Shenzhen SJET Supply Chain Co., LTD. (B) : Information System and The Establishment of An "Ecosystem"

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OMS-17-463-CE 2017-08-28
Shenzhen SJET Supply Chain

Co., LTD. (B):
Purchased for use on the Supply Chain Strategies and Technologies, at Maastricht University School of Business & Economics.
Information System and the
Establishment of an “Ecosystem”
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Taught by Maximilian Körber, from 4-Sep-2022 to 28-Oct-2022. Order ref F454367.
One morning in April 2015, Mr. Wen, the president of
Educational material supplied by The Case Centre
Shenzhen SJET supply chain co., LTD. (SJET for short), was
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overlooking Shenzhen, the “innovation city”, through the

window of his office. Mr. Wen recalled clearly the confusion and
worry within his management team 12 months earlier. At that
time, the middle managers had already sorted out the supply
chain participants, the critical points of value, the pains and risks,
and had created a new business model based on FQ’s service
requests. However, how could SJET deploy this innovative
business model? How could SJET meet FQ’s service demand and
create value for FQ? How could SJET create new profit point for
itself?
Now, due to the hard work in the past year, SJET finally
realizes the innovative business model and build the “ecosystem”
based on business process integration and information system
integration. However, with the growth of customers in the
ecosystem, what kinds of new problems will SJET face? How can
SJET solve them?
Innovative Business Model Supported by

process integration and innovation
The Original Business Process of FQ
Before it worked with SJET, FQ followed the typical

approach by a start-up technology firm (see Exhibit 1): It
focused on its core competency of R&D and integration, and
outsourced the rest through “virtual manufacturing.” The process
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Shenzhen SJET Supply Chain Co., LTD. (B)：

Information System and the Establishment of an “Ecosystem” OMS-17-463-CE
started with getting the purchase order of smartphones from an international customer.
FQ would purchase components from domestic and foreign suppliers, wait for the
imported components to pass through the customs, pay import duties for these parts,
then deliver all the parts to a selected assembly plant for production. After the products
were made, FQ hired logistics firms to ship and export those phones to the customer
and waited for the international payment and duty drawback from Chinese tax bureau if
some imported components are qualified for such drawback. (Here it specifically refers
to the refund of the value-added-tax for exports by Shenzhen municipal government).
In handling the order fulfillment process, FQ needed to manage all the non-core
activities importation, custom clearance (in and out), logistics, product quality control,
cash flow, bank financing, and drawback of duties and taxes. To a small firm that was

limited in capital and expertise, managing such a spectrum of tasks can be an
overwhelming experience and resource drain. In addition, with a small business scale,
the transaction costs of finding the right partners and service providers, managing all
these processes could be very costly and often suffered from low efficiency.
Like many countries in the world, the Chinese government adopts a VAT system.
Except for food and some limited items, a 17% VAT is assessed and collected on the
value of manufactured goods and services that a purchase involves. The seller charges
VAT to the buyer, and the seller pays this VAT to the government. If, however, the
purchaser is not an end user, but the goods or services purchased are costs to its
business, the tax it has paid for such purchases can be deducted from the tax it charges
to its customers. The government only receives the difference; in other words, it is paid
tax on the gross margin of each transaction, by each participant in the sales chain. By
the method of collection, each seller charges VAT rate on his output and passes the
buyer a special invoice that indicates the amount of tax charged. Buyers who are
subject to VAT on their own sales (output tax), consider the tax on the purchase
invoices as input tax and can deduct the sum from their own VAT liability. However,
the VAT tax rebate process requires expertise and could be time-consuming, it is a
“frequent headache” to the CEO of FQ.
The Reconstruction of Business Processes
When FQ approached SJET in 2014, both sides worked out a business flow model
as delineated in Exhibit 2. In Exhibit 2, client FQ only performed 3 tasks denoted by
the solid lines. Once FQ secured a purchase intent from an international customer (Step
1), FQ first signed a framework of agreement with SJET and provided the bill of
materials (BOM) (Step 2), starting the SCF project. SJET then took over at this point
and managed all the following activities (all denoted in dotted lines), except product
quality control and final inspection (Step 7). Two subsidiaries of SJET were involved:
The Asia Chuang Lian Company in Hong Kong was the interface entity between SJET
and the international client and managed all international trade transactions. On the
other hand, the Wu Zhou Tong (meaning “five continent pass”) company managed
Copyright © 2017 China Europe International Business School 2

