save the time and human resources for product identification and checking the amount of inventory.
Both Johnson & Johnson and Park’N shop have agreed and established a forecast model which includes forecast quantity, safety stock and service level and lead time. Under this model, Johnson & Johnson can share the daily stock-on hand and ex-warehouse data through EDI, to generate daily-proposed purchase order in EDI for Park’N shop.
Not only the information flow can increase by using technology equipment such as EDI, but also it can be enhanced by the human communication. To take an example, Watson’s the Chemist and Procter & Gamble has formed a cross-functional team. It involves the representatives from marketing, sales, merchandising, operations, logistics and IT functions from the both side. In this cross-functional team, they have the opportunity to develop the same goal which can increase the relationship between the Watson’s the Chemist and Procter & Gamble.
Since many business in Hong Kong such as Watson’s the Chemist, Procter & Gamble, Park’N shop and Johnson & Johnson have implemented the concept of supply chain for many years, many people who are experienced in managing the supply chain in Hong Kong. The most important thing is they are top level and middle level managers who have good conceptual and communication skill. It can help to develop the best supply chain strategy respect to experienced mangers. Compared with other Asian country, many businesses in Hong Kong implemented the supply chain equipment with high efficiency.
Logistics strategy is the strategy of planning, implementing, controlling the efficient, effective flow and storage of goods, services and related information among the supply chain partner to satisfy the customer’s need at dynamic environment. Under this strategy, it involves the Cross docking, ASN (Advanced Shipping Notice) and Dispatch Advice. Cross docking is the term for the process that allows a retailer to receive the goods at the distribution center and process them for direct store delivery without further handing. The main advantages of using the Cross docking is reduce the warehouse cost and improve the lead-time.
Inventory management is one of the important steps of applying successful logistics strategy. Many vendors take active to develop the tracing and monitoring of sales performance and replenishment needs from their customers. The risky of stock out can be reduced. It also helps to receive valuable trend information for product development for the next seasons. Many companies such as wellcome and seven eleven used logistic strategy to control the good flow.
In the recent, many businesses develop the logistics services to their customer. To take an example, Sun logistics provides “One Shop” a service that meets the customer’s needs to move goods in a manner that balances the speed with the cost effectiveness. They provide for the their customers to warehouse management, inventory management, delivery service and value-added services such as in-house labeling, packaging and price-tagging services to support special promotions and re-export operation.
To conclude, not only the supply chain partner use the logistic strategy, but also other companies provide logistic service to the customers. Compared with other country, we can see that a lot of companies in Hong Kong use or offer logistic strategy. Therefore, Hong Kong can develop the logistic strategy respect to the human resources as well as the equipment such as multiple strategically located warehouses.
Relationship strategy is a main cause in developing the best supply chain management strategy in Hong Kong. Having a good relationship between each party, it will be smoother in dealing business and solving problem with them. Indeed, Hong Kong is a suitable place for companies developing a good relationship between its partners, suppliers and customers. It is because Hong Kong’s technology is so advanced. Having advanced technology, information will be exchanged more efficient and accurate. Then, it may eliminate much unnecessary technical or paperwork problem with other parties. Relationship will then easily build up.
In Hong Kong, it has put so much effort on information technology education; therefore, there are many IT talents to support the supply chain management. Also, Hong Kong people always chase the trend of technology all over the world. It leads to improve the process of supply chain management more efficient and efficiency.
Frankly speaking, trust is a main element of establishing good relationship between every party and trust is correlation. Even if our technology is so advanced, we cannot establish good relationship with our stakeholders without trust. Therefore, trust will be the main focus on developing good relationship strategy between suppliers, partners and customers.
Firstly, from suppliers’ point of view, they want to have an exact demand scheduling of their customers. However, if suppliers are still using paperwork or working with low technology, it is difficult for company to exchange accurate information. Therefore, electronic database interchange (EDI) is needed. If suppliers have not installed such technology, their customer will persuade them to install it. On the other hand, if suppliers have installed EDI, it is encouraged to fully utilize such technology in order to exchange information more accurate and faster.
On the other hand, if there is suppliers cooperate with company for the first time. Short-term contract of one to two years can be signed with them in order to protect both of parties. As both parties do not have any transaction before, it may occur many invisible problems after cooperating. Many problems have not occurred with existing suppliers may appear with the new one; therefore, short-term contract will be encouraged.
