International port authorities could be doing a lot more to help streamline the supply chain between China and Europe, says the article "Untangling the Knots in the New Silk Route" by IESE Prof. Jaume Ribera and Cristina Castillo of the Port of Barcelona Chair of Logistics at the China Europe International Business School (CEIBS) in Shanghai.

Writing in the latest edition of IESE Insight magazine, the authors cite logistical inefficiencies and excessive red tape, which are hampering this strategically important trade route, causing some European companies to bring back part or all of the production that they had previously outsourced to China.

The authors undertook a major study of all the key agents and actors involved in the supply chain between China and Europe. They found overly complicated freight forwarding and shipping processes, as well as convoluted information flows.

"It is surprising, for example, that there is no direct communication between the respective authorities at the ports of departure and arrival," they write. "The same information is circulated multiple times and at different levels. This unnecessary doubling or tripling of communication increases costs and the likelihood of errors."

Other problems are related to cultural differences. Europeans perceive Chinese customs checks as less rigorous, and so repeat the same checks of goods upon arrival. Chinese brokers, on the other hand, regard European wages and working conditions as inflexible and “abusive,” with frequent labor disputes and strikes interrupting port activities and causing the entire distribution chain to break down.

The authors call for greater integration and collaboration to make the entire supply chain more responsive and reliable.

"Ultimately, it comes down to understanding and meeting the needs of the end customers. And essentially what they care about are lower costs, reliable services, transparent practices and stable prices."

To find out more, go to IESE Insight review