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domestic purchasing and outsourced manufacturing in China for SJET. SJET would
purchase the materials and parts from suppliers, both domestic and international, and
ship them to SJET’s warehouses to conduct “vendor managed inventory.” Inside the
warehouses, the parts were sorted, inspected, and put in kits and delivered to an
assembly plant that was pre-selected and approved jointly by SJET and FQ. FQ was
responsible for monitoring the quality of the manufactured products, as well as the final
inspection before shipping. After inspection, SJET would manage the shipping and
exportation and delivery to the international customer. SJET then dealt with the
governmental agencies to get the value-added tax (VAT) rebate and duty drawback
(Step 14). In the end of the SCF project, SJET paid FQ what the firm should receive,
after deducting SJET’s service fees and financing interests charge.

SJET E-SCM Platform
Exhibit 2 describes the flows of the 15 steps of SJET’s order fulfillment processes,
which all operate on the E-SCM platform. During the past 5 years, SJET spent a great
deal of time and resources to build up its E-SCM platform. With the advent of
information technology, a myriad of software systems, such as MRPII, ERP, CRM,

SCM, etc., had long replaced many traditional methods of communication based on
phone call, fax, and mail. Nevertheless, in many cases, such systems were limited to
internal use within an organization. The connecting points between an organization and
its supply chain partners remained to be weak, hence forming many isolated islands in
the information flow in the supply chain. The E-SCM platform referred to the
establishment of a common service platform on the Internet to promote fully automated
transaction exchanges. It was aimed to optimize the supply chain coordination through
online, real time, accurate information exchange and data flow.
Exhibit 3 shows the architect of the E-SCM platform at SJET, as well as the
functional services it provides.
The ERP system of German software SAP was the backbone of the platform.
Internally, it supported various modules, from EDI to the duty and tax module.
Participants only needed to interact with the portal of this platform via SJET’s web site
“b2b.cjscm.com”. All the e-commerce could be conducted on this platform (as shown
in Exhibit 3). Specifically, the procurement and production were supported by the
Customer Relationship Management System, Supplier Relationship Management
System respectively, which were the original sub-systems in SAP. And SJET integrated
the original Transportation Management System and the original Warehouse
Management System into the SAP system to support domestic and international
logistics, warehouse management respectively. The integration above was realized in
the way of secondary development. In addition, SJET integrated the IBM SI data
exchanger into the SAP system. So SJET could realize the connection with the customs,
tax office and banks supported by the custom system (Quick Pass, QP), the tax system,
the E-bank system respectively.

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This platform helped supply chain partners, including governmental agencies of

China customs, commercial inspection bureau, and internal revenue (tax) bureau, each
had a different IT system to easily communicate with their supply chain partners via a
common infrastructure and protocol. Consequently, faster communication, shorter flow
time, lower transaction costs, lower pipeline inventory, and more effective planning
and coordination became reachable goals. Further, SJET can analyze the vast volume
of data and present customized analytical results to fit a client’s specific request. For
major clients whose business volumes exceed a high threshold, SJET created VIP
portals to tailor the transaction exchanges with them.
To Mr. Wen, this E-SCM platform fulfilled to two strategic goals for his firm:

“The completion of the E-SCM helped us create a congregative effect. More and
more smartphone supply chain partners, from foreign clients who bring orders, to
upstream component suppliers or logistics providers who are seeking businesses, are
attracted to congregate to join the platform to meet their needs. However, we are not
offering an open market place for sellers and buyers to meet. Rather, we perform some
screening functions and only admit qualified players into the user community of the
E-SCM platform.
Another benefit of the E-SCM is that it gives us a “grab hand (抓手)” or control
lever of all the flows: We can see and control all flows of the data, goods, or money
passing through the platform! We have set up control mechanisms at different points to
verify these flows against what we physically see and count on the warehouse shelves,
in a product assembly line, or on a truck passing through the customs for export. This is
why I usually said that our supply chain services are ‘embedded’ in the (smartphone)
industry. Ordinary banks have no confidence to lend money to small firms because
banks could not get down to our levels of visibility and control.”
The Smartphone Supply Chain Ecosystem
Shenzhen has a wide variety of industries that heavily utilize electronic

