2007 Jan-Feb Issue

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THE MAGAZINE FOR GLOBAL SUPPLY CHAIN LEADERS

China supply chain speeds into

CONTENTS JANUARY/FEBRUARY 2007 www.chaina-online.com

THE MAGAZINE FOR GLOBAL SUPPLY CHAIN LEADERS

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COVER STORY

China supply chain comes of age Big picture trends, micro-trends and challenges in the year ahead in China supply chain

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Q&A

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Serving the world from China Gerold Simbuerger, managing director, BenQ-Siemens Shanghai

REGULARFEATURES 7

COMMENTARY ■ Top five picks to watch in 2007 ■ Leading the way in M&A ■ The value in bonded logistics parks

11 NEWS ROUNDUP 32 REGIONAL FOCUS ■ Dongbei: Full of northeastern promise

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37 CAREERS 39 CLASSIFIEDS

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Q&A

End-to-end players Pierre Blayau, group chief executive officer, Geodis Alan Chimene, Asia regional managing director, Geodis

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41 EVENTS CALENDAR 41 COMPANY INDEX 42 CHINA SUPPLY CHAIN IN NUMBERS

SUPPLY CHAIN FEATURE

China supply chain converges Collaboration at all levels of the China supply chain was a prevalent theme at the recent CHaINA Summit

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C

ontrary to the predictions of many international analysts, who one year ago wrongly predicted that 2006 would see a slowdown in China, the Chinese economy last year once again stormed ahead, growing at an estimated 9.8 percent. It was a bumper year for the manufacturing and logistics industry too (see page 42). Many foreign manufacturing companies operating in China reported a record year of sales: Ford Motor for example announced a staggering 86 percent year-on-year growth for 2006. China’s ports also saw unprecedented levels of growth, cementing their position among the most important ports for the global supply chain (see page 42). As we enter 2007, Chaina magazine makes some predictions of its own about what the year ahead will bring for supply chain management in China (see Top five picks to watch in 2007, page 7; and, China supply chain comes of age, page 18).

Analysts are once again predicting a slowdown, albeit slight, for China in 2007 and are hoping that government measures designed to slow economic growth will finally start to pay off. The government in turn hopes that such measures will see the frenetic growth witnessed over the preceding decade replaced with more sustainable development. Which means cooling sectors where there exists a fear of over-supply. The auto industry is just one sector where the government is taking steps to slow growth and has recently announced plans to restrict investment in auto manufacturing (see page 12).

At the time of going to print, many companies in China were still suffering from the indirect effects of an earthquake which struck off the coast of Taiwan towards the end of 2006. The earthquake affected China in a rather 21st century manner: disabling its internet connection to the outside world as a result of damage the earthquake caused to cables situated on the seabed near to the earthquake’s epicentre. The internet blackout in China caused some fairly sizeable headaches for a number of foreign companies in China with some (but not all) reporting major disruption to their company’s supply chains.

Such problems raise serious questions about what steps companies in China are taking to protect the disruption of their supply chains from such unforeseen disasters. It’s an issue we promise to look at in more detail in subsequent issues of Chaina magazine.

Michael Pennington Editor and Publisher michael@chaina-online.com

Chaina magazine’s sponsors:

CHaINA MAGAZINE Publisher Michael Pennington editor@chaina-online.com Editorial Consultant Max Henry

Contributing Writers Chris Horton, Russel Beron, James Ian, Edward Walshe Art Director Colin Dizengoff Graphic Designer How Xu

CHaINA MAGAZINE EDITORIAL ADVISORY COMMITTEE Jamie Bolton Executive Partner Supply Chain Management North Asia Accenture

Amit Kumar Logistics Manager Asia Intercontinental Freight and Logistics Services Electrolux Group

Mark Millar Director of Strategic Business Development UPS Supply Chain Solutions

Jean-Luc Laboucheix Supply Chain Director Asia Pacific, Goodyear

Eugene Lim Registered Foreign Lawyer Baker & McKenzie, Hong Kong Henrik Anker Olesen Transport & Logistics Leader, Asia IBM Global Business Services Bee-Choo Lim Materials Director Asia and Latin America Intel

Sean Shao Logistics Manager NuSkin China Jeffrey Tew General Manager and Lab Group Manager General Motors R&D Centre Ash Lim Market Development Director Supply Chain Management APAC Oracle

ADVERTISING SALES Publisher/Sales Michael Pennington michael@chaina-online.com +86 138 1897 6097 DISTRIBUTION By direct mail to subscribers in China, Hong Kong and Singapore who are involved in supply chain management, manufacturing and logistics including: supply chain directors and managers; logistics, warehousing and transportation directors and managers; sourcing, materials management, procurement and purchasing directors and managers; operations, manufacturing, import/export and trade managers; and chief executive officers, chairpersons, presidents, vice presidents, general managers, managing directors and country managers.

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© Copyright 2007, Red Circle Group (Hong Kong) Limited. All rights reserved. CHaINA™ (or Chaina magazine) is published by the Red Circle Group (Hong Kong) Limited, Room 813, Hollywood Plaza, 610 Nathan Road, Kowloon, Hong Kong. Telephone: +852 8192 5719.

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COMMENTARY

Top five picks to watch in 2007

F

irst a quick word on China’s trade performance over the last year. The latest trade statistics issued by the General Administration of Customs indicate robust growth in China’s trade position. Foreign trade grew 24.3 percent in the first three quarters of 2006 and this trend seems unlikely to abate. Clearly such growth patterns will continue to increase the need for sophisticated and competitive supply chain solutions.

China trade in 2006 Item Total Foreign Trade Imports Exports General Trade Processing Trade Other Trade

Q1 – Q3 2006

YoY increase

(US$)

(%)

1272.6 bn 691.2 bn 581.3 bn 547.1 bn 596.1 bn 192.2 bn

24.3 26.5 21.7 25.3 21.8 n/a

Source: http://www.customs.gov.cn/YWStaticPage/419/7336d6c2.htm

The beginning of the year is obviously an appropriate time to take a look at some recent developments which promise to significantly affect supply chain operations in China over the next 12 months, are here are my five top five picks.

Enterprise Income Tax Reform After a lengthy gestation period, Enterprise Income Tax (EIT) reform continues to look likely sooner rather than later. Details of the new EIT regime are still shrouded in secrecy but some predict that EIT rates for domestic and foreigninvested enterprises are likely to be harmonized at between 24 percent to 27 percent. EIT incentives are likely to be re-aligned dependent upon an enterprise’s main business activities rather where an enterprise is located. And, such new legislation may be issued as early as 2007 and is likely to have a profound impact. An assessment of existing corporate structures is necessary to ensure tax efficient supply chain operations in China after the reform is introduced.

2007 HS Code rewrite In line with the World Customs Organisation’s 2007 Harmonised System (HS) Code rewrite, China’s tariff classification regime has been substantially revised with effect from January 1, 2007. Tariff classifications of imports and exports must be reviewed to ensure compliance with the new PRC tariff numbers. Confusion is expected as both corporations and local Customs houses come to grips with the new regime. www.chaina-online.com

China RoHS The Measures for the Administration of the Control of Pollution Caused by Electronic Information Products (China Restriction of Hazardous Substances or RoHS Measures) comes into force on March 1, 2007. The China RoHS Measures apply to electronic information products (EIP), including EIPs that are components used in non-EIPs, that are imported, manufactured and sold in China (but excludes EIPs manufactured for export). Initially, affected EIPs must satisfy certain labelling requirements to indicate whether they contain certain toxic substances (including lead, mercury, cadmium, hexavalent chromium, polybrominated biphenyls (PBB), polybrominated diphenyl ethers (PBDE) and other toxic and harmful substances or elements prescribed by the State). The China RoHS Measures provide that affect EIP products will eventually have to comply with mandatory minimum content levels of such toxic substances.

(Editor’s note: Steve Schulttz, director of strategic planning and communications for Avnet Logistics, is right to point out: “China is taking a radically different approach than did the EU [to RoHS]. The EU had a date and time and made clear what products were covered... In China, they will publish a catalogue that will say what will be covered.” Critically though this catalogue has not yet been released and companies don’t yet know if they are impacted.)

Eugene Lim is a Registered Foreign Lawyer with Baker & McKenzie, based in Hong Kong.

New trial customs clearance model Selected localities have started a trial to allow enterprises to import goods through different ports but pay customs duty and import VAT to the Customs house where the enterprise is registered.

If successful, this trial could fundamentally change how companies deal with Customs authorities in China. Enterprises could potentially need to deal with only a single Customs house and minimise the need to deal with the variations in treatment by different Customs houses regarding issues such as tariff classification, dutiable value and so on.

Free trade agreements Free trade agreements (FTAs) provide immense opportunities to reduce customs duties throughout the supply chain. China will continue to enter into FTAs with major trading partners. Apart from FTAs with ASEAN and Chile, China is negotiating FTAs with other countries such as Australia and New Zealand. This is another area which could have a significant impact on supply chain operations given their impact on customs duty savings planning opportunities.

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COMMENTARY

The value in bonded logistics parks Trent Illife is the Regional Director, Head of Industrial for Jones Lang LaSalle, based in Shanghai.

O

ne of the greatest opportunities offered in China’s real estate market at present is that surrounding bonded logistics zones and centres. This growth is being driven by the “offshore treatment” of the VAT refunds entitled to its occupant, those with an export orientated business, whether it be manufacturers, 3PLs or the procurement arms of international companies.

Proximity to ports has been an important factor driving the geography of logistics activity, reflecting China’s continued focus on export markets. Growth in logistics activity has also in turn resulted in growth in land values and rents in these port areas, and these ports also form major clusters of consumer and economic activities in their own right, thus further pushing property values.

An extensive network of ports China has one of the world’s most extensive network of coastal ports, including, from North to South, Dalian in Liaoning province (see Full of Northeastern promise, page 32), Tianjin, Qingdao in Shandong province, Shanghai, Ningbo in Zhejiang province, Xiamen and Fujian, both in Fuzhou province, and finally Guangzhou, Shenzhen and Zhongshan, all in Guangdong province. Ningbo in particular has experienced a dramatic increase in cargo volume since 2004, and is now China’s fourth largest port. The completion (in 2008) of the Hangzhou Bay Bridge, which will link Ningbo directly with Shanghai, will boost the port’s competitive position.

Shenzhen is China’s second largest port after Shanghai, and has been very successful in capturing trade from the Pearl River Delta region – trade that would have previously been channelled through Hong Kong. Tianjin, currently the second largest container port in North China, is the deepwater port closest to Beijing. It is expected to see rapid expansion over the next five years as it attempts to consolidate its position as the primary port in North China.

According to the central government’s 11th Five-year plan, China will develop five large coastal port networks comprising the consolidation of the port networks in the Yangtze River Delta, the Pearl River Delta and Bohai Bay, together with the development of new port networks along the Fujian coast (focused on Xiamen) and the southwest coast (embracing western Guangdong, Guangxi and Hainan provinces).

Because of the difficulties that foreign manufacturers face in getting their products out of 8

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China including bottlenecks in their supply chains or endless customs procedures and bureaucracy, many base themselves in economic zones.

FTZs versus BLPs Free trade zones (FTZs) or bonded zones, of which there are 15 in China, are enclosed areas designated to be outside of China’s customs authority in terms of import tax. Since China’s accession to the WTO however, the FTZs have lost their appeal as China continues to reduce its tariff rates. In order to stem the flow away from FTZs and the coast, the government launched bonded logistics parks (BLPs or bonded logistics zones) which provide the same incentives as FTZs, with the advantage that the whole facility need not be bonded.

The first BLP opened in the Shanghai Waigaoqiao FTZ in April 2004 and the government has since approved a further eight in Dalian, Tianjin, Qingdao, Zhangjiagang, Ningbo, Xiamen Xiangyu and Shenzhen Yantian. (The Suzhou Industrial Park is not considered a logistics zone).

The main advantage of the new BLPs is that they integrate the functions of ports and FTZs and thereby reduce the number of customs inspections to that by a single office at the gate. As a result, BLPs can now undertake a range of value-added activities that help their occupants reduce transaction and logistics costs, such as consolidation of cargo, kitting, labelling and bar-coding.

But at a premium Such value-added activities however come at a price. BLPs tend to attract a rental premium of somewhere in the order of 20-25 percent over and above that of a standard logistics zone, yet these two zones can be side by side and have no real locational advantage over each other. For example, there is a premium rental in Lingang for the bonded logistics park of 0.2 RMB per square metre per day, or 25 percent, over the adjoining logistics park.

As the land around the ports continues to be developed and occupied, we expect this premium to continue to grow in the future.

