Spare parts logistics for the Chinese market

Abstract

PurposeDespite the proven benefits of high‐performing spare parts logistics, recommendations on how to organize spare parts logistics in China are rather rare. The absence of spare parts logistics concepts for China is surprising, since the spare part business is the profit pool of the capital goods industry: spare parts create about 17 percent of the industry's total revenue. The margins involved in this spare parts revenue are, on average, 25 percent compared to 2‐3 percent of the capital goods. This paper aims to offer recommendations to increase spare parts logistics performance.Design/methodology/approachThe authors conducted an extensive benchmarking project with a variety of firms (focus group and single case study) in order to gain a better understanding of spare parts logistics in China. By reviewing the first benchmarking findings with a single company that struggled to achieve sufficient spare parts logistics performance, additional insight was gained into how spare parts logistics should be organized in China.FindingsThe paper attempts to provide a better understanding of the necessary changes for improving logistics performance in the Chinese market. It analyzes the necessary changes to achieve a cutting‐edge logistics solution, and shows how companies can implement the solution.Research limitations/implicationsResearch limitations come from the qualitative nature of the research.Practical implicationsManagers can use the results obtained in this study to challenge their current logistics practices and develop a project procedure on how to initiate logistics projects that lead to cutting‐edge logistics performance.Originality/valueRather than concentrating on performance benchmarks of the supply chain of spare parts or specific aspects of spare parts management, the paper develops the setting up of a cutting‐edge logistics solution for China and Asia. The cutting‐edge solution is based on two main pillars: companies should try to develop logistics solutions for Asia that consider existing Asian and Chinese constraints instead of taking the logistics practices used in mature markets and trying to adapt them to the Chinese market, and the development of the logistics solution should be in intensive collaboration with the logistics providers.