More than ever before, Chinese retailers are facing local competition from foreign companies. China's highly regulated economy has insulated businesses from competition.
Now that China is loosening its regulations in an effort to benefit from international trade, its own businesses must work harder to become more efficient and effective and keep customers. Yansha is one of China's biggest retailers. It sells upscale designer clothes from around the world along with other fine merchandise. One of its largest retail stores occupies 215,000 square feet in Beijing's famous Youyi Shopping City. Yansha has long experienced market leadership in China, but in recent years has felt increasing competition from international companies. Yansha's management team was aware that its methods of communication with suppliers-the placing and receiving of orders-was less than efficient. It was also aware of other inefficiencies in communication throughout the organization. For Yansha to maintain its leadership role in the market, it would need to cut the waste and become lean and mean in its application of information system technology. Yansha turned to IBM China Research Lab to evaluate its information systems and recommend the latest technologies to bring it up to date. IBM implemented a massive system upgrade across the entire enterprise: an enterprise resource planning (ERP) system. The ERP allows Yansha executives and managers to view real-time performance data, such as sales across all locations, in certain regions, or in one particular store. Using this system, managers could, for example, determine the success of a particular marketing approach. The new ERP interfaces with a new supply chain management (SCM) system that provides close communication between Yansha and its suppliers. These two systems working together, the ERP system and the SCM system, allow for Yansha and its suppliers to work as one tightly knit organization.
The new systems required a substantial investment of time and money for Yansha, but the benefits have vastly overshadowed the costs. The new systems reduced the time it takes for suppliers to ship merchandise to Yansha (order lead time) from 2.5 days to 4.5 hours. The order acknowledgment rate has increased from 80 percent to 99 percent. Order errors have been reduced from 9 percent to 1 percent. The money saved by Yansha receiving the right merchandise at the right time has saved the company enough money to pay for its expensive new information systems within nine months of rolling them out. Achieving a return on investment (ROI) in such a short time is something any chief information officer (CIO) would be proud of.
Discussion Questions
1. China is experiencing a rapidly evolving economy. Why do you think most international businesses are looking to China as both an opportunity and a threat?