Whilst there are still issues surrounding the operational side of these new zones, the future still looks positive for their continued expansion across China as import and export activities continue to grow. If China can emulate the Singapore and Hong Kong models, then we should see the rental differentiation between bonded and non-bonded zones continuing to increase over time. www.chaina-online.com

COMMENTARY

Leading the way in M&A

I

n a recent survey conducted by Accenture and the Economist Intelligence Unit, China ranked second overall (after the US) as the most popular source of acquisition candidates over the next three years. Respondents in the survey also identified China as the most popular near-term market for mergers and acquisitions (M&A) in manufacturing.

Multinational M&A is always tough and the usual difficulties associated with doing business in China can significantly complicate potential deals. As a result hundreds of carefully honed and well-time behaviours are needed. When it comes to making M&A work in China, two leading practices stand out: a strategic approach to due diligence and an accelerated pre-deal merger-planning program.

The importance of due diligence The more challenging the new business environment, the more important it is to conduct rigorous due diligence efforts and China is no different. M&A minded multinationals must grasp the implications of China’s legal and regulatory environment. A recently enacted law requires multinationals to report planned M&A activities to antitrust regulators before a China-focused merger can be announced. The statute also limits the degree to which information can be shared prior to deal closure. This makes it even more critical to evaluate the strategic and practical value of partner candidates as early as possible.

Many Chinese companies view mergers as infusions of cash rather than precursors to major operational changes. And it’s also common for companies to embrace a strong, top-down management style, believing whoever controls the operation to be more important than whoever owns the operation. Each of these convictions demonstrates the importance of a due diligence process that resolves operational and governance issues quickly, completely and democratically.

Supply chain as a driver of M&A benefits The due diligence stage is also the right time to examine a pending merger’s success factors and a recent Accenture survey sought input on this issue. Among the executives interviewed in the survey, procurement or supply chain expertise on the due diligence team was the most frequently cited contributor to successful merger integration.

The survey also showed that in their collective experience, 82 percent of M&A benefits are supply chain-related: 21 percent from sourcing and procurement; 14 percent from manufacturing; 13 percent from product development; 12 percent from customer service or support; 12 percent from www.chaina-online.com

transportation; and 10 percent from warehousing.

Whenever possible, merging companies should strive for calculations like this at the due diligence stage so that plans for restructuring assets and pooling capabilities can be brought forth and assessed.

Jamie Bolton is Executive Partner, Supply Chain Management, North Asia for Accenture, based in Shanghai.

Most popular M&A markets (% percentage of respondents)

US US China India UK Germany Brazil Russia Mexico France Japan

UK 79% 54% 48% 29% 27% 27% 20% 18% 18% 18%

China US UK India Brazil Spain Germany Russia Mexico Italy

53% 50% 46% 33% 24% 21% 20% 20% 14% 13%

Source: Accenture and Economist Intelligence Unit

Jump-starting the M&A process In Europe and North America, there is typically about nine months between the announcement of an M&A deal and its closing. In China, the span is longer, typically nine months to a year.

This is why it is so important for China-focused companies to jump-start the merger-integration process with a “clean room” strategy, the principal goals of which are accelerated value capture and the ability to enter the market more rapidly once the merger is approved. Because concerns about sharing sensitive information are particularly acute in China, companies frequently benefit by staffing their clean rooms with independent third parties. Particularly close attention should be given to the transformation and integration of procurement organisations, including “quick hit” and longer-term sourcing and supplierrationalisation opportunities.

With China taking the lead in Asia’s M&A activity, any company that plans to embrace opportunities in the region must move fast and act quickly. Addressing supply chain and operational issues early in the process and setting clear goals for supply chain integration can help organisations increase their odds of M&A success (and save money). Without a strategic due diligence process and careful, accelerated planning prior to a merger, companies will miss opportunities to quickly realise synergies.

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Promise To deliver the same level of service and high quality sustainable warehouses to our existing and new customers across China.

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LEGAL

China supply chain prepares itself for RoHS

China launches new retailer-supplier regulations China has introduced new regulations to ensure that its retail sector deals fairly with suppliers. The regulations are designed to stop retailers from charging suppliers’ fees for activities unrelated to the sales of their products, and require retailers to pay for all stock ordered, even if it is not sold.

Many analysts however expect to see little benefit for suppliers, with one analyst saying: “In a market where supply surpasses demand, the retailer who owns the precious sales channel www.chaina-online.com

China Foto Press

China’s version of the Restriction of Hazardous Substances (China RoHS) designed to limit the amount of lead and other environmentally harmful substances in electronic devices comes into effect on March 1 (see Top five picks to watch in 2007, page 7).

Although similar to EU RoHS, companies are being warned not to assume that compliance with, or exclusion from, EU RoHS will result in compliance with or exclusion from China RoHS. Just to confuse matters, many of the specific details of the dual-phase introduction of the policy in China have not yet been determined and as yet no date has been set for implementation of China RoHS’ phase two.

According to a recent Global Sources report, more than one-third of flexible printed circuit board manufacturers in China are not yet compliant with EU RoHS. Many smaller manufacturers find the cost of upgrading facilities to phase out lead soldering materials too much to bear though most are expected to absorb the costs of RoHS compliance in the short term in order to remain competitive.

Total Parts Plus, a leading provider of environmental compliance management services, has expanded its product offerings to support China RoHS label generation. Users will be able to expedite the process for collecting component substance information and creating the product label by using a web-based application to quickly identify the component substances and export the data in a pre-defined label format.

R&D

GE Lighting to continue heavy R&D investment GE Lighting is planning to pump up to US$49.32 million into R&D in China in the next four years, said Darryl Wilson, president and chief executive officer of GE Consumer & Industrial for Asia-Pacific. “We highlight energysaving and durable technologies in our strategy to fortify the position in the competitive but lucrative lighting market in China,” Wilson said. “For this, GE will continue to invest heftily in R&D here in the coming few years.”

Such high-tech solutions have enabled GE to win lucrative contracts for many lighting projects across China including the Donghai Bridge in Shanghai, the Chengdu Convention Centre, the Nanjing Olympic Centre and the Beijing-Zhuhai expressway.

GE Lighting invested US$12.33 million into the R&D of energy-saving technologies in China in 2006.

has a greater say in negotiations with suppliers. I believe most suppliers will still take on inventory risks and pay fees, only maybe in other forms. And I don’t think the supplier will sue when the retailer doesn’t abide by the regulation.”

R&D

Carrier opens R&D centre in Shanghai Air conditioning unit and refrigerator manufacturer Carrier has opened a global R&D centre in Shanghai. The company plans to boost investment in R&D in China up to US$50 million over the next three to five years. The 20,000-square-metre centre, located in Jinqiao, Pudong and one of the company’s 18 global R&D centres, will provide technical support for Carrier’s operations in China.

Carrier also recently opened a manufacturing JV in Chengdu, Chengdu Carrier-EDRI Air Conditioning Equipment. “Carrier’s new factory in Chengdu will serve as a bridge, bringing Carrier closer to the western customers,” said Philippe Delpech, president of Carrier Building Systems

& Services Asia. “The new factory also allows Carrier to reduce operating costs on logistics and local sourcing.”

Honda to establish R&D centre Honda JV with Guangzhou Auto, Guangzhou Honda, plans to open a R&D centre to enhance its own development capability and offer products more suitable for local customers.

The plan comes amid growing calls from Chinese industry regulators for JVs between Chinese and foreign auto manufacturers to raise their local development capability, instead of being cheap assemblers of foreignbranded cars. JVs of Volkswagen, PSA Peugeot Citroën and Nissan have already built their own research or technical centres in China.

Guangzhou Honda aims to sell 310,000 vehicles in 2007, up from an estimated 260,000 units in 2006. The Japanese carmaker also has an exportoriented plant in Guangzhou, which is assembling Jazz subcompact cars for the European market. Honda said its car exports from China had rocketed by 126 per cent to 25,000 units in 2006.

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Novartis plans to launch R&D centre Swiss pharmaceutical giant Novartis is planning to spend US$100 million on a R&D centre in China in a move designed to cut costs in product development. The pharmaceuticals division of Novartis spent US$3.97 billion on R&D in 2005. The company’s plans come less than a year after AstraZeneca announced a similar R&D investment. Novartis said its researchers will begin work in a temporary facility in May this year while construction of a 38,000-square-metre centre is expected to begin in July.

The green purchasing list is part of a wider green procurement policy that will be implemented across all levels of central and provincial government in China in 2008 which will have a substantial effect on the way China’s massive government procurement budget is spent. The current list includes 859 products in categories including transport and construction materials.

“By purchasing environmentally friendly products and services, the government could become the real driving force for [commercial businesses] to develop green technology,” said a SEPA official.

SOURCING MANUFACTURING

China to implement green procurement policy China’s State Environmental Protection Administration (SEPA) has announced that from this year the government will have to purchase products and services, according to a new government “green purchasing” list. The agency has released a list of products that carry China ecolabels to encourage environmentally friendly procurement practices. When products and services carrying the ecolabel are available, the Ministry of Finance may refuse to pay for alternatives chosen by purchasers.

Government moves to cool auto sector China’s central government has announced plans to restrict investment in auto manufacturing. Vehicle sales in China in 2006 grew by more than 20 percent, to around 7 million cars and trucks, making China the world’s second-largest auto market. But the government is concerned about the excess installed capacity of the country’s car manufacturing industry, despite the market’s strong growth: there’s already enough capacity in

Imagine China

Michael Dell chief executive officer, Dell

SOURCING

Dell bought US$22 billion worth of China components in 2006 Dell estimates its’ 2006 China procurement of computer components at US$22 billion, up from US16 billion in 2005, said Liu Junling, vice president of Dell Asia-Pacific.

Dell also recently announced that they are planning to move more if its global supply chain and manufacturing operations to Singapore, the company’s current hub for Asian operations.

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place in China to build more than 8 million vehicles a year, with another 2 million units of capacity currently under construction.

One goal of the government’s plans is to promote consolidation in China’s auto industry, which numbers more than 100 vehicle assemblers, many of them building no more than a few thousand units each year.

The moves come as GM increasingly shifts its focuses on the Chinese market with some analysts suggesting that China could represent the future of one of the company’s oldest brands, Buick.

Buick sold 206,582 vehicles in the United States in the first 10 months of 2006, while during that same period Buick sold 218,603 vehicles in China.

GM is investing US$3 billion in China over four years ending in 2007, building a network of dealerships and factories.

Dell launches free recycling service in China Dell has launched a free recycling programme in China as part of a wider move to expand its recycling services into several new markets, including Brazil, China, India, South Korea and Mexico.

Through the programme, the company provides free recycling of any Dell-branded product for consumers worldwide as part of its global recycling policy. Dell says it is the first and only computer manufacturer to offer such a programme. www.chaina-online.com

NEWSROUNDUP news@chaina-online.com

MANUFACTURING

Chrysler, Toyota to manufacture compact cars in China

China Foto Press

DaimlerChrysler and Chery Automobile have agreed on a plan for the Chinese manufacturer to build small cars for export worldwide.

The cars are expected to be sold at Chrysler dealerships in the US and Europe under a Chrysler Group brand as either a Dodge, Chrysler or Jeep.

The move gives Chrysler a relatively quick entry into a growing segment of the car market where it now has no significant product.

GM spokesman Tom Wilkinson said the Chery cars certainly would

“We remain focused on raising consumer awareness about the importance of recycling and increasing the volume of products we recover from consumers,” said Eric Gates, Dell’s worldwide manager of asset recovery services.

Dell says it supports a policy that would make all producers responsible for offering recovery and recycling services for their own brand products from consumers at no charge. Dell also believes the marketplace is best positioned to increase efficiency in collection, recycling and design of products, and any legislation should not include fees or creation of new government infrastructure for collecting and recycling electronics.

compete against Chevrolet’s Aveo small car, which is built by GM Daewoo in South Korea. Last year, GM settled several legal disputes with Chery over allegations that it had stolen GM’s design of the Spark minicar, which looks similar to the Chery QQ. GM had sued to prevent Chery from selling the car in various markets, including Asia and Eastern Europe.

Toyota Motor has also recently announced it will start manufacturing its Yaris compact car in China from 2008 to meet local demand for smaller vehicles. The Japanese automaker will produce 80,000 to 90,000 Yaris cars a year at its JV with Guangzhou Automobile.

Lenovo CEO losing patience with supply chain restructuring efforts William Amelio, president and chief executive officer of Lenovo, is losing patience with efforts to revamp the company’s supply chain: “It’s still not where I’d like it to be and I’m getting impatient,” he was quoted as saying.