components. There are a multitude of companies in the electronics components
business. A great deal of them is small firms with annual sales lower than CYN 20
million (US$3 million). These small firms have a strong need for financing their
production once they receive a sales order. Small firms typically own limited physical
assets for collateral and their cash flows are weak or problematic, resulting in low
credit ratings and increased difficulty in obtaining loans from banks. As Mr. Wen put it
bluntly “The financing for these small firms are difficult, expensive, and chaotic.”
SJET created its business model to fill this void. Through the services running on the
E-SCM platform, SJET has complete visibility of all the transactions about three types
of flows: materials, information, and capital. Therefore, SJET could set up control and
audit points along these flows to ensure that all flows form a “closed-loop system” –

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that there was no leak or open gap. With this tight control, SJET was able to provide
financing to its clients who have a hard time obtaining loans from traditional channels.
Within SJET’s clientele of more than 80 customers as of April 2015, the majority
of them started working with SJET when they were small firms. Mr. Wen described the
profile of SJET’s client base, with a sense of achievement and pride:
“These small firms do not necessarily have low credits. Sometimes, their credits
scattered around and lack transparency to a particular bank or a major customer. Now
our E-SCM platform gives them a place to aggregate their scattered transactions
together with quantifiable data to prove to their customers and banks.

We have a good saying now – it is not enough to create values for our clients, but
more importantly is to help our clients succeed. Or be more candid, that is to help them
make money! Therefore, I can say that in the past five years, SJET has helped mold
50-plus enterprises attaining the level of $50 million in annual sales. Several of them
have even grown to the first level (about $100 Million) firms. This is a miraculous
thing!
I believe SJET forms an ecosystem of the mobile phone supply chain, and every
ecosystem has its industrial boundary as well as its “optimal scale.” Thus, I don’t think
it is necessary a good thing if this ecosystem continues to grow. The positioning of
SJET’s business model is to create ‘general goodness,’ to serve ordinary people’s small
and medium size firms. My target clients are not big, nor the micro ones. What we
choose to deal with are the ‘3 have, 3 have not’ types of people that operate a firm in a
growing stage: those people that have ideals, customer orders, and technology, but lack
capital, supply chain, and effective credit history! I see our model as based on services,
using platform technologies as a means, through solving financing problems it further
optimizes the supply chain. As this supply chain functions better, more capital will
enter this ecosystem for further investment. In the end, more capital investment,
industry investment, and business investment are converging into this ecosystem. I
estimate that this ecosystem, based on the SJET platform, carries a business value of
CY100 billion today. We have processed 2,000 smartphone orders since 2010. In this
smartphone ecosystem, there are now 80 project managers, our main customers, 120
international ‘ultimate’ customers (who gave purchase orders to our main customers),
60 manufacturing and assembly plants, and 2500 components suppliers.”
SJET Core Competency
When asked about what made SJET stand out from the competition, President
Wen identified four areas of core competency that separated SJET from more than 375
supply chain management firms operating in Shenzhen: “Over many years of
development, SJET has accumulated four core advantages: customs, tariff duties and

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taxes, financing, and coordinated management. Let me elaborate on them as follows.

1. Customs advantage: We have obtained an ‘AA’ rating from the Chinese Customs.
We are recognized as a client-coordinator type of enterprise that gives us fast-pass
status in customs clearance. These qualifications help our goods go through the
expedite ‘Green Passage’ that the Customs takes fewer and less frequent samples in
import inspection. In return, we need to maintain our good record of being
violation-free. Otherwise, we will be subject to heavier penalty fines than ordinary
importers and may lose that Green Pass privilege.
2. Duty and tax advantage: The National Tax Revenue Bureau awarded us a title of
‘Convenient Express Line service enterprise.’ Meanwhile, we have been ranked as
one of ‘the ten best tax paying enterprises.’ We are also selected as an experimental

firm for new national policies that aim to bring tax benefits to businesses.
3. Financing advantage: We received a combined credit line of exceeding 10 billion

