2009 Jan-Feb Issue

SUPPLIER RISK

The lender’s perspective

THE YEAR AHEAD

Voices from CHaINA Summit

CEVA LOGISTICS Moves up the chain

INSIDE INDIA

JOB CUTS

A seasoned view

JANUARY/FEBRUARY 2009

Tough times loom

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THE MAGAZINE FOR GLOBAL SUPPLY CHAIN LEADERS

2009: Crisis/Opportunity Your decision, your move

THEWORD

A fish story

There’s nothing like a shark on your back to keep you fit The Japanese have always loved fresh fish. Unfortunately, because of over-fishing, for several decades the waters close to Japan have not held many fish. To keep Japanese people happy, fishing boats got bigger, used better technology and ventured farther out. The farther the fishermen went though, the longer it took to bring back the fish and often the fish were no longer fresh.

To solve this problem, fishing boats installed freezers to store the fresh caught fish at sea. This allowed the fisherman to go farther and stay out longer. However Japanese people like fish a lot and could tell the difference between frozen and fresh. They especially did not like the taste of frozen fish in their favourite sushi and sashimi dishes.

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JANUARY/FEBRUARY 2009

Consequently, the frozen fish brought a lower price.

Once again the fishing boat owners had to don their thinking caps. This time they installed fish tanks on their boats. The fisherman would catch the fish and stuff them in the tanks, fin to fin. After some time thrashing around in the crowded tanks, the fish got tired and lost their vitality, along with their fresh fish taste. The question of how to keep the Japanese people supplied with fresh fish seemed to have no clear answer.

A sharp edged solution Today, the fish in Japan taste fresh. How did they manage it? Fish populations close to Japanese shores are still low. Fishing boat owners got smart. They figured out that if you put a small shark in the fish tanks on their boats, survival instincts will keep the fish moving and alive. They also stay fresh, keeping Japanese consumers happy with the taste of their sushi.

How different are things in the big pond we call our world? Like the fish, for our own reasons, maybe just routine, we can become tired, dull and unchallenged. Throw a shark into the tank – think global credit crunch, economic crisis – and now we have something to keep us on our toes. Now we’re thinking survival, nobody wants to get eaten. Yes, some will, but the rest will be leaner, fitter and fresher. While we won’t end up as sushi, at least we’ll get to keep eating it!

Success is a lousy teacher. It seduces smart people into thinking they cannot lose Bill Gates

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Managing Editor & Publisher Russel Beron Art Director How Xu Graphic Designer Acco Fang Finance Manager Jenny Kim Key Account Manager Wendy Yu Circulation Manager Carl Pan

Researcher Carl Pan Event Manager Giselle Yang Photographers Grant-Oh! Buchwald Jackson Lowen Contributing Writers Malcolm Ainsworth, Peter Bachmann, Robert Barrett, Duane Bolinger, Jack Buffington, Tom Ng, Guillaume de Roquefeuil, Noha Tohamy, Frances Wang

Chaina magazine editorial advisory committee Dittmar Nerger Head of Global Sourcing Bayer Healthcare

Max Henry Founder and Executive Director, Global Supply Chain Council

Dong-Hong Zhu Head of WW Procurement (China), Materials Manager, Agilent Technologies Shanghai

Vanessa Guo VP Sales, Runbow Logistics

Guy Tran Logistics Manager, Auchan China Hypermarkets Jean-Luc Laboucheix Supply Chain Director Asia Pacific, Goodyear

Nis-Peter Iwersen VP Procurement, Asia Pacific Schaeffler China Robert Jiang General Manager, Dajin Logistics Tony Li Logistics Manager, Amway China

CHaINA Sponsorship For information on sponsorship opportunities with CHaINA Magazine, please contact: Russel Beron rberon@supplychain.cn DISTRIBUTION We distribute CHaINA free by direct mail to subscribers in Greater China who are involved in all aspects of supply chain management, manufacturing and logistics.

Our target subscribers are logistics, warehousing and transportation directors and managers; sourcing, procurement and purchasing directors and managers; and manufacturing executives at foreign and domestic Chinese companies.

For subscription inquiries, please contact: subs@chainamagazine.com.

Contact us to receive a free digital or print edition of the magazine.

CHaINA Magazine is distributed through selected locations in Shanghai, including hotels, restaurants, business centers, airport lounges and other key locations.

Comments and Feedback We welcome feedback and comments about our content or any issues relating to supply chain management or trade in China.

FROM THE EDITOR Enough said about the “crisis.” Who said life was supposed to be easy? How long can individuals and companies live beyond their means before reality catches up? Instead of heeding the doomsday rhetoric, we can look at these challenges as an opportunity to grow, a time to build something new.

They say admitting you have a problem is always a good first step towards change. At least the Americans finally admitted we’re in a crisis.

Getting out of might take time, but that’s okay, we can do it better this time. Interesting times we live in, history has shown that all empires and boom times must end, and will come again. It’s a natural cycle and here we are, witnessing it.

No, China is not immune – the new economy is facing the same problems that other market oriented problems have faced. One of the beauties in a central government is you don’t’ have to wait around for consensus to make decisions.

Beijing reacted fast with billions of dollars in stimulus activities. Only a few months ago, we were reporting on a shortage of workers, now these workers are heading back to their farms in poor provinces by the millions. The history books will tell us a good story whether these stimulus packages were the right thing or not.

A lot of articles in this issue deal with how to cope in tough times. How do you evaluate your suppliers; what is effective risk assessment; what’s the best sourcing strategy; what should you be doing as an employer or employee to survive and thrive? Do you cut your marketing budget or increase it; do you think of this as a time of opportunity or a time to hide out until the smoke clears? Where do the opportunities lie in 2009? We hope there are some answers for you here.

As 2009 starts, we’d like to take this opportunity to thank our readers for reading our advertisers for their support and wish you success and a safe passage through the year.

Please email any comments to: comment@supplychain.cn

Chaina magazine’s sponsors:

Russel Beron Publisher and Managing Editor CHaINA Magazine

CHaINA Magazine (ISSN 1992-9668) is published jointly by Painted Horse Media Limited (Hong Kong) and the China Supply Chain Council Limited (Hong Kong). There is no charge for qualified readers to receive subscriptions. Send subscription requests or address changes to subs@chainamagazine.com. The contents of the magazine may not be reprinted in whole or in part without the permission of the publisher. The publisher is not responsible for product claims and representations. CHaINA is a registered trademark of the China Supply Chain Council.

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JANUARY/FEBRUARY 2009

5

FEATURE STORIES

Navigating through 2009

SPECIAL FEATURE

25

Supply risk nanagement in China – The money lender’s perspective

6

JANUARY/FEBRUARY 2009

BOOK FOCUS

30

56

China Now: Doing business in the world’s most dynamic market

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THE MAGAZINE FOR GLOBAL SUPPLY CHAIN LEADERS

JANUARY/FEBRUARY 2009

www.supplychain.cn

CONTENTS THE WORD 4 A fish story

TIER TWO 45 Ningbo: small profile, big shoulders

THE NUMBERS 8 New Chinese graduates receive cold welcome

SOFT SKILLS 47 No pain no gain: how to outgrow your competition in a recession

INDUSTRY VOICES 10 China 11 Vietnam

Luxury in China

36

COMPANY PROFILE 12 China meets Europe NEWS ROUNDUP 14 The Big Picture – A roundup of news relevant to operations in China 18 Supply Chain Management – A roundup of supply chain news

16

RESEARCH FOCUS 50 How to enter foreign markets 3PL FOCUS 52 Logistics veteran gets a new face INSIGHT 54 Managing the buggest supply chain risk of all: constant change

22 India – A roundup of news relevant to operations in India

INSIDE VIEW 58 Managing supplier risks in an economic downturn

23 Vietnam – A roundup of news relevant to operations in Vietnam

CSR FOCUS 60 China hears carbon message

SCM GADGET 24 Toyota winglet

AWARD NOTICE 62 Excellence across the supply chain

EXECUTIVE PROFILE - INDIA 28 A look at India’s manufacturing and supply chain sector

MOVERS & SHAKERS 63 Executive movement

PRODUCT RECALLS 40 Consumer product recalls in the U.S.

JOB CUTS

AMERICAN VIEW 49 U.S.A needs manufacturing, China needs services

SOURCING FOCUS 64 Low cost country sourcing outlook

EXECUTIVE INSIGHT 41 Engineering the link

66 CLASSIFIED LISTINGS

70 COMPANY INDEX

GUEST COLUMN 43 Cash strapped suppliers threatened

70 EVENTS CALENDAR

EVENT UPDATE 44 Benefits of customs compliance outweigh non-compliance

Layoffs reach wide and far

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JANUARY/FEBRUARY 2009

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THENUMBERS

NEW CHINESE GRADUATES RECEIVE COLD WELCOME Millions of Chinese students are graduating into uncertain times these days. As the impact of the global financial crisis begins to be felt, jobs are increasingly hard to find. Most foreign companies and Joint Ventures, which have offered solid opportunities for new graduates are laying off, not hiring.

6 million 1.5 million 775,000 149,000 11%

or more students will seek jobs next year, 500,000 more than

entered the market last year.

new graduates could be jobless by the end of 2008 predicts the Chinese Academy of Social Sciences. candidates wrote the national civil service exam, competing for 3,566 government – 130,000 more candidates than 2007. students graduated from colleges in Shanghai in 2008,

6,000 more than 2007.

of companies surveyed by employment consulting firm Watson Wyatt had already cut wages or planned to do so over the next 12 months, and 10 percent either have reduced their benefits or planned to do so.

8

JANUARY/FEBRUARY 2009

Photo by ImagineChina

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Crowds of graduate and postgraduate university students seek employment at a job fair in Nanjing, Jiangsu province, 15 November 2008. www.supplychain.cn

JANUARY/FEBRUARY 2009

9

INDUSTRYVOICES

Do you think can eliminate product defects from China by 2012?

In the wake of recent scandals, Wal-Mart is setting strict new policies continuing its sustainability push with its Asian suppliers.

The company recently announced a broad program to address these and related issues, with a goal of driving the need to return defective merchandise “virtually out of existence” by 2012. To get a sense of the viability of such a program, we posted the above question to the Global Supply Chain Council community.

10

Simon Bigolin Manager, Dalla Costa Alimentare Srl, Italy

Joe Gordillo Managing Director, TrueBlue Consulting, U.S.A.

Andre Leroy Marketing Director MTS SgT, Hong Kong

In my opinion it is possible to succeed within 2012 but only if the Chinese top directors fully embrace the goal.

For achieving defect reductions, the Chinese companies will have to plan and implement improvement projects and perform quite a lot of training and coaching.

‘Eliminate’ is a strong word. However, they should definitely be able to bring them into a six-sigma environment.

This step WalMart is taking will be enormous, but much needed. The strongest card they have is “contract negotiation and enforcement”.

I believe it is the common work of all Retailers to drive quality improvement. We also need to see tighter product safety guidelines for products sold in China. As long as cheap, “bad” chemicals can be used in China for local markets, then contamination risk for export products is hard to manage.

JANUARY/FEBRUARY 2009

Mike Young President at QCR, U.S.A.

Yes, they can if WalMart can articulate the requirements for their products to the Chinese culture and are willing to monitor and enforce conformance to requirements at the point of activity. Therein lays the rub.

www.supplychain.cn

INDUSTRYVOICES As the global financial crisis snowballs around the world, its impact is starting to be felt in China and now Vietnam. Nguyen Da Quyen, Operations Director of the Vietnam Supply Chain Council asked several several people on the ground in Vietnam about how the global financial crisis has impacted supply chains in Vietnam.

Vietnam remains an Emerging Dragon in the shadow of China. We are cautiously optimistic and will remain committed to our presence in the country in the years to come. On a more personal note, I am confident that Vietnam will emerge even stronger in its own rite post the global financial crisis.

Vietnam Inflation Headline and ex-food CPI 30 25 20 15 10 5 0

Shirley Justice General Manager, Nike Vietnam

04’

05’

06’

07’

08’ We believe, it will be on opportunity to improve the value of staff by training and where possible investing in technology. In general we think the real impact will come after January 1st and the following months when 100% owned companies will be able to engage in distribution.

CPI (Source: HSBC, Trade and Supply Chain, Vietnam)

• Inflation, currently at 26.7%, has fallen for the first time in more than a year • The year-end target is 26% year on year

Jasper Overgaard Waale CEO, Skeye Indochina

Direct & Indirect February 18, 2009

Shanghai, China

Did you know that a 5% reduction in spending can have the same impact on bottom-line profits as does a 30% increase in sales?

Business services are an expenditure area ripe for optimization, as they account for an average 30% to 50% of purchasing dollars that companies spend in China.

For more information, visit: supplychain.cn

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JANUARY/FEBRUARY 2009

11

COMPANYPROFILE While most of the worlds’ media attention has been focused on foreign companies and their successes and failures in China, Chinese companies are increasingly setting their sights abroad.

Parchim International Airport, the vision of Chinese entrepreneur and CEO of the Airport, Jonathan Pang, is one such enterprise.

China meets Europe

on a cargo landing strip

CHaINA’s Editor, Russel Beron, spoke with Mr. Peng and Werner Knan, Managing Director Germany European Logistics for Goodman, Parchim’s logistics property partner on the project, at the Nanjing International Logistics Expo held in late November. This abridged version of the interview has been edited for clarity.

How did this airport come about?

Werner Knan (WK): We met Mr. Pang at a Logistics Fair in Munich in 2007 and he talked with me and presented his vision. Because of his background in logistics – he had dealt with DHL for 17 years. - we knew him to be a reliable and realistic partner. We signed a contract to do things together in April 2008. The ground breaking ceremony will be next year.

ing Bejing, Shanghai, Chengdu and other smaller cities, and are mostly engaged in the cargo business. We just entered the international bidding process in Germany and made a business plan, which included the idea of “China meets Europe.”

Where is the Parchim airport located?

WK: The airport is named for the city of Parchim, which is in between Hamburg and Berlin. It was an old Soviet Union airport, left in the 90s when East Germany joined the West.

So it is fairly close to the Hamburg port?

WK: The airport is 120 kilometers far away from the port; we are in discussion with members of Hamburg Port and there is a huge opportunity to work together to support each other. Parchim has great potential because of the situation whereby Frankfurt [airport] is dedicated to Lufthansa and Leipzig [airport] is dedicated to DHL, We will run our own operation so there’s no dedicated owner or operation company controlling the airport. We can build tailored warehouses based on customer needs.

Most of the benefit is it that it will also be a bonded area.

How did the idea for this airport come to you?

Jonathan Peng (JP): We [our company] have operations in many airports in China includ12

JANUARY/FEBRUARY 2009

Parchim Airport is operational 24 hours/ day.

So the idea is to make Parchim a hub not only for Germany but also for other parts of Europe?

JP: Of course. This airport also has a lot of land. In total, we have 8 hectares of land which is very good because it is undeveloped. So we can build up the airport from scratch.

How big will the airport be?

WK: The airport is being built in three phases, which will be eventually station 46 aircraft - the size of the A-380. It should take 3 or 4 years to get to phases 3.

Does Europe need another airport?

JP: In Europe, there are several hubs such as Amsterdam, Frankfurt, but these airports are restricted by night curfews because of the noise. I’ve been working with airlines since 1992, and I know curfews are very important for cargo operations because many of the cargo flights operate at night.

When you planned the airport, you probably didn’t foresee the global economic crisis. Is that going to impact your plans?

JP: We see a lot of long term opportunity in Parchim Airport. The airport business is obviously tied to aircraft. Between the US and Europe, there’s an open Sky policy, but in Amsterdam and Frankfurt, expansion is restricted. Berlin is also limited. Parchim is right in between Hamburg and Berlin, so it can support these two cities. Parchim also has a long runway which is 3,000 meters long, so it is good for Boeing 747s to land.

