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Cai Jin speaks at the 16th Online Forum on Supply

by:VIPUTRANS     2020-07-25
On July 11, the 16th Online Forum on Supply Chain Innovation and Application was held under the guidance of the Market Construction Department of the Ministry of Commerce, organized by the Purchasing and Supply Chain Management Committee of the China Federation of Logistics and Purchasing, and provided academic support by the Business School of Renmin University of China. Cai Jin, vice chairman of China Federation of Logistics and Purchasing, attended and delivered a speech. The following is the record of Cai Jin's speech:

President Li's speech was very pragmatic and in-depth. It can be seen that he has deep thinking about how to upgrade and optimize the supply chain of bulk commodities. The comments of the two professors, Hong Tao and Feng Gengzhong, are also very exciting. At the same time, they talked about some of their forward-looking views on the innovation and development of the bulk commodity supply chain, which inspired me deeply.

The bulk commodity supply chain is a focus of my country's supply chain innovation and development. At the same time, there are many pain points and difficulties in the innovation and development, and it can also be a key point in the future supply chain innovation process. I have the following knowledge of today’s forum:

1. Fully recognize the importance of the bulk commodity supply chain to my country's economic development.

In the process of my country's economic transformation and upgrading, especially in the process of superimposing global economic changes, we must grasp the importance of the bulk commodity supply chain to my country's economic development.

(1) Bulk commodities occupy an important position in the national economy.

The total sales of consumer goods in 2019 was 41 trillion yuan. According to the statistics of the China Logistics Information Center of China Internet of Things, the total sales of bulk commodities reached 75 trillion in the same year. This is only the statistics of bulk commodity sales in the industrial sector. If agricultural products are added, the total sales of bulk commodities should reach 80 trillion yuan. Its market size is twice that of the consumer goods market. Therefore, bulk commodities occupy an important position in our national economy. From this perspective, the supply chain of bulk commodities is of great significance to the innovative development of my country's supply chain. Supply chain systems that lack a commodity supply chain are immature. The development of the supply chain of bulk commodities can promote the development and maturity of the entire supply chain system, and even promote the transformation and upgrading of the entire country. Therefore, the positioning of the development of the bulk commodity supply chain is not only a question of the transformation and upgrading of the bulk commodity market model, but also the key to the transformation and upgrading of the entire macroeconomic development model.

(2) Bulk commodity trade is the top priority of international trade.

From the perspective of international trade, bulk commodity trade is the top priority of international trade, and even affects and influences changes in the global economy. For example, the world economic crisis in the 1970s was caused by the oil crisis. The Middle East suddenly raised the price of oil from a few dollars a barrel to more than ten dollars or even 30 dollars a barrel, which caused a global economic crisis.

Just now Director Dajian also mentioned that my country is the largest buyer and largest producer of global commodities. my country ranks first in the world in the production or consumption of bulk commodities such as steel, coal, and cement. Therefore, my country's bulk commodity trade is the top priority of my country's international trade, and its supply chain is even more critical.

(3) The financial attributes of bulk commodities affect the fluctuations of the global financial system.

Professor Feng Gengzhong just emphasized that commodities have financial attributes. Its financial attributes can affect the fluctuations of the global financial system. Commodities are often used as a bargaining chip in a country's diplomatic, political and other fields, and are used to sanction opponents.

2. Grasp the pain points in the innovative development of the bulk commodity supply chain.

Commodities have many pain points in the process of supply chain innovation. In general, the development status of my country's bulk commodity market is four words: big but not strong. Say it is big, regardless of production or consumption, the total amount accounts for more than 50% of the world; but it is not strong, production and consumption of such a large volume, but it has not improved my country's position in the global bulk commodity field. I think there are several reasons for this pain point:

(1) Lack of an effective production organization model.

Over the years, my country’s bulk commodity companies, especially companies like China Central Reserve, have achieved great results in the process of supply chain innovation. But compared with international multinational companies, our production organization model still has a big gap. In the past ten years, we have made detours in the process of innovation in the production organization model of bulk commodities. Some commodity markets learn from the consumer goods market to develop e-commerce. Although we do not deny the development of e-commerce, it is not enough to rely solely on e-commerce for the transformation and upgrading of bulk commodities, but to expand the development model of the supply chain. To develop enterprises that do not follow the production organization of the supply chain will result in low efficiency of the enterprise. On a global scale, if my country does not develop a supply chain of bulk commodities, it will not be able to gain the initiative in pricing bulk commodities.

(2) There is no effective value chain.

The international trade of bulk commodities in my country is only buying and selling, and a small amount of indirect exports. Although big in and big out, there is no effective value chain. A few years ago, our research found that more than 80% of my country's bulk commodity exports are FOB, which means that a series of services such as logistics after offshore have nothing to do with us. my country’s bulk commodity imports are all CIF prices, and the services before they arrive have nothing to do with us. The price risks and cost risks that we want to avoid cannot be avoided, let alone value appreciation. In this respect, we lack an effective value chain.

Now, our bulk commodity companies participate in international competition, which is a competition between a single company and the global supply chain. First of all, commodity resources are controlled by others. For example, iron ore. On the surface, it is Chinese steel companies negotiating prices with Brazil’s Vale, Australia’s Rio Tinto and Bitto, but it is actually a company’s buying and selling behavior and competition in the global supply chain, because the capital of the United States and Japan has long been controlled. The iron ore resources of Brazil and Australia have been improved. Secondly, logistics is controlled by others. It does not only refer to the problem of transportation, but the entire logistics plan and logistics channels, which are controlled by other parties. The Americans claim that six keys lock the world, through the Panama Canal, the Strait of Gibraltar, the Suez Canal, the Strait of Hormuz, the Strait of Mande and the Strait of Malacca, they control global logistics channels and logistics resources. It is difficult for our enterprises to take the initiative in the control of logistics resources. Third, market resources are also controlled by others. For example, the Baltic Airlines Exchange, which is controlled by the United Kingdom and the United States, controls the pricing power of many commodities through the dry bulk freight index.