Yuan, aggregating over all banks that we work with. In particular, we received the
designation of ‘headquarter-level business partner’ from the China Construction
Bank, and the ‘branch-level key customer’ from both Bank of China and Industrial
and Commercial Bank of China.
4. Coordinated Management advantage: In the past 5 years, SJET has invested lots of
resources and efforts to establish our Information Technology (IT) infrastructure to
improve our internal operation as well as external coordination and integration. We
had installed an ERP system as the backbone of our IT infrastructure. We purchased
an IBM Si integrated data center, and are now pilot testing our B2B web-based data
integration with select clients. The completion of pulling all these IT infrastructure
components together would enable us to reach a higher degree of aggregation and
integration of three types of flows: information, goods, and money. When we can
coordinate all flows in real time, the SJET supply chain becomes a ‘joint-win’ (共赢)
and also ‘joint-manage’(共营) chain! (Note: these terms are homophones in Chinese
pronunciation)”
The Experience and Decision Making of FQ
FQ became a client of SCF service which is called project manager to SJET since
2014. FQ preferred to use SJET’s services on both the front end and back end of the
entire project. As in the words of FQ CEO Mr. Alan Zhao:
“The smartphone industry is facing ever more competitive pressure, and we have
witnessed a stiff game of merger and elimination. For component suppliers and
manufacturers, the trend is to get bigger and more concentrated. We relied on SJET’s
scale advantage to help get good price for our components because SJET can purchase
a part by aggregating multiple orders from different customers. A 500 pixels
automatic-focus camera lens, for instance, has a current market price of $2.5 each.

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However, with a large purchase volume, the unit price can be lowered to $1.5. There is
no way I can get this price without going through SJET.
In addition to the purchasing power, the whole process of receiving the order and
deliver the order were handled by SJET. On the front end, SJET helped us to evaluate
the credit history of an international customer and the validity of its orders because
different customers used different forms of payments, such as Teletext (TT), Letter of
Credit (LC), LC with deposit, full amount LC, or even Open Account. SJET has to be
more watchful than us because the LC is sent to SJET, not to us!
In order to get the VAT tax rebates soon after a smartphone is made and exported,
we would like to use the supply chain services provided by SJET to produce and export

smartphones. Usually, the VAT tax rebate process requires expertise and could be
time-consuming. If a complicated component involves several tiers of suppliers,
sometimes we may not receive the rebate until as long as 18 months later. Thus, it
would do well to my firm that SJET serves as the exporter on behalf of my firm and
gives a cash advancement equivalent to the amount of the rebate to my firm before
SJET could receive the actual rebate payment from the tax bureau of the government.
We think it’s reasonable that SJET charges us a small interest on the cash advanced.”
This case further explores these research questions: under what circumstances
project managers need to use a larger amount of SCF and what corresponding
performance outcomes they can achieve? Survey data from 34 project managers and
their 214 SCF projects were conducted through SJET. The procedures of data
collection and data analysis and the results of the data analysis are given in Appendix 2.
First, the data analysis results show that project managers need to use a larger
amount of SCF and spend longer supply chain operation time when the levels of their
product innovation are higher. In addition, when project managers decide to use a
larger amount of SCF in certain projects, it usually means that the projects are more
complicated and would take a longer supply chain operation time. Meanwhile, it also
indicates that project managers need a larger amount of SCF to support their high
value-added commercial projects of the innovative products so as to achieve a higher
financial performance.
Accordingly, when the levels of project managers’ product innovation are higher
(e.g. allowing their high-quality innovative products to penetrate the market faster), it
generally means that the project managers can achieve larger orders of mobile phones
through improving their added values. On the other hand, they would face larger
capital pressure due to higher manufacturing costs and longer periods of cash cycle in
the commercial projects with more innovative products. Under this circumstance, the
project managers can consider to use a larger amount of SCF and collaborate with
SJET at a higher level to complete the projects which necessitate higher level of
financial support and longer supply chain operation time, and ultimately alleviate their
capital pressure. By doing so, the project managers can achieve higher financial