Moreover, regular evaluation with suppliers will be needed too; no matter it is new one or existing one. It is because company can solve many problems during evaluation. For example, if a company discovers that one product’s quality is always out of standard, company can discuss it during evaluation. Within evaluation, company may understand suppliers’ difficulty on manufacturing such product, then, company can suggest solution to the suppliers.
This kind of evaluation is not only aiming at problem solving, but also mainly at building up a trustee relationship with them. Indeed, company may also share both problem on transaction process, services etc.
After a certain period of evaluation with the new suppliers, long-term contract will be proposed to sign if both parties are willing to do so. It is because company has already built up good relationship with their suppliers. .
Actually, having a good relationship with suppliers can help a company operation more efficiently. It is because any problems existing between suppliers will cause ultimate effect on end customers. We value the relationship with suppliers as well as the customers’ relationship.
Besides suppliers’ relationship, partners’ relationship is important too. In Hong Kong, keen competitive is everywhere. In order to enhance competitive power and bargaining power, cooperating with a company’s competitors is suggested in developing the best supply chain management strategy.
Then, those competitors will become the company’s strategic partners. During cooperation, there is suggesting three “Joints”. They are joint procurement, joint transportation and joint research and development.
Firstly, joint procurement means companies jointly purchase their supplies. One good example is Cathy Pacific. After joint procurement with One World Alliances, Cathy Pacific is successfully reducing US$3.5million cost. Obviously, joint procurement is practicable. It is increasing not only the procurement value, but also the bargaining power against suppliers and competitive power within its industry.
Secondly, joint research and development is also suggested. In which companies and companies can jointly take a research on product development. For example, SCE and Sony are jointly developing the most advanced semiconductor technology with Toshiba and IBM respectively. And this most advanced semiconductor technology will be used on the central process unit (CELL) of Play Station 3. Therefore, it can share the cost and risk of research and development in each company.
Lastly, joint transportation of strategic partner can also be adapted. Because suppliers may not fully utilize the capacity of cargo shipment, using joint transportation can greatly reduce the transportation fee.
Several decades ago, the customer value to the goods was just based on the price. Later they concerned more on the quality, price and time. But nowadays, more and more customers are concerning element, SERVICE. Since the change of customer value, reducing the price in order to maintain the customers’ loyalty is not adoptable. As a result, suppliers have to change their operating, logistics and relationship strategy to satisfy the changes of customer value.
The most important thing in improving the relationship between supplier and customer is to increase the service providing to customers. Companies should at least satisfy the several primary factors such as the product design, product price, service, etc. Apart from these factors, if companies can satisfy the extra needs of customer, it will maintain or increase the loyalty of customer.
Company should set some principles or rules to staff when servicing customers. Also, customers responses must be realize and regard seriously. Over 60% of customers leave companies because of the shortcoming in customer services and caring. Therefore, companies have to react as soon as possible in order to keep customers base on the efficient customer service management.
Total quality management is one of the methods to maintain the quality of product. It can ensure the quality of product is at standard. One of the techniques is six sigma quality. This quality controlling can reduce the defect rate to nearly 0%. Although it is impossible to reduce the defect to 0, it can at least increase the satisfaction of customer and maintain their loyalty to the product. Since the main purpose of companies nowadays is not to attract new customer, but to keep the existing customers. As mentioned before, the information flow of Hong Kong is advanced; company can react to the customer in a short time to reduce the waiting time of customer. In recent years, the after sales service is common throughout the world. This kind of services is to increase the customer loyalty also.
But if there is lack of reviewing processes of customer relationship management, there will be less progress on the services provided. In this changing world, little improve of services will forces the customers to shift to other companies. If companies can practice these activities, they can develop a information feedback from customer for future improvement.
In customer relationship, quick customer response is important. It is because if company reacts to customers slowly, customers will think the company neglects them. Hence, customers will leave the company. If companies make use of high technology to react faster to cope with customers needs, company can then maintain customers’ loyalty. For example, the Q & A section in the homepage of company.
To develop the best supply chain management strategy, the participation of companies is not enough. The role of government is also important. However, Hong Kong government is not fully participating in the development, but just act as a supportive role because of non-intervention policy. Therefore, we suggest a few points to government in order to help to develop the best supply chain for Hong Kong.
In Hong Kong, the number of parking space of cargo ship is just eighteen; it cannot afford the average daily number of ship which is 108. Hong Kong cargo terminal still uses the 19th century method, which is using the barge to load the cargo from the cargo ship and ship to terminal. As a result, it increases the transportation processes and the transportation cost. To tackle this problem, Hong Kong government should build more infrastructures such as cargo ship parking area to reduce the loading process and to satisfy the huge daily number of cargo ship.
