Evolving Supply Chain Offers New Opportunities for Global Growth
The Bund is a one-mile pedestrian walkway that runs along the western bank of the Huangpu River in Shanghai, China, offering one of the most spectacular views of the Shanghai skyline. Reflecting off the water, the lights that line the buildings along The Bund are a sight to behold for tourists and natives alike, their flashing cameras only adding to the light show.
What’s amazing about The Bund view is that three decades ago it didn’t exist. Many of the buildings lining the river’s eastern bank, including the Oriental Pearl Tower, a television tower that points to the sky and seals the Shanghai skyline as an original, was little more than vacant land. It took less than thirty years for that to change—proof of Shanghai’s rapid growth and evolution. The contrast between the two sides of the Huangpu River, the futurist eastern bank and the London-like western bank, reflects Shanghai’s deep rooted western influence in the early part of the 20th century and Shanghai’s current position as the dragon head of economic reform in China.
As a native of China, I’m proud to return and see the phenomenal transformations that Shanghai has made in such a short period of time, a true feat for any city. I recently participated in the U.S./China Business Symposium sponsored by Harvard University and China’s State Council, an annual event to discuss the global economy and how the United States and China can further grow. I also briefed reporters in Beijing and Shanghai about the evolution of the supply chain and its role in global economic and trade growth.
Supply chain has been a key driver of explosive global growth. Starting in the early 1960s, the world shrank dramatically as airline speeds doubled to 600 miles per hour. The hub-and-spoke system, which FedEx Chairman Fred Smith introduced to the air cargo industry, continues to maximize the number of attainable connections while lowering cost. Technological progress and standardization have deepened global value chain and vastly enhanced the sophistication of economic structure. The number of economic sectors has increased from 37 recognized in the 1930s in the original Input-Output table to today’s 1,065 according to the North American Industry Classification System (NAICS).
To see continued growth, countries must take advantage of value-added supply chains, learn to think globally and to operate without borders. The global connectivity we enjoy means we no longer have to settle on doing business at arm’s length. For China, a more efficient logistics system needs government prioritization. The country has an infant logistics industry, but one that has high growth potential should the Chinese government reduce fees and taxes, and encourage the consolidation of the fractured logistics sector to improve efficiency and increase firms’ profit margins.
China’s domestic logistics costs are about twice that of the United States. Lowering logistics costs is the key to promoting domestic consumption in China, which will in turn help to address trade imbalance. By lowering those costs, local economies in China and around the world have a greater opportunity to touch new cities, connecting Memphis to Milan and Shanghai to Sheboygan.
FedEx plays a huge role in this connectivity, allowing economies to thrive and grow by managing supply chains and moving business’ critical shipments across oceans. One such business is INDOCHINO. The Canadian company creates customized men’s suits online, and does most of its manufacturing in China. The brainchild of two college classmates, INDOCHINO was born in 2007. Nearly six years later, the company has employees based in Vancouver and Shanghai, and creates customized apparel for thousands of men in 60 countries around the world.
An INDOCHINO spokesperson recently said, “FedEx’s effectiveness and real time shipment tracking function allows us to better manage our production process. Meanwhile, FedEx’s various services enable us to manage our orders more flexibly.” It’s a Cinderella story, and a testament of the power of growth when you think globally.
Just like INDOCHINO, the city of Shanghai serves as a lesson of what can be achieved with the right partnerships and the right business mindset. Over the past two decades China has made giant strides in learning from an open global system. Shanghai’s changing skyline is a manifest of this learning process. I hope China can continue to participate, benefit and contribute in the open global economic system, transforming its inland as it has done in the city of Shanghai.
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November 25, 2015
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