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performance in a way that they complete the projects with relatively higher profits at
relatively lower SCF financial costs.
In addition, project managers can also consider to combine their own financial
capital with SCF funds. They can purchase a part of standardized, complicated raw
materials according to their prediction of market needs by using their own cash in
advance. When customers place orders to them, they can purchase other raw materials
by using SCF funds immediately. In this way, the project managers can speed up their
manufacturing processes. Meanwhile, they can reduce the amount of SCF and the
financing time so as to decrease the financing costs.
Second, the results of data analysis show that project managers would reduce the

amount of SCF and shorten the supply chain operation time when their SCF prices (i.e.
the SCF interest rates) set by SJET are higher.
Accordingly, in high-tech industry, in order to compete for a higher market share,

project managers are committed to enhance the functionalities and improve the quality
of their mobile phones, which usually lead to rising manufacturing costs and prolonged
supply chain operation time. The manufacturing costs and supply chain operation time
should be taken into account in the stage of product research and development to
reduce capital pressure. In addition, the project managers can ask for lower SCF prices
by maintaining good credit records, and subsequently reduce financing costs.
Finally, the results of data analysis show that project managers need a larger
amount of SCF to alleviate the capital pressure when they face higher uncertainty of
purchase amount or higher uncertainty of accounts receivable.
Accordingly, project managers can consider to borrow a larger amount of SCF

from SJET to handle the shortage of purchasing funds caused by the volatility of
purchase amount and the security problems of account receivables. This will ensure the
successful completion of the commercial projects of innovative products especially
when handling the uncertainties associated with the above issues are difficult for them.
For example, project managers would worry about that the overseas customers may not
make the payment when they receive the products in certain projects in which the
payment terms are 100% open account (OA). In this circumstance, the project
managers can purchase the raw materials only by using the SCF funds and
subsequently collaborate with SJET deeply to ensure the security of their capital
facilitated by SJET as being their professional service provider. For more details, given
the high risk of OA orders, SJET would set up OA projects, buy China’s export credit
insurance, and assist the project managers to complete the orders strictly according to
the commercial contracts. In case that the overseas customers break the contracts, SJET
can help the project managers get the full payment from the China Export and Credit
Insurance Corporation. The project managers would not bear high capital pressure
during the process of claims because they only use the SCF funds offered by SJET to

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purchase raw materials.
The Experience of Assembly Plant DAXING

DAXING had been in business since 1985. DAXING specializes in surface mount
technology in assembling integrated modularized smartphones. It has worked with
several top domestic smartphone brands like Huawei and ZTE. For the 2014 order from
India that SJET received from FQ, SJET recommended DAXING to be the
manufacturer because FQ had no manufacturing facility of its own. In this arrangement,
DAXING simply served as a contract manufacturer and charged SJET on a per-unit
price. SJET managed materials purchasing, logistics, and risk control related to the

materials supply. When all necessary materials and parts arrived at DAXING, they

received incoming quality control. SJET sent resident-staffers to live at DAXING
during the project interval to monitor materials replenishment and inventory auditing.
They could access DAXING’s internal ERP system to inquire and print the status of
inventory for any components or the final products. In the end, every shipment of final
goods must be signed and photographed by SJET staff.
In the manufacturing stage, a thorny issue was how to deal with situations where
higher than expected defective products occurred (i.e., low production yield). Although
SJET managed the contract manufacturer DAXING as a project coordinator, the
auditing of production quality and final inspection before shipment (Step 7 in Exhibit
2) was still the responsibility of the customer, FQ, because only the customer had the
design and engineering expertise to evaluate whether the product meet the order
specifications. Sometimes, the shipment day had to be delayed in order to rectify the
quality problems, and SJET had to report to and negotiate with the international client
about the monetary effects caused by the delay. In past working experience, DAXING
had raised questions about a design’s manufacturability early on. DAXING informed
SJET that the design of this smartphone would most likely produce a high defect rate
and hence should be revised before ramping up high volume production.
Mr. Wen knew that SJET had strong leverage against assembly plants like
DAXING. He knew that DAXING world rather produce goods for SJET than directly
receive an order from an international customer because SJET always paid invoices on
time. In contrast, an international order had a risk of default and a manufacturer would
not get paid until the shipment arrived at the destination, typically with a 60-day
payment term. On the other hand, selecting and recommending a proper contract
manufacturer to serve its customers not only was SJET’s responsibility, but also
affected its revenues and most importantly its brand reputation. Admitting and
recommending a bad manufacturer or component supplier could bring disputes, penalty
fines, postponed or reduced payments, or even lawsuits to SJET. If such an unpleasant
ending happened, it would surely damage the reputation and credibility of SJET and
the ecosystem that its platform had created.