The airport will also be used for value-added logistics services, such as labeling and light assembly. With China’s ongoing quality crisis, “Made in Germany” means quality guaranteed. Through Parchim, companies can have easy access to Europe.

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Move Forward

NEWSROUNDUP

The Big Picture A roundup of news relevant to operations in China Chinese Manufacturing Sector Suffering 67,000 factories of various sizes were shuttered in China in the first half of 2008 100,000 plants will be shuttered by the end of 2008, experts predict The first half of 2008

100,000 End of 2008

67,000

Children can often be found dismantling e-waste containing many hazardous chemicals known to be potentially very damaging to children’s health.

CSR Majority of Hong Kong companies failed on CSR The Corporate Social Responsibility Survey of Hang Seng Index Constituent Companies shows that 26 companies scored less than 50 per cent and eight companies scored below 10% in a rating on CSR practices. Released by Oxfam Hong Kong, the survey examines the CSR policies of the 43 companies listed on Hong Kong’s Hang Seng Index, Hong Kong’s best performing companies.

The research also highlighted certain companies with excellent CSR initiatives in place. HSBC ranked first out of all HSIlisted companies with a total score of 93 per cent, followed by CLP Holdings (84 per cent) and China Mobile (82 per cent). The positioning of China Mobile in third place and the placing of other Hong Kong-listed mainland companies among the top 18 shows that Chinese companies are setting a benchmark on CSR for other mainland Chinese companies to follow.

Wal-Mart’s greener stores in China Wal-Mart and China’s Environmental Certification Center of the Ministry of Environmental Protection have signed a memorandum of understanding on environmental 14

JANUARY/FEBRUARY 2009

sustainability at the Wal-Mart chain store in Wangjing, Beijing.

The company will design and open a new store prototype that uses 40% less energy and will reduce energy use at existing stores by 30% by 2010. In addition, during the next two years, Wal-Mart China will aim to cut water use in all of its stores in half by investing in new hardware and systems, employee education, and other measures.

The number of suppliers actively serving the U.S. apparel sector dropped over 70% in just three months, falling from 22,099 suppliers in July to just 6,262 suppliers in October.

Suppliers are considered active if they have shipped to an American customer within the previous three months.

22,099 Drop in suppliers serving U.S apparel market

July

6,262 Oct.

(source: Chinese government statistics)

Legal Gome chairman suspended from duties, wife quits China’s largest consumer electronics retailer Gome announced in late December that its board of directors has suspended the executive duties of the company’s founder and chairman Huang Guangyu, who was arrested in November for alleged irregular share trading. The suspension was effective from Dec 23. The company said it has not been able to contact Huang.

Huang’s wife Du Juan, a director of Gome, has resigned, the company said.

Huang is the richest businessman reportedly probed by the Chinese government that in the past 12 months jailed at least three men who’ve appeared on lists of the nation’s wealthiest. The Communist Party, intent on ensuring economic growth, has www.supplychain.cn

NEWSROUNDUP cracked down on corruption via a judicial system criticized for holding suspects in secrecy and denying them access to legal representation. The home appliances and electronics retailer recently reported ninemonth profit more than doubled to 1.59 billion yuan.

In happier days, founder and chairman of Gome, Huang Guangyu talks with his wife Dujuan at a Gome forum in Beijing.

Guangdong delays stringent labour law, lets cities make rules

China borrows big China’s foreign debt has increased by more than 18 percent in the first nine months of the year, with short-term debt rising especially fast. According to the State Administration of Foreign Exchange, At the end of September, overseas borrowing stood at 442 billion dollars. With forex reserves reaching 1.9 trillion dollars in late September though, China is still in a good position to service its debt.

China announces major stimulus plan China announced a stimulus program that could exceed half a trillion dollars, its biggest move yet to rebuild rapidly weakening confidence and unleash domestic demand to counter the prospect of global economic recession. The package of infrastructure investment and other stimulus measures is to be spread over the next two years and appears to include some measures that were already announced. Still, the huge scale of the planned response -- potentially 4 trillion yuan ($586 billion) -- underscores how rapidly the outlook for China’s once-booming economy has worsened and how the country remains comparatively well-placed to deal with such a slowdown.

Photo by Wu Changqing/ChinaFotoPress

Factories in the Pearl Delta do not need to meet the rigorous demands of the new PRC Employment Contract Law after the Guangdong provincial government decided to put off province-wide implementation, reports Hong Kong legal journal China Law & Practice.

Instead, provincial authorities will allow the cities facing the global economic downturn, Shenzhen and Dongguan among them, to issue their own labour rules in such a way as not to deter business or increase costs which have risen sharply.

Guangdong manufacturers have welcomed the move because strict implementation risks higher costs, which if passed on, will discourage exports. The national Implementing Regulations for the PRC Employment Contract Law were issued September 18, 2008. Thus far, only Guangdong has made an official announcement regarding implementation.

China Marks 30th Anniversary of Reform Drive. Two people walk past a photo showing a group of Chinese women wearing sun glasses in the 1980s on December 16, 2008 in Beijing. The photo exhibition named ‘30 Years Of Daily Life’ was held to mark the occassion.

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JANUARY/FEBRUARY 2009

15

LAYOFFS

Global layoffs mark the end of 2008:

Signals suggest more layoffs coming in

2009

Company

Layoff Number

Date Announced

AMD also plans to layoff an additional 10% of its 15,000 global workforce in January.

Hon Hai / Foxconn

400,000

26-Nov

Citigroup

75,000

3-Dec

DHL will close all of its express shipment operations in the USA, including its Ground and Air Operations.

Caterpillar

25,000

22-Dec

Hewlett -Packard

24,600

15-Sep

AMD

16,500

2-Apr

Rio Tinto

14,000

10-Dec

ATT

12,000

4-Dec

DHL

9,500

11-Nov

Sony

8,000

9-Dec

Sun Microsystems

6,000

14-Nov

Dow Chemical

5,000

8-Dec

Motorola

3,000

1-Nov

Xerox

3,000

23-Oct

SKF

2,500

10-Dec

Textron

2,200

22-Dec

Nokia

1,850

11-Nov

3M

1,800

8-Dec

Applied Materials

1,800

12-Nov

Nortel Networks

1,300

10-Nov

Alcatel

1,000

12-Dec

700

5-Dec

Maersk China

16

JANUARY/FEBRUARY 2009

Dow will close 20 plants, temporarily idle 180 plants and prune 6,000 contractors from its payroll.

Xerox’s trimming of 3,000 jobs over the next six months, will save the company US$ 200 million.

AP Moller-Maersk’s closure of its global service centre in Guangzhou will lead to 700 job cuts.

The worst has not come yet.

Hon Hai chairman Terry Guo

1,000 workers stage sit-in at Chinese factory

N

early 1,000 workers staged a rare sit-in protest outside a Shanghai factory recently in the latest sign of strain in China’s manufacturing industry, which has been hit hard by the economic crisis.

The workers were protesting because managers at the computer and telecoms equipment factory had failed to fully pay at least six months’ worth of overtime, bonuses and benefits. “I know the economy is bad now, but none of us can stand being badly treated by our employers,” one of the organizers, Ding Xiaohua said.

“It’s near the end of the year, most of us are migrant workers so we want to go back home with some cash so we can enjoy the spring festival,” said Ding, a 24-year-old technician. The most important holiday in China, the spring festival is in late January.

Ding said the workers were each entitled to a 1,200-yuan (175-dollar) bonus after working from June to September in temperatures greater than 40 Celsius (104 Fahrenheit). The summer bonus was supposed to be in addition to their basic 960 yuan monthly salary.

Ding said managers were also paying just over half of the overtime workers were entitled to and were failing to pay the full required amount for medical insurance.

www.supplychain.cn

An unemployed migrant worker shouldering his luggage observes at the Nanjing Railway Station before going back home to Nanjing city, Jiangsu province, 20 November 2008. China has roughly 200 million migrant workers, who leave their rural homes to work in factory or construction jobs. As many as 5 million have been laid off in recent months.

Photo by ImagineChina

NEWSROUNDUP

Supply Chain Management A roundup of supply chain news economy, including adjusting the portfolio, lowering inventory levels and reducing operational expenses.

Dow Chemical gains on plan to cut jobs, close plants Chief Executive Officer Andrew Liveris recently outlined plans to cut 5,000 jobs, permanently shut 20 facilities, temporarily idle 180 plants and reduce the company’s contractor workforce by about 6,000. Dow joins DuPont Co. and BASF SE in slashing output as the global recession reduces demand for materials used to make houses, appliances, automobiles and packaging.

“The entire industrial supply chain all the way to whatever the consumer buys outside of food and health is in a recessionary mode,” said Andrew Liveris.

R&D Microsoft to invest $1bln on R&D in China Microsoft will spend more than $1bln in China over the next three years on R&D. The research spending does not include the $300mln that the company has already committed to build a new R&D facility in Beijing, said Zhang Yaqin, chairman of China R&D for Microsoft. “This spending is mainly targeted at staffing and resources for R&D; it does not include mergers and acquisitions,” said Zhang, who is the acting chairman.

Sourcing Siemens looks to increase Asia sourcing, exports Siemens is looking to increase sourcing and exports from Asia to help control costs.

“This is an area which we are focusing on,” Richard Hausmann, the chief executive for Siemens North Asia, told reporters when asked about low-cost sourcing.

Siemens, whose products range from turbines to light bulbs, also wants to increase the level of exports from China. In fiscal 2008, the company’s exports from China were equal to about 10 percent of the 57 billion yuan ($8.28bln) in total mainland sales, said Hausmann. The company is recovering from a scandal in which it had to 18

JANUARY/FEBRUARY 2009

pay fines for bribes it made to win business in many developing countries.

Gap shuts sourcing centre

America in crisis U.S. companies cut payrolls in December at the fastest pace in 34 years.

Unemployment rose to 6.7 %, the highest level since 1993

US retailer Gap will close its regional sourcing hub in Singapore next year, possibly leaving more than 100 staff jobless.

Gap will be moving its buying centre from Singapore to existing sourcing centres in Hong Kong and India.

Manufacturing Sony reviews China plans Japanese electronics giant Sony Corp is reviewing its China operations amid a global layoff plan that will see 16,000 people lose jobs. Hou Li, an analyst at Essence Securities, said he believed that Sony layoffs in China are set to happen as the demand for consumer electronics products is slowing both in China and globally. The firm employs about 48,000 people in China, more than one quarter of its global headcount. Sony China said the company has implemented several measures to fend off the slowing

Much hope is placed on Barack Obama to lead the U.S. through what is being called another Great Depression.

Despite the slowing demand and intensifying competition, China is the company’s largest growth potential market and also the most important part in the operations value chain.

Sony China said in a statement

www.supplychain.cn

NEWSROUNDUP next year from this year’s 150 million tons.

Evergreen Group establishes its Chinese headquarters in Shanghai

Chinese hybrid car charges into weak market BYD, best known for making cellphone batteries started selling its F3DM -- China’s first mass-produced hybrid electric vehicle.

The car is expected to retail for around US$ 20,000 in China and make its way to U.S. shores in 2011.

Among those betting on BYD is Warren Buffett, who in September bought a 9.9% stake for $230 million. The billionaire investor apparently was impressed with both BYD’s green technology and with the management of the company.

Taiwanese shipping company Evergreen Group recently established its Chinese headquarters in Shanghai. Company chairman Y.F. Chang said, ‘After 15 years of growth and success, Shanghai is the economic and transportation center for the entire Asia-Pacific region. Evergreen will continue to choose Shanghai in the future because we believe it is becoming the economic and transportation center for the world.’

Logistics

UPS recently launched a new international hub at the Pudong International Airport. It features the largest on-site 24/7 customs inspection area in Shanghai and was built to a unique design that facilitates rapid handling of express packages in addition to heavy freight. “Everything about this facility was built for speed and reliability” said Dan Brutto, president of UPS International.

The hub features 117 conveyor belts and 47 docking bays and has a package sorting capacity of 17,000 pieces per hour.

Shenzhen Qianhai Bonded Port Area gets state approval Shenzhen’s Qianhai Bonded Port Area project has been approved by the China’s State Council, making it the ninth such facility to be built in China. The Bonded Port Area is Shenzhen’s fifth special customs supervision area, apart from such Bonded Areas as Futian, Shatoujiao, and Yantian and Yantian Port Logistics Park. It lies in the west of Shenzhen port covering 3.7 square kilometres.

Historic mainland-Taiwan direct transport

Ship building orders to fall 60% in ‘09 Ship building orders in China will fall 60% in 2009 as prices drop 30% from their 2010 high. A modest recovery may happen in 2011 when shipyards would start to reload capacity. Orders have already dropped 14 million tons in August to less than 1 million in November, and will again drop 60%

UPS opens major hub in Shanghai

The mainland and Taiwan now allow civilian planes and ships to directly cross the

Evergreen chairman, Y.F. Chang Taiwan and the Chinese mainland are bridging their long divide.

Company Announcements Bureau Veritas introduces its New Chinese Name Bureau Veritas Group announces its new Chinese name -- 必维. “必维” - translated as “must safeguard” which best translates the core values and branding of the Group.

Founded in 1828, Bureau Veritas is an international group specialized in the inspection, analysis, audit, and certification of products, infrastructure (buildings, industrial sites, equipment, ships, etc.) and management systems (ISO standards etc.) in relation to regulatory or voluntary frameworks.

Leading consultancy firm opens Shanghai office Plimsoll Management Consultancy is a specialized search firm focused on shipping, logistics and supply chain. The company has appointed Olivier Binkhorst, formerly of Stanton Chase, as its Asia Director. Demand for talent in China is still strong. Hewitt Associates has observed that 6 out of 10 foreign companies in China are critically short of experienced Chinese leaders.

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Straits, ending a situation since 1949 that air and shipping transport between the two sides had to transfer through a third place.

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19

NEWSROUNDUP In accordance with a historic agreement signed by the two sides last month, the mainland will open 48 sea ports and 15 river facilities, while Taiwan will open 11 harbors for direct shipping.

IBM study reveals doubt about food safety in China Chinese consumers don’t trust food manufacturers during a recall

Agility in Shanghai logistics hub and plastics factory project with Borouge Agility, and the UAE’s Borouge, a major provider of plastics products, have commenced construction on a 70,000 square metre logistics hub and a 30,000 square metre factory in Shanghai that will handle 600,000 tonnes of polyolefins (polypropylene and polyethylene) annually.

The facility will be operational by May 2010, employing some 120 dedicated Agility staff. The hub will receive the polymer granules in bulk containers directly from the Borouge Middle East gateway situated at Ruwais in Abu Dhabi. A 30,000 square metre factory, known as a compound manufacturing unit (CMU), will also be built for Borouge on the same site, producing 50,000 tonnes of compounds each year for use in automotive, domestic appliance, power tools and electrical appliances.

65%

59%

Chinese consumers don’t trust retailers (source: IBM Institute for Business Value, survey of 300 adults across China, a margin of error of 6%.)

This is our largest investment in China in the nearly 30 years we have been doing business here.

Indra Nooyi, Pepsi

Retail

business here.”

