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After-sale services and logistics in China are lower than average

In a study of after-sale services and logistics in China, it turns out that Chinese customer requirements, specifically in economic centers such as Shanghai, Beijing or Shenzhen, aren’t much different from the standards in western countries. The need for high-quality services like short-term part deliveries within two to four hours, competent call centers, general tracking and tracing and subsequent supply chain event management, complete stock visibility, multi-vendor stock management, and third-party repair is comparable to western countries.

Nevertheless, the study indicates, this high standard of service remains unfulfilled in China, even in the above mentioned economic centers. Moreover, these requirements have no opportunity to be fulfilled in more rural regions due to clearly underdeveloped infrastructure.

The study, conducted by management consulting firm Barkawi, reports that 60% of the companies use multi-level distribution channels to reach their customers adequately. For this reason, appropriately higher stock costs must be absorbed. Contrary to the rapid and steady growth in customer requirements, low prices are the top priority for Chinese companies when it comes to outsourcing. Outsourcing partners are therefore selected less for the scope and level of their service than for cost reasons.

When it comes to transportation, outsourcing potential is almost fully tapped (up to 95%). Warehouse outsourcing is likewise well developed but still has a potential for development.

The result is similar for IT systems and data management. Only ERP (enterprise resource planning) systems use standard products, whereas companies in China tend to use home-grown solutions for CRM (customer relationship management) and APS (advanced planning systems) tools. Data preparation for controlling spare parts logistics is not sufficiently developed and as such offers clear potential for optimization.

According to Barkawi, companies doing business in China should actively formulate service requirement with their customers, and define a distinct product portfolio. They should rely on proven methods and measures used in western markets to prevent mistakes that have already been made elsewhere. Collaborating or cooperating with companies from other industries will also help overcome some of the basic deficits in infrastructure and management in service parts logistics in China.

In May of 2006, Barkawi teamed with DHL Logistics and the China Supply Chain Council (CSCC) to study service logistics in China. The strategies of over 180 companies were evaluated according to customer requirements. Topics such as efficiency of infrastructure, logistical services, outsourcing, IT systems and data management in service logistics from the high-tech, electronics, medical engineering, and automotive industries were taken into consideration.

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