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Concerns and Opportunities
Turning to his calendar, Mr. Wen recalled a recent message from Mr. Zhao, the
CEO of FQ company indicating that FQ planned to purchase an existing smartphone
assembly plant in Shenzhen and take back some of the production works in the future.
This news prompted Wen to examine the services that SJET had provided to FQ. He
found that the most recent order FQ brought to SJET was an order from a top brand in
India in October 2015, with a monthly exportation of 2.5 million units of smartphones.
Mr. Wen wondered how changing the assembly plant from a third-party to a
client-owned facility would alter SJET’s existing business processes with FQ in
processing future orders. Mr. Wen saw both concerns and opportunities arising from

FQ’s decision of taking production back from third-party assembly plant DAXING to
its own facility. One critical issue to SJET was whether SJET could exert the same
degree of control over the new facility as it had done on DAXING. As a third party
manufacturer, DAXING relied on SJET’s reference to gain more business. Therefore,
DAXING was highly motivated to cooperate with SJET and adopt SJET’s monitor
system to trace all flows of materials, information, and capital. Its information system
had synchronized with SJET’s E-SCM platform to allow data and process integration.
On the contrary, because FQ’s new assembly plant was recently acquired from another
firm, it would take time and resources for FQ to “integrate” three IT systems among
FQ, the new plant, as well as the E-SCM of SJET.
Aside from IT integration, FQ’s new plant also presented a challenge to SJET’s
supply chain financing operation. In the past, SJET managed almost all the steps in the
order fulfilment processes - except Steps 1 and 7 - as described in Exhibit 2 in an
earlier section. SJET provided financing from the beginning to the end, hence FQ did
not get its sales revenue until SJET exported the completed smartphones and then sent
payment to FQ. SJET had full ownership as well as full control of all the flows of
materials, information, and capital. It formed a “closed-loop” of control without a gap.
With its newly owned manufacturing plant, FQ would take production in-house but
would continue to use the components purchased by SJET. Thus, some steps in Exhibit
3 of CASE A that used to be managed by SJET would be under the auspice of FQ. How
could SJET adapt to this situation while abiding with its closed-loop control principle?
How could SJET trace and monitor its purchased component inventories in FQ’s new
facility as tightly as it used to do with assembly firm DAXING? In the past, SJET had
seen some assembly plants create fraudulent transactions, such as shipping final
products to a different party without notifying SJET or using components that SJET
had purchased for client A to make smartphones for client B. How could such frauds be
prevented if FQ managed its own assembly?
Further, did this incidence with client FQ represent an inevitable “client life cycle”
for SJET? SJET had helped numerous clients grew from small firms, with full-fledged
services provided by SJET, to large firms which could run their own supply chain

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without SJET’s assistance. Once these clients grew big and independent, it was often
the time they said farewell to SJET.
On the other hand, FQ’s new plant presents a turning point from which SJET
could elevate its services to FQ from the current level of Supply Chain Integration
Programs to the third and most profitable level of Supply Chain Service Solutions, as
described earlier in Exhibit 1 of CASE A. Mr. Wen recognized that SJET could offer
consulting and platform integration services to help FQ integrate the IT systems with
the new plant. This type of customized project management of IT integration fitted the
Supply Chain Service Solutions. This was a new area of business that SJET was
exploring and desired to expand because it had accumulated sufficient knowledge and
experience over the past five years through helping many clients connect with SJET’s

E-SCM platform. The talents and expertise SJET had acquired and accumulated were
comparable to a mid-sized information technology consulting company. If FQ
welcomed SJET’s involvement in integrating the business and information processes of
its new plant, it would be more likely that FQ would continue to use SJET’s platform
and other services in managing its supply chain in the future. It would also be more
likely that FQ would trust SJET enough and allow SJET to build risk-control
mechanisms to address the “closed-loop” concern discussed earlier.
Pondering on the uncertainty associated with the above issues, Mr. Wen was pretty
sure about one thing: the agenda would be very full for the forthcoming executive
meeting this Friday!