Pepsi has big plans for China PepsiCo plans to invest $1 billion in China over the next four years to boost production and expand its brand name. The company’s chairman, Indra Nooyi, remarked, “This is our largest investment in China in the nearly 30 years we have been doing

Hembly To Sell Stake In Apparel Company In Mainland China Hembly International Holdings plans to sell its 83.33% stake in a distribution and retail company on the Chinese mainland for RMB 100 million, reflecting a loss of RMB 50 million. The transaction will include the

A roundup of logistics related news

Hitachi Logistics Division establishes joint-venture in China - Liang Zhang, Shanghai Securities News

Guangdong official say province’s logistics lags behind national average - Chinanews

Hitachi, Ltd. recently announced a jointventure project with Yuxin Logistics and Zhengzhou Xin He Hua Kemao Co., Ltd. which is expected to be operating by February, 2009. Hitachi will hold a 51% of the share of the enterprise, while Yuxin Logistics and Zhengzhou Xin He Hua Kemao Co., Ltd. will hold a 29% and 20% respective share. The JV will provide services to Japanese companies and will also target the 3PL business of Chinese companies.

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The logistics industry in Guangdong has issues like high costs, low added-value margins, and slow logistics infrastructure construction, an official in the Economic & Trade Commission of Guangdong Province said recently. According to government statistics, Guangdong Province’s logistics expenditure accounts for 18 percent of the provincial GDP, in contrast to some countries like the United States and Japan which have sophisticated logistics and supply chain sectors with logistics expenditure of only 8-9 percent of their GDP.

Amway VP voted as one of the Top-10 people of the Year in the logistics industry - http://www.sina.com.cn

Shaoming Xu, Vice President of Amway (China)‘s Storage/Shop division was nominated as one of the top 10 People of the Year at the 2008 China’s Logistics and Entrepreneurs Forum and Annual Conference of China’s Logistics Business. “I’ve witnessed the development of the logistics business in mainland China from the very beginning; it was very hard for us to find large-scale warehouses,” said Xu, who has been in charge of the company’s logistics since Amway built up their first factory in mainland China in 1995. www.supplychain.cn

NEWSROUNDUP retail stores, store inventory and assets of the Sisley brand as well as the group’s land and real estate in Yangzhou, Jiangsu Province.

In 2002, Hembly established joint ventures with Stonefly, Lotto, and Sisley, opening medium and high-end apparel retail stores and shoe retail stores in first and second-tier cities on the Chinese mainland.

In addition, Hembly bought the ten-year exclusive distribution rights for mainland China from Moschino for RMB 10 million.

Industrial Property

refinancing pressure and enhance liquidity,” Chief Executive Officer Walter Rakowich said in a statement. Jeffrey Schwartz resigned as CEO in December and was replaced by Rakowich.

Technology Geodis acquired IBM’s internal global logistics operations In a significant acquisition, Geodis will manage around one billion Euros a year of IBM’s logistics costs, supporting asset

recovery services, service parts logistics and flow management of all hardware and software products worldwide.

The move is part of Geodis’ global expansion strategy, in which it aims to move from a European multi services company to a worldwide logistics provider. Since 2007 it has strengthened its position in the Americas and is expanding in China, India and Russia. The transaction is expected to start operating in the first quarter of 2009.

Prologis sells China operations Prologis, the world’s largest warehouse owner, agreed in late December to sell its operations in China and property fund interests in Japan to the Government of Singapore Investment Corp. for $1.3 billion.

In China, the assets to be sold include 20.7 million square feet of completed properties and properties under development as well as Prologis’ interest in five joint ventures and a property fund. “In one substantial step, this transaction helps Prologis de-lever its balance sheet, relieve near-term

After growing into one of the biggest Industrial property developers in China, Prologis announced the sale of it’s China operations and Japan interests.

from the Chinese Media

Logistics warehousing becomes haven for real estate investment - www.hexun.com

With the ongoing financial crisis, logistics warehousing has became a haven for real estate investment, reports Jones Lang LaSalle. The Investment Return rate for logistics storage facilities was 9.2 percent in the third quarter this year, higher than the 8.1 percent return of office buildings. The prediction is that that rental fees for logistics warehousing will increase by 5 percent in 2009.

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Compiled by Carl Pan

Suning expands against odds, hiring 30,000 employees and opening 200 stores - Chang Liu, JF Daily

Suning Appliance will open at least 200 stores in 70 cities in 2009, establish a large scale logistics center and will recruit 36,000 employees. According to the employment plan, Suning will hire 1,500 vocational college graduates, 1000 university graduates and 1,500 middle to senior level management professionals. They are prioritizing the demand for retail management talent in Tier-1 cities like Beijing, Shanghai, Nanjing and Guangzhou.

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21

NEWSROUNDUP export cargo booking in October has declined by as much as 25-30 per cent compared to September, while import cargo bookings have decreased by about 15 per cent compared to the previous month, according to agents in Chennai.

The situation has prompted container train operators to seek an across-the-board reduction in haulage charges from India’s Railway Ministry. However, the Railways have already cut haulage charges in the heavy-weight domestic segment by 10 per cent for container operators between November 1-December 31 and Indian Railways is resisting pressure to lower prices further as this would affect its profit margin also, said the report.

MOL opens India auto unit

Indian consumers and exporters are starting to feel the bite of the recession. The government is responding by cutting duties.

India A roundup of news relevant to operations in India India cuts import duty to buck trend in world slump India has cut import duties 4 percent to prevent itself from falling into the global economic meltdown just when its economy has never been better, reported The Times of India.

Tax cuts will provide lower prices on cars, consumer products, steel, cement and also a two per cent subsidy on loans for export manufacturing and private public partnership road projects. Cuts do not cover petroleum products or tobacco.

The consensus of foreign firms importing into India is that the old duty regime was too high, but remains unsure if the cuts will be retained when demand returns to the market.

er, Concor, saw a 7% decrease in boxes handled, and 3% for the first half of 2008, with its overall economic slowdown affected by both foreign and domestic cargo said managing director Rakesh Mehrotra.

The sharp fall in the volume is mainly on account of the slowing down of export orders from India’s largest trading partners like the United States and the European Union, following the global credit crisis with the month of October reporting its first negative result in the last five years as the country’s merchandise exports fell 15%.

Customs agents in India take hit from economic slowdown

Japanese carrier MOL announced it has opened a wholly-owned subsidiary in India, MOL Auto Logistics (India) Pvt. Ltd., to handle automobile movements.

The new entity, headquartered in Chennai, will provide inland transport and exportrelated port services, utilizing the carrier’s experience in handling such traffic in Thailand, China, and Indonesia. Chennai, India’s largest automobile export hub, handled a record 138,000 Hyundai units in fiscal 2007-08, up from 115,000 units the previous year.

Currently, state-owned Chennai and Mumbai are the only ports in India with facilities to handle vehicle exports, while the privately-run Mundra Port recently signed an agreement with Japan’s NYK Line and Wallenius Wilhelmsen Logistics of Norway to develop a dedicated automobile terminal at the west coast hub.

Some customs agents in India claim that

Container slowdown hits India’s railcar operators India’s state and private-run container rail operators are experiencing unprecedented drops in volumes with a 10 to 25 per cent plunge in the private sector and 35-40% expected in final months of year.

Last month India’s largest container play22

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NEWSROUNDUP

Vietnam A roundup of news relevant to operations in Vietnam HCM City offers incentives to infrastructure investors Infrastructure projects will enjoy incentives like tax and rental breaks, the Ho Chi Minh City Department of Planning and Investment officials said at a meeting organized by the city Investment and Trade Promotion Center.

The city needs an investment of $30 billion for infrastructure by 2025, with the inner city alone needing $15 billion. Six highways, including, and seven expressways besides ring roads and major city roads need to be built, they said. The city also plans to build 107 kilometers of subway lines on six routes, 35km of tramcar lines, 10 wastewater processing plants, and six water supply projects.

UK top FDI capital investor in Danang The Danang Investment Promotion Center reported that in 2008, the city attracted 22 new FDI projects, and had one FDI project increased by USD 804.26 million. So far, 141 FDI projects, worth more than USD 2.552 million, from 25 different countries and territories, have been invested in Danang. Almost all the projects have focused on real estate, with the rest in information

Street vendors in Danang, a city that attracted US $804 million in FDI in 2008.

and technology, machine processing, industry, tourism and services, electronic components production, and garments and textiles.

Japan took the lead in the number of projects, with 32 projects in total, followed by the Republic of Korea, with 21 projects, and Taipei (China), with 18 projects; and both the US and United Kingdom (UK), with 10 projects. At present, Danang is promoting 12 FDI projects worth nearly USD 1 billion.

Nissan may restart local production Nissan Motors Co. said it was consid-

ering resuming its automobile production project in Vietnam, having established the Nissan Vietnam LLC (NVL) joint venture with international vehicle distributor Kjaer Group A/S. The 10 million USD joint venture, licensed last month, would initially focus on importing and distributing Nissan vehicles in Vietnam , as well as providing Nissan parts and accessories, Japan ’s second biggest automaker told Vietnam News Agency on Dec. 8. “We have a long-term plan focused on enhancing our business, which includes studying the possibility of local production in the future,” said NVL general director Flemming Eltang.

Textile sector stitches big targets together Vietnam is set to double its textile and apparel export turnover by 2015. The Vietnam Textile and Apparel Development Plan to 2015 and Orientation to 2020 was approved by the Ministry of Industry and Trade (MoIT) in late November. The MoIT set a target of increasing the sector’s export earnings to $18 billion by 2015 and $25 billion by 2020, 2-3 times higher than this year’s estimated figure of around $9.1 billion. The annual export growth rate has been set at 20 per cent for 2008-2010 and 15% for 2011-2020. At present, Vietnam is the world’s ninth largest textile and apparel exporter.

Workers at Viking Vietnam, a rainwear maker, listen to the inauguration speeches for the new facilities

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23

SCMGADGETS

Toyota

Winglet

The Winglet looks something like a slimmed-down version of the American-built Segway and is ridden in a standing position. It can carry an average-sized person a distance of up to 10 kilometers at a speed of around 6 kilometers per hour.

The Winglet was developed by a 10-man team that includes five engineers on loan from Sony. The consumer electronics giant approached Toyota last year about transferring some of its technology to the auto-maker’s robotics program after Sony closed down its own robotics work, which was symbolized by the Aibo robot dog.

Trials will begin later this year at Chubu International Airport in Nagoya and at a nearby resort and are scheduled to continue next year at the Tressa Yokohama shopping mall near Tokyo. Toyota hopes to commercialize its first partner robots in early 2010.

If you have an opinion on this concept, email us at: comment@supplychain.cn.

SPECIALFEATURE

Supply Risk Management in China The money lender’s perspective With the recent financial crisis spreading across the globe resulting in a shortage of banking funds and general credit tightening, it is important to understand how lenders evaluate supplier risk. This article

by BBK Shanghai, takes a look at lending in China, explaining how lenders behave when faced with distressed companies.

This piece is a follow up to an interview with Mr. Bolinger in the September/ October issue of CHaINA, which suggested ways for companies to assess the financial viability of their supply base, as part of the Supply Risk Management process.

Pictured are the authors of this article, Fannie Xie (Senior Director)and Duane Bolinger (Managing Director) BBK China, an Operations and Financial advisory company .

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SPECIALFEATURE Banking conditions in current economic environment China has experienced over 10% GDP growth in the past couple of years. As a result, commercial banks were encouraged to provide loans to companies and consequently expected low risk.

During the second half of 2008, the financial crisis has spread across the globe and hit the real economy in China which has caused many Chinese companies to face operating difficulties.

Unlike commercial banks in other countries, Chinese banks do not suffer from a liquidity shortfall. Furthermore, the Chinese government is now adjusting monetary policies (Charts I and II) to encourage bank lending as a means to mitigate the GDP decline. Despite this stimulus pressure, in order to mitigate non-performing loans, commercial banks are not only tightening loan qualifications but also looking to withdraw loans to some companies which are identified as high risk.

8.0% 7.5% 7.0% 6.5% 6.0% 5.5% 5.0%

05’

16.0% 12.0%

06’

07’

08’

ence: 1) Building and land use rights, 2) Machinery and equipment, 3) Accounts receivable and inventory. While most will advance loans based on the first two categories, Chinese banks tend not to favor receivables and inventory since the registration process for these types of liens is not well tested and is viewed as difficult to enforce. Like most banks in North America, Chinese banks often offer clients a line of credit.

However, unlike North American banks, these credit lines typically are not based primarily on receivables and inventory.

Banks will also extend credit based on guarantees from either a parent company or a third party. Recently, there have been reports of failed companies which obtained bank financing by creating a “circle of mutual guarantees” in which firms within a local community guaranteed each. Given these failures and the government’s pressure to set up risk controls, it is unlikely that banks will continue to allow such arrangements.

Other non-banking financing sources Local governments often play an active role 8.0% Although commercial banks are the major in borrowing activities among banks and com4.0% source of debt financing, private lending is also panies, either through direct loan guarantees 0.0% available in China. BBK has reviewed many meor indirect influence. It is expected these prac05’ 06’ 07’ 08’ dium and small sized firms in China, several of tices will gradually phase out as banks continue which include accounts that are often described to migrate to more market and business driven as a form of private borrowings. There are many reasons for comlending practices. panies to turn to private sources: • In Chinese tradition, family relation and friendship are close.

It is worth noting that companies often utilize short-term bank Therefore borrowing among family and friends is not uncommon. loans for long-term needs. Generally, as long as a company repays • In China, private savings rates are high but the available investa loan on the due date, the company is offered a new loan to draw ment channels are limited. Hence, people with excess cash seek the following day. However, in a recent case, a manufacturer was alternative investments. unable to repay a loan when due. Rather than foreclose on the firm, • The commercial bank loan application process is complicated the bank granted a new loan but with a higher interest rate. Such and time-consuming. Further, some companies also do not have an inability to repay is viewed by banks as a very strong signal of enough collateral to satisfy banks’ requirements. distress. Given the economic downturn and heightened attention to In general, the lending rates from private sources are much higher than normal bank lending rates; some could be as onerous as 100% annually. Although not regulated, the Chinese government recognizes the existence of private lending and has indicated that a law to regulate private lending will be established to govern the lender’s qualification as well as the maximum lending rates.

Photo by ImagineChina

Bank lending practices Similar to lending practices around the world, companies that apply for loans from Chinese banks are required to demonstrate a sensible business plan, adequate collateral, and an ability to generate cash to repay the loan. However, different banks operate differently and even operate differently from region to region.

The Chinese legal structure has systems in place for banks to file liens; however, those systems vary by asset type. Therefore, banks look to secure loans with collateral in the following order of prefer26

JANUARY/FEBRUARY 2009

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SPECIALFEATURE risk management, banks may not be as willing to re-extend credit as was commonplace in the past.

Banks’ behavior when companies are in distress When faced with under-performing loans, banks are forced to make difficult decisions. BBK observes that banks in China behave rationally to mitigate exposure and seek to maximize recovery. While China revised its bankruptcy laws in 2007, BBK observes a strong trend to negotiate solutions outside of the court’s involvement. We present here two case examples to demonstrate some of the tactics which banks utilize when faced with a non-performing loan.

As a producer of heavy gauge galvanized steel, the Steel Producer utilized high debt levels to support rapid growth to generate profits in an environment of escalating steel prices. When the global demand for steel dropped along with steel prices, the company’s

Steel Producer Description

Manufacturer of heavy gauge galvanized steel

Annual Sales

RMB 10+ billion

Ownership

Publicly Traded (Singapore)

Debt Capital

22 Chinese and Foreign Creditors (approx RMB 5 billion)

Situation

Unable to pay creditors (Creditors initiated foreclosure on Company's assets) - High debt levels to fund rapid growth - Global demand for steel has dropped - Sudden drop in steel prices - Abrupt decline in sales

Outcome

Creditor banks formed committee (22 participants) - Agreed to take no action alone.

- Currently exploring restructuring plans to avoid formal bankruptcy.

- Each of the creditors agreed to take pro rata share of recovery.