Lenovo saw PC sales fall in the US and Europe in 2006, though Amelio added that: “Our operations outside China are still a work in progress,”

adding that a transactional sales model that targets consumers and small businesses is being rolled out worldwide and should improve things.

Part of the problem is Lenovo’s supply chain, which was hit hard in 2006 by inadequate IT systems and too much “complexity,” he said. Lenovo is investing a great deal of money in an attempt to address the problems and has invested heavily in the rollout of an updated IT system based on software from SAP. That process is underway and will be completed by early 2008, Amelio said, declining to specify how much it will cost. “Suffice it to say, it’s a sizeable investment,” he said.

Motorola, Gome sign retail co-branding partnership Motorola and electronics retailer Gome have signed a retail co-branding partnership to generate marketing opportunities for their respective products. Gome will open Motorola shops-within-shops inside 30 of its largest stores across China.

“Gome has been working with Motorola and other manufacturers to improve the mobile ecosystem to better meet consumers’ needs,” said Huang Guangyu, chairman of Gome. Motorola will also help Gome penetrate China’s third and fourth tier markets, providing the retailer with direct retail support and sales strategy consultation.

William Amelio

Caterpillar opens parts remanufacturing plant

www.chaina-online.com

China Foto Press

Caterpillar recently announced a deal with the Chinese government to develop a remanufacturing industry in the country to remake and recycle parts for its earth movers and other equipment.

In October last year, Caterpillar opened a plant near Shanghai that will serve as its remanufacturing hub across Asia. The 3,450-square-metre plant will refurbish motors, pumps and a variety of other components, re-using most of the original materials and selling the components at a fraction of the price for new parts.

The company already has 13 factories in China.

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LOGISTICS

Geodis acquires TNT Freight Management, doubles China turnover European freight forwarder Geodis has acquired TNT’s freight forwarding division, TNT Freight Management (TFM) for US$590.3 million. TNT Freight Management, formerly known as Wilson Logistics, recorded a net revenue of US$1.03 billion for 2005.

The acquisition of TFM is expected to double Geodis’ revenue from freight forwarding to about US$2.05 billion.

This would account for more than one third of Geodis’ total revenue and rank the group among the top 10 freight forwarders globally. Geodis expects to more than double its turnover in China in 2007 to US$265.3 million. Th comapny’s network stretches across 120 countries and employs 23,800 people.

make a good acquisition and then grow it organically.”

China presents challenges to companies such as Schneider due to a lack of experience in providing sophisticated inland trucking and integrated logistics services from the nation’s largest ports to remote hinterland areas. Schneider believes this provides an opportunity for it to step in and fill the gap.

Zim to provide global intermodal rail-sea services from China Israeli shipping group Zim Integrated Shipping Services has recently signed an agreement with China Railway Container Transport Corporation to build, over two phases, large-scale rail container terminals in 18 cities across mainland China by 2010, with a planned investment of US$2 billion.

During the first phase of construction, the JV aims to construct railway container terminals in Shanghai, Kunming,

Chengdu, Chongqing, Wuhan, Xi’an, Shenzhen, Qingdao, Dalian, Harbin and Tianjin. The second phase will cover the seven cities of Zhengzhou, Lanzhou, Shenyang, Guangzhou, Urumqi, Beijing and Ningbo.

The type of services that the company will initially provide include schedule block train services under the administration of China’s Ministry of Railways, container handling, storage and repair, as well as customs declaration and logistics service in a bid to enhance the speed of rail freight transportation.

Schenker named Beijing’s official forwarder for 2008 Games Schenker China has been selected to act as the official freight forwarding and customs clearance exclusive supplier at the Beijing 2008 Olympic Games. The appointment of Schenker China by the organising committee mirrors the company’s participation in

Two leading Chinese 3PLs join forces Two of China’s leading private transport and logistics firms are merging to create one of the country’s biggest comprehensive logistics service providers. The merger of Qingdao-based SITC Maritime, China’s largest private shipper, and Beijing-based New Times International Transport Service, the biggest airfreight forwarder in export terms, will have total assets valued at US$127.7 million.

Yang Shaopeng, chairman and chief executive officer of SITC, said: “China’s logistics market is rather fragmented and lacks proper information support and a credit system. We hope to combine resources at the two companies to build the firm into the largest private logistics service provider to tap into a largely unmet demand in China.”

LOGISTICS

Yangshan Deep-Water Port phase-II now open Phase-II of Yangshan Deep-Water Port has opened and includes four berths on a 1.4 kilometre waterfront. Located to the west of the five-berth phase-I, it extends the port’s current waterfront to about 3 kilometres and has a designed handling capacity of 2.1 million TEUs annually.

According to the port’s development plan, Yangshan phase-III will be completed in 2010 and cover an area of 4 square kilometres on Xiaoyangshan Island. The third phase will have a designed handling capacity of 5 million TEUs annually, making it bigger than the previous two phases combined.

Beyond Yangshan, Shanghai is building more docks for bulk cargo and the transportation of motor vehicles. Still under construction in the city’s Baoshan district is Luojing Port which will become one of China’s biggest ports for bulk cargo, with a designed capacity of 37.8 million tons.

Schneider to set up China trucking firm

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China Foto Press

Schneider National, a provider of trucking, intermodal transportation and logistics solutions, plans to acquire a local trucking firm in China in the company’s first major business deal outside the US. “We’re not looking to make a big acquisition,” said Chris Lofgren, Schneider’s president and chief executive officer. “We’re looking to

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the Athens 2004 Olympic Games and Torino 2006 Winter Olympic Games.

“We recognise the rich experience that Schenker has developed over previous Olympics Games events, and we look forward to that knowledge and experience contributing to the success of the Beijing Olympic Games,” said a representative of the Beijing Games organising committee.

Yangtze River freight traffic reaches nearly one billion tons

Imagine China

The volume of transport along the Yangtze River is expected to have reached 990 million tons in 2006, a rise of 15.1 percent over the volume in 2005. Trunk line traffic in 2005 reached 700 million tons, which is 1.6 times the total volume of cargo transported though the Mississippi, and 3.1 times that of the Rhine waterway. Cargo moved along the waterway is 80 percent iron ore, 72 percent crude oil and 83 percent coal.

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To list your company now, go to: www.supplychain-directory.com/china Or for further information, please contact Michael Pennington +86 138 1897 6097

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REAL ESTATE

IBM to set up global delivery centre in Chengdu

China Foto Press

IBM has signed an agreement with the Chengdu High-Tech Zone to establish a global delivery centre within the Chengdu Tianfu Software Park. The centre is expected to be operational by February 2007 and will provide multilingual application development and maintenance services to clients globally in English, Japanese and Chinese, and to the IBM Global Procurement Centre, recently located to Shenzhen.

With the opening of the Chengdubased centre, IBM now has four global delivery centres across China. The other are three located in Shenzhen, Dalian and Shanghai.

RETAIL

Tesco increases China stake, IKEA plans three new stores Shenzhen seeks free port status Shenzhen is reportedly applying to central government authorities to turn its bonded logistics zone into a free port.

Shenzhen’s desire to receive free port status comes amid local Chinese media reports that a “number of top authorities” are considering a proposal to suspend the approval of new free ports to promote the development of existing bonded logistics zones.

Korean logistics firm KTC plans to invest US$381.51 million to construct a logistics park in Pinghu, Shenzhen in response to calls from Korean firms based in Shenzhen that have expressed ‘strong demand’ for logistics services provided by a South Korean company.

China Foto Press

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Tesco, the UK’s biggest supermarket group, has announced it will spend US$352 million increasing its stake in Ting Hsin, the owner of the Hymall stores, from 50 percent to 90 percent.

Tesco has recently announced plans to open stores in China under its own name for the first time, after previously choosing to operate behind the Hymall and Happy Shopper brands since the company first entered into China in 2003, and plans to introduce more than 500 Tesco-branded products.

Retail sales in China have risen by 13 percent a year over the last decade.

Further indication of the growth is provided by the fact that retail giant IKEA is planning to open three new stores in China by 2008.

RETAIL

Home Depot buys stake in HomeWay chain

Ace Hardware sets up China distribution warehouse

Home Depot is to buy a 50 percent stake in Chinese furnishing chain HomeWay, marking the US home improvement retailer’s entry into China. HomeWay has 12 stores in six Chinese cities. Home Depot previously failed to buy bigger Chinese chain store Orient Home.

Annette Verschuren, the Canadian president of Home Depot’s Asian and Canadian divisions will be leading the company’s expansion into China. Home Depot entered Canada in 1994 and Mexico in 2001 and now holds the top spot in both markets. It has more than 2,100 stores in the United States, Canada and Mexico.

The HomeWay acquisition comes at a time of intensified takeover activity in the fast-growing Chinese retail sector.

Ace Hardware, the largest retailerowned cooperative in the US, has opened its first China distribution warehouse, in Shanghai.

The warehouse is located in Shanghai’s Waigaoqiao Bonded Logistics Park and covers 1,394-square-metres.

The warehouse will enable Ace Hardware to meet the demands of international retailers without first transferring goods to the US and is planned to hold 1,000 varieties of hardware from more than 50 suppliers. It would also cut costs by shortening the time needed for deliveries, said Ray Griffith, president and chief executive officer of Ace Hardware.

Ace Hardware operates more than 4,600 hardware stores in 70 countries worldwide. www.chaina-online.com

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McDonald’s looks to China to trim costs

IT

Savi gains approval for RFID products in China Supply chain solutions provider Savi Technology has been granted approval from the China State Radio Regulation Committee (SRRC) to use its Radio Frequency Identification (RFID) products throughout China, following extensive testing and document reviews.

The Chinese government has repeatedly emphasised the importance of the development of RFID and the positive role it has to play in China in leading to more efficiency in supply chain management and procurement activity.

China Foto Press

McDonald’s is looking to trim costs by supplying more of its restaurants around the world with food and packaging made in China.

The company has invested heavily in creating a large supply chain in China to serve its growing number of restaurants there and now the fastfood giant is hoping its restaurants in other parts of the world will be able to benefit from that investment.

“The supply chain for [McDonald’s Asia, Middle East and Africa] is looking at ways to leverage what is available in China to supply other parts of Asia and other parts of the world,” Jerry Schafer, chief restaurant officer for McDonald’s China.

When McDonald’s opened its first restaurant in China in 1990, all it had was a single meat production plant.

The rest of its products were brought in from elsewhere and subjected to hefty import duties, said Herbert Wong, senior director of supply chain management for McDonald’s China. Today, nearly 96 percent of the products sold in McDonald’s 770 restaurants in China are produced at 43 facilities there.

become the country-wide distributor for Motorola phones in China. Synnex currently operates 23 warehouses in China and a logistics hub in Shanghai.

The company is planning to establish two more logistics hubs in Beijing and

Chengdu later this year and two others in Nanjing and Guangzhou in 2008.

There will be two more logistics hubs established in Beijing and Chengdu next year, and two others in Nanjing and Guangzhou in 2008, Lin said.

IT

Metro uses RFID to speed up Asia-Europe supply chain Metro Group is using RFID to speed up the movement of goods being shipped from Asia to Europe. The German retailer is testing active RFID tags affixed to shipping containers carrying non-perishable items from a consolidation centre in Hong Kong to a distribution centre in Germany.

Metro’s Advanced Logistics Asia project relies on both active and passive RFID technologies. Active RFID tags are being applied to shipping containers, while passive tags are being affixed to cartons and cases packed inside those containers.

RFID uses a wireless system that helps enterprises track products, parts, expensive items and temperature-and time-sensitive goods. RFID tags are attached to objects and each tag carries information on it such as a serial number, model number, colour, place of assembly or other types of data.

Synnex in talks with Motorola

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Imagine China

Synnex Technology International, Asia’s largest IT product distributor, is reportedly in talks with Motorola to offer logistics services to the world’s second-largest mobile phone manufacturer in China.

The deal will offer services such as cash flow, logistics and after-sale maintenance services to Motorola and the long-term plan is for Synnex to

Heinrich Birr chief operating officer, Metro Markets Asia

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China supply chain comes of age Big picture trends, micro-trends and challenges in the year ahead in China supply chain 18

COVERSTORY

C

hina is well-recognised in today’s global economy as the low-cost manufacturing centre for almost every product and component for practically every country in the world. And, the resulting need to move these goods across China and the world has in turn led to the growth of a massive supply chain management or logistics sector in China, which accounts for a huge 18 percent of the country’s GDP. This figure, almost double that of the US, 10 percent, or Europe, 12 percent, points to an inherent inefficiency, corresponding opportunity, and perhaps most importantly, the crucial role of the China supply chain in the global economy.

