China is discovering that clearing the air of harmful pollutants for the Beijing Olympics is a marathon, not a sprint, no matter how many factories are idled or vehicles are taken off the roads. But international supply-chain managers are starting to breathe easier.
China's recent actions, including hundreds of factory closures during the games, had done little to resolve Beijing's chronic smog problem as the Olympics got under way on Aug. 8. However, the impact of the factory shutdowns on international supply chains is expected to be less than some had feared.
The impact of the plant shutdowns is not yet clear. It appears to depend mostly on the direction of the trade and on whether the markets are domestic or international. What does seem clear is that companies manufacturing or doing business in China needed to have their logistics plans in place or at least prepared well before China's official announcement about the initial closures in April. Some did; others did not.
"Most of our customers planned ahead and pre-staged inventory rather than wait for factories to catch up after the fact," said Jack Gross, senior vice president and general manager, international, at Schneider Logistics.
The problem for logistics managers was complicated when, only days before the start of the games, China imposed even stricter measures to curb industrial and vehicle emissions during the Olympics.
The cities of Beijing and Tianjin and Hebei Province expanded previously announced restrictions on cars, construction projects and factory operations, basically at the direction of meteorological departments.
Beijing's heaviest smog days occur when upwind conditions blow smoke from hundreds of coal-fired plants toward Beijing. China said it would shut down 105 more electric, furniture, building material and chemical plants, halt all construction work and pull more vehicles off the road. That's in addition to the closures announced earlier this year.
In Tianjin, 56 more coal-fueled power companies, coal-fired heating projects, building materials, electric and chemical factories will suspend production.
On July 1, about 300,000 trucks - many of which deliver goods to shops and supermarkets - were barred from the city through September. That spurred some retailers to bring in supplies early. IKEA, the Swedish furniture retailer, built up extra inventory of popular items at its Beijing store. About half of the capital's 3.3 million cars will also be banned on alternate days according to their odd or even plate numbers. Similar measures are in place in Hebei Province in Zhangjiakou, Chengde, Shijiazhuang, Baoding, Langfang and Tangshan.
"I'd say that under the initial closure announcements, there was minimal impact for about 75 percent of those doing business in China," Gross said. "The more recent closure announcements have created a lot of issues for the domestic supply chain in China."
On the export side, he said, the impact appears to have been "fairly minimal." Some customers may have missed a sailing or two, but that meant only a day's delay, he said.
"It's a hiccup. By the middle of September, it all will be back to normal," Gross said. "A lot of shippers really prepared well, so they are encountering far less grief than anybody initially thought."
But the story is different for distribution directly to Beijing. "That's a problem," Gross said.
Even for factories not linked with pollution, strict traffic controls from July 20 to Sept. 20 will affect daily operations and cause difficulties in getting goods to and from ports in the region, said Charles Wang, director of the China Development Institute for Logistics and Supply Chain Management.
"Even some food-producing companies are facing reduced intervals for urban distribution to their clients or supermarkets in the city," Wang said. "There is not much they can do but to wait until the games are over and resume normal operation."
"There is an impact of the Olympic actions toward shippers and supply-chain managers," Wang said. With all pollution-related factories ordered to suspend production temporarily, he said, "Members in the related supply chain will be influenced either by shortages of supply, of power, or raw materials, or customers will be in short supply of products."
Bryan Larkin, director of marketing for GXS, a Gaithersburg, Md., provider of business-to-business EDI and supply-chain integration services, said some international carriers leased additional trucks earlier this year to ensure regular service. "That was probably smart of them," he said.
But the truck repositioning going on in Beijing raises another issue, Larkin said. The trucks are coming from outlying areas to Beijing to augment transportation operations there, but there may not be enough equipment available to deliver products from those outlying areas to ports, he said.
"It's not a supply-chain nightmare, but it is a challenge," Larkin said. That's especially true for retailers moving to private-label producers rather than the name brands, he said.
Lead times for manufacturing and shipping name-brand products take two or three weeks, compared with four to eight weeks or more for private labels, Larkin said.
"Basically, we're seeing an immature supply chain," he said. China's two months of factory shutdowns, coupled with what could be up to a two-month lag time for the private labels, "means there may be a problem for some retailers to get their products on the shelf for Christmas."
Although China has invested more than $17 billion over the past 10 years to improve Beijing's air quality and some progress has been made, there are still many days when the city's smog-enshrouded skyline is virtually invisible. This year, China passed the United States as the largest global emitter of greenhouse gases by volume.
The major culprits are the coal-fired plants east and north of Beijing that power much of China's manufacturing output. Coal accounts for more than 70 percent of China's total energy consumption.
Bill DiBenedetto can be contacted at email@example.com.