Stakes are high in China’s food chain

James Morehouse, senior partner with supply chain consultant A.T. Kearney estimates that the population of 500 million consumers will spend more than $650 billion on food alone by 2017. However, 75 percent of that market lives in regions that aren’t supported by efficient distribution networks. And when you’re talking food, lack of efficiency means a lack of safety.

Unfortunately, it may take a monumental disaster to bring this problem to light and inspire logistics managers around the world to help rectify the situation. That disaster could happen as soon as the 2008 Summer Olympics in Beijing.

“The [food delivery] system will be stressed and there’s no process in place to fix it,” Morehouse told me. “People need to be careful where they eat and drink.”

Why is food poisoning a foregone conclusion? It all has to do with how food is handled in China’s supply chains and under what conditions.

Logistics automation is a long way down the road for China. According to Morehouse, the handling equipment that exists is dilapidated. There’s little consciousness of temperature control issues: Efficiency is not at the top of China’s priority list because labor is so cheap.

“If a guy pulls up to a dock he’ll hire some lumpers to help unload the truck, but it will be a case or two at a time, or at most, a hand cart full,” Morehouse says. “In the meantime the truck is open and exposed. Frozen chickens get transported under a blanket on a truck going over the road.”

This problem will not be solved by a bunch of entrepreneurs, but by logistics professionals working for companies with brands to protect. Morehouse is reaching out to those companies to collaborate on a solution. He has already presented his case to 400 top food executives from around the world, and is now trying to form a coalition.

The needs are many but they fall under a handful of easily identifiable categories: national quality and safety standards; inspection and enforcement; and, of course, logistics technology.

That last one is a biggie. Even technology as basic as a lift truck used to move product and to transmit timely information about that product is in short supply. However, Jim Malvaso, president and CEO of Raymond Corp. and president of the Industrial Truck Association (ITA), says this market represents a real opportunity for U.S. companies like those that are ITA members.

“China has 1.2 billion people and they produced and shipped about 110,000 lift trucks last year,” he says. “So China will be challenged to meet its own demand.”

According to an ITA member survey, expectations are high that U.S. manufacturers will partner with Chinese manufacturers to produce lift trucks in China. You can bet that other technology producers from around the world will also partner up to meet China’s screaming need for a logistics overhaul.

Morehouse estimates it will cost $100 billion to build a national, end-to-end, climate-controlled supply chain to serve that growing Chinese middle class by 2017; however the payback should translate to something like $100 billion a year. If you want to hear more about the coalition he’s trying to build, call Morehouse at 312-223-6500. Tell him I sent you.

Sourse: Logistics Management