There’s no doubt that China’s role in the global economy will increase in importance in 2007 and will likely expand towards one of increasing innovation, R&D capacity, greater efficiency and higher levels of service.

Greater inflows of capital

China Foto Press

2006 marked a record inflow of venture capital into China, meaning more money available for expansion and development in every industry including logistics.

“The trend of venture capital and private equity funding in logistics in China will accelerate,” says Benjamin Gordon, of BG Strategic Advisors, a US-based investment-banking consultant whose company BG Strategic Advisors specialises in M&A in the logistics sector.

“It will go to companies that can demonstrate that they are category leaders, with true differentiation, rapid growth, and top-quality management teams.

We have worked on several such deals already.

There will be much more,” Gordon remarked.

According to Eugene Lim, a lawyer with Baker & McKenzie in Hong Kong, “The general trend of Chinese government regulations has been to liberalise foreign investment in the logistics sector.”

Foreign banks can now buy larger stakes in Chinese banks, also meaning greater inflow of capital. Coupled with venture capital inflow, this means a lot more money will be available for expansion and consolidation activity.

Lim, whose practice focuses on distribution and supply chain strategies added, “Nevertheless, it remains to be seen whether moving forwards the Chinese authorities will continue to liberalise the logistics sector at the same pace now that most of her WTO commitments have been met.”

Across the APAC region, new free trade agreements (see Top five picks to watch in 2007, page 7) will mean that companies can operate more easily and effectively, and will also create opportunities for cost savings. According to Bernie Hart, global product head at JPMorgan Chase Vastera, “As free trade agreements proliferate, many companies are leaving millions of dollars worth of duty savings unclaimed.”

Russel Beron is a freelance journalist specialising in supply chain and logistics based in Shanghai. He is a regular contributor to Chaina magazine.

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COVERSTORY Cost saving through localisation

The challenge will be to establish more effective ‘intermodal connectivity’ and to streamline logistics and transportation exchanges.

Mark Millar, UPS Supply Chain Solutions

Cost savings opportunities are also being found in operations and sourcing through localisation, which should steam ahead in coming years.

According to Marc Hantscher, who runs the international purchasing office for Bosch and Siemens Home Appliances Group, first movers such as Nike and Adidas have already made great steps towards the goal of localisation. Technical component manufacturers on the other hand are still in the early stages of this process.

An accelerating trend though, Hantscher noted, is that “Foreign companies are increasing their R&D capability in China and are more frequently doing part of their design work in China.”

Novartis and Unilever are just two of many companies who have opened major R&D centres in Shanghai; in the coming year this trend is expected to continue.

Infrastructure expansion Infrastructure is the arterial network that will determine the ultimate success of China’s supply chain. “Infrastructure expansion is expected to continue un-abated in 2007,” says Mark Millar, director of Strategic Business Development, UPS Supply Chain Solutions and Honorary Chairman of the China Supply Chain Council.

Millar believes that, “The industry challenge is to establish more effective ‘inter-modal connectivity’ and to streamline logistics and transportation exchanges.”

The advantages offered by China’s centrally planned infrastructure however will likely decline in importance over the coming years. “In the past, China has built a relatively good infrastructure,

Trucking on Big foreign trucking companies, like Schneider are eyeing China hungrily, and have yet to really satisfy their appetite for growth.

Schneider, which set up in Shanghai last year to offer consulting, is in the process of obtaining a license to operate in China and is set to make some big investments.

Trucking companies and 3PLs are finding both opportunities and challenges in China. Gefco-DTW Logistics, a French 3PL with a JV in Beijing providing finished vehicle logistics, is making some inroads into offering better service in the market.

According to Olivier Rateau, Gefco-DTW’s international project manager, “Gefco-DTW is one of the first service providers to provide western style service standards through track and trace and is offering co-loading to enable the delivery of one or two cars to a dealer.”

It is clear that if 3PLs are to succeed in China, they will need to expand the variety and quality of their service offerings. “Some Chinese 3PLs are doing just as well as the foreign providers in terms of service,” says Max Henry of the China Supply Chain Council.

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which has paid off as a supply chain differentiator against competition from other low cost countries.

Given that these countries are currently building their infrastructure and that wage costs are increasing across China’s coastal cities, this advantage is shrinking,” says Jim Ridgwick, a senior consultant in Deloitte’s SCM Strategy and Operations practice.

An intermodal revolution One relatively new infrastructure development is the shift towards more truly intermodal transportation in China.

It is difficult to think of intermodal transportation in China, observed Max Henry of the China Supply Chain Council: “Trucking is top-of-mind for most companies. Though this might be because they are unaware of their options or do not want to deal with the railways.”

As a result of the government’s “Go West” campaign, Mr. Ridgwick commented, “The investments now being made in hard and soft infrastructure are setting the stage for an intermodal revolution along the Yangtze, which will unfold over the next five to ten years. Options for shipping containers along a well-integrated network of road, rail and river transport are proliferating, to say nothing of China’s efforts to link interior cities by expanded air cargo service.”

It will be interesting to watch as other forms of transport such as river, rail and air transport continue to grow.

A wave of consolidation and collaboration Consolidation in the industry is happening so fast that, according to some experts, in the near future, there will be only a handful of major players in global logistics.

“We are in the early stages of a massive wave of consolidation. In the US in the past 5 years, M&A has touched 6 of the top 7 players in warehousing, and 6 of the top 7 players in freight forwarding.

In China, we are seeing the same forces at play.

Companies will need to decide whether they are buyers or sellers,” says Gordon.

“Consolidation is also happening within the community of local Chinese service providers as they establish broader coalitions and partnerships better able to compete on a regional basis,” says Mark Millar.

Alongside consolidation, there is also an increasing trend towards collaboration amongst players across the China supply chain.

Hantscher, of Bosch Siemens, commented that, “Manufacturers of technical components are working towards utilising more Chinese suppliers.

The technical components purchasing market lags behind the consumer market and is still much more fragmented.” www.chaina-online.com

COVERSTORY “Another big trend in the area of electronics sourcing is ongoing M&A as electronics companies move towards realizing scale and acquiring knowledge,” Hantscher added.

This trend towards collaboration among suppliers of both goods and services should accelerate in the coming year.

Capacity growth “China’s government in many ways is on the ball, implementing major logistics infrastructure improvement projects such as the new freight and cargo handling capabilities at Pudong Airport and the deepwater port at Yangshan. In fact, more of the global supply chain pain-points will start to hurt at the North American and European ends as ports struggle to meet China export demands especially at peak periods,” said Ridgwick of Deloitte.

Juan Bautista, the China general manager of Werner Global Logistics, which recently set up shop in Shanghai, goes on to say, “We still think the trend of exports from China will grow and for this the US distribution capacity will be very tight, so we have been working with our customers and partners to establish strong commitments and partnerships, so we can offer the best solutions for their supply chain.”

“We are also seeing a big market finding alliances with Chinese NVOCCs [Non Vessel Owning Ocean Carriers] who have a very weak presence in the US, which will allow us to take advantage of both networks.”

A promising future for China’s railways Let’s turn now to look at some of the micro-trends that we can expect to see in China supply chain in 2007. In coming years, the railway sector should prove hot, as the government builds new track and gears up to improve freight rail service to India. New rail networks currently under construction suggest a promising future for China’s railways.

Technology as a driver of the China supply chain Across the global supply chain, technologies such as RFID, are helping to create efficiency, not just in cargo handling but also in terms of security and forecasting.

According to a recent study by AMR Research, the global market for supply chain management software is growing steadily. Top vendors include SAP, i2, Oracle and Manhattan Associates.

“Two major obstacles to widespread immediate adoption [of RFID] are cost and security,” writes Bernie Hart of JPMorgan Chase Vastera. Local companies, sometimes reluctant to spend on IT, are realizing that in order to meet service demands of foreign manufacturers, spending on IT and technology such as RFID is inescapable.

Nie Guangxiong, secretary and vice general manager of China Railway Express International Logistics, recently grumbled that trucking has an unfair advantage over rail due to overloading which helps companies cut trucking costs: “In fact, rail offers many advantages over trucking, including being more environmentally friendly, and offers ontime delivery, safety and quality handling.”

China Railway Express, a state owned company formerly known as China Railway, is revamping itself in a drive to win more foreign business in both domestic cargo movement and international freight forwarding.

According to Nie Guangxiong, China’s railways are still relatively underdeveloped compared to the US or Europe and are set to expand from the current level of 75,000 kilometres to over 100,000 kilometres by 2020.

More of the global supply chain painpoints will start to hurt at the North American and European ends as ports struggle to meet China export demands.

Jim Ridgwick, Deloitte Touche Tohmatsu

Imagine China

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21

COVERSTORY The demand in the air and on the sea Like rail, airfreight continues to experience high demand across Asia. Based on recent statistics released by the International Air Transport Association, China is one of the fastest growing airfreight markets in the world.

According to one China based investment analyst, airfreight is another underdeveloped and underutilized transport sub-sector in China.

“The coming year should prove exciting for Shanghai which will become recognized as the world’s largest port,” Mark Millar, commented. “The Yangshan port expansion will continue, alongside the development of Lingang logistics parks – which includes a freight rail connection. These integrated infrastructure developments will provide benefits for both manufacturers and logistics providers.

Shenzhen port will also see a continued increase in throughput, driving further expansion in Yantian.”

With China exporting at record levels with greater efficiency, capacity pressure is continuing to be felt on the US West coast and in Europe.

Contrary to some views, Francis Bassolino, managing director at Alaris Consulting’s Shanghai office, observed that greater technological capabilities (see Technology as a driver of the China supply chain, page 21) are helping the US West coast ports handle cargo quite smoothly.

more popular than wet markets, as consumers and governments press for greater food safety.

According to AT Kearney research, in 1998, there were 16,000 supermarket outlets, whereas in 2003 there were 80,000.

AT Kearney research also indicates that there is a dramatic shortage in refrigerated trucks, projecting a need for 170,000 long haul trucks and 680,000 local trucks by 2010 (see Trucking on, page 20).

According to a recent China Supply Chain Council survey on cold chain logistics, 35 percent of companies said they would significantly increase their cold supply chain investment in the near term.

Another fast growing sector, offering significant growth and profit potential in China supply chain management is service parts logistics. The China Supply Chain Council’s recent Service Parts Logistics Study indicated that opportunities in this subsector lie in outsourcing, increased service and greater cooperation among companies.

Christian Rubenauer, a project manager with Barkawi Management Consultants, a German consultancy, commented that: “The gap between the service expectations of customers and the reality is growing due to the extensive market growth within China. Currently many manufacturers try to close the gap by using intensive management capacities which actually leads to increasing costs and dropping profitability.”

According to some estimates the market for after sales service and spare parts logistics in China in 2005 was US$1.5 trillion. This market is expected to see sustained growth in the coming year.

Companies must evaluate sourcing alternatives based on the strategic and financial value they bring to the overall business.

Bernie Hart, JPMorgan Chase Vastera

Sourcing as a global strategy

Singapore Technologies Aerospace

The growth of specialised logistics services Alongside technology, investment needs to be made to modernise cold chain logistics in China.

As the country’s food retailing industry faces increased demand for fresh food products from the growing middle class, transportation of fresh foods is becoming critical.

Supermarkets are becoming increasingly www.chaina-online.com

Global strategic sourcing is another buzzword that we are likely to hear about in the next few years. A recent executive level study showed that companies are planning to make global sourcing a core part of their strategy. The survey also revealed that China International Procurement Organisations (IPOs) in China are growing rapidly.

According to Hart of JPMorgan Chase Vastera, “Companies must evaluate sourcing alternatives based on the strategic and financial value they bring to the overall business.”

The challenges in China supply chain So what of the major challenges in China supply chain management? Well perhaps the biggest concern continues to be the skills gap in China’s workforce in this area.

Jeffrey Stryker, a managing partner at Hunt Partners Asia Pacific, an executive recruitment company commented recently, “While any position in China is difficult to fill, it is those positions related to contract logistics and operations types of roles that are always the most challenging.”

JANUARY/FEBRUARY 2007

23

COVERSTORY Bassolino, of Alaris Consulting, advises his clients against getting involved in a JV: “What is happening is key individuals are being paid in equity-like ways, which avoids the need for a traditional JV.” Other industry insiders, such as Gordon, see clear advantages to integrating foreign and Chinese management: “We see more and more global buyers seeking to acquire Asian logistics platforms. In effect, you could call it a “reverse takeover.” The foreign company is the buyer, but the Asian management maintains operational control. We will see more and more deals like this.

We will see more and more global buyers seeking to acquire Asian logistics platforms.