Information System and the Establishment of an “Ecosystem”
Copyright © 2017 China Europe International Business School

Exhibit 1: The Original Business Process of FQ
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Information System and the Establishment of an “Ecosystem”
Copyright © 2017 China Europe International Business School

Exhibit 3: SJET E-SCM Platform Architect
Exhibit 2: The Business Process for FQ’s Order
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Exhibit 4:
Data collection
The data in this case consists of the secondary data from SJET and survey data
from project managers.
For the secondary data collection, we collected 34 firm-level data and collected
214 project-level data samples in two stages. In the first stage, we selected the project
managers who were willing to participate in this research.
The amount of project managers with whom SJET maintained business records
from September 2015 to September 2016 was 39. 5 of them refused to participate in

this research. Therefore, we collected the SCF project secondary data of 34 project

managers from SJET. In the second stage, we identified the data items and collected the
data from SJET. For more details, we listed the data items according to the research
target. Then we checked the feasibility of the data collection with the general manager
and middle managers of the firm. After several amendments, we finally confirmed the
secondary data items (as shown in Table 1). And ultimately we collected 34 firm-level
data and 214 project-level data during the period between September 2015 and
September 2016.
Table 1 Items of secondary data
Data
Data items Comments
scopes
Company name of project

--
manager
Firm
Number of employees -- level
Interest rate of SCF --
Project Number --
Project
Date of starting the project The date from which the project manager company level

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started to cooperate with SJET after it received an order
from overseas
The date from which project manager paid all the
Date of settlement
principal and interests to SJET
The purchase amount that was paid by SJET on behalf of

SCF principal
the project manger
Purchase amount The total purchase amount (including the SCF principal)
Sales The total amount being paid by overseas customer
Number of products The number of products that were actually assembled
The date from which SJET started to place purchase

Date of placing order
orders to suppliers
Date of shipment(1) The date of initial shipment
The date of final shipment (in case SJET delivered the

Date of shipment(2)
goods in several rounds)
Payment terms between

Deposit - L/C, T/T or OA - account period,
project manager and
Such as: 20%L/C - 80%L/C - 100 days
overseas customer

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The total amount of fees (including SCF interest,
Total fees operational service fee and other fees) that SJET charged
project manager for different services
According to the research target, we continued to design the questionnaire (as
shown in Table 2) and collect survey data to obtain the information that hardly be
captured via secondary data. We collected the survey data from 34 project managers

from October 2016 to November 2016, lasting about 1 month.

Table 2 Items of questionnaire
Compared with main competitors, please mark your company’s product
innovation capability
A litter
Much worse A litter Almost Better than Much better
Worse than better than
than worse than the competitor than
competitors competito
competitors competitors same s competitors
rs
Introduce
new product 1 2 3 4 5 6 7
frequently
The first to
introduce
1 2 3 4 5 6 7
new produce
in the market

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Introduce
new products
1 2 3 4 5 6 7
in the market
quickly
Develop new

product with 1 2 3 4 5 6 7
high quality
For data collection, 34 surveys were conducted with 34 project managers in two
stages. In the first stage, we selected senior managers from 5 project managers
companies to fill in the questionnaire and heard their opinions on the survey instrument.
We then revised the questionnaire according to their comments. In the second stage, we
collected survey data from 34 project managers in the form of online questionnaire or
offline questionnaire. All 34 surveys were collected (for a response rate of 100%) and
all the data were available.
Data analysis and the Relationship Model
This quantitative model postulates the relationships among product innovation,

SCF price, uncertainty of purchase amount, uncertainty of accounts receivable, unit
amount of SCF, supply chain operation time and financial performance by using
structural equation model with Mplus 6 and adopting the robust maximum likelihood
estimator. The measurement items of each construct are showed in Table 3.

