09 May 2006 | Anusha Bradley

The hidden cost of a poor transport infrastructure and lower standards of logistics services must be considered when buying cheap supplies from China, according to logistics consultancy Barkawi.

The German-based firm surveyed 180 logistics customers in China, in conjunction with DHL Logistics and the China Supply Chain Council, and found services such as quick delivery, call centre help and the tracking of cargo are not carried out to the standards that Western European firms are used to.

Unlike Western European logistics firms, which tend to distribute products from a central warehouse in Europe to sites across the continent, the survey found poor roads and transport links in China meant 60 per cent of firms surveyed had to operate several warehouses in order to reach their customers, adding extra cost.

Holger Clasing, general manager of Barkawi, told supplymanagement.com that rising wages in China were pushing many manufacturers away from prosperous economic zones with well-developed transport links, such as Beijing, Shanghai and Shenzhen, to rural areas where labour was cheaper but infrastructure worse.

He said purchasers who were considering sourcing from China should beware of the added logistics costs involved in transporting these cheap supplies.

"In Western Europe logistics costs equal about 4 per cent of the overall product's cost price. But in China that is 10-fold," he said.

The study found Chinese manufacturers tend to select their logistics suppliers based on the lowest cost at the expense of levels of service or overall value.

Clasing said if purchasers were buying supplies from China through an agent, but did not know where they were sourced from in the country, it could lead to delivery delays.

SMmay2006