Benjamin Gordan, BG Strategic Advisors

A unclear regulatory environment

The consensus among most insiders is that the dire skill shortage across the supply chain in China will continue to be a problem, driving up salaries and limiting service and innovation levels.

“One thing we would like to see is for independent industry bodies and educational establishments to come together with manufacturers and service providers to develop medium term solutions to address the skills shortages,” commented Millar.

Go local?

A decision foreign companies have to make when they enter China is whether to partner with a local company or to stay wholly foreign owned. According to one recent market survey, 63 percent of 3PLs are operating in China without a Chinese partner.

“Chinese 3PLs are reluctant to give up control of companies they started and nurtured. They might sell a stake in their company, but they will still want to be heavily involved,” says Henry.

While China’s regulatory environment is loosening up, it still remains unclear how the regulatory environment will shape up in the near future.

“China’s legal regime relating to the logistics sector is highly fragmented,” says Eugene Lim. “Different ministries and government agencies have different roles in approving foreign investment in the logistics sector, which can affect the ability of investors to effectively participate in this sector.”

An ongoing trend should be for China’s legal framework to keep adapting to the economic climate. “Although,” according to Baker & McKenzie’s Lim, “It remains to be seen whether the legal framework will continue to evolve to create a conducive environment to allow foreign investors to transfer their know-how and expertise to China.”

Supply chain fraud Peter Humphrey, founder of Chinawhys, a Shanghai based consultancy promoting good business ethics among multinationals in China, observed recently that bribery, corruption and loss of intellectual capital is rampant, costing companies billions of dollars every year. To some, this is just a cost of doing business in China, yet according to Humphrey this is a much bigger problem.

Automotive logistics at a crossroads With the big automotive companies such as GM, Volkswagen and Ford struggling for survival on their home turf and looking to China as their saviour, the automotive logistics sector will continue to grow and mature exponentially.

“The automotive logistics sector in 2007 will reach a crossroads and the industry will need to address some serious and fundamental issues. The supply of experienced and skilled logistics professionals cannot keep pace with the growth in countries such as China, India and Russia,” said David Cardle, of Frazer Nash Associates, a UK based automotive logistics consultant.

While it’s unlikely that the big automotive companies will be exporting large numbers of cars from China back to Europe or North America due to protectionism in those markets, parts sourcing for factories in the US and Europe and whole vehicle shipping for other developing markets such as Africa and Eastern Europe should continue to be fast growing trends in coming years.

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COVERSTORY “Some Chinese scholars estimate that an amount equivalent to around 15 percent of Chinese GDP is lost to fraud, bribery and embezzlement. The fraud rate in the USA is estimated at around 4 percent.”

According to Humphrey, “The most common type of fraud in China is supply chain fraud, where employees defraud their employers by

backburner. Corporate social responsibility, a new concept in China, should become more important in China as more foreign companies bring these concerns, observed Marc Hantscher.

“My view on the general environmental issues is that we in the West have no right to try and curb China’s economic development through environmental pressure. I do however believe that, as we in the west are being forced to curb our carbon emissions, there will be a consumer backlash against buying goods and services from countries who, on the surface, seem to be ignoring environmental concerns,” Cardle commented.

On the plus side the Chinese government appears to be intensifying environmental regulations; enforcing them is another story. Regardless, global environmental regulations will push ahead forcing countries to comply if they want to keep business channels open.

Going forward

Imagine China

extorting kickbacks from vendors, or by inserting their own phantom companies into the sales or purchasing chain. There is widespread collusion in this kind of activity by employees, suppliers, distributors, customers and JV partners.”

While there has always been a need for supply chain security (SCS), according to Juha Hintsa, of the Switzerland based Cross Border Research Association, “The new aspect is that for the first time in history, the underlying SCS measures are packaged, promoted and controlled systematically.”

According to Hintsa, companies and governments need to ask themselves, “What is the actual threat facing their supply chains, if any?” Companies should do extensive analysis before they invest heavily in SCS systems.

The likelihood is that cargo security will increase in importance and become easier to handle with more sophisticated technology such as RFID. Data tracking will also continue to be an issue.

Environmental issues With the economy in full swing, companies and governments are focused on growth and seem to have put environmental issues on the www.chaina-online.com

So what does all this mean? Well, despite all the relative hype and optimism, according to Accenture’s Jamie Bolton the key solution is to “formulate a China-focused global operations strategy”.

While the shift in China from low cost and low quality producer to greater innovation, quality and service is happening, the transformation will not occur overnight; neither will it likely happen in the way we expect it to. The shift will not necessarily be one from Chinese to North American or European practices. Indicators are that the transformation will take the form of a fusion between western service and quality standards with Chinese culture and business practices.

Into India and Vietnam Whether the term Chindia, a buzzword that emerged in the past year, has relevance in terms of India and China as a combined force, remains to be seen. Without question though, Chindia is a touchstone for the rising global importance of each of these two countries in their own right.

India, which suffers from poor infrastructure, lack of central planning, a smaller middle class and less foreign direct investment, has a few key advantages over China. Overall, India has higher level of English literacy, making it possible to outsource services such as telemarketing and IT. India’s GDP is also projected to grow faster than China next year, in excess of 10 percent, which should prove interesting for regional dynamics.

The likely scenario, many experts predict, is that India and China will work more closely together to leverage their combined strengths. Other developing countries in the APAC region, such as Vietnam, where labour costs are even lower than China, will continue to grow in importance.

Even Chinese companies are outsourcing manufacturing to Vietnam.

JANUARY/FEBRUARY 2007

25

Q&A

Serving the world from China

QA &

Gerold Simbuerger is the managing director of the BenQ-Siemens Mobile division of BenQ, based in Shanghai and is responsible for the company’s global supply chain management. He has been living and working in China since 1998, when he was a senior vice president for Siemens Shanghai Mobile Communications, also responsible for global supply chain management. Chaina magazine recently met up with Mr. Simbuerger in Shanghai, keen to discuss with him how the recent shut down of BenQ-Siemens Mobile’s overseas operations would affect business in China and to hear about the challenges he faces in running the company’s global supply chain.

Chaina: What are the biggest challenges that you currently face in your supply chain operations in China?

Gerold Simbuerger: I find my two biggest challenges to be, one: overexpectation from HQ, where they still believe that everything is possible in China, and of course we all know that isn’t true. Although supply chains in some areas of China are already becoming advanced, many of the regulations, particularly with regard to import/export are still very strict, so this over-expectation from HQ has to be managed. And two, when we think about supply chain we need to think about the whole chain right down to the suppliers, the challenge here is utilising the strengths of as many suppliers as possible. Helping smaller suppliers to grow with us is a big challenge.

C: There’s been a lot written in Chaina magazine about the challenge of finding qualified supply chain professionals in China. How is BenQSiemens Mobile solving this problem?

GS: Shortage of talent I think comes from an under-estimation from many graduates about the career 26

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opportunities in this area and also a lack of understanding of the importance of supply chain management. When one goes to universities in China, the thinking of the students is to go into sales or finance. They won’t touch manufacturing, so as a result a lot of the best talent is walking away from this area. They need to understand that factories are just a small part of the supply chain. They need to understand that supply chains are global. We need to make supply chain management more attractive.

C: So the perception of supply chain management to most Chinese graduates is that it’s a boring area to work in?

GS: Yes, they see it is as factory life.

Integrated supply chain developments are not well known in China. Another consideration is how we can recruit these graduates. The job and the package need to be made attractive.

You have to be very active and have a clear picture of what you can offer these people and how you can develop their careers. It’s also important to recognise the value of these people and pay them accordingly. Training is also an important part of the package, including perhaps some overseas training. Here at BenQ we are working in cooperation with Tongji University in Shanghai and have developed a supply chain course for their MBA students. We sometimes recruit the best graduates from this course.

C: How do you find out about the strategies that your competitors are using to retain their staff?

GS: Through my network and through the advice of consultants. New staff coming in are also a wonderful source for benchmarking!

C: How has the way in which you approach your supply chain changed since you made the transition from Siemens to BenQ in 2005?

GS: We have definitely become more focused on local suppliers, because of the expertise of BenQ in this area. We were consequently able to compare the suppliers that Siemens used with those used by BenQ, and make changes for the better where necessary.

C: BenQ-Siemens Mobile recently shut down most of their overseas operations. The only market that BenQ-Siemens Mobile will continue operating in is China, is that right?

GS: Right. Luckily, right from the beginning, we had planned to move most of our supply chain activities to Asia. We had already started to concentrate our activities in China. So we had been more or less prepared as we were already starting to develop independently from Europe.

Nevertheless we have had to restructure. We no longer have access to the European market and we need to move to an Asian-based platform for products.

C: So, not just China, but Asia?

Which countries?

GS: From a supplier base: Korea and of course China. We will focus on India, Russia and China as key markets for us. Hong Kong is also an important market. We do have a recovery strategy www.chaina-online.com

Q&A

here in China and building a sustainable business is very important.

C: There’s been recent reports in the news about BenQ-Siemens Mobile opening a new manufacturing facility in Jinqiao, Shanghai in the second quarter of next year: does the move reflect a move away from Siemens?

GS: No, when we first started working together we didn’t have our own facility here and that made sense at the time and made for a smooth transition. But our long-term strategy is to grow as we have no room for development in our current facility.

C: It was announced recently that BenQ will expand its distribution channel to 3,000 stores in China from about 1,000 currently; will BenQSiemens Mobile be involved in this?

GS: BenQ wants to develop BenQ stores to develop their brand in China. They will sell BenQ mobile phones in this store. I am not certain whether there will be BenQ stores in India and Russia.

supply chains, although I think China can and will continue to lead global supply chain activities.

The cost of running supply chains from China is growing, and lots of people are talking about this. For me though this is perhaps just another indication that we are not improving efficiency in our supply chains. Too many managers are only focusing on the fact that Shanghai is becoming more expensive and costs are going up as result. But we’ve known this for a long time, it’s nothing new. They aren’t thinking about the efficiency issue and the extra potential that needs to be utilised there.

Another big trend now that everyone is talking about is integration and the integration of everything in the supply chain. Maybe this is right in some areas, but we need to also be aware that perhaps some disintegration could be the next step.

A strategy that enhances words such as big, cheap and flexibility is not always the best one.

It’s important to have the whole supplier base working together in tandem with you.

Gerold Simbuerger, BenQSiemens Mobile

C: What is your biggest achievement to date in China?

GS: I think my biggest achievement, starting during my time with Siemens and continuing with BenQ, has been to give our global HQ the confidence that we are able to serve the whole world from China. At the beginning they didn’t believe we could do it.

But we were able to convince them through performance and marketing.

I also feel setting up excellent supplier relationships and succeeding in managing those suppliers has been a key achievement. Together with our suppliers we have developed a new concept about how a company should communicate with its suppliers so that they have a very clear understanding of supply chains. It’s important to have the whole supplier base working together in tandem with you.

C: How do you see the future of supply chain management in China?

www.chaina-online.com

China Foto Press

GS: We need to become more aware about how we can integrate other countries such as Vietnam into our China

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Q&A

End-to-end players

QA

Chaina magazine met with the group chief executive officer of global logistics provider GGeodis, eodis, Pierre Blayau, and regional managing director for Asia, Alain Chimene, during their recent annuall visit i i to Shanghai.

PB: I believe we offer an alternative because we are still at a size that allows us to be more flexible whereas probably larger groups can’t afford to be.

C: Can China continue to stay competitive in the global supply chain, especially as other low-cost country sourcing destinations such as Vietnam continue to get stronger?

Chaina: How does Geodis differentiate itself from the many other international logistics services providers that are also currently heavily promoting themselves in China?

Pierre Blayau:

I

think

our

difference in the first instance comes from the fact that none of our competitors believed we would be able to acquire TFM [TNT Freight Management], but now they have to consider us an important global player. In one day we have become one of the most important players in logistics in China and we want to to start operating as a global player. We have the expertise to cover all the areas such as logistics, distribution, warehousing and freight forwarding.

Alan Chimene: We have become a real true alternative to the global players in every aspect of the supply chain by reinforcing our end-to-end offer.

C: But a lot of the services you’ve just mentioned are also being promoted by your competitors.

28

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PB: As a logistics supplier, our rule is to follow our customers. If our customers feel it is more profitable to be based in Vietnam and they need us to deliver a service between Vietnam and China, between India and China or between Europe and China, we have to satisfy the needs of our customers. Our role as a service provider is not to have an opinion about the competitiveness of this country or that country.

AC: Its very difficult to predict whether China will remain competitive over five, ten or fifteen years. This is one of the reasons we’re looking to move away from the coastal cities. We have to go West and in 2008 we plan to open new offices further West in cities such as Chengdu and Xi’an. There is real potential in those areas.

