Supply chain management is the management of the flow of products from one point, usually the manufacturing, to the consumer. China’s Imported Frozen Aquatic Products (IFAP) supply chain has a multi-level structure because the imported aquatic products are sourced far from the country, which creates the need for proper distribution channels to convey these products to the consumers in the country. The multi-level structure ensures that all the key players involved in the supply chain are well represented.
These include the foreign aquatic product suppliers, the cold chain storage and logistics services enterprises, the international traders, the Chinese traders, and the aquatic product consumers. The multi-level structure equally ensures a smooth transition of goods as they move along the supply chain from the primary producers to the final consumer. Having upgraded their logistics technology to reflect the international standards, China’s local investors are ready to take over the mantle of logistics services. One of the players that are ready to consolidate the supply chain through the vertical integration is China’s Zhangzidao logistics company.
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Zhangzidao is the most qualified candidate to implement the vertical integration in China's IFAP supply chain because of its leadership ability, as well as its regional advantage. The logistics company is situated at the largest port in Northern China, which implies ease of access by the most delicate IFAP products, which needs large scale handling. Additionally, the firm uses an advanced technology which makes such services as storage of the highly perishable aquatic products much easier, to ensure the products are kept fresh and viable for a longer time, regardless of the volume of products being handled. The standard management system implies highly professional handling of IFAP as well. The company has a number of advantages that make for the factors pushing for its vertical integration.
The technology level of cold chain storage and Logistics Company is one major factor that pushes Zhangzidao to implement vertical integration. The company is well equipped technologically to handle more than one stage of the supply chain, i.e., its technology advancement can facilitate the handling of storage, transportation, and sales comfortably. The experience of acting as a buffer between the upstream and downstream segments of the IFAP supply chain has equally prepared the firm to adopt vertical integration. The international traders, however, are not willing to have the local Chinese logistics company implement vertical integration since it challenges the status quo that had been established up to the year 2017. To implement the vertical integration, it is critical that the company adopts forward integration.
Forward integration would be a better choice for Zhangzidao since it will give the company more control of the movement and distribution of IFAP, while at the same time keeping its duties domestic. Backward integration is not a good idea because it threatens the relationship the local Chinese logistics company has with the international traders in the sense that it challenges further the status quo set by the latter, leading to competition. Forward integration is better in drawing boundaries between the areas of operation for the international stakeholders and the Chinese players. The best method Zhangzidao should use to implement the vertical integration is downstream integration. This means the company should take over all the processes conducted by aquatic products processing factories, the wholesalers, and the retailers.
In conclusion, vertical integration will give the company a higher bargaining power, both with the foreign and international suppliers, as well as with the local Chinese aquatic product consumers. Integrating downstream will imply processing the IFAP and then taking charge of all the handling from the processing plant to the final consumer without involving any third party. This puts Zhangzidao at a better place to increase its market share by eliminating competition and market barriers as far as IFAP supply in China is concerned.