Petrochemical Company Description

Manufacturer of chemicals used in textile industry

Annual Sales

RMB 8 billion

Ownership

Private ownership

Debt Capital

Multiple commercial and regional banks. Also private highinterest short term loans (approx RMB 10 billion)

Situation

Unable to pay creditors - Global industry had excess capacity - High debt level with support from local government - Participated in "circle of mutual loan guarantees" - Substantial operating losses - Speculative investments in derivatives - Incurred private high-interest loans to cover losses

Outcome

Local government stepped in to coordinate restructuring.

- Banks were instructed to not withdraw loans - Guarantor companies were not required to fulfill guarantees - New equity capital (RMB 1.5 billion) was invested by other local businesses - Company continues to operate

rapid growth ended abruptly and its ability to support high debt levels dried up. Due to the large and complex nature of the situation, the banks recognized that they could only maximize their recovery by forming a unified creditor committee. The Company continues to operate some of its major plants under the supervision of this committee. Currently the bank group is investigating alternatives including selling the company through which all of the banks recognize they will only realize a pro rata share of the ultimate recovery.

Often times, local governments in China intervene to prevent the meltdown of a local economy. In the case of Petrochemical Company, the government used its influence to ensure an orderly restructuring of this local manufacturer. The company had run up substantial debt levels through both bank-lending as well as private About the authors: Duane Bolinger, Managing Director of BBK Shanghai, has over 30 years of experience working with tier one suppliers, much of it in the Asia Pacific region. Fannie Xie, a Senior Director at BBK, has over 16 years experience in all finance functions including accounting, treasury, budget/forecast, investment control, taxation and internal controls. Paul Dhruvan is a Director at BBK where he provides financial consulting services focused on mitigating distressed supplier expense and supply continuity risk.

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high-interest borrowings. Furthermore, it participated in a circle of mutual loan guarantees within the community. Hence, if any of the banks were to enforce those guarantees, many of the local firms could fail and damage the local economy. To avoid this situation, the local government persuaded the banks to forebear from pulling their loans that allowed the firm to continue operations. New local investors were found to invest fresh capital. Although the banks may have preferred to exit this business, they complied with the local government’s directive and currently continue to maintain their loans with the firm.

Summary Banking practices in China will continue to evolve toward market and business driven practices with pressure to grow profits while utilizing rational tactics to mitigate risks. Banks will increasingly focus on tangible metrics including a company’s ability to generate cash, operating performance, as well as industry and sector conditions. As we try to draw specific conclusions regarding the Chinese lending environment, we are reminded of the “Ten Golden Rules For Doing Business In China” which illustrate why it is easy to observe such a fluid nature and diversity of business practices.

Ten Golden Rules For Doing Business In China 1

Everything is possible in China

2

Nothing is easy

3

Patience is the essence of success

4

The answer "yes" is not necessarily an indication of agreement or confirmation

5

"You don't understand our country" means they disagree

6

"Provisional regulations" mean they can change the rules anytime they want, even retroactively

7

"Basically, no problem" means a BIG problem

8

Signing a "contract" means the beginning of the real negotiation

9

When you are optimistic, think about rule number two

10 When you are discouraged, think about rule number one

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EXECUTIVEPROFILE

Pravin K. Purang

A seasoned look at India’s manufacturing and supply chain sector Based in New Delhi, India, Pravin K. Purang is Management Advisor & Group Head of Procurement & SCM at Jindal Steel & Power Ltd. CHaINA’s Editor, Russel Beron talked with him about the key moments in the progression of India’s manufacturing and supply chain sector. : Where did you study?

Pravin K. Purang (PKP): I completed my B.Tech. Degree in Mechanical Engineering followed by a Masters in Industrial & Production Engineering, at the Indian Institute of Technology (IIT) Delhi. This was one of the initial IIT’s in India started in the 1960’s. I also studied International Strategic Management at Manchester Business School, UK and have been trained in TQM in Japan.

You have had a long career in India, starting from the mid-1970’s, can you summarize the highlights?

PKP: I started my career as a Management Trainee with Voltas Ltd. (A JV between TATA’s and a Swiss Company), where I was mostly responsible for centralized purchasing. After 5 years I joined Eicher Tractors Ltd., (an Indian/German collaboration to make agricultural tractors), as a Materials Manager. I progressed through different 28

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roles in Procurement, Manufacturing, Engineering, Marketing and became Director of the Tractor Business Operations. Subsequently I moved over as Managing Director of Royal Enfield Motors, and eventually became Managing Director and Group Head of Global Buying for Eicher Ltd., New Delhi.

Following that I headed a Global Consulting company before my present postion.

How has India changed over the course of your career?

PKP: India has changed tremendously over the past 30 years, from being highly industrially protected with strict government licensing controls and limited foreign exchange, with the challenge of indigenizing imports to conserve foreign exchange.

In the 1990’s the government decided to reduce licensing controls to open the economy, resulting in global players establishing business in India. This created a need for

cost reduction and quality upgrading. At the same time import liberalization started and many enterprises looked at global sourcing to achieve a global competitive advantage.

This is obviously similar in some ways to what happened in China?

PKP: Yes, very much so. With the opening up of India, leading manufacturers like Toyota and other Japanese companies brought new concepts of management such as TQM, JIT manufacturing and Zero Defect.

European companies brought new manufacturing and design technology which was implemented and managed according to the new management principles.

What effect did these changes have on Indian manufacturing?

PKP: With these changes, exports from India started improving. New concepts such as QS9000 came in along with many other

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EXECUTIVEPROFILE kinds of certifications. The quality and costs of Indian manufactured products in many sectors reached global standards. Companies such as Sundram Fastners were able to develop, supplying components to auto and other manufacturers.

What are some current issues that India’s manufacturing sector is facing?

PKP: The big challenge for us is reducing logistics costs and improving the response times so as to enable quicker delivery at short notice. Outsourcing is also underutilized whereby not enough companies are making strategic alliances with each other to combine their resources. Flexibility in our operational processes needs to improve.

Where are the opportunities in India?

PKP: There are so many freight forwarders, companies are looking for someone to provide a comprehensive “end-to end logistics” service. Sophisticated supply chain management is still an upcoming concept for India and presents opportunities for the right players. Aside from IT, manufacturing

in India is growing and improving and holds potential as a lower cost global option. Industrial design is another big area that is developing in India, offering higher value added services at competitive costs.

What about the global economic slowdown, how will this impact India?

PKP: The slowdown obviously puts huge pressure on costs. India will be able to respond to companies looking for cost reduction. In some industries such as IT, the impact will be felt, but the manufacturing sector should see opportunity. India will have to tighten its belt though, as western companies look to renegotiate prices.

How can India and China work together more closely?

PKP: Each country has their own strengths and weaknesses, most of which are well known. The two countries can work together as partners, rather than as competitors, to enhance their quality, volume and services. I think the time has come for Chinese and Indian companies to form alliances and

create joint ventures.

Do Indians look at China as a model to follow?

PKP: Yes, we look at China with admiration, especially in the way they have handled outsourcing and maintained a low-cost structure. On the other hand, India has done more in terms of automation and engineering designs which China could learn from.

What advice would you give to someone starting out in the supply chain profession?

PKP: They can choose the profession of supply chain, but they must also understand manufacturing, logistics and concepts like TQM along with finance and costing principles and other business functions. Overall a supply chain manager is actually a business manager, managing vendors/ancillary units and outsourcing partners. Thus, he needs to find time to augment his knowledge to meet the needs of today’s dynamic and competitive world.

SHANGHAI – FENGXIAN DISTRICT 120,000 sqm for China domestic & international logistics 上海奉贤库－12万平米的物流中心开展国内和国际业务 Operations start in August 2008 Strategic location for Distribution, FMCG, Retail, Automotive, Fashion, International Supply Chain and High-Tech

For space and service inquiries, please contact Sinotrans Logistics Ltd. frederichoudoyer@sinotrans.com • lirenzhi@sinotrans.com • www.SinoTransOne.com

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Row 1: Michael Yee – Accenture, Jean-Luc Laboucheix – Goodyear, Wolfgang Hollerman - Agility, Pilar Dieter - Alaris Row 2: Hou Xun – LowendalMasai, Jean Michel Fallet - Schneider Electric, Tom Marquis –AMB, Denny Yang - Metro Row 3: John Sun - Hollsys, Olivia Luzi – Salans, Paul Kovie – CHEP, Beng Ti Tan - Baker & Mckenzie

30

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(From left to right)

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FEATURESTORY

HOW

to navigate through an uncertain 2009 S

upply chains are a top priority for most manufacturers as the impact of the global financial crisis spreads like a virus around the world. On November 5 and 6, the Global Supply Chain Council held a two-day event at the Shanghai Marriott Hotel, where speakers from different industries talked about the major issues impacting supply chains and mapped out their strategies for 2009, a year whose main theme appears to be restructuring for efficiency and cost savings.

Wang Fangqing Frances Wang is a Shanghai-based freelance writer and regular contributor to CHaINA Magazine. She also writes for other trade publications such as Securities Industr y News and World Tobacco.

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R

FEATURESTORY

Reshape your business In the face of recession with no clear end in sight, more than ever, experts are stressing the importance of a lean supply chain. “A lean value stream can minimize waste and maximize value, which is a key competitive advantage,” said Marcus Chao, president of Shanghai-based Lean Enterprise China.

For manufacturers, typical wastes include operational errors, unnecessary double confirmation and waiting. For example, delayed accessories or sample confirmation will keep production lines waiting. “In a typical supply chain, less than 10 percent of the process is value added, but you only get paid from those value-added links in a process,” observed Janet Su, analyst from Louisiana-based Chemical producer Albemarle.

Some tips she offered for companies are to check their own processes include low stock, ensure efficient cooperation with suppliers and standardize processes.

For Chinese companies, which generally lack sophisticated supply chain management and usually are only attracted to cheap prices offered by suppliers but overlook the overall cost of the whole supply chain, Lean Enterprise’s Chao said that the time for change has come: “You need to analyze and make sure every step is valuable, flexible and adequate.”

According to Accenture’s research on those firms surviving the previous recession in the US and Europe during 1990 to 1991, transforming business models to create sus-

tainable advantages for the next upturn is also what companies, especially higher profile companies, should look into now. From Accenture’s point of view, sustainability means creating value through enhancing the approach to social and environment issues. Addressing carbon emissions, mostly attributed to physical supply chain such as manufacturing and distribution, is high on the agenda.

For example, Copenhagen-based supply chain solution provider Maersk Logistics developed a carbon calculator service called Carboncheck, a four step methodology based on internationally recognized emission standards said Kim Overman, Maersk’s head of commercial of North Asia region. Meanwhile, companies can also choose CAST-CO2, provided by UK-based software vendor Barloworld Optimus, to estimate and design an eco-friendly supply chain.

Since consumers are becoming increasingly aware of sustainability, “going green” needs to be fully integrated into a company’s operations.

“A ‘green’ facade is no longer enough,” said Accenture’s executive partner Michael Yee. Compliance counts One of the risks a company has to face is fraud, which leads to business damage such as the loss of customers, company reputation and difficulties in management. In a supply chain, how to keep an eye on everyone from in-house staff to outside suppliers is a big challenge to top managers.

Fraud such as a false invoicing, mishandling of scrap or product theft during manufacturing, or unauthorized sub-contracting, could happen anytime anywhere, warned John So, director of operations crisis and risk consulting in Greater China for Londonbased consulting firm Control Risks.

But it doesn’t necessarily mean fraud is unpreventable.

“Watching out for signs such as high turnover of staff, untraceable scrap and some manager’s over-concentration of decision making will help minimize risk,” John So suggested. Measures like due diligence on potential partners, vendor audit, a transparent tendering process and separation of responsibilities should be imple-

In a typical supply chain, less than 10 percent of the process is value added, but you only get paid from those valueadded links in a process

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Michael Yee Accenture “Going green” needs to be fully integrated into a company’s operations. “A ‘green’ facade is no longer enough.”

John So Control Risks Watching out for signs such as high turnover of staff, untraceable scrap and some manager’s overconcentration of decision making will help minimize risk.

Beng Ti Tan Baker & McKenzie

Beng Ti Tan, lawyer and tax advisor at Baker & McKenzie warned that companies should keep up with the changes of regulations on taxes, which have been unstable since 2006.

Jean-Luc Laboucheix Goodyear Goodyear has utilized solutions which target people, organizations, IT and ultimately reduced the cost on supply chain and even increased the profits through better strategic sourcing.

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FEATURESTORY mented throughout all steps, he added.

Another headache for companies is how to deal with the Customs and pay duties, which are based on Customs valuation, an important means of non-tariff barriers. Principles of valuation include the actual value of products, packing and international insurance and freight, noted Damon Paling, partner of New York-based PwC. Beng Ti Tan, lawyer and tax advisor at Baker & McKenzie warned that companies should keep up with the changes of regulations on taxes, which have been unstable since 2006 due to the wobbling global economy. For example, the export VAT refunds rate of certain textile and garments was lifted to 14 percent in November 2008, one percentage point higher than in October, a month when it rebounded to 13 percent from the previous 11 percent, a rate effective from September 2006, and industry analysts say a further adjustment to 17 percent is very likely in the near future.

Address challenges proactively A problem that all the multinationals have to face is managing thousands of suppliers all over the world. Ohio-based tire maker Goodyear is one of these companies. Today, it manufactures in more than 60 plants in 25 countries, according to Jean-Luc Laboucheix, supply chain director of Asia Pacific region with Goodyear.

One of the biggest challenges in the AP region is transportation. Laboucheix gave an example - In Europe, suppliers in Germany can serve the whole continent. But in Asia, the Himalayas alone hinder road transport between India and China.

Other regional challenges include different IT systems among various regional operations and varying degrees of performances caused by different KPIs (key performance indicators).

To improve, Goodyear has utilized solutions, which target people, organizations, IT support and process, and ultimately reduced the cost on supply chain and even increased the profits through better strategic sourcing.

Manufacturers in China are also facing the cost pressure. In addition to rising labor costs, there are less observable costs, such as inventory relocation, discounts and other indirect expenses, said Marnix Ettema, senior manager at New York-based advisory firm Alvarez & Marsal.

“These are the biggest opportunities to cut costs,” he added. However, it requires a highly organized supply chain management. For instance, real time inventory control leads to

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Schneider Electric makes China its centre

Revenue: €10 Billion Revenue in 2004 €17.3 Billion Revenue in 2007 19% - Asia-Pacific Revenue share Employees: 120,000 - Employees in more than 100 countries 31,500 - Asia Pacific employees Production: 215 plants 135 DC’s [70 closed in 4 years] 875 000 SKU’s 125 Brands

Jean Michel Fallet Senior Vice President, Supply Chain & Logistics, Schneider Electric.

Reflecting a shift in the company’s global strategy, industrial giant, Schneider Electric has made China the base of its global sourcing, a strategy other multinationals are also adopting given the share of global sourcing that comes from China. Arriving in China several months ago to take charge of this globalized supply chain strategy is Jean Michel Fallet, Senior Vice President, Supply Chain & Logistics for Schneider Electric. We spoke with Mr. Fallet at the 2008 CHaINA Summit, where he delivered a keynote presentation.

What areas are you responsible for?

Jean Michel Fallet (JMF): I am responsible for purchasing, manufacturing, supply chain and IT - almost all the global solutions in the group. We decided to split the organization in order to be global but not central. We are an international team - my manager is American and we also have lots of Dutch and French people on our team. We decided to be closer to our market and be less of an ivory tower.

Where’s your biggest market?

JMF: In terms of business, the U.S. followed by France and China, which are almost equal now. China has more than 1.2 Billion Euro’s in annual revenue. In 2008, China grew 15-20%.