C: A lot of people are obviously very keen to learn more about Geodis’ acquisition of TFM, has this deal been a long time in planning?

PB: We were conscious that one of our weaknesses was our overseas business in terms of size and geographic breakdown. In order to develop our forwarding activities we knew that we had to reinforce our position in Scandinavia, in Asia Pacific and in North and South America. We knew for a long time we needed to make an acquisition. The challenge was to find a company that fitted with Geodis.

Finding TFM was like a dream.

&

C: So there was always such an idea.

PB: Yes, and in fact the process

has been very quick. The opportunity came when it did by chance and we had to take the opportunity in just six weeks. It wasn’t planned. I am happy though that the opportunity came at the time it did though because we had the money available. Let’s suppose that opportunity had come one year before probably we would have had difficulty [making the acquisition].

C: How can we expect the new entity to brand itself?

PB: Wilson. For the overseas business, the combination of Geodis overseas and TFM, we will call ourselves Geodis Wilson. We want to renew this brand which has existed for a long time.

C: And when should we expect the deal to be finalised?

PB: By February the closing will be done by which time I hope we will have official approval from Brussels and from the United States.

We will take a cautious approach. I don’t know yet when the integration will be complete.

C: Where will the new entity’s regional headquarters be located?

AC: For the time being there is no reason that the regional head office will move from Hong Kong.

C: And finally on a slightly different note, as the former President of French Ligue 1 football team Paris Saint Germain, what do you think of China’s chance of qualifying for the World Cup in 2010?

PB: I love Football because it’s a universal sport. It’s difficult for me to imagine a world competition without China.

www.chaina-online.com

EVENT

China supply chain converges Collaboration at all levels of the China supply chain was a prevalent theme at the recent CHaINA Summit

C

onvergence and collaboration at all levels of the China supply chain, from strategy, mergers and acquisitions, consolidation of suppliers and the convergence of IT and other processes, were prevalent themes at the CHaINA Summit held in Shanghai last November.

Organised by the China Supply Chain Council (CSCC) the two-day conference attracted over 300 senior supply chain executives from a range of supply chain-related sectors including manufacturing, logistics, consulting, IT and professional services.

Jamie Bolton, executive partner, Supply Chain Management, North Asia for Accenture, based in Shanghai, set the stage for the conference by highlighting the “importance of China in developing an integrated global operations strategy and model” in terms of supply chain planning. According to Bolton, developing countries will play an increasingly important role in the global economy and companies “need to balance the attractions and challenges of entering the China market.”

Increase value through improvement Bee-Choo Lim, Intel’s materials director for Asia and Latin America, is another proponent of collaboration who emphasized that, to be a true leader in the global supply chain, companies need to increase value through skills and systems improvement and supplier collaboration. Lim’s experience at Intel has shown that working closely with suppliers has “helped enhance their quality process and professionalism in dealing with multinational companies.” www.chaina-online.com

As China’s role in the global supply chain shifts from world’s factory towards greater capabilities in R&D and innovation, collaboration between manufacturers and suppliers will also become more important. This shift was highlighted by a variety of speakers such as Henrik Anker Olesen, Asia Pacific transport and logistics leader for IBM Global Business Services and Marc Hantscher, who runs Bosch and Siemens Home Appliances Group’s international purchasing office.

Hantscher sees supplier collaboration accelerating going forward: “Manufacturers are getting more involved in supplier development, working with supplier operations to improve quality and ramp up capacity.”

Russel Beron is a freelance journalist specialising in supply chain and logistics based in Shanghai. He is a regular contributor to Chaina magazine.

The skills shortage Many of the CHaINA summit conference sessions also highlighted the dire need for skilled and experienced local logistics professionals as China’s economy matures.

One session by Rasmussen and Simonsen identified some of the key areas of shortage in terms of skills and talent, and identified how companies can strategically plan their training.

“Part of the problem,” says Lucia Simonsen, a director of RSI International, an Asia focused training consulting company, “is the lack of available trainable candidates, high turnover rate of critical staff and the difficulty of sourcing or developing practical training.”

Philip Kwa of Accenture identified some of the approaches companies can take towards employee development, pointing out that Accenture’s Supply JANUARY/FEBRUARY 2007

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EVENT

Key trends in China supply chain management Outsourcing of almost every business function should continue.

Localisation of human resources – where the supply of talent is available – will push forward.

Q The level and variety of training and employee development programs will increase in response to the skills shortage.

Q Service providers will continue to differentiate on service as opposed to just on price.

Q Trade and regulatory barriers within China and barriers to foreign ownership in certain sectors will continue to loosen.

Q A shift from “Just in Time” to “Just in Sequence,” will become more prevalent, as a result of greater efficiency and optimisation of the supply chain.

Q Increasing innovation in strategic sourcing will be driven by technology and Internet innovations (such as e-sourcing).

Q The development of logistics infrastructure: rail, roads, river transport, ports, bonded logistics parks and free trade zones will continue.

Q Increasing value will be placed on information management as opposed to information availability.

Q Big box retailers will continue their move towards direct sourcing and private label branding.

and service parts consulting, demonstrated how after sales service and support can become an important profit centre within a company through filling this service gap.

Q

Q

As the China supply chain matures, suppliers have to become more accountable through an increased focus on both service and quality consistency (a shift from simply a cost focus) through score-carding and supplier evaluation. “Current factory assessments provide ‘pass-fail’ and status reporting only,” says Paul von Brenkelen of Bureau Veritas.

As many speakers highlighted, in terms of 3PLs, China is still a highly fragmented market with a multitude of players, high costs and significant inefficiencies, which suggests tremendous opportunity for the right service providers.

A likely future shift in terms of service provision in China is that companies will reduce their total number of 3PL service providers as they look for global end-to-end service providers.

Based on many of the conference sessions, it seems there is great potential for 3PLs to grow, both in revenue and in the breadth of their service offerings. According to Benjamin Gordon, only two percent of money spent on logistics in China goes to 3PLs – whereas in Europe and North America, it’s around 25 percent.

Modus Link

Chain Academy has enabled a “just in time” approach to supply chain training: “This has saved money and created greater efficiencies through blended learning developed by experienced supply chain practitioners rather than HR functions.”

At a macro-level, the trend towards global convergence is being driven mostly by the entry of big foreign companies in the China market. Benjamin Gordon of BG Strategic Advisors predicts that this consolidation will continue at full speed until there are between five to ten global leaders with the majority of market share.

“Sinotrans is one of the few companies with the potential to become a global top ten logistics company.” According to Gordon, Sinotrans and other logistics companies have to decide if they are buyers or sellers if they want to be players in this market.

Increased focus on quality

The need for IT convergence Convergence in IT across functions and between manufacturers and their suppliers was highlighted as another great area of need. This will likely change as China’s IT development capability increases and a desired level of transparency in information arises.

The growing popularity of new technology and IT systems as cost savings, and efficiency mechanisms, highlighted by Rene Homeyer of Aldata in his day two opening presentation, was continued through many of the sessions.

Service is still one key area that suffers a critical gap between supply and demand. Holger Clasing, general manager of the Shanghai office of Barkawi Management Consulting, a specialist in after-sales 30

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No one-stop shop In reality though, as one Chinese investment analyst observed, the current fragmented logistics market is not really capable of offering “global endto-end supply chain solutions.” One of the problems is that despite all the talk, there is no “one-stop” global logistics service provider as of yet. It will be interesting to watch as the race for supremacy in the China logistics market continues.

The growing attendance at this year’s summit, attests to the importance of supply chain issues in China. This year’s China Supply Chain Councilorganised CHaINA Summit will again be held in Shanghai in November. www.chaina-online.com

REGIONALFOCUS

A government revitalisation programme and a huge infrastructure boom means plenty of opportunity in Liaoning, Jilin and Heilongjiang provinces

Chris Horton is managing director of the Meridian Group of Hong Kong, a logisticsfocused consultancy with offices in Hong Kong and Kunming. He is a regular contributor to Chaina magazine.

32

J

ust a few years ago, times were tough for the northeastern provinces of Liaoning, Jilin and Heilongjiang – formerly called Manchuria in the west and known in Chinese as Dongbei, or ‘The Northeast’. Economic growth lagged behind most of the country’s other regions, unemployment and social unrest were high and the region was having difficulty competing with other parts of China for foreign investment.

Written off by observers as a moribund rust belt, Northeast China received a major boost from the central government when a special office headed by Premier Wen Jiabao was formed by the State Council in late 2003 to promote a Northeast revitalisation plan that has achieved some success in its efforts to boost economic development and regional integration with preferential policies, financial support and infrastructure investment.

Sandwiched between Russia and Japan and stretching from the Bohai Bay up into Siberia, Northeast China is of major importance to the country’s economic development and occupies a central location in Northeast Asia. The region is home to more than 100 million people and accounts for 40 percent of Chinese crude oil output, half its timber production and a quarter of the national auto output. Major cities in the region include Dalian, Shenyang, Changchun and Harbin.

JANUARY/FEBRUARY 2007

The region is still recovering from the effects of being one of the first areas of the country to undergo rapid industrialisation, with some of the biggest growing pains coming during then-Premier Zhu Rongji’s attempts to restructure and streamline China’s notoriously inefficient state-owned enterprises, which overwhelmingly dominated the regional economy. ‘Boss’ Zhu’s measures did reduce waste and redundancy in the region’s state-owned enterprises (SOE), but the millions of unemployed it created are still an issue in the region today – although economic growth in the area’s major cities has absorbed significant numbers of unemployed in recent years.

SOE reform did not lead to SOEs becoming less important. By 2005 the number of SOEs in the region dropped by 500 from the total in 2003, while total state-owned assets grew by US$18.8 billion. Zhu’s reforms weeded out the worst-performing SOEs, but those that survived generally ended up stronger and with less domestic competition than before.

Bouncing back Some indicators suggest that Northeast China is bouncing back from the doldrums of recent years. In 2005, the region recorded US$5.7 billion in foreign direct investment (FDI), an increase of almost 90 percent year-on-year. Northeast China’s FDI now www.chaina-online.com

China Foto Press

Full of northeastern promise

REGIONALFOCUS

China Foto Press

accounts for nearly one-tenth of the national total.

Urban and rural incomes in the three provinces have generally been rising in recent years and unemployment is steadily dropping. Liaoning had China’s highest unemployment rate - seven percent - in 2003, now it is closing in on five percent. In 2005 the total trade volume of the region reached US$57.1 billion, up 19 percent year-on-year.

Despite these positive indicators, there are still many obstacles to the government’s aim of converting this former industrial powerhouse into a modern industrial base. Despite the accomplishments of reforms, SOEs in the region still account for US$17.9 billion in non-performing loans. Although it has a low-cost advantage when compared with the Greater Bohai Bay, the Yangtze River Delta and the Pearl River Delta, the Northeast suffers from heavy pollution, a comparatively shallow HR pool and the effects of extremely harsh winters.

Bringing Northeast China closer to the development levels of the coastal region to its south will require a great deal of effort. SOEs and unemployment aside, the government is paying more attention to the region’s transport infrastructure shortcomings. Fixed-asset investment in Northeast China rose sharply to make up 9.2 percent of the nation’s total in 2005, up from 7.6 percent in 2003.

The region is hoping that road, rail, port and warehouse projects will improve the area’s supply chain infrastructure, stimulating growth in the industrial and logistics sectors. To get a better understanding of Northeast China’s prospects for the short-term, it is helpful to look at each of its three provinces.

A major international port in the making

www.chaina-online.com

North versus South “Throughput growth is not as high as we expected - terminals are not full… Dalian may not have capability to develop into a major transit port,” he said. “Northern China may have a better highway infrastructure, but from my point of view, Southern China’s logistics facilities are much better developed.”

Dalian and other cities in Northeast China hold a lot of promise for foreign logistics providers, the executive said, but the balance is presently tipped in favour of Chinese companies.

“Chinese companies already have established networks and possess a lot in the way of fixed assets,” he said. “Foreign logistics providers in the region offer better service, but they haven’t invested enough in tracking and warehouses.”

In terms of logistics infrastructure, Dalian has seven major logistics distribution centres and has approved the establishment of Dalian Changxing Island Bonded Logistics Park for this year (See The value in bonded logistics parks, page 9), but few official details about the park have been released. It also has eight major export processing zones, plus one major planned industrial park, Dalian Changxing Island Industrial Park, which will occupy an area of 3.15 square kilometres. The park will have a petrochemical industrial base that will occupy 14 kilometres of coastline and will be a 50-minute drive from Dalian. The city is also expanding its warehouse capacity, particularly in Dalian International Logistics Park, which has been busy adding 160,000 square meters of warehouse space to its existing 120,000.

