44. The Relationship between Temperature and Shelf Life Product Transportation Shelf Life (at 1 o C) Shelf Life (at 3 o C) Shelf Life (at 5 o C) Meat 2.5 days 7 days 5.5 days 4.5 days Sea Food 2.5 days 5 days 3 days 1 days Strawberry 2.5 days 10 days 7 days 3 days Salad 2.5 days 12.5 days 10.5 days 7.5 days
Metro uses centralized buying in China and has established different types of distribution centers in China. REID: A technology uses communication via radio waves to exchange data between a reader and an electronic tag attached to an object for the purpose of identification and tracking. Some tags can be read from several meters away.
Picture: Wal-Mart’s distribution center in Jiaxing, China Wal-Mart serves customers and members more than 200 million times per week at more than 8,692 retail units under 55 different banners in 15 countries. Wal-Mart made a substantial investment in developing its information systems and has the scale economies to justify it. Wal-Mart invests 15% profit in information system annually.
Wal-mart has three distribution centers in China: Tianjin (North), Jiaxing (East), and Guangzhou (South). Each distribution center can support 100 stores.
There are many small manufacturers in China with limited knowledge on information system. It is hard for Wal-mart to conduct centralized buying with them and connect them with Walmart’s information system.
Carrefour uses decentralized buying system.
85% products in Walmart are self-distributed.
Most of distribution centers were developed from warehouses. They were used to be the storage facilities in planned economy. Thus, they are relative small and not equipped with advanced technologies. They were not designed for large-scale market activities. Typical functions of distribution centers: transportation and distribution; Storage; processing, assemble, load, and unload; Information processing; and Forecasting. Replenishment time in Wal-mart is 2 days.
Pictures: retailers’ warehouses in rural areas. Chaoshifa has reached to 80% of self distribution Shanghai Hualian has own fresh food distribution center.
More and more retailers begin to purchase directly from the manufacturers and adopt centralized buying.
In the planned economy, merchandise was distributed through different levels of wholesalers. Retailers had to buy merchandise from local wholesalers. During the market reform, there is no restriction on where a retailer buy merchandise. Thus, many retailers buy directly from manufacturers or first level wholesalers. As a result, many third and second level dealers were out of business. Distribution channel has become wider and shorter.
Originally, slotting fee is the sum paid by a vendor or manufacturer to a retail chain or establishment for (1) making room for a product on its store shelves, (2) making room for the product in its warehouse, (3) entering the product data in its inventory system, and (4) programming its computers to recognize the product's bar code. It is also called slotting allowance. However, Chinese retailer charges more than the above purposes.
Slotting fees have dramatically changed the retail landscape by reducing the diversity of products available to consumers. Some companies argue that slotting fees are unethical as they create a barrier to entry for smaller businesses that do not have the cash flow to compete with large companies. The use of slotting fees can, in some instances, lead to abuse by retailers as in the case where a bakery firm was asked for a six figure fee to carry its items for a specific period with no guarantee their products would be carried in future periods. Supplier may increase their wholesale price as a coping strategy. Usually, slotting fees are not specified in contracts. Sometimes, suppliers even do not get their receipts. Retailers do not pay tax for slotting fees because there is not a tax category on slotting fees. Retailers may become lazy because it is much easier to charge more on suppliers than to improve its own internal management and marketing strategies.
To address the problem of abusing slotting fee by big retailers, Ministry of Commerce have put forward a regulation on slotting fee. However, the fine is not serious enough to deter retailers form charging slotting fee (maximal fins is around $4,600)
Many Chinese suppliers do not offer the lowest price to Wal-mart, because if other retailers know it, they will ask for the same price (they may still charge high slotting fee at the same time). Some suppliers specially design a brand for Wal-mart, and use another brand name for other retailers. Thus, Walmart’s products is not necessarily cheaper than other retailers in China.
In China, retailers have absolute negotiation power most of the time.
Picture: 1 Hongyan’s store; 2. Hongyan’s headquarter and distribution center Hongyan is typical local retailer in China. Through this example, you may get some sense of the current status of supply chain development in Chinese retailers.
The common temperature is 2-8 C.
This figure shows that Chinese consumers consume much more fresh food than consumers in other countries. That’s why cold chain is important in China.
Chinese government is encouraging retailers to directly purchase from farms. It helps to reduce the intermediates, cut cost, and maintain the freshness of products.
Use Probe thermometer or Infrared thermometer to measure center temperature.
A 1000 square meter fresh food distribution center needs 40 million RMB investment (land cost is not included). It is about the profit of a retailer with 4 billion sales.
Some drivers turn off the A.C. on the road and turn it on near the destination.
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