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Table 3 Measurement items of the constructs
Constructs Measurement items Data source
Product innovation Introduce new product frequently 34 survey data
The first to introduce new produce in the market
Introduce new products in the market quickly

Develop new product with high quality
Price of SCF Interest rate of SCF 214 project-level

secondary data
Uncertainty of purchase Standard deviation of unit purchase amount
amount
Uncertainty of accounts 1-percentage of deposit-percentage of L/C + account
receivable period
Unit amount of SCF SCF principal/ Number of products
Supply chain operation Project time: Date of settlement- Date of starting the
time project
Lead time: Date of shipment(1)- Date of starting the
project
Manufacturing cycle: Date of shipment(2)- Date of
placing order

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Financial performance Sales- Purchase amount- Total fees
Project size Number of products
Firm size Number of employees 34 firm-level
secondary data

In this case, a two-level hierarchical analysis was used to analyze the data and test
the model because the data involve two different sources. Product innovation, price of
SCF, uncertainty of purchase amount and firm size were measured by firm-level data,
whilst uncertainty of accounts receivable, unit amount of SCF, supply chain operation
time, financial performance and project size, were measured by project-level data, and
the differences between the effects of these two level of data on the dependent
variables were large. For example, the design effect of supply chain operation time is at
11.197, and the design effect of unit amount of SCF at18.919, both larger than 2,
indicating that the effects of different level of data were large enough to be taken into
consideration. The results of data analysis are shown in Figure 1.
Figure 1 Results of data analysis
The standard path coefficients are showed in Figure 1. And the Goodness-of-fit
indices are as follows: Chi-Square/df = 1.056, p = 0.3765 > 0.05; CFI = 0.996 > 0.95;
TLI = 0.983 > 0.95; RMSEA = 0.016 < 0.06; SRMR(value for within)= 0.027 < 0.06;
SRMR(value for between)= 0.018 < 0.06, confirming the acceptability of the model.
The data analysis results of this case are summarized in Table 4.

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Table 4 The results of relationship verification
Relationships path coefficient Results
Product innovation is positively related to unit 0.315*
Supported
amount of SCF
Product innovation is positively related to supply 0.358*

Supported
chain operation time
Price of SCF is negatively related to unit amount of -0.102**

Supported
SCF
Price of SCF is negatively related to supply chain -0.220***

Supported
operation time
Uncertainty of purchase amount is positively 0.450**

Supported
related to unit amount of SCF
Uncertainty of accounts receivable is positively 0.272**

Supported
related to unit amount of SCF
0.333*** Rejected
Unit amount of SCF is negatively related to supply
(significantly
chain operation time
positive

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relationship)
Unit amount of SCF is positively related to 0.314*
Supported
financial performance

Supply chain operation time is negatively related to 0.083 Not supported
financial performance (Non-significant)


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621-0028-1B

Shenzhen SJET Supply Chain

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overlooking Shenzhen, the “innovation city”, through the

Innovative Business Model Supported by

The Original Business Process of FQ

Before it worked with SJET, FQ followed the typical

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The Reconstruction of Business Processes

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information technology, a myriad of software systems, such as MRPII, ERP, CRM,

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Shenzhen SJET Supply Chain Co., LTD. (B)：

This platform helped supply chain partners, including governmental agencies of

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The Smartphone Supply Chain Ecosystem

Shenzhen has a wide variety of industries that heavily utilize electronic

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SJET Core Competency

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taxes, financing, and coordinated management. Let me elaborate on them as follows.

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3. Financing advantage: We received a combined credit line of exceeding 10 billion

and Commercial Bank of China.

The Experience and Decision Making of FQ

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Shenzhen SJET Supply Chain Co., LTD. (B)：

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Accordingly, in high-tech industry, in order to compete for a higher market share,

Accordingly, project managers can consider to borrow a larger amount of SCF

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Shenzhen SJET Supply Chain Co., LTD. (B)：

purchase raw materials.

The Experience of Assembly Plant DAXING

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Taught by Maximilian Körber, from 4-Sep-2022 to 28-Oct-2022. Order ref F454367.

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Concerns and Opportunities

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mechanisms to address the “closed-loop” concern discussed earlier.

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Shenzhen SJET Supply Chain Co., LTD. (B)：

Copyright © 2017 China Europe International Business School

Shenzhen SJET Supply Chain Co., LTD. (B)：

Copyright © 2017 China Europe International Business School

Shenzhen SJET Supply Chain Co., LTD. (B)：

Usage permitted only within these parameters otherwise contact info@thecasecentre.org

Taught by Maximilian Körber, from 4-Sep-2022 to 28-Oct-2022. Order ref F454367.

Company name of project