Provincial capital Shenyang is located in North Liaoning and relies upon the ports of Dalian, Yingkou and Dandong for ocean access. Pillar industries include heavy industry, automobiles and manufacturing.

Road, rail, port and warehouse projects are improving the area’s supply chain infrastructure.

China Foto Press

Situated on the north side of the Bohai Bay, Liaoning is the only northeastern province with any significant coastline. With a population of 42.2 million, Liaoning is the most populous province in the region. Its two major cities are provincial capital Shenyang and Dalian, the region’s main port.

Dalian Port was designated the newly established North-East Asia International Shipping Centre in 2003 as part of an effort to revitalise the region.

Dalian’s total throughput for 2005 reached 2.69 million TEU, up 21.7 percent year-on-year.

Dalian Port Company is the operator of China’s largest crude oil terminal and was the second Chinese port operator to float on the Hong Kong Stock Exchange. The money raised has been earmarked for container berth expansion and the relocation of oil-handling facilities.

The Dalian Port Administration Bureau has invested more than US$3.3 billion in the construction of the North-East Asia Shipping Centre which will essentially be another port the size of Dalian Port.

By 2010, Dalian Port is projected to become one of the world’s top container ports.

One executive at an international shipping company in Dalian said that although Dalian port’s throughput was up, it did not have the growth velocity of other ports such as Qingdao and Ningbo and may have some difficulties competing with other major Chinese ports.

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REGIONALFOCUS

The central government’s investment strategies and preferential policies have made it increasingly convenient to do almost anything in this part of the country.

Joanna Zhang, ABX Logistics

Shenyang has several planned logistics distribution centres that are aimed at ameliorating the city’s lagging logistics infrastructure. Tiexi Comprehensive Logistics Centre will be located in Shenyang’s Tiexi district, Shenghai Comprehensive Logistics Centre will be built just south of Shenyang East Station rail cargo terminal and has a planned area of 1,800,000 square metres. Other planned centres include Hunnan International Goods Public Bonded Logistics Centre and Zhangshi Comprehensive Logistics Centre.

A big opportunity...

Lacking Liaoning’s ocean access and Heilongjiang’s petroleum resources, Jilin, with a population of 27.2 million, is arguably the northeastern province with the largest developmental challenges. In the mid1990s the UN Development Programme attempted to initiate its Tumen River scheme, which would have created a major transport and logistics hub at the mouth of the Tumen River in between Russia and North Korea on the Sea of Japan. The US$30 billion project would have been a boon for Jilin, but the project fell through as a result of a lack of interest by Russia, North Korea and even Beijing.

Since the launch of Beijing’s Northeast revitalisation campaign, there has been occasional talk of reviving the scheme.

Jilin’s development is heavily dependent on SOEs, and in 2005 more than 70 percent of provincial capital Changchun’s economic output was generated

by FAW, a car and truck manufacturer with JVs with foreign automakers, including Volkswagen (See The other motor city, opposite).

Joanna Zhang, Northeast China District Manager for ABX Logistics, said the small number of international supply chain and logistics providers in Jilin and the rest of Northeast China present a big opportunity for companies that want to establish themselves in a part of China with little foreign competition.

Zhang also said she has seen good results from the government’s revitalisation program in Jilin.

“The number of supply chain and logistics companies has increased greatly in the last few years, leading to more competition – I feel that the government’s investment strategies and preferential policies have been fundamentally sound,” Zhang said. “It’s becoming increasingly convenient to do almost anything in this part of the country.”

...but at what cost?

Despite the opportunities, ABX’s Zhang said, foreign companies moving into Northeast China will encounter their share of difficulties.

Imagine China

34

JANUARY/FEBRUARY 2007

www.chaina-online.com

REGIONALFOCUS Zhu Yanfeng president, FAW

The other motor city China’s answer to Detroit, Changchun in Jilin province is wellknown as a centre for all things auto. It’s estimated that around 20 percent of all cars manufactured in China are made there. The city has been at the forefront of China’s auto industry since the 1950s when the central government designated as a centre for car manufacturing and Changchun hasn’t looked back since.

Perhaps the best known auto manufacturer to come out of Changchun is First Automotive Works, or FAW. The company’s name in Chinese literally means ‘first autocar’. FAW has JVs with Volkswagen, Toyota and Mazda. Daewoo, Chrysler and Audi also all have a presence in the city through JV tie-ups with local manufacturers.

Imagine China

“Human resources is a major issue, finding someone that can do things the right way isn’t easy,” she said. “Finding people who understand the global supply chain concept is very difficult.”

Changchun has begun to focus on improving the quality and capacity of its logistics infrastructure.

The Changchun Northeast Asia International Procurement Centre will eventually occupy 700,000 square metres in Changchun’s Erdao district. The centre will feature wholesale, retail, procurement, display and warehousing facilities.

Changchun Corn Industrial Park was scheduled for completion by the beginning of this year. Also in Changchun’s Erdao district, the park will eventually occupy an area of 41.9 square kilometres, making it China’s largest modern bio-chemical city and textile base.

Changchun Export Processing Zone was approved in June 2006 and will be established near the Changchun Airport Development Zone.

It has a planned area of one square kilometre.

The zone will be 18 kilometres from Changchun Longjia International Airport and one kilometre from Changchun’s containerised rail cargo terminal. There are 28 domestic and international enterprises planning on establishing operations in the zone.

Most warehouses in Changchun are small, privately owned facilities. Only in the last two years has the Changchun government pushed for customsapproved or international-standard warehouses. This push has little to show for it other than Changchun Lüxing Public Bonded Warehouse, the first public bonded warehouse in Changchun (and Jilin Province), which was established in 2005. The other major public bonded warehouse in the city is located in Changchun Automobile Development Zone. www.chaina-online.com

According to figures recently released by website China Auto News, Sino-foreign JVs are among the most lucratuve car manufacturers in China. Top spot for number of cars sold in 2006 went to Shanghai GM, selling 413,400 cars. Shanghai Volkswagen and FAW-Volkswagen came in second and third respectively.

Business as usual in Heilongjiang China’s coldest province, Heilongjiang province spends several months of the year with snow on the ground and temperatures often dipping to -30 Celsius. Coal, petroleum, lumber, machinery and grain are the traditional pillars of the provincial economy. Despite the long harsh winters, Heilongjiang has a population of 38.2 million, 50 times the population density of the Siberian region it borders.

Heilongjiang province is currently focused on developing a modern, efficient industrial corridor connecting provincial capital Harbin with second-tier cities Daqing and Qiqihar. The corridor is the cornerstone of the province’s revitalisation strategy.

Leon Wang, General Manager of Liaoning Air Sea Worldwide (ASW) in Harbin, said that Harbin has experienced respectable growth in recent years, but he attributed it to momentum the city already had rather than the central government’s Northeast revitalisation scheme.

“It’s been business as usual here, the government’s revitalisation policies haven’t had a major impact on Harbin,” Wang said.

Wang said Harbin’s economic future would be buttressed by the planned industrial corridor with Daqing and Qiqihar and that Harbin in particular and Northeast China in general had several strengths in comparison to other regions in the country.

“Harbin is a major grain and lumber export base. Operations here often have low costs and the opportunity for high profits,” Wang said. “The other side of that coin though is competition is quickly heating up – it seems that every month there is a new logistics company moving into the market.”

Heilongjiang is focused on developing a modern, efficient industrial corridor connecting the provincial capital with secondtier cities.

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CAREERS Changed jobs in the past month? Hired someone new recently? careers@chaina-online.com

All change at Ford Motor China

Schneider Logistics strengthens international sales team Schneider Logistics have appointed Michael Squadrille as team vice president of International Sales. In his new position, Squadrille will focus on international development, working closely with the company’s wholly owned subsidiary, American Overseas Logistics, and with Schneider’s growing international freight forwarding networks in Europe and China. Squadrille joins Schneider Logistics from GeoLogistics.

Eric Legros to become chief of Carrefour China Carrefour is set to name Eric Legros as its China president this month after incumbent Jean-Luc Cherreau retires. Legros, who was www.chaina-online.com

China Foto Press

Phil Spender has been appointed chief operating officer for Ford Motor China. Phil Spender will be based in Nanjing in his new role.

Mei Wei Cheng vice president of Ford Motor Company, and chairman and chief executive officer of Ford Motor China, said: “Ford Motor China has been undergoing significant business expansion... Our business is now at a critical stage of tremendous growth and complexity. During 2007 and the immediate future, Changan Ford Mazda Automobile Nanjing plant, Changan Ford Mazda Engine Company, the recently-announced Ford Motor R&D centre and our China sourcing office will either be starting to operate, or maturing... The newly created COO position will coordinate and provide leadership to all these operations.”

Mei went onto say: “Phil Spender led the successful launch of Ford Focus, which is one of the top selling products in China’s C-segment car market. He also played a key role in the production of Mazda3 and Volvo S40 at CFMA.” Spender was previously president of Changan Ford Mazda Automobile and is replaced in that role by Jeffrey Shen.

He was previously president of Ford Lio Ho Taiwan.

Phil Spender

appointed as China chief executive officer in March, will maintain that position, according to local media sources. Legros previously held the position of general manager Carrefour Argentina.

Steve Siu becomes OOCL CIO, director Steve Siu has been appointed as a company director and CIO of Orient Overseas Container Line (OOCL) after the resignation of Ken Chih. Siu previously served as OOCL’s chief technology officer and was instrumental in developing technology platforms and applications for the company.

Lenovo appoints senior vice president and chief strategy officer Lenovo has announced the appointment of Cuong Do as senior vice president and chief strategy officer. Do will report directly to chief executive officer William Amelio and will be responsible for the company’s worldwide strategic direction.

Prior to his position with Lenovo, Do was most recently a director and senior partner with McKinsey, where he led consulting assignments in strategy, sales, marketing, operations and corporate finance. He has broad experience working with technology leaders in semiconductors, computing and consumer electronics.

“Cuong has helped improve the performance of many leading international businesses,” said Amelio. “His experience will help us as we continue to build our company worldwide, and our customers will benefit from his ability to get results.”

The company’s new business transformation organisation will focus on coordinating and driving process improvements and operational efficiencies in such areas as configure-to-order, customer relationship management, and supply-chain processes, and will work closely with the company’s strategy and IT organisations.

Kellwood appoints new Asia sourcing and production leader Jimmy Choi has been named senior vice president and managing director of Kellwood Global Asia, according to Jeff Streader, president of Kellwood Global.

Choi will be responsible for leading all aspects of strategic sourcing and production for the Asia business unit and will act as a liaison between domestic and international Kellwood Global business units. Kellwood Global manages a major portion of Kellwood’s worldwide supply chain activities.

Choi has 25 years of experience in production and supply chain management.

Prior to joining Kellwood, a leading marketer of apparel and consumer soft goods, he held the position of vice president Asia for Oxford Industries. Choi will be based in Hong Kong.

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CAREERS Changed jobs in the past month? Hired someone new recently? careers@chaina-online.com

“Jimmy Choi has the ideal experience, leadership skills and industry knowledge necessary to accelerate our strategy to develop a world class global sourcing model. He will be a great asset to our team and I look forward to working with him,” said Streader.

Tyco Healthcare appoints vice president Global Supply Chain

the new role when Nokia Siemens Networks China is officially established, a statement from Nokia said.

Colin Giles

Colin Giles set to become president Nokia China Colin Giles, senior vice president for customer and market operations for the Greater China region, is set to become the president of Nokia China.

Giles takes over from David Ho, who will join a planned new company, Nokia Siemens Networks, as chairman of the China region. He will take on

China Foto Press

James Muse has been appointed Tyco Healthcare’s vice president Global Supply Chain, responsible for directing the strategic, global and day-to-day operations of Tyco Healthcare’s customer service, strategic procurement, working capital, inventory distribution operations, trade compliance, supply chain solutions and systems functions. Muse previously held managerial positions within the logistics function at Tyco Healthcare.

Tyco International announced in early 2006 that the company would split into three separate publicly traded entities which include Tyco Healthcare, Tyco Electronics and the combination of Tyco Fire & Security and Tyco Engineered Products and Services. Tyco Healthcare is a manufacturer and distributor of medical devices, with sales of US$9.6 billion in 2006.

What’s it like to work for Electrolux?

Amit Kumar, Logistics Manager Asia, Inter-Continental Freight & Logistics Services Who’s the boss?

How do you get a job at Electrolux?

Bjorn Vang Jensen, based in Singapore, the vice president for InterContinental Freight & Logistics Services for Electrolux Group. This is the division of Electrolux which controls all international freight for the whole group.

