The IBM Global Business Services 2007 Mainland China Value Chain Study examines the supply chains of operations across the country, and makes recommendations on the basis of best practice.

A total of 640 supply chain executive respondents, from a variety of industries, were surveyed to provide a picture business objectives, enabling technologies, current practices, as well as core performance data.

Comparisons have been made the data collected in China and that gathered from studies elsewhere in the world, including North America, Western Europe, Japan and India.

Using their benchmarking system, IBM has assessed how developed supply chain management is in China and how it is evolving against leading practices within a global economy.

The study's key findings focus on supply chain planning, new product development, and sourcing and procurement.

Top performing executives are adopting strategies including synchronising supply and demand through planning and forecasting, sharing information and risks with partners to reduce exposure, and using realtime information to create responsive, customer-driven processes, according to the study.

Understanding demand patterns and optimal planning of supply are the constant endeavors of supply chain planning, with leaders demonstrating the ability and flexibility to be responsive IBM found.

"In a growing economy like Mainland China's, fluctuations in demand and bottlenecks in infrastructure pose additional challenges to supply chain planning," the study says.

The study found that most respondents feel that they are rapidly responding to changes in market conditions, however, they have yet to evolve to more mature risk-sharing across a network as opposed to concentrating in a single enterprise.

Only 17 per cent of respondents said they have widely adopted risk-reducing processes through sharing information, resources and financials with others operating with the supply chain.

About 42 per cent of the respondents indicated that they have extensive, dedicated programs to replenish supplies based on actual and forecasted product demand, with about 33 per cent adopting effective returns management to improve end-to-end supply chains.

While respondents considered customer interaction with production employees as a very effective tool for supply planning, but only 10 per cent had adopted this kind of interaction extensively.

According to IBM, the adoption of realtime information transparency is an indicator of collaboration, with only 12 per cent of respondents adopting electronic sharing of data.

The study recommends that companies should enforce more use of technology, while forecast sharing with suppliers, weekly planning processes, system-generated supply and demand plans.

For a rapidly developing country like China, the ability to bring new products to market quickly, efficiently and ahead of the competition is becoming increasingly important.

About 24 per cent of Mainland China respondents said at least 80 per cent of their new products launched to market on time, while 39 per cent said 80 per cent of products were launched to market to budget.

Globally, sourcing patterns continue to shift dynamically in search of low-cost sources, according to IBM.

Direct sourcing of 75 per cent of supplies locally is practiced by 71 per cent of respondents, however the study found that more companies are searching for materials globally than they were three years ago.

Sourcing from Europe has increased from 30 per cent compared three years ago to 42 per cent in 2006. Those that source from North American have increased from 36 in 2003 to 45 in 2006, while sourcing from Asia, excluding Mainland China, has increased from 30 per cent to 56 per cent during the same period, the study found.

Leaders in industry are achieving global buying power by investing in fewer, deeper supplier relationships, and outsourcing operational procurement, payment and audit functions.

The study recommends that in order to reduce "maverick buying," Chinese companies should consider a centralised sourcing organisation, with a centrally managed and consolidated supplier management, and master contracts with key suppliers established.

"Defining a strategy is the first step. Translating strategic direction into action plans is the second one," the study says.

The study found that while many Mainland China companies are well informed and gearing up to meet challenges and opportunities, there is still considerable room for improvement for delivering better performance with increased responsiveness within the supply chain.