Competition is getting fiercer in
China's steel market with a situation of oversupply in evidence and foreign steelmakers entering the local market one after another. Although
Baosteel still maintains obvious dominance in the local middle and high end market, its top management have forecasted a potentially serious market situation in the future and have taken measures to enhance inland supply chains in order to firm up relations with all customers. The major measures in question are these:
Regional distribution centers
Currently,
Baosteel divides the entire Chinese market into four independent regions - eastern, western, northern and southern – each having a
distribution center in charge of sales in its area. All
distribution centers have the authority to draw up their own sales plans and strategies, but have to meet annual sales targets fixed by
Baosteel headquarters at the end of the previous year. When the
distribution centers achieve the targets set out, they are rewarded by headquarters. In the opposite case, their bonuses are cut.
With a view to sustaining sales,
Baosteel issues policies to encourage its regional
distribution centers. One policy is to reward high-performing
distribution centers with priority in steel resources, badly needed in the market, for their big regular orders in a declining market situation.
Regional steel processing centers
Normally, the steel coils produced by the mills cannot be used by end users directly. They need to be processed, namely to be slit into strips or cut into sheets. Most steel end users don't have the facilities to process steel coils. Thus, they either buy the processed steel from steelmakers or traders, or buy coils and then entrust specialized steel processing companies with the processing work.
With the intention of serving customers better,
Baosteel has decided to establish or invest in as many steel processing centers as possible in the major industrial cities where its present and future potential clients are based. To date,
Baosteel has set up 15 processing centers in major cities in
China. The two most famous ones are located in the Jilin and Guangdong provinces. Both serve the processing needs of the automobile industry.
Advanced network management systems for supply chains and clients
The competition for clients is concentrated in the competition between the steelmakers' supply chains.
Baosteel has now established advanced computer network systems and also demands certain criteria of its supply chain management. More and more of
Baosteel's strategic clients, such as Dongfeng, Nissan, Honda and Toyota, are also adopting the
Baosteel criteria as their own. Besides these end users, the related logistics companies are also doing the same.
Baosteel's supply chain management systems have become popular among clients and are contributing to firmer ties between
Baosteel and its clients. So far,
Baosteel has applied for over 10 supply chain management patents.
In order to sustain its progress,
Baosteel keeps honing and popularizing its advanced and practical experience of supply chains management among its interior departments and subsidiaries. It can be expected that
Baosteel will maintain a strong competitive edge into the future.