Hong Kong government can also announce the consultant report to small-middle enterprises. This gives companies a clear guideline and future government policy. Companies can develop their own supply chain according to the government policy. For example, companies can setup their warehouses near to the harbor terminal or airports in order to decrease the transportation cost or design the transportation network. Recently, the Hong Kong Productivity Council has sent the report of research on Hong Kong’s transportation and trading sectors to relevant sector for strategic planning in order to meeting the change and challenge in the coming decades.
Most of companies realize the importance of supply chain recently, but they are lack of the knowledge, capital and talent. Because developing a good supply chain system is costly. The government can subsidize companies to develop the supply chain system. Although the Hong Kong Trade Development Council is providing fund for small-medium enterprises (SME), the number of successful applicant is small. This means the approval standard is very high and difficult to apply for the fund. As a result, the fund is not effective and this will discourage the company to apply the fund and create disincentive the development of supply chain management. So, the Hong Kong Trade Development Council should lower the approval standard to make more companies obtain the fund for developing the supply chain system. Moreover, Hong Kong government is helping tertiary institution to develop the courses about the supply chain and logistics to training the professional for this sector.
After Mainland China entering WTO, the trading activities with Hong Kong will become frequent. The role of Mainland will become more important also. To help the development of companies in Hong Kong and in Mainland, Hong Kong government should contact the province government especially Guangdong province government and Pearl River Delta government. Because of the rapid business activities in these two regions, the government support can help to develop the supply chain such as cooperate the ports in the region and the Hong Kong Kwai Chung Cargo Terminal. The ports in the region can act as backup role of Kwai Chung Cargo Terminal. Also, both Hong Kong and Mainland government can build a cross-harbour steel bridge in order to make a direct transport of goods from other places to Hong Kong. Since Hong Kong has efficient transportation network, Hong Kong should act as the main character amount other cities in the region. All the goods are transferred to Hong Kong from other region and making use of the Hong Kong International Airport; all the goods from the region can immediately distribute to other places and act as a distribution hub.
Although Hong Kong is has the advantage on exploring Mainland market, the information and the legal aspect of Mainland is not clear. Therefore, government should set up some organization for company to develop the supply chain in Mainland or in other regions. The Hong Kong Productivity Council will setup 9 offices in different cities in Guangdong province to develop the supply chain, legal support, etc
The checking procedure in Lok Ma Chau Border Crossing is complicated that this will increase the queuing time of lorry. Hong Kong and Shenzhen government should simplify the procedure and increase the working hour to 24-hours service. The transportation of goods of companies will become more flexible. This can help company to improve the quality and on time delivery of product.
One of basic element of developing the best supply chain is technology support. In Hong Kong, the technology is enough to support the rapid information. But the software of supply chain is inadequate. There is little number of software company in Hong Kong is developing supply chain programme for Hong Kong. Therefore, Hong Kong government can subsidize software companies to develop a suitable supply chain programme to Hong Kong companies. In recent years, the internet shopping and transaction is common. However, the restriction of internet shopping and transaction is limited. Government is still drafting the context of the rules. If government finish the legistration as soon as possible, E-shopping will become more acceptable in Hong Kong. This will improve the B2C, B2B and C2C. Companies no longer to setup a retailer shop and wait for the customers. It can reduce the cost of employing forefront salesman. And this can also increase the customer responses and opinion through the internet.
Even there is a good supply chain system; lack of promotion cannot attract more foreigners to invest in Hong Kong. Because of the investment will bring the capital, technology and talent into Hong Kong, therefore, the Hong Kong government should promote Hong Kong is a good logistics and supply chain center to other countries. Several months ago, Mr. Tsang has promoted Hong Kong as a logistics and supply chain center during his public speech.
After studying this report, there are opportunities and challenges for Hong Kong to develop the best supply chain management strategy. If companies and government make use of it and follow the strategies that mentioned before, then it will help to develop a good supply chain center in Hong Kong.
In developing the supply chain, government support is very important, especially the cooperation in infrastructure. However, Hong Kong government is giving little support to companies. It is hard time to companies to survive without the support from government. Although government started to concentrate on developing logistics activities, the legistration procedures are so complicated that make Hong Kong losing the competitive power. If Hong Kong government reduces the legistration procedures, more effective infrastructure and policy can be carry out. It will really make Hong Kong become the world known supply chain center and practicing the best supply chain management strategy.
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