FEaTuRE Sourcing & Procurement
China and India:
A Comparison
in Sourcing Potential
nCharles Avery, The Beijing Axis
the study found higher productivity levels in India. Thanks to geographical endowments,
India, in terms of capital intensity, delivery China also has more navigable waterways. Be-
frequency and stock-turn ratios, China had the sides some of the world’s most active ports,
edge. In a more recent, broader assessment commerce in China moves on 110,000 kilo-
across multiple industries, Deloitte found that meters of inland aqueous passageways. This
here are many similarities the average number of days an item sits in is more advantageous than India’s 16,000
T
between China and India inventory favored China at 24.2 compared to kilometers of waterways, particularly in the
in today’s global-economic India’s 32.5. movement of bulk commodities.
climate. Both have over one Beyond the factory floor, connecting prod- These transportation differences are par-
billion citizens, both have ucts to end users poses different challenges tially reflected in the World Bank’s Logistics
experienced resilient growth in output, and in China and in India. Within India there is a Performance Rankings. China is rated the
both have greatly expanded their roles in in- heavy reliance on roads. Their network is the highest of all BRIIC (Brazil, Russia, India,
ternational trade. The relatively inexpensive second largest in the world, behind the US, at Indonesia and China) countries at 27th in
yet well educated workforces of these two over three million kilometers. However, only the world. Its comparatively higher scores in
countries have made them key prospects for around half of these roads are paved, and customs clearance, infrastructure adequacy,
the sourcing of manufactured goods. Yet their width is generally too narrow to allow logistics, timeliness and tracking ability place
differences remain in their supplier and lo- the passage of anything beyond smaller, two- it above India, ranked 47th globally. Some
gistical capabilities which must be taken into axel trucks. Road transit is further slowed of the largest discrepancies between the two
account by sourcing professionals. by a fragmented Indian trucking industry countries are shown in survey data collected
Both India and China are capable of world and by state border checkpoints. China, in by the World Bank. Responders reported
class manufacturing processes. A study per- contrast, has a far less extensive network of much higher frequencies of compulsory
formed by the London School of Econom- roads. Out of its million-plus kilometer road warehousing/transloading and involuntary
ics on the supply chains of the two countries’ network, only around 300,000 kilometers are payment solicitation in India, while in China
automotive industries found that two-thirds paved. But what China lacks in actual length, greater expenses were incurred in the form
of their domestic suppliers were able to pro- it makes up for by having newer, more pass- of agent fees.
vide inputs with defect rates of less than 100 able roads. It has five times the number of The infrastructure and logistical differ-
parts per million – the typical threshold for multiple lane highways than India. ences may explain why India is a more com-
suppliers in the China also has mon site for the outsourcing of services, par-
US, Europe, and Made in China more transport op- ticularly IT services, which do not require a
Japan. It was
Share of world manufacturing output, %
tions available to physical good to be brought to market. How-
observed that
1993 2003
its supply chains in ever, India should not be entirely discredited
both Chinese the form of rail, air, as a sourcing destination for manufactured
0 1 2 3 4 5 6 7
and Indian auto and waterways. Over goods. Both it and China have allocated over
manufacturers
China 78,000 kilometers of
10% of their GDPs toward infrastructure
domestically out- terrain are connected development which will enhance their future
sourced compo-
South
Korea
by rail in China com- logistical abilities in bringing their products
nent production pared with 63,000 in to the world’s consumers. The greatest simi-
at similarly high
ASEAN
India. Goods can be larity between China and India: neither can
rates, suggesting flown in and out of be ignored by the sourcing professional.
Taiwan
an adequate avail- China by way of 500
ability of local airports whereas there
India
The China Sourcing Blog is THE BEIJING
competent sup- are only 334 locations
AXIS’ online platform on sourcing and the
pliers. Whereas
Source:UNIDO
to take to the sky in
Chinese economy.
40 MARCH/APRIL 2010 www.supplychains.com
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