Here comes the second part of the analysis about supply chain integration issues in China:

In the past few years, we saw many state-owned enterprises in China moving towards foreign joint-venture companies or eventual public listings. Therefore the effectiveness of the government's directive actions has been reduced, despite the fact that it can still direct state-owned enterprises via the National Asset Commission.

On the other hand, government is starting to play a more supportive role towards enterprises. The supportive role can be seen in possible government funding or support in strategic projects via the National Development & Reform Commission (like setting up of public platforms for supply chain integration, especially with SMEs).

As such, it can be seen that the environment of adopting e-Commerce technologies for Supply Chain Integration is improving. However, one should be aware that government's influence most of the time will stay in the top management level of the enterprises. Knowledge and skill at the operation level are still relatively insufficient to deliver successful Supply China Integration projects.

The second question many MNCs ask is why overseas Supply Chain Integration solutions don't necessarily work in China. In the US, most if not all Supply Chain solutions focus on realizing Return on Investment (ROI) to the buyers, or original equipment manufacturers (OEMs), through driving cost savings from the supply chain for them.

e-Sourcing Solution is a typical example. There are various e-Sourcing solutions from eBidding, eRFQ to eAuction which all aim at identifying the most cost competitive suppliers for the buyers and driving sourcing costs down. If MNCs try to implement these solutions in China, very soon they will realize that there are more non-monetary factors like product quality, transportation cost, and after-sales services that they have to consider in addition to pure cost comparisons. When these factors are taken into consideration, there are really too few instead of too many suppliers and therefore encouraging online competition is not necessarily effective.

On the other hand, for those Chinese OEMs that deal with a group of already very low cost domestic suppliers, there is no need for buy-side Supply Chain solutions. In fact, their pain point is more on the sell-side. In contrast to their US counterparts chasing after sourcing and production cost savings, they are more interested in deploying solutions to generate more sales opportunities, especially in the international market.

The success of Alibaba or Global Sources illustrate that sell-side solutions are in much greater demand in China than the buy-side solutions that are more familiar to overseas MNCs.