We have a corporate policy called ‘open labour market’, which means any managerial level position in Asia has to be listed on the job board on Electrolux.com. All other positions are also listed there. The job board is also used internally, for internal transfers.

People often move internally across geography and functions, and the HR division encourages this.

How many staff?

We have five people working in the Inter-Continental Freight & Logistics Services division based in Shanghai and thirteen in total globally including Bjorn Vang Jensen in Singapore.

Supply chain responsibilities?

Any training offered?

There are corporate training programmes for leadership development. More uniquely though most of the training is very hands on. If you’re new in a role you will get plenty of support.

My team manages anything that is exported or imported into Asia, whether by ocean or by air. We also manage global logistics pricing for sourced components so if for example we’re moving something from Brazil to North America, that pricing is done in Shanghai. And, we’re also globally responsible for procurement and operations of airfreight and courier services.

Pay or perks?

Who are your customers?

Being in China, yes. More than 50 percent of what we move from Asia is going to North America. So with the time difference, late hours are regular. People tend to work late. There’s no day goes by that I’m not talking on the phone with a factory overseas. But I am flexible in when I expect my staff to come into the office in the mornings.

All internal stakeholders, the factories, the sales divisions, the purchasing people. Whover is buying or moving things from Asia.

And also any office of Electrolux globally using courier services.

All of these people are using the products or services which we buy, which we manage and which we contract. We also have the external customers in terms of suppliers, anybody who is shipping something with Electrolux. As a policy, any cargo has to move on Electrolux contracted rates.

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The pay is decent. We try to follow the market average. Employees get discounts on products. And depending on a person’s grade level, there are long term benefits.

Long hours?

Business travel?

I spend about eight to ten days per month travelling internationally.

In Electrolux, managers with regional responsibilities tend to spend about this length of time on the road. www.chaina-online.com

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Industrial China

• Do you have industrial experts who understand the regulations, processes, and needs of this developing market?

• Can you find the right site for your business needs in over 2,000 industrial zones in China?

For more information about Jones Lang LaSalle’s Industrial and other services that we provide, please contact: Trent Iliffe Head of Industrial, China +86 21 6132 3706 trent.iliffe@ap.jll.com

Richard Shan Head of Industrial, Shanghai +86 21 6132 3635 richard.shan@ap.jll.com

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Wonder Wang Logistics, China +86 21 6132 6906 wonder.wang@ap.jll.com

Jileen Loo Business Parks, China +86 21 6132 6941 jileen.loo@ap.jll.com

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COPYRIGHT © JONES LANG LASALLE 2006

JANUARY/FEBRUARY 2007

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Need answers? Contact us today: Mainland Director: Christopher Horton E: chris.horton@meridiangrouphk.com Logistics Consultant: Lee Perkins E: lee.perkins@meridiangrouphk.com T: +86 871 551 9116 www.meridiangrouphk.com

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Ⴡ ః

www.chaina-online.com

EVENTSCALENDAR

COMPANYINDEX

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8

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17 17

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DG (Dangerous Goods) Logistics China 2007 January 17 Shanghai, China www.supplychain.cn

Lingang Logistics Park & Yangshan Port Tour January 18 Shanghai, China www.supplychain.cn

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21

23

24 Philips & Yaming Lighting Site Tour

27

130 Supply Chain Human Resources China Summit

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22

25

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January 24 Shanghai, China www.supplychain.cn

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31

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3

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2

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4

5

66-9

5

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China Industrial 9 Real Estate Summit March 8 - March 9 Shanghai, China www.ciresummit.com

February 1 Shanghai, China www.supplychain.cn

MARCH 1 India Supply Chain Summit March 1 New Delhi, India www.supplychains.in

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China Sourcing Summit March 6 - March 8 Shanghai, China www.chinasourcingsummit.cn

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11

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11

12

16

Intra-China & Domestic China Logistics March 7 Shanghai, China www.supplychain.cn

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29 28-30

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Logistics World 2007 March 28 - March 30 Suzhou, China

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www.chaina-online.com

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ABX Logistics .......................................................................34 Accenture .........................................................2, 9, 25, 29, 40 Ace Hardware ......................................................................16 Adidas ..................................................................................20 Alaris Consulting..................................................................23 Aldata ...................................................................................30 American Overseas Logistics...............................................38 AMR ......................................................................................21 AT Kearney ..........................................................................23 Audi ......................................................................................35 Baker & McKenzie .......................................................3, 7, 19 Barkawi ..........................................................................23, 30 BenQ ....................................................................................26 BG Strategic Advisors ..............................................19, 24, 30 Bosch .............................................................................20, 29 Bureau Veritas......................................................................30 Carrefour ..............................................................................37 Carrier ..................................................................................11 Caterpillar.............................................................................12 China Railway Container Transport ....................................14 China Railway Express ........................................................21 China Shipping ....................................................................37 China Supply Chain Council ...................................20, 23, 29 Chinawhys ...........................................................................24 Cosco Group........................................................................37 Cross Border Research Association ....................................25 Daewoo ..........................................................................13, 35 Daimler Chrysler............................................................13, 35 Dalian Port ...........................................................................33 Dell .......................................................................................12 Deloitte Touche Tohmatsu ............................................20, 21 Economist Intelligence Unit ..................................................9 Electrolux .............................................................................38 FAW ................................................................................34, 35 Ford ................................................................................24, 37 Frazer Nash Associates ........................................................24 Gazeley China......................................................................10 GE.........................................................................................11 Gefco-DTW Logistics...........................................................20 Geodis ............................................................................14, 28 GeoLogistics .........................................................................38 GM..................................................................................12, 24 Go Kunming ........................................................................40 Gome ...................................................................................13 Happy Shopper ...................................................................16 Home Depot ........................................................................16 HomeWay.............................................................................16 Honda ..................................................................................11 Hunt Partners .......................................................................23 Hymall ..................................................................................16 IBM .................................................................................16, 29 IKEA .....................................................................................16 Intel ......................................................................................29 Jones Lang LaSalle ...........................................................8, 39 JPMorgan Chase Vastera................................21, 23, 40, Back Kellwood Global..................................................................37 Kerry EAS .........................................................................4, 40 KTC ......................................................................................16 Lenovo............................................................................13, 37 Liaoning Air Sea Worldwide ...............................................35 Manhattan Associates ..........................................................21 Mazda .............................................................................35, 37 McDonald’s ..........................................................................17 McKinsey..............................................................................37 Meridien Group of Hong Kong ....................................32, 40 Metro ....................................................................................17 Motorola .........................................................................13, 17 New Times International Transport Service .......................14 Nike ......................................................................................20 Nissan ...................................................................................11 Nokia ....................................................................................37 Novartis ..........................................................................12, 20 Oracle...................................................................................21 Oxford Industries.................................................................38 PSA Peugeot Citroën ...........................................................11 RSI International ..................................................................29 SAP .......................................................................................21 Savi .......................................................................................17 Schenker ..............................................................................15 Schneider Logistics ..............................................................38 Schneider National ........................................................14, 20 Siemens ..............................................................20, 26, 29, 37 Sinotrans ..............................................................................30 SITC Maritime ......................................................................14 Supply Management Institute .............................................43 Synnex..................................................................................17 Tesco ....................................................................................16 TNT ................................................................................14, 28 Total Parts Plus ....................................................................11 Toyota ............................................................................13, 35 Tyco Healthcare...................................................................38 Unilever ................................................................................20 UPS .......................................................................................20 Volkswagen ........................................................11, 24, 34, 35 Volvo ....................................................................................37 Werner Global Logistics ......................................................21 Zim Integrated Shipping Services .......................................14 JANUARY/FEBRUARY 2007

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CHINA SUPPLY CHAIN IN NUMBERS

China-US to become number one global airfreight market

Imagine China

Is China really set to overtake Japan in R&D spending?

A recent much-talked-about report from the Organisation for Economic Co-operation and Development (OECD) had China forecast to overtake Japan and become the world’s second largest R&D spender in 2006. Based on a projected growth calculation of around 20 percent, the OECD predicted that China spent US$136 billion last year, slightly more than Japan’s estimated US$129 billion.

Local Chinese media heralded the report as the latest indication of the dramatic rise in research spending in China until the dramatic forecasts were re-assessed when China’s National Bureau of Statistics predicted R&D spending in China in 2006 at around US$30 billion.

China manufacturing PMI watch 2006 The CFLP China Manufacturing Purchasing Managers’ Index (PMI) provides a monthly indication of economic activity in the manufacturing sector, compiled each month from data about their purchasing activities and supply situations from more than 700 manufacturing companies. % 60 58

So how to explain this apparent discrepancy in the numbers? The OECD says that forecasts are based on the real purchasing power of the RMB within China, which is nearly four times the current exchange rate.

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BusinessWeek.com also picked up on this story and noted that when measured as a percentage of GDP, China’s spending on R&D is much smaller than Japan’s – about 1.3 percent for China versus 3.15 percent for Japan.

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The OECD report also highlights an increase of 77 percent in the number of China-based researchers in 2006. China now ranks second worldwide with 926,000 researchers, just behind the United States with more than 1.3 million).

Auto industry reports staggering growth The automotive industry growth rate in China (excluding exports), for the fist eleven months of 2006 stood at 26 percent, according to the China Association of Automobile Manufacturers. Ford Motor outpaced the industry and reported its strongest year to date in China, with a yearon-year growth rate of more than 86 percent for the full year of 2006.

China’s consumer goods retail sales to pass US$1 trillion Retail sales of consumer goods in China are predicted to rise a dramatic 13 percent to hit US$1.075 trillion in 2007 according to the Ministry of Commerce.

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Leading aircraft manufacturer Airbus predicts that by 2025 the export market from China to North America will have overtaken the US domestic market to become the largest airfreight market in the world, based upon current growth rates of around 9.6 percent each year over the last ten years.

China’s domestic market is expected to be the world’s fourth largest in 2025 and China’s long-range freighter fleet is also forecast to increase from the current level of 22 to 117 in 2025.

JANUARY/FEBRUARY 2007

In the first ten months of 2006, retail sales in China reached US$7.95 billion, an increase of 13.6 percent over the same period in 2006 and the biggest year-on-year increase since 1997. Retail sales of consumer goods reached US$2.57 billion in the same period, an increase of 12.4 percent.

54 52 JAN

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Source: China Federation of Logistics and Purchasing

Domestic logistics up 15.6 percent China’s total domestic logistics value reached US$5.6 trillion during the first nine months of 2006, an increase of 15.6 percent over the same period in 2005, according to the National Development and Reform Commission (NDRC).

Fixed assets investment in logisticsrelated sectors totalled US$101.6 billion in 2006, an increase of 28 percent over the same period last year.

Transportation costs in China have seen a tremendous rise due to energy price hikes.

Shanghai port reigns supreme Shanghai port is on course to handle more than 530 millions tons of cargo in 2006, and making it the world’s the biggest freight port by cargo tonnage.

The port handled 443 million tons of cargo in 2005.

Shanghai port is the third largest port in the world by container volume, after Singapore and Hong Kong, and was predicted to have handled 20 million 20-foot equivalent units (TEU) 20-foot equivalent units this year in 2006.

www.chaina-online.com

Supply Chain Excellence

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Join the conference to take part of the insights from some of the most influential Leaders in Purchasing and Supply! Among them you will find speakers such as:*

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Prof. Helmut Merkel, Chairman of the Management Board, KarstadtWarenhaus GmbH Prof. Christopher Jahns, Executive Director Supply Management Institute SMI/ Rector ebs European Business School

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Dr. Zhang Xia, CEO SAP North Asia Nis-Peter Iwersen, VP International Purchasing Offices China Marc Hantscher, Head of International Purchasing, Bosch Siemens Home Appliances Amit Kumar, Logistics Manager Asia, Electrolux Matthias Gramolla, VP Sourcing Strategy, EADS Peter O'Brien, CEO Triscol Prof. Jean Lee, Professor of Management, China Europe International Business School

Platinum Sponsors:

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Gold Sponsor:

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Organizing Partners:

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Contact Supply Management Institute at +49 (0) 611 - 36018 800 or German Industry and Commerce Shanghai at +86 (0) 21 - 6875 8536 or visit www.chinasourcingsummit.cn for further information. * Reservation for changes.

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your entire supply chain while mitigating risk. At JPMorgan Chase Vastera, we help global organizations with complex supply chains optimize working capital, drive cost savings and improve supply chain efficiencies while helping maintain compliance with ever-changing government regulations.

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To find out more, go to jpmorganchase.com/vastera, or contact: Europe, Middle East, Africa Asia-Pacific Latin America North America

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