A relatively weak supply chain and a relatively strong supply chain can't compete, let alone our single enterprise competing with the global supply chain system, it is bound to be 'pain'.

Therefore, the supply chain is the top priority for the transformation and upgrading of bulk commodity companies. Once it is transformed, the entire supply chain in China will basically mature.

3. Grasp the path and key points of the development of the bulk commodity supply chain.

In today's forum, combining President Li's speech with the comments of the two experts, we basically grasped the path or key node of the development of the bulk commodity supply chain.

(1) Focus on the initiative to control global resources.

The supply chain of bulk commodities must first focus on the control of global commodity resources, which is the prerequisite for a bulk commodity supply chain. Director Dajian also talked about this view before. To do the supply chain, we must first integrate resources. Integrating resources actually realizes the control, use and sharing of resources. We must pay attention to the initiative in this area to enhance our control over commodity resources.

(2) There must be a guarantee of logistics resources.

From the perspective of the real economy, a very important feature of the bulk commodity supply chain is to ensure logistics channels. Whether it is transporting iron ore from Australia or Brazil, or transporting coal from western China to other regions, the route is thousands or even tens of thousands of kilometers, and its storage period is long, so logistics guarantee is very important. Just as President Li emphasized just now to ensure safety, but also to ensure its high efficiency and low cost.

(3) Do a good job in the processing and distribution of bulk commodities.

The processing and distribution of bulk commodities is an element that is often overlooked. Today, colleagues from China Railway Materials and China Railway Materials and Trade, who are now engaged in the supply chain of railway construction, are moving the supply chain forward to the project. Wherever the railway is repaired, the supply chain will follow. For example, sand and gravel materials and cement are no longer simply delivered to the construction party in a package, but are mixed into a cement slurry that can be directly used for railway laying according to the required ratio, providing processing and distribution supply chain services . Such processing is more common in the steel industry, such as the cutting of steel coils and the production of railway fasteners. The same is true in the field of coal. There must be a process of coal blending and processing, which is the most economical and reasonable. Therefore, processing and distribution are a very important area of ??the bulk commodity supply chain.

(4) Build a collaborative service platform for the bulk commodity supply chain.

Just now, President Li also talked about the need to have a collaborative service platform for the supply chain of bulk commodities to realize the synergy between supply and demand, the synergy between transaction parties, and the synergy between commodity transactions and logistics. This platform is a comprehensive and full-process collaborative platform, not an e-commerce platform based on transactions. There is still a misunderstanding, thinking that having a platform is to provide supply chain services. It should be said that the platform is just a tool for supply chain services, or a node, it does not represent or equal to the supply chain.

(5) Use technical means to do a good job of supply chain finance for bulk commodities.

Commodities have strong financial attributes. The supply chain finance of bulk commodities should be able to develop better, with larger scale and higher quality. But unfortunately, the supply chain finance or logistics finance of some commodities has gone wrong in the past few years. For example, some risk events have occurred in the pledge of warehouse receipts. Therefore, we must use technical means such as CA certification technology and blockchain technology to eliminate and avoid the risks of supply chain finance. This point was also emphasized in Mr. Li's sharing just now.

(6) Support the development of the entire industrial chain of bulk commodities and the management of the supply chain with technological innovation.

Supporting the development of the bulk commodity supply chain with technological innovation should be from the perspective of the entire industry chain. For example, the United States has achieved control of shale gas through the development of new technologies in recent years, which is to use technological innovation to support the control of bulk commodity resources. In addition, the management and service of the supply chain also need technical support, that is, digitalization.

(7) There must be national guarantee and support for the bulk commodity supply chain.

I totally agree with the two experts mentioned by Mr. Li and that there must be national policy guarantees and support for the development of the bulk commodity supply chain.

Fourth, grasped the basic goal of the innovative development of the bulk commodity supply chain.

As President Li introduced just now, one is safety. Safety is the bottom line and the premise. Commodities are not only an issue in the economic field, but also the security of their supply chain must be considered in the all-round view of politics, military, and diplomacy. The second is efficiency. The efficiency of the bulk commodity supply chain is not about speed, but about planning and effectiveness, whether it can be fulfilled as agreed in advance. The bottom line of efficiency is cost. At present, the cost of China's bulk commodity supply chain is relatively high, especially the cost of bulk commodity logistics is much higher than others. Therefore, the bulk commodity supply chain must pursue efficiency, and ultimately it must be able to reduce the cost of the supply chain. It must be based on safety. Improve efficiency and control costs.

Fifth, grasped the key points of the development of the bulk commodity supply chain through large enterprises.

At present, China’s bulk commodity supply chain is doing well. It is basically some large enterprises, which are relatively more standardized, more efficient, and innovative. Therefore, Mr. Li said that large enterprises should take on the responsibility of being a mass commodity supply chain. I think this angle is very good.

Just now, some representatives at the conference also talked about strengthening the government's power in advancing the development of the bulk commodity supply chain. During the epidemic this year, we, the China Federation of Things, proposed to the State-owned Assets Supervision and Administration Commission of the State Council to integrate the industrial chain resources related to bulk commodities to form a strong supply chain platform that can guarantee the safe operation of bulk commodities in emergencies. After the epidemic, it is hoped that the national level can strengthen the integration of state-owned resources and large-scale enterprises' bulk commodity logistics and supply chain resources, and strongly promote the innovative development of my country's bulk commodity supply chain.

thank you all!
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