What is Schneider’s main strategy?

JMF: The strategy now is to localize the plants, suppliers, warehouses close to the markets. The Chinese plants are mainly for the Chinese markets. Of course we have global plants, which we can use for our worldwide market, but the main strategy is to use plants to supply local markets. Right now we have more than 200 hundred plants.

What would you say the primary goal of Schneider’s strategy is: cost savings, optimization, efficiency – or are they the same?

JMF: Of course our goal is cost savings. With the financial crisis though, our goal is to finance our development and produce our own cash by decreasing inventory.

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FEATURESTORY

Larry Wang Wang & Li Asia Resources

It’s not all about ‘show me the money’ anymore, those people have a more mature, longerterm approach to developing career success

Tuan Phung VCI Legal

Encouraging investment fields in Vietnam include IT and telecommunications, which have a large scale of employment and infrastructure, said Tuan Phung Esq. from Hanoi-based law firm VCI Legal Indicators of China’s move up the value chain include the set-up of this Airbus final assembly line in Tianjin.

lower inventory and higher revenues can be expected by using different retail channels.

How to keep professionals from switching jobs, especially in China, where the annual turnover rate is as high as 20 percent, is another challenge that companies have to meet.

Larry Wang, CEO of Wang & Li Asia Resources, has noticed the trend among China’s top talent.

“It’s not all about ‘show me the money’ anymore, those people have a more mature, longer-term approach to developing career success,” he said. Based on his own experiences, Wang commented that as an employer, companies have to build “an employer brand”, which includes the top three selling points to persuade someone you want to join you, and your ability to use your staff to help ‘’sell’ the company.

In addition, a strong platform, such as new and challenging responsibilities, or a good growth opportunity, is necessary to keep the talent from going elsewhere, he added.

On the other hand, the economic downturn has also stopped companies from recruiting. A recent report by Beijing-based human resources company FESCO, revealed job cuts of more than 10 percent in the manufacturing sector in 2008, which will worsen in 2009.

Top firms are still recruiting, but with more selective criteria. Talent for positions that can make money are particularly needed by companies, such as top purchasing

professionals, and commodities managers, said Brian Fenerty, practice leader of the automotive group at MRI China.

The emerging Vietnamese market Vietnam, a market highly touted for its potential still holds potential, albeit with some uncertainty. When the inflation rate in Vietnam fell back to 26.7 percent in October from a17-year high of 28.3 percent in August, foreign investors again started to pump money into the country. In October, the Vietnam Energy Association suggested that the government attract foreign investment into its 13 power projects with a combined capacity of 13,800 mill watt.

In 2007, more than US$20.3 billion foreign direct investment went to the country, a year-on-year increase of about 70 percent, reported state-owned Vietnam News Agency (VNA) in August.

Encouraging investment fields in Vietnam include IT and telecommunications, which have a large scale of employment and infrastructure, said Tuan Phung Esq. from Hanoi-based law firm VCI Legal at the event.

But projects determining environment and historical and cultural relics are prohibited.

Taiwan is the leader of the foreign investors in Vietnam currently due its low labor cost, which is less than one tenth compared to Taiwan, according to VNA. No doubt in low-level labor intensive industries, China is losing its advantage to Vietnam and other emerging markets, but Bart van Ahead, business consultant at Tri Thuc Viet Education & Consultancy Co., Ltd, said the relationship between China and Vietnam shouldn’t be competition, but cooperation through using the pluses in the two countries to attract different foreign investors.

Uncertain times The Chinese government has long been calling for moving its industrial structure from lower level labour intensive manufacturing to more higher level value added services and manufacturing. In September, the first Airbus final assembly line outside of Europe opened in China’s Tianjin province. The global financial crisis has sped up the need for China to address the country’s heavy reliance on manufacturing. The governments five year planning might get rocked somewhat, but overall the global economic crisis also brings with it long term opportunity for better more efficient ways of doing things.

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FEATURESTORY

Luxury brands look for new distribution channels in China With retail sales still climbing and a slowdown just beginning, luxury brands in China are adjusting their positioning and distribution strategies.

Companies are hesitant to reveal numbers, especially with a cooling economy, but a brief survey among foreign brands shows that second and third tier cities are viewed as holding opportunity. Brands that already have a dealer network or directly managed retail locations in place are most likely to profit from this emerging trend.

By Peter Bachmann

Trendy young Chinese women walk past a Louis Vuitton (LV) boutique at Plaza 66 luxury shopping mall on West Nanjing Road in Shanghai.

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4

00,000 square feet of prime retail space have been taken off the Indian market in the last weeks and months due to the economic slowdown and the attacks in Mumbai. At the same time, in China, luxury brands including Versace, Gucci and Louis Vuitton keep announcing new store openings. Luxury sales are still growing in double digits relative to other countries.

“China’s share of global luxury goods sales has increased from USD6 bln or 12 % in 2006 to (an expected) 18 % for 2008,” Sheng Lei, Managing Director of the Beijing Top Essence fair said. Organizers of the fair issued a record 12,000 VIP cards for this year’s event, where 60 luxury brands showed their newest collections. For 2009, Sheng predicts that the share will grow further to 20 %. A study by Ernst & Young says China’s luxury market could almost double from its 2006 levels and hit USD 11.5 bln by 2015.

Luxury brands make up less than 1% of retail sales As the central and provincial governments announce stimulus package after stimulus package to keep economic growth on an acceptable level, the Chinese consumers seem not worried at all.

Latest figures show that retail sales grew over 22 % in November, slightly less than the record 23 % in August but the numbers are still strong. Does this mean that luxury brands enjoy continuous growth as well? “No”, says Paul French, Chief China Analyst at research firm Access Asia. “High end sectors such as shoes and jewelry suffered the biggest falls in growth”, he says. French questions the 22 % of retail growth. This number is “far lower.” Tom Miller, Deputy Editor with Beijing-based research and advisory firm Dragonomics agrees:

Paul French Chief China Analyst at research firm Access Asia, questions official figures of 22 % retail growth.

“Don’t put too much faith in the retail figures because they exclude household service purchases but include government goods purchases. Healthy retail figures might indicate that the government is buying more, not ordinary consumers.” Indeed, French noticed that “most retailers report that in cities their growth rates are off by a few percent,” with November and December to be “poor” in terms of same store sales. Statistics from the World Luxury Association show that luxury sales in the United States and Europe have fallen between 20 and 25 % in late 2008 due to the economic slowdown.

China saw its sales fall 5 %.

And still, luxury makes up only a fraction of total retail sales in China. Luxury brand sales account for “significantly less than 1 % of total sales,” French said. He believes this rate is “fairly steady” but adds that low sales for clothing, accessories and jewelry could cut it by a “point or two.” This low number will not change for the better any time soon even though luxury brands feel at home in China.

In November, Porsche said the country has become its third largest market after the United States and Germany as sales reached 7,600 units between August 2007 and September 2008.

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FEATURESTORY Luxury heads West The growing middle class, a 170 million people or 13 % of the population, “can afford to buy luxury brands,” the China Association of Branding Strategy estimates. This number includes a 108 dollar billionaires and over 300,000 dollar millionaires. While most of them are living in and around first tier cities such as Beijing, Shanghai, Guangzhou and Shenzhen, luxury brands can still conquer untapped markets, given logistics and dealer networks are in place. Provinces in the north-east, along the east coast and in the south have a per capita retail sales volume of RMB 3,000 to RMB 10,000. This number is significantly lower in provinces such as Sichuan, Qinhai, Guizhou, Yunnan or Gansu, where per capita retail sales is below RMB 2,500, writes InterChina Consulting in its recent luxury briefing.

Giovanni Innocenti, head of Boutique BIA, a company that retails and distributes Florence-made custom jewelry “Angela Caputi Giuggiù” in China, remains confident that the economic slowdown will

Giovanni Innocenti Head of Boutique BIA, remains confident that sales will be strong for their products.

not hit sales hard. “Our accessories are sold in limited quantities to people who have a special interest in jewelry and have the means to buy them.” And he is not counting on Shanghai and Beijing only: “Second and third tier cities offer tremendous opportunities. We negotiate with potential franchisers in Hangzhou, Ningbo, Taiyuan and Harbin as we believe that people there have more spending power for luxury products than residents in Shanghai.”

Logistics and infrastructure are of no concern but Innocenti criticizes the fact that he needs to pay 35 % import duty on polyester jewels plus 17 % VAT. “It drives up our unit price by more than 45 %.”

How well luxury brands in China can weather the current economic slowdown remains to be seen. But it may depend on more than just fancy shops on Shanghai’s Nanjing Road. Daniel Grossmann of B&Bs Consulting, a company that advises international clients on China entry strategies, says it is all about location. “Foreign retailers who have focused only on the coastal first tier cities in their retail development are now facing more

It is selected 2nd and 3rd tier cities that continue to demonstrate strong growth as some of those interior local economies are seemingly more insulated from the global economic slowdown.

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FEATURESTORY turmoil than those who have a broader and better balanced retail distribution across the entire mainland market.” Grossmann sees growth for luxury brands slowing in first tier cities such as Beijing, Shanghai, Shenzhen and Guangzhou. “It is selected 2nd and 3rd tier cities that continue to demonstrate strong growth as some of those interior local economies are seemingly more insulated from the global economic slowdown.”

A good way to reach these consumers in cities such as Hefei or Changsha is through directly managed retail locations. “We know that some Italian luxury brands operate this way and they are doing well,” Grossmann adds.

A bit more pessimistic about the short term is Lelio Gavazza, General Manager of Sharmoon EZ Garments Co., a high-end men’s suit

Lelio Gavazza General Manager of Sharmoon EZ Garments Co.

Some companies manufacture semifinished products here in China, send it back to, say, Italy for a final task and re-export the goods to China

Smith and Burberry. Firms including Louis Vuitton, Prada or GAP prefer not to comment on this matter but sources told CHAINA magazine that this is “standard procedure”.

“Some companies manufacture semi-finished products here in China, send it back to, say, Italy for a final task and re-export the goods to China,” a person familiar with the industry said. “Costs are lower and profits higher; why shouldn’t these companies do it this way?” In order to keep a low profile in cities such as Shanghai or Beijing, “these firms do not officially register with the government, do not run a WFOE or a representative office and do not even sign up with the Chamber of Commerce of their country.”

But soon there is no more reason to hide. The World Luxury Association estimates that 60 % of the world’s luxury brands will have their

and sport jacket manufacturer partly owned by Ermenegildo Zegna. “Luxury brands are going to face a very tough 2009 and surely this economic crisis is going to change the way all companies have to approach the market.” Also not so sure about continuous growth in these cities is Xiao Qian Yang, President of ALLE International Trading, a company that imports and distributes Italian and French brands including Aurora, Nettuno, Visconti, Tibaldi, Stipula, Jaguar, Delta and De La Foret. “[The] brands we manage may not maintain [their] growing trend in second and third tier cities,” Yang says. She also thinks that logistic problems, caused by incompetent credit systems, hamper growth in these cities and lead to higher freight costs, lower profits and lower service standards. Whether the RMB 4 trillion from the central government will solve some of these problems is not sure for her. The stimulus package is not likely to have “any relations with the logistics industry,” Yang fears. And Miller adds: “The true amount of stimulus spending is almost certainly lower than the headline figure, which includes a significant amount of spending that would have occurred anyway.”

Keeping a low profile When sales and profits are shrinking and costs for rent, salaries and logistics keep climbing, luxury producers are considering China as a production base. And there are some companies that do produce in China including Armani, Coach, Paul 38

JANUARY/FEBRUARY 2009

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FEATURESTORY Luxury Brand Growth in China Sales in billion USD % Worldwide Market Share %

45% 40% 35% 30% 25%

The World Luxury Association estimates that 60 % of the world’s luxury brands will have their products made in China by the end of 2009

20% 15% 10% 5% 0% 2006

2007

2008

2009

2015

Source: Ernst & Young, Goldman Sachs, Top Essence Fair, Xinhua, Research *Estimates

Peter Bachmann Peter Bachmann is managing partner of Biz China Update, a business news website based in Shanghai, and is a writer for China-based online and print publications.

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products made in China by the end of 2009. Adidas, in China a luxury brand for the mass and a main player with a revenue target of EUR 1 bln for the Chinese market in 2010, has no issues with ‘made in China’ and is taking advantage of its logistics network throughout China. “We have a large pool of skilled labor, good infrastructure and a good investment climate,” says Wolfgang Bentheimer, Managing Director of Adidas Greater China. Statistics show that sales are up 50 % in the first three quarters of 2008 year-on-year.

At the same time a recent survey by Nielsen China revealed that “nearly half of Chinese international travelers purchase luxury-branded goods when they travel overseas.” In 2007, Chinese travelers spent USD 30 bln while abroad, putting China on the fifth place in terms of international travel expenditure. “A lot of people who can really afford these things simply buy them in Hong Kong or Paris, where they are cheaper,” says Miller of Dragonomics. A point international luxury brands should keep in mind when targeting Chinese shoppers.

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PRODUCTRECALLS

DANGER!

The U.S. Consumer Product Safety Commission is charged with protecting the public from unreasonable risks of serious injury or death from more than 15,000 types of consumer products. Below are just a few of those products.

Rage Wireless Guitars recalled due to chemical burn risk The U.S. Consumer Product Safety Commission, in cooperation with Performance Designed Products LLC, of Sherman Oaks, Calif., recently announced a voluntary recall of about 57,000 units of Rage Wireless Guitars. A circuit board defect can cause AA batteries used in the guitar to leak if the batteries are installed incorrectly, posing a risk of chemical burns to consumers.

The Rage Wireless Guitar controller is designed to be used on the Nintendo Wii system.

Infant death prompts recall of 600,000 drop side cribs by Delta Enterprise Delta Enterprise Corp., of New York, N.Y., announced a voluntary recall recently of about 600,000 drop side cribs. The crib drop side can detach when the spring peg is not engaged which can cause an entrapment and suffocation can risk to infants and toddlers. The recall involves all Delta drop side cribs manufactured prior to 2006 that use crib Trigger Lock with Spring Peg drop side hardware design. The cribs, which were made in China, were sold at major re- tailers in the U.S. from January 2000 through January 2007 for between $33 and $200.

Portable generators recalled due to fire hazard About 13,000 units of Portable Generators were voluntarily recalled

by General Power Products LLC, of Loveland, Ohio recently due to a risk of the generator fuel valve being damaged by the cover plate during shipment, causing a fuel leak and fuel spillage during use, posing a fire hazard to consumers. Manufactured in China, generators were sold at hardware and home improvement stores primarily located in Illinois, Indiana, Louisiana, Ohio and Texas from June 2008 through September 2008 for between $600 and $800.

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Homelite Consumer Products recalls chain saws due to chain brake failure The U.S. Consumer Product Safety Commission, in cooperation with Homelite Consumer Products Inc., of Anderson, S.C., recently announced a voluntary recall of about 370,000 units of Homelite Chain Saws. The chain brake can fail to stop the chain on its first application, posing a risk of laceration to consumers. Manufactured in China, the chain saws were sold exclusively at Home Depot stores nationwide between December 2007 and October 2008 for between $110 and $200.

Ghost Tealight Holders recalled due to fire and burn hazard In cooperation with Trade Associates Group Ltd., of Chicago, Ill., the U.S. Consumer Product Safety Commission recently announced a voluntary recall of about 30,000 units of Ghost Tealight Holders. Manufactured in China, the recalled tea light holder can ignite, posing a fire and burn hazard to consumers. The product was sold through Crate & Barrel from August to October 2008 for about $10 for a set of 3, and other houseware retail stores in the U.S. from August 2008 to October 2008.

Gaming System batteries and recharging station recalled due to burn hazard The U.S. Consumer Product Safety Commission, in cooperation with Leap Frog Enterprises Inc., of Emeryville, Calif., recently announced a voluntary recall of about 35,500 units of rechargeable batteries and recharging stations for Didj Custom Gaming System. The batteries included with the recharging station can overheat if the gaming system is placed into the recharging base upside down, posing a burn hazard to consumers. Manufactured in China, the product was sold at department stores and toy stores in the U.S. and at www.leapfrog.com, and online retailers in 2008 for about $35. www.supplychain.cn

EXECUTIVEINSIGHT

Engineering the link

Based in Shanghai, Daniel Zhu is Engineering Director, Asia Pacific at Tyco Electronics. He manages more than 100 engineers across the region. Global recruitment firm, Michael Page International, talked with Daniel about his views on career development.

D

aniel Zhu commenced his career in the United States with General Instrument as a project leader after completing a Ph.D. in Electrical and Computer Engineering at Drexel University, Philadelphia. Sixteen years later, he is now Engineering Director, Asia Pacific for Tyco Electronics, responsible for managing and continuing to build Tyco Electronics’ Asia Pacific engineering function.

Tyco Electronics is a global provider of engineered electronic components for consumer and industrial products, network solutions and systems and wireless systems.

What are some of the factors that have made you successful in your career?

I think my ability to learn from successful business leaders both within the companies I have worked at, and externally have helped me progress in my career. I also believe my analytical and problemsolving skills have helped me achieve success. As a leader, you face challenges and complex problems every day and you need to have a systematic approach of identifying issues and devising practical solutions.

As a manager, you must also train, nurture and mentor your staff.

Having the right people in place and being able to develop an environment that promotes teamwork, high-standard work ethics and innovation is essential for leadership success.

How do you work with other business functions?

Although I work in the engineering division of Tyco Electronics, I am constantly communicating and collaborating with colleagues in the sales, procurement, product management and manufacturing teams. For example, I work with product management to define the new products we are going to design and launch. Similarly, I talk to our sales team to identify the revenue potential and profit margins of new products before making a decision on production. If you want to progress to the senior level, it’s essential to understand how the broader business works and be able to apply your skills to different areas.

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What advice do you have on career progression?

You need to be tech savvy, business focused and politically astute.

Technology is evolving very quickly and you must continually upgrade your knowledge and skills to ensure you remain ahead of the competition. Upgrading your soft skills like communication and negotiation is equally important if you want to transition to a management role. You also need to understand the business politics – who are the influential people to build rapport with who you can rely on to get things done! Financial business knowledge is also imperative.

For example, you need to understand the importance of revenue, margins and cash flow, which link your engineering work to financial success.

What do you look for when hiring new staff?

There are three main things I look for when recruiting a new team member. The first is their suitability and capability. By that I mean, do their technical skills match the requirements of the role yet still provide room for growth? Then I look at their motivation and energy levels. They must be passionate about what they do and be motivated to take advantage of new opportunities. Finally, I look for people who are team players and can interact with other business units and regions.

Any challenges for the future?

One of the greatest challenges facing businesses right now is the current global economic downturn. However, it’s not all doom and gloom. It’s also an opportunity for organisations to be more efficient and productive by streamlining operations and making process improvements. As we now operate in a global business environment, the ability to work with teams that have different cultures, backgrounds and different ways of doing things is also an increasingly important requirement for future leaders. You have to be sensitive to that.

For further advice on career development or for general information on current employment opportunities, please contact Josh Hollway at Michael Page International: joshhollway@michaelpage.com.cn.

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DON’T MISS OUT!

List your company in the most comprehensive

supply chain services directory in China

VENDORS’ DIRECTORY 2009 •Logistics Service Providers • IT & Software Solutions •Real Estate Services •Consulting Firms

• Material Handling Equipment

A comprehensive bi-lingual listing of vendors, service and equipment providers, consultants and IT solutions providers for the supply chain and logistics industry n Companies are listed according to their specific service offering n In-depth company profiles including contact details and full description of services and solutions n Free and complete online access at www.supplychain.cn

Who should list in the 2009 VENDORS DIRECTORY? Any China-based company that provides services or solutions to the supply chain and logistics industry should be listed.

How much does a company listing cost?

A 12-month company listing costs only RMB 5,000 (or RMB 3,000 for China Supply Chain Council members). Because the Directory is re-printed every 6 months, we give companies the opportunity to update their profile online, meaning your company information will always be up-to-date.

Who reads the 2009 VENDORS DIRECTORY? The Directory is read and used by key decision-makers in companies that regularly buy and use supply chain and logistics services and facilities in China. These are the people that decide which supply chain and logistics service providers to use in China.

How is the 2009 VENDORS DIRECTORY distributed and promoted?

Targeted at qualified decision-makers, the directory is distributed free-of-charge to subscribers of CHaINA Magazine and companies based in mainland China who request a copy (companies are only asked to cover the mailing cost). In 2009, we will print more than 10,000 copies, which will be given out at more than 100 supply chain and logistics-focused events each year.

To find out more about how the VENDORS DIRECTORY can contribute to your marketing needs in China, please contact: ) +86 (21) 5102 1617/18 + directory@supplychain.cn

8 www.supplychain.cn

GUESTCOLUMN As the global economic crisis continues to snowball around the globe, suppliers long squeezed by large powerful manufacturers are increasingly being hit. Companies which depend on one or two key suppliers face the greatest risk and are having to step in to ensure their suppliers stay afloat.

H

Global economic slowdown impacts supply chains

ealthy manufacturers such as Daimler, EADS and Volkswagen that have been largely unaffected by the global credit crunch, are increasingly forced to rescue their key suppliers and explore a range of options to keep supply chains intact.

Dieter Zetsche, Daimler’s chief executive, said “300,000 jobs were at risk in the industry” if banks continued to tighten credit and added that he was already helping some suppliers with cash.

In Shenzhen, China, the knock-on effects from the global financial crisis present “grimmer challenges than the financial turmoil in 1998”. Mr. Xu Zongheng, the city’s mayor says that in 2008, 682 factory closures alone have claimed 50,000 jobs in Shenzhen. Many of these suppliers were caught in the global credit crunch as manufacturers and banks tighten payment terms and credit.

Wang Zhiguang, vice-chairman of the Dongguan Toy Industry Association, told the Guangzhou Daily that as many as half of all toy contract manufacturers/suppliers in the Pearl River Delta could go bankrupt within the next two years. The government has already said that 3,900 of the country’s toy makers -- 53% of the industry -- have gone out of business so far this year, 90% of which were small operations.

Volkswagen, Europe’s largest carmaker with many suppliers from China, had set up a “crisis cell” to monitor difficulties at suppliers, and in effect attempting to stop suppliers from collapsing. In “exceptional circumstances” Volkswagen could help increase the capital at its suppliers or change purchasing terms to enable suppliers to get their hands on cash earlier than usual. EADS last month helped Latécoère, one of its main suppliers, overcome liquidity difficulties by paying it in advance to compensate for delays in aircraft projects.

Big companies are partly the blame. Many have squeezed suppliers mercilessly for years. The car industry is renowned for manufacturers suddenly imposing demands for 10 per cent across-the-board cuts in component prices. Likewise, big retailers like Tesco have succeeded in pushing payment terms with suppliers increasingly

in their favour. Tesco has increased the time it takes to pay for some goods from 30 to 60 days.

So what could happen if a key supplier collapses?

Production at the manufacturer could be forced to come to a stop if key suppliers go bankrupt. One good example is the case of Land Rover in 2002. UPFThompson, the only supplier of Land Rover’s Discovery vehicle’s chassis – had gone bankrupt.

Land Rover estimated that 11,000 jobs were at risk at Land Rover and its other suppliers, if Land Rover stopped its Discovery production, and it would have taken at least six to nine months to find an alternative supplier. The company at the time added that the cost of having dual suppliers would have doubled the £12m ($18m) investment needed for the chassis, The end result was a horrible experience for Land Rover. KPMG, the receivers for UPF, wanted about £60m from Land Rover to maintain supplies of the chassis.

Land Rover accused KPMG of holding it to ransom and the matter ended up in court.

Under a settlement, Land Rover took on UPF’s debt and paid an estimated £15m.

This trend to rescue cash-strapped suppliers could become common as manufacturers try to ensure they can continue to deliver products to their customers.

Manufacturers today have made their supply base far more global in recent years in an attempt to reduce risk. The consequence is such that stress from the ever-deepening global credit crunch is spreading quickly to suppliers large and small. It is testing the global supply chain concept to an extent rarely seen and forcing companies in industries from cars to retailing to take extreme measures.

- Cash strapped

suppliers threatened

682 factory closures alone have claimed 50,000 jobs in Shenzhen

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Thomas Ng

Thomas Ng is a supply chain professional with 15 years experience in developing innovative supply chains, planning & redesign, logistics, customer services and business operations. He has developed and implemented a range of strategic and operational solutions for MNC companies.

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EVENTUPDATE

Benefits of customs compliance outweigh non-compliance

By Wang Fangqing

Dealing with Customs is a big headache for many manufacturers in China.

Complicated VAT calculations, changeable duty policies and time-consuming procedures are some reasons motivating companies to find “alternate” ways to maneuver through the customs minefield.

At the recent “China Customs and Trade Compliance Seminar,” jointly organized by PricewaterhouseCoopers and the Global Supply Chain Council, experts from PwC, Volvo Logistics, Delphi and Tyco Fire & Security agreed that compliance with Customs can bring significant benefits.

Classification “It’s possible that Customs at different locations may have different classification of certain products,” said one compliance manager from a multinational truck maker, explaining how people may have different opinions on defining products, and it usually happens to imported products, because the supervisors are not very familiar with the HS (Harmonized System) coding. In this case, “companies can either have the Custom broker talk to the officials, or report to the classification center, the only professional HS coding department in the Customs,” he suggested.

Also, purchasing an annually published HS system is always helpful,” you have to double check the HS code before moving to next step,” he added.

Choose your RDC When it comes to choosing the right regional distribution center, companies are often confused by the variety of choices. There are many RDC options with different functions available in the country, including the heavily used free trade zones (FTZ), bonded logistics centers (BLC) and export processing zones (EPZ).

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JANUARY/FEBRUARY 2009

To make the right choice, Michael H Jiang, director of the world-trade management service of PWC, asked companies to look at their own business model at first. For example, one RDC is not sufficient for multinationals like Intel and Motorola because it can not serve their business across China.

Also, it’s necessary to get a close look at the key differences between those RDC’s.

Some companies may weigh more on locations, some want to set up factories, or some want to get VAT refunds. All these factors are critical for making choices. The compliance manager (who preferred to remain anonymous) also suggested initiating

a talk with RDC’s regulators before making any decisions.

“Tell them your business model and your requirements, and the regulators will negotiate with the Customs for you because those officials are eager to lure more companies,” he said. For example, though EPZ’s and FTZ’s are both open to manufacturing, Shanghai Waigaoqiao Free Trade Zone is an exception because it has a very different regulation and management system.

Who you know counts “There are many divisions in Customs and people from those divisions will ask different questions,” the compliance manager noted, suggesting professionals should be involved, because if you can’t give them proper answers, “you will be in trouble.”

For example, a market-negotiation talk can be used with officers from verification center, while a far more tactical room-space discussion could happen with those from the valuation division.

Some companies worry about imbalanced books and try to make their books perfect by legal or illegal means, but experts said it’s unnecessary and on the contrary, even worsens the perception of the company.

Customs are skeptical of a 100 percent balanced handbook, one speaker noted.

Rather tell them you are working very hard to meet their requirements even initiate a periodic report of bonded materials, it was suggested. Customs will be happy for the openness because they know you are not trying to violate rules. Earning the trust of Customs is important for future business.

www.supplychain.cn

Ningbo small profile,

TIERTWO

big shoulders

Not as well known as Shanghai or Guangzhou, Ningbo is one of the top 3 logistics locations in China in terms of volume and is home to major manufacturers such as Dupont, Geely, Ningbo Steel and Coca-Cola. As part of a regular series of regional roadshows, on November 16 and 17, the China Supply Chain Council took a group of visitors on a 2 day visit to Ningbo to visit factories, the port area and key designated economic development zones in the region.

Located south of Shanghai, Ningbo is a key second tier city in the Yangtze River Delta. Thanks to the 36 kilometer cross-sea Hangzhou Bay Bridge, completed in May 2008, Ningbo is now within 2 hours of driving from Shanghai. In the middle of China’s Eastern seaboard, Ningbo Port is the second largest in China and fourth largest in the world, with 340 operational days per year.

In 2007 the Port’s handling capacity was 473 million tons of cargo. By 2020, the Port’s goal is to handle 653 million tons of cargo.

A quiet competitor to Shanghai’s Yangshan Port, Ningbo Port’s growth rate (in container volumes) has slowed somewhat from the 50% per annum growth of previous years, but still grew at a healthy rate of 28% in 2007. Ningbo offers considerable advantages over Shanghai such as cheaper land costs and availability, along with lower labour costs and living conditions for workers.

www.supplychain.cn

Over two days, the council group, which included participants from both Shanghai and Ningbo, visited a range of facilities such as Chinese car maker Geely Automotive; Blue Dragon Logistics (a JV with Maersk Logistics); an AMB warehouse managed by logistics company Globe Express on behalf of its retail client, GIFI France; CooperNature a JV with American power and lighting and industrial company, Cooper Industries and Hicon, a refrigerator, ice-machine and appliance maker for companies such as Electrolux and Emerson. The group also visited government zones in Beilun and Cixi and visited the Port terminal, witnessing a large container ship being loaded.

Ningbo is characterized by a lot of private enterprise. Geely Automotive, located in the Beilun Port area of Ningbo, is the only private automotive company in China. The Ningbo plant of Geely produces 100,000 cars per year on 2 platforms with around 2,600 workers. Utilizing over 250 suppliers, most are located in close proximity to Ningbo. Hicon is also a private company, with roots as a village cooperative in 1972, the company has just moved into a 400,000 square meter facility producing much of its products for export to the United States.

The city’s unique characteristics such as its proximity to Shanghai, plenty of land, a stable affordable workforce, strong government support, backing for industry and one of the largest ports in the world, make Ningbo a city worth exploring as a viable alternative location to Shanghai.

JANUARY/FEBRUARY 2009

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2009

No Pain No Gain: How to

SOFTSKILLS

outgrow your competition in a recession Many companies suffer in a recession, but others continue to grow and emerge stronger. Managers need to focus on getting ready for the next up-turn. This article looks at three ways you can outgrow your competition.

T

ake Control of your Mindset Mindset refers to the thought processes characteristic of an individual or group. So an upbeat, solution-oriented and enthusiastic manager will be surrounded by a similarly positive team.

How would you describe the mindset in your company today? Are you letting doom-andgloom pollute your team? Energize your team through these dark times by creating an upbeat mindset.

Top management must take the initiative to set the tone. A recent survey from Hewitt found that top performers are expected to pull their company through tough times. So bring them together for a roundtable discussion on what needs to happen to emerge stronger. Appoint advocates to deliver your positive message throughout the company.

Companies with a negative mindset lower their work intensity and stop looking for opportunities. Challenge your top performers to be agents of change and reward them for finding new opportunities. At the same time, a manager needs to embrace reality and realistically explain what sacrifices need to be made. Some companies are using acrossthe-board pay cuts to prevent layoffs. Set clear expectations of your people in the areas of sales and service so these opportunities can be attained.

Twin pillars of success: service and selling A McGraw Hill survey through five decades of economic recessions found that the

companies who remained aggressive in sales and marketing during the downturn increased sales by 275% in the first year following recession, compared to 19% for those that cutback or stopped marketing.

Two words should be on your lips every day: service and selling. Now is the time to launch a “customer first” program. Get your front line sales and service teams together and work out how to support your clients even more.

Have your service team make personal calls to clients to engage with them and find solutions to their most pressing concerns.

Measure your sales activity for sales visits, proposals made and business won. Make it fun, turn it into a game, use a scoreboard and celebrate success – however small.

Also, take a medium term view by upgrading your service. Have your service team follow up with phone calls rather than emails.

Get smarter with your marketing budgets.

Switch from big ticket general advertising to targeted niche advertising or lower cost direct mail. Get personal with your clients.

Have your team send handwritten “thank you” cards to clients. This will help you stay in your client’s mind and strengthen relationships.

Use the 60:30:10 rule advocated by sales expert, Bill Todd. Todd recommends

Companies who remained aggressive in sales and marketing during the downturn increased sales by 275% in the first year following recession

Warwick John Fahy leads interactive engaging workshops that improve essential management skills and coaches managers to higher performance across Asia.

He is the author of The One Minute Presenter available at www.warwickjohnfahy.com.

www.supplychain.cn

your sales efforts are split 60% on existing customers, 30% on qualified new accounts and 10% on prospecting. Don’t ignore your current or past clients by spending too much time on looking for new business.

Collaborate with your people Now is the time to collaborate with your team. People tend to unite in the face of adversity, so use this opportunity to create a solid team. As a manager, you play a key role in helping collaboration become a part of your organization’s culture. The issues you place your attention on, what you reward and the people you hire will all contribute to the success of collaboration.

Bring your people together as a part of the solution. Increase the frequency of townhall style meetings to share challenges and solutions. Publish a weekly bulletin on milestones reached in moving the company forward – accounts won or held, examples of cost saving and how the team are working together. In the online world, create a private group using Facebook or Ning and tap into the creativity of your younger staff.

Encourage creative solutions and reward them with public recognition.

Tough times can bring out the worst or the best in people. Don’t leave it to chance.

Take action today to guide your people’s mindset, establish the two strong pillars of success by increasing sales and service activity and tap into your people’s knowledge through open collaborative efforts.

JANUARY/FEBRUARY 2009

47

BETTER

6.9 Nokia - Scores maximum points for its comprehensive voluntary takeback program.

5.9 Sony Ericsson - Scores points for its new environmental warranty, guaranteeing take-back and recycling for individual products regardless of location.

5.9 Toshiba - Toshiba climbs to 3rd gaining extra points on the energy criteria; it is now reporting its use of renewable energy.

Guide to Guid o Green Electronics ctronics

5.9 Samsung - Good on toxic chemicals and energy but very poor on recycling.

5.7 Fujitsu Siemens - Good on energy, scores poorly on electronic waste.

5.7 LGE - Improved score on recycling and energy.

5.3 Motorola - Improved score on energy, waste and recycling.

5.3 Sony - Still has room for improvement on energy.

5.1 Panasonic - Scores maximum points on energy but still scores poorly on all e-waste criteria.

4.9 Sharp - Improved energy policy but reporting of energy efficiency of its products continues to be weak.

4.7 Acer - Needs to improve on reducing toxic chemicals and recycling.

4.7 Dell - Loses points for withdrawing from its commitment to eliminate all PVC plastic and brominated flame retardants (BFRs) by the end of 2009.

4.5 HP - Still needs to improve on ewaste.

4.3 Apple - Now reporting product carbon footprint and new iPods are free of both PVC and BFRs. 4.1 Philips - Scores well on toxics and energy but scores zero on most other e-waste criteria.

BAD

3.7 Lenovo - Scores well on toxic chemicals, poor on recycling and energy.

2.9 Microsoft - Still scores poorly on recycling and energy.

0.8 Nintendo - Zero on most criteria except chemicals management and energy.

This Guide ranks leading moble and PC manufacturers on their global policies and practice on eliminating harmful chemicals and on taking responsiblity for their products once they are discarded by consumers.

Source: www.greenpeace.org

AMERICANVIEW

Jack Buffington A former Management Consultant, Jack Buffington is Director of Supply Chain Logistics at Molson Coors Brewing Company. Based in the United States, he has authored several books about outsourcing, supply chain issues and the need for American manufacturing.

I

n 2007, the former Federal Reserve Chairman Alan Greenspan wrote in his book, The Age of Turbulence, that “the loss of traditional manufacturing jobs in the United States is often considered a worrisome hollowing out of the economy. It is not.” The reason, he said, is that “manufacturing jobs can no longer be highly paid….since consumers pay the wages of factory workers…and prefer WalMart prices.” Greenspan’s notion is one of an America that rids itself of traditional manufacturing in favour of white collar jobs in financial services, real estate, and information technology. Today however, this American vision of a high growth white collar economy is vanishing. The U.S. government employs almost nine million employees more than the manufacturing sector, hardly a sign of a thriving economy.

The plight of U.S. Manufacturing For two years now, I have been suggesting that the U.S. national economy develop a solid and growing manufacturing sector foundation, while my detractors have taken more of the Alan Greenspan New Economy position.

A manufacturing economy enables a foundation for more of an end to end view of a complete Product Lifecycle Management, leading to growth in other sectors, such as Research and Development, Engineering, Logistics, Finance/Accounting, Marketing, and www.supplychain.cn

America and China need to work together on a global fix U.S.A needs manufacturing, China needs services Information Technology. China’s emergence as a manufacturing power is leading to growth in jobs beyond manufacturing, and the country’s economic growth will depend upon these non-manufacturing sectors.

The irony of the present situation is that the Chinese economy is too dependent upon blue collar manufacturing while the U.S. is fixated upon white collar service jobs. This lack of balance across the entire product lifecycle by both economies has led to the imbalance that exists today and has contributed to the global recession.

A lesson for China Chinese manufacturing should promote a resurgence in U.S. manufacturing rather than a degradation of it. Sound crazy?

Think again. If America doesn’t have sufficient sectors with growth opportunities, consumer demand will continue to weaken, which is bad news for developing economies like China and India. The aftermath from this current global recession will lead to paradigms that the world economy would never have expected before, and the sooner these new truths are realized, the sooner the real recovery will begin.

Refocusing the U.S. economy into more of a balanced manufacturing/services based economy won’t happen overnight, as won’t be the case in China gaining increased growth through white collar work. There will be as many detractors in America as there will be in China for this transformation, but smart private enterprises will catch on to this new paradigm.

U.S. policy and corporations will eventually promote a better balance between manufacturing and services.

Hopefully much will change as a result of this current global recession allowing for Chinese manufacturers to balance their activities and support the re-emergence of U.S. manufacturing. The question is whether your company will be ready for this challenge.

JANUARY/FEBRUARY 2009

49

RESEARCHFOCUS

How to enter foreign markets This article is based on a report titled, Internationalisation of Logistics Systems – How Chinese and German Companies Enter Foreign Markets, in which A German and a Chinese University analyse each country’s companies’ internationalisation strategies from a logistics perspective.

I

beginning, saving time and money and gainn the ongoing process of internaa growing number of famous market reing a competitive advantage by meeting tionalisation, companies try to bentreats. the service expectations of their customefit from global opportunities by 2. Secondly, in order to deal with the heters better. tapping growth potentials in new reerogeneity and complexity of international Most important is that companies are gional markets and leveraging cost networks, logisticians need to balance globaware that situations in different counadvantages of locations with specific factor ally standardised procedures with local adtries are diverse and constantly changing. endowments and cost conditions. As a reaptations. The benefits from global process Hence, their logistics strategy has to cope sult, we see companies with internationalstandardisation are widely recognised, yet with complexity and uncertainty. Three key ly dispersed operations, embedded in globnot sufficiently leveraged (see Fig. 1). components were identified as the main al supply chains that serve their customers 3. The third component is the strategic success factors of any logistics approach worldwide. Global Logistics Systems form collaboration with logistics service providfor setting up an offshore business entity: the backbone of these activities, as they ers (LSPs). Chinese companies operating 1. Logistics managers have to ensure a have to bridge the gap between cost effiin China traditionally outsource less than high degree of flexibility and agility in their ciency in the global value chain and the reWestern companies. But in the context of system to make sure it will meet the chalquired customer service. Hence, logistics is foreign market entry the collaboration with lenges of unknown future requirements. one of the most decisive success factors LSPs can significantly facilitate to build up Surprisingly, few companies include an exit for companies when they enter foreign marlogistics operations. (see Fig. 2). option in their logistics strategy, despite kets.

The survey shows that the challenge of With the financial support of the the ongoing internationalisation of Swiss Kuehne-Foundation, the Gerbusiness activities requires a holistic Chinese German man Berlin Institute of Technology logistics management approach that conducted a survey on the internaconsiders a multitude of aspects, 12% 3% tionalisation of logistics systems and ranging from the regional differences worked together with the Chinese in lifestyle, working behaviour, tech60% 39% Huazhong University of Science and nological skills and equipment, infraTechnology in Wuhan. They reviewed structure, and the supply of profes28% 58% companies’ internationalisation prosional logistics services. This can cedures from a logistics perspective only be achieved, when the people and compared the strategies of maninvolved are sufficiently trained and agers from both countries. empowered to get the job done efThe overall picture shows that imficiently.

Outsourcing Strategies provements are necessary in the 45% 42% 14% Chinese The report has been published in consideration of logistics aspects Complete Outsourcing English and Chinese: Straube, Ma, and the involvement of logistics manexecution by One S top Bohn (2008): ”Internationalisaagers, especially in the early phasown logis tcs S hop s ervices to recources LS P s tion of Logistics Systems – How es of the foreign market entry, when Chinese and German Companies strategic decisions are made. The German 14% 77% 9% Enter Foreign Markets”. Springer. most successful companies inteISBN 978-3-540-76982-8 grate logistics issues from the very 50

JANUARY/FEBRUARY 2009

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Asia's Hot Growth Companies: 2008 2008 Rank

Company

Country

Sales 2007 (US $ mil.)

(source: Business Week)

Profits 2007 (US $ mil.)

12Mo. High Stock Price (US$)

12Mo. Low Stock Price (US$)

Recent Market Stock Value Price (US$ (US$) mil.)

Business Description

1

ALIBABA.COM

China

307.3

137.5

5.2

0.5

0.6

2,956.7

Internet Software & Services

2

PHILEX MINING

Philippines

254.6

115.7

0.2

0.1

0.1

401.4

Diversified Metals & Mining

3

SIHUAN PHARMACEUTICAL HOLDINGS GROUP

Singapore

40.7

25.5

0.6

0.3

0.4

169.3

Pharmaceuticals

4

DIGITECH SYSTEMS

Korea

41.4

12.4

24.7

7.5

9.1

123.1

Computer Storage & Peripherals

5

AVY PRECISION TECHNOLOGY

Taiwan

80.6

17.7

5.5

2.6

3.1

174.3

Photographic Products

6

DIVI’S LABORATORIES

India

247.5

83.3

39.0

19.3

22.4

1,446.8

Life Sciences Tools & Services

7

SHIN ZU SHING

Taiwan

163.7

38.7

6.5

3.2

3.4

416.6

Industrial Machinery

8

TULIP TELECOM

India

292.1

44.8

23.1

10.1

13.8

399.7

Alternative Carriers

9

DANHUA CHEMICAL TECHNOLOGY

China

62.6

11.0

4.6

1.6

1.7

247.8

Packaged Foods & Meats

10

TENCENT HOLDINGS China

542.1

222.5

9.2

4.9

7.1

12,659.6

Internet Software & Services

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JANUARY/FEBRUARY 2009

51

3PLFOCUS

Logistics veteran gets a new face CEVA’s Charlie Jing says his pool of clients is diversifying as China moves up the value chain You know us, but you don’t know us,” was how CEVA’s CEO Charlie Jing described the company to the world when it formed in December 2006. Though a young company in name, CEVA is actually a re-branded merger between contract logistics company TNT logistics and freight management business EGL. This means that CEVA’s heritage in China extends back to 1988.

With this dual operational approach, CEVA’s China business stake runs nearly the whole length of the supply chain. The firm boasts 6,000 employees in 70 locations in China, with 2007’s revenue totaling US$1 billion, including Hong Kong. Jing talked with CHaINA Magazine about how China’s rise up the value chain affects the logistics business and the prospect of industry consolidation.

How has your client mix evolved over the years?

Charlie Jing: About 45% is contract logistics, 45% is freight management, which includes international air and ocean, and a final 10% is in domestic services. Most of our clients are multinational companies (MNCs), but that doesn’t mean that they are foreign companies. We have Chinese MNCs as well, and these are the group of 52

JANUARY/FEBRUARY 2009

customers who have reached a scale that they are more than happy to outsource their headache to third-part logistics (3PL) companies.

More and more companies will differentiate themselves by their core competencies rather than trying to do everything by themselves.

So, today we are focusing on six key sectors and counting, and when we started, we really only had automotive. www.supplychain.cn

3PLFOCUS What joint ventures does CEVA currently have?

CJ: We have two. Our largest is with Shanghai Automotive Industry Corporation (SAIC), which we formed in 2002, called Anji-TNT. With SAIC, we do automotive logistics, which is one of the most complex operations in the industry because, today, nearly every car is customized in some way.

We provide contract logistics and some international freight business for SAIC’s key customers like Shanghai Volkswagen. It’s the largest automotive logistics company in China. The other is with [passenger and freight transport firm] Shanghai JY Group, which provides a line haul business. We use our own trucks that, basically, run a shuttle between key cities in China, doing milk-runs. We also outsource the local delivery to smaller cities, which creates a hub-and-spoke of coverage.

What trends have you seen among 3PL competition?

CJ: We’re basically competing with a group of foreign players in China and also competing with locals, so it requires us to differentiate ourselves. I think competition will get fiercer among both groups. When you look at the hundreds of thousands of logistics companies registered in China, it’s a very fragmented industry. You really have to make a decision between competing on price or on value. If you try to be everything for everyone, you may not succeed.

What is the consolidation outlook for the industry?

CJ: Even though the market is very big, with lots of potential, it just can’t afford to have hundreds of thousands of logistics companies. So I predict increased business alliances, joint ventures and mergers and acquisitions. One way foreign brands can enter China quickly is by buying a local company.

All you have to do is re-brand it, drive some efficiency into their operation and build-up your customer base.

How does operating in China differ from other places? www.supplychain.cn

CJ: People have said this in other industries as well, but you really need to come in with a long-term commitment. Even though the country’s development began 30 years ago, I think China is still at an early stage. Also, companies must be willing to make asset investments here and not go “light.” The strategy to just set up something like a brokerage works in well-developed economies, but in China, the sub-contracting environment is not very stable and there are regulation changes. If you don’t have your own assets under your direct control but rely on someone else’s assets under contract, you may come up against challenges.

What kind of effect will the new Ministry of Transport have on such bureaucracy?

CJ: It’s a little early to see how this new ministry will break down these old barriers, but I think the concept is good. Rather than having someone in charge of air transit, railroad, roads and water, you would assume that there will be more coordination across them and more standardization in terms of policies, safety and licensing regulations.

Hopefully, there will be more consistency.

If so, this would be a tremendous benefit to logistics companies What are your biggest costs?

CJ: Certainly, fuel costs are a big part, and everyone faces that. The second cost that is important, particularly for freight forwarding and domestic services is the labor costs.

Inflation or talent shortages can drive up this cost quite significantly. Also, there are many general costs dealing with regulations and licenses that you have to have in place, that [operating in] developed countries, you may not have to face.

What are the remaining holes in China’s logistics infrastructure?

CJ: First, I think the whole world recognizes the speed that China has built this infrastructure in the last 10-15 years. However, for instance, you have this highway system that is connected, but it is controlled by each individual province. And making sure you are in compliance in each province causes delays.

Also there is seaport and airport capacity.

Because China exports more than imports, you almost have to send empty containers in, so airlines and shipping companies have their own trouble optimizing this container space. And we, as a service provider in the middle, we are in charge of booking that space.

What kind of value-added services are you seeing high demand for?

CJ: This is increasing in areas such as vehicle inspection, repackaging or labeling. In some cases, we offer basic repair services or exchange services.

For instance, if I’m a cell phone manufacturer, rather than hiring a group of people to fix those broken cell phones, I can have a 3PL company do that for me, which I just pay a fee for. Then I can focus my attention on my core competency, designing new cell phones.

What are CEVA’s development plans?

CJ: I can’t tell you an exact number, but I think we’re looking to double China’s business in 3-4 years time. That’s a goal that many companies have. We have various programs in place to develop local talent – to recruit them, train them, and give them a career path. We hope that, over time, we’ll localize more and more key positions.

JANUARY/FEBRUARY 2009

53

C

INSIGHT

Managing the Buggest Supply Chain Risk of All:

onstant Change

Global companies are struggling to understand and mitigate risks across their extended supply chains in arguably some of the worst economic conditions of modern times. Their goal is to fulfill increasingly shrinking demand profitably during this downturn cycle and be well positioned for the next growth cycle. What follows is an excerpt from the AMR Research report “Managing the Biggest Supply Chain Risk of All: Constant Change.”

In a recent survey, conducted in October 2008, AMR Research asked 130 global companies about the risks that they face in their supply chains. To measure the trends in supply chain risk management, these findings were compared against previous surveys and to the respondent perceptions of these levels of risks from one year ago and for next year.

Noha Tohamy Noha Tohamy is vice president on AMR Research’s Market Services team, responsible for the research and analysis of market trends and technologies in supply chain risk management, strategic network design, inventory management and optimization.

China contributes the most risk in global supply chains Intellectual property infringement

50%

Supply chain security breaches

41%

Rising labor cost

35%

Regulatory compliance

33%

Supply failure

28%

Rising transportation costs

Volatile energy, commodity, and transportation costs wreak havoc even on the best-run supply chain Volatile fuel, energy, and commodity prices rank as the top three risks of our respondents. It has been breathtaking to witness the dizzying decline in the prices of oil this summer. Oil prices reached record highs in July, at around $150 barrel, before reaching sub-$50 a barrel in November.

When fuel and energy prices skyrocketed, many companies questioned much of their globalization assumptions: chasing low material and labor costs in countries like China with little concern about the cost of transporting raw materials, components, and ultimately finished costs to and from these countries. Rising transportation and energy costs validated recent trends to investigate nearshoring and onshoring options, where higher labor costs in near regions like Mexico or Eastern and Central Europe were offset by the savings in the price of fuel. Overall rising energy prices also gave momentum to the quest for alternative fuel sources and cleaner energy.

Rank

Compared to May 2008

IT risks

45% of the respondents identified this risk as the top risk

No change

82% believe that the level of this risk has increased form one year ago

55% believe that the level of this risk will increase one year from now

Rising transportation costs

2

42% of the respondents identified this risk as the top risk

The level of risk went down by 9 points, from 51% to 42%

85% believe that the level of this risk has increased from one year ago

58% believe that the level of this risk will increase one year form now

Commodity price volatility

3

38% of the respondents identified this risk as the top risk

The level of risk went down by 5 points, from 43% to 38%

75% believe that the level of this risk has increased from one year ago

55% believe that the level of this risk will increase one year from now

25% 23%

Natural disasters

17%

Immature physical infrastructure in offshore countries

15%

Rising energy costs Lower consumer spending

13% 8%

Source AMR Research, 2008

China is still perceived as the biggest risk When asked what country or region contributes the most risk to their supply chains, respondents overwhelmingly chose China as the top contributing region for 9 of the 15 risks, including intellectual property infringement, supplier and internal product quality failure, and security breaches. This creates a dilemma for many global companies that, on one hand continue to enjoy the advantages of cheaper material costs and labor wages in China as well as the potential to reach vast consumer markets, but on the other must continually reassess the pros and cons of operating in China.

Source: AMR Research, 2008

JANUARY/FEBRUARY 2009

25%

Shortage in managerial talent

Compared to One Year From Now

1

27%

Commodity price volatility

Compared to One Year Ago

Rising energy costs

54

52%

Supplier product quality failures

Top three supply chain risks (October 2008 survey results) Risk

57%

Internal product quality failures

The United States is the top contributing region for 5 out of 15 risks, including energy and commodity price increases and volatility, and lower consumer spending. Finally, India was the top contributing region when it came to immature logistics infrastructure.

For more information about AMR Research’s Supply Chain Planning and Execution Service or about becoming a client, contact info@amrresearch.com. www.supplychain.cn

www.supplychain.cn Shanghai: +86 (21) 51021617

Hong Kong: +852 8199982

Ho Chi Minh City: +84 (8) 35493711

China Now:

Doing Business in the World’s Most Dynamic Market In ‘China Now: Doing Business in the World’s Most Dynamic Market, co-authors Mark Lam and John Graham tackle everything from Chinese culture to history to economics and business dealings. Malcolm Ainsworth spoke with Mark Lam recently in Hong Kong about the book.

H

ow did you get the idea to write the book?

Mark Lam: The idea goes back 10 years ago, when I was co-teaching a class at the University of California, Irvine Business School with Dr John Graham. I remember clearly it was 1998 and we were preparing for a class.

I observed there was no book that gave a comprehensive deal on China. There were books that gave snippets of China background, and sensational books like “The Coming War with China” and other titles, but not one that gave a comprehensive view of China.

Why did you feel it important that readers understand the background about China when your book is called “China Now”?

ML: You need to understand the background if you are to understand China. We illustrated this by starting the book with the case of when GM and Ford went into China at around the same time. Ford had the lead, but somehow lost it to GM. To cut a long story short, Ford didn’t take the time to

56

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learn about China.

The second section talks about negotiations and closing a deal, while the third section talks about various parts of the country. China is very diverse, and oftentimes the best way to go into China is not straight to China. When you look at China, you have to understand that the concept of Greater China is very important. Hong Kong, Taiwan, Singapore and the Chinese diaspora have played a huge role in China’s development.

What is the goal of your book?

ML: We talk about China from the American perspective in the book, but if our Chinese counterparts were to read it, they would learn a lot too. Our aim was to promote cultural understanding. People come with prejudices and baggage of their past and don’t really understand China. We are not trying to write a best seller, we are trying to write something that is very useful for business people. But in order to do that they have to understand some background and some

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BOOKFOCUS legal structure of the country.

You talk in some length about ‘guanxi’ in your book, but from what Hong Kong businesspeople are telling me, its significance in China is dwindling?

ML: True, people grab all they can when they are in power, and when they get squeezed out, then you have to deal with new guanxi.

You wrote your book when George Bush was in power. Now that the Democrats will be taking over the reins, what changes do you think we will see in Sino-U.S. relations?

ML: The Democrats are more protectionist than the Republicans, but I think by and large we are living in a global economy. I personally don’t believe in big government, but I also think government should play a strong and clear role as to what is and what isn’t allowed -- the case in point being the financial crisis. Why did it happen? Because government just looked the other way. People thought self regulation would work, but there is no such thing as self regulation.

Singapore and Hong Kong being locked in constant competition, but Singapore has become a logistic kingpin and a regional financial center -- especially in private banking and wealth management, while Hong Kong is the region’s financial centre. China is so huge that I think it is going to develop into five or six polar regions.

Some people believe Hong Kong is becoming too China centric at the expense of its internationalism? As someone outside looking in, what is your view on that?

ML: I think Hong Kong was too British before, but now the pendulum has swung to the other extreme. It would be good for Hong Kong to be a little more international. Hong Kong must distinguish itself and remain the Pearl of the Orient, instead of getting sucked into China and losing its lustre.

What is the key takeaway message of your book?

ML: In a global economy, it is very important to understand the Chinese how they should be understood.

The Pearl River Delta is looking to develop into a service and advanced manufacturing hub, which is the same goal as the Yangtze River Delta. Can China have two service hubs?

ML: China is so big that I do not think this will be a problem. I remember when China opened up there was this argument about

This article is an abridged version of an interview conducted by Malcolm Ainsworth, Editor of The Bulletin, the Hong Kong General Chamber of Commerce’s magazine. The article is printed with their permission.

March 11, 2009

Shanghai, China

The role of human capital in supply chain management is becoming critical as firms face tight supply of skilled labor and increasing salaries in China.

The Supply Chain HR Summit is a one-day event packed with conference sessions, panel’s discussions and interactive debate with senior supply chain and HR leaders. Recruitment, leadership development, retention good practices, team management, corporate governance and ethics, effective training and the benefits of HR outsourcing are just some of the issues which will be addressed at this highly interactive event.

For more information, visit: supplychain.cn

www.supplychain.cn

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INSIDEVIEW

Managing Supplier Risks in an Economic Downturn

Assessing risk In fact, financial stress is one of the most common causes of supply chain quality and disruption. Yet most supply chain managers have limited, if any, training in assessing the financial viability of suppliers. Many purchasing agents and buyers have clerical or engineering backgrounds and don’t intuitively assess financial risks in supplier choices or decision criteria. Data around financial performance can also be relatively opaque and difficult to track. Now more than ever, understanding the full set of risks that impact the supply chain is critical – which means procurement groups need to raise their game.

Supply chain managers can substantially reduce the risk in their supply chains if they adopt a more balanced and proactive view of what drives risk. One way to mitigate risk is to understand their suppliers better. In China, many suppliers have broader footprints which could impact the overall structure of the business – for instance, an auto parts supplier may have a legacy steel foundry and also own real estate assets like hotels – any of these could increase the risk exposure of primary supply divisions.

Robert Barret is a Director in PricewaFocusing on the processes that drive risk rather than terhouseCoopers Performance Improvereacting to specific events will allow supply managers to ment (PI) practice. Based in Shanghai, be more proactive. Risk mitigation should be incorporated China, he has been working in South into the sourcing strategy and qualification along with the East Asia since 1995. Robert leads traditional Price, Quality, Delivery, Design selection criteria.

PwC’s Consumer/Industrial Products Regular monitoring and frequently a second source strategy and Supply Chain consulting groups in are necessary – but this should take a more insightful form China and is a member of PwC’s Global than traditional third-party plant audits and quality checks.

Operations and Procurement Council While quality checks are important, they are not a means to manage risk – they occur too late. o you know how your suppliers are doing?

While monitoring primary suppliers are a challenge in The answer to this question is critical to the integemerging markets, they are easy compared to secondary rity of any supply chain. Yet suppliers. Too often, second and third If you’re not looking many companies have little tier suppliers are unknown and their acvisibility into their suppliers and whether tivities even less transparent. Indeed, ‘under the hood’ at they are in trouble. This is especially how your suppliers manage their supthe production lines, true in China and other emerging marpliers – how quickly they pay, how they asking questions about kets, but it is true in mature markets as are related, how they enforce quality the parts suppliers well. Given the recent economic downand specifications will have a major imturn and resulting turmoil, every supply pact on the extended supply chain and and simply observing chain is at risk, whether due to trading its risk. other manufacturing partner bankruptcy or because of tradGiven this complex set of measures activities on a regular ing partner efforts to maximize profits. that drive quality and integrity across basis to gauge a Managing supply chain risk is a critithe supply chain, we believe it is time cal dimension of any supply chain manto enhance the mandate and skill set vendor’s output you ager’s job. While price was the initial foof supply chain and procurement orgacould be setting your cus of most low cost country sourcing nizations. As supply chains become business model up for initiatives, recent attention has been on more global, the skills and experience some real challenges quality and supply chain integrity. Probrequired to manage them become more lems with milk products, toys and pet complex and logistically difficult. Just down the road. food were simply the most high-profile because getting information is harder examples and are symptoms of greater in emerging markets does not mean it Scott Jenkins problems found earlier in the supply should be less important. director of Asian sourcing chain – problems that originated with “Make certain to look at your entire for Lowe’s Global Sourcing’s financial stress. supply chain - at all of the products you Shanghai office

D

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INSIDEVIEW purchase - and not only what you’re doing through your local sourcing office, said Scott Jenkins, the Shanghai based director of Asian sourcing for Lowe’s Global Sourcing.

“Even though we’re sourcing a lot of proprietary-branded merchandise in Asia to sell in our nearly 1600 North American retail stores a lot of the products in our stores come from all around the globe.”

A case in point The case of one of our multinational client’s with operations in China is useful to illustrate the challenges of supplier management. When one of their suppliers of a key raw material (we’ll call them “Supplier X”) suddenly began to exhibit erratic delivery behaviours after years of solid performance, the client was surprised. Meetings with Supplier X uncovered that they had taken on excessive amounts of debt in order to fund a series of acquisitions. When one of the acquisitions fell through, they were struggling to stay afloat.

Eventually the client sent in a multi-disciplined team to see if they could stabilize their supply from Supplier X. What they found was that the debt was just one problem.

The acquisitions had stretched the management team to its limits. They had also been diverting supplies of the raw material to another, larger company who was threatening to stop payment unless they improved their delivery performance, and our client bore the brunt of this diversion.

The client’s team began to work with their supplier’s team, and even had discussion with the other customer.

They helped to put together a plan to speed-up payments to Supplier X. They also moved from a purely order-based relationship to a planned volume and order basis to help Supplier X to plan their resource needs better. In return for the restructuring of terms, Supplier X agreed to provide more regular financial updates and to cooperate with reviews.

Mitigating risk There are a few things that global companies can do today to improve their supply chain risk management: Select the Right Suppliers • Perform adequate levels of financial and operational due diligence based on the potential risk of the supplier and the commodity of product being sourced • Do not rely on third party data sources for critical suppliers – obtain and validate all the relevant financial and other data • Investigate their portfolio of customers and understand where you rank • Investigate their suppliers and their supplier management process and ensure that it Improve Supplier Measurement and Monitoring • Develop a robust and risk-based supplier monitoring framework that leverages self-reporting, financial and operational data collection, industry information and on-site supplier reviews www.supplychain.cn

• Analyze risk data against established limits and other industry warning signs • Identify suppliers who are outside risk limits and enhance the monitoring process Develop Supplier Development and Contingency Plans • Based on the outcomes of the monitoring process, determine which suppliers need development and support programs • Perform targeted onsite financial reviews

• Advise supplier on performance improvement initiatives • Selectively provide financial support or modified terms of business • Identify alternative supply sources if necessary Develop a Supplier Workout Approach • Form a cross-functional workout team • Perform on-site assessment • Analyze strategic and financial alternatives • Determine appropriate course of action (Exit, Workout, Sale) • Execute preferred course The ever increasing shift to global sourcing offers unique opportunities for companies, but also exposes them to great risks. The new world order requires a review of how companies deal with their global trading partners. Left unmanaged, or assuming that the old ways of doing things are sufficient, can open the door to significant failures. Managed effectively, the rewards of global sourcing are rich and expansive.

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CSRFOCUS

China Hears Carbon Message Fears that China’s pre-Olympics carbon reduction initiatives were little more than a Games-related PR exercise appear unfounded. Just returned from a month-long speaking tour of Asia, Barloworld Optimus’ Global Business Development Director Fraser Ironside says that widely-publicised measures to limit traffic flows in Beijing remain in place several months after the close of the Games, while pollution in the city has improved dramatically as a direct result.

T

here is growing evidence that China is beginning to embrace key carbon reduction initiatives such as the UK based Carbon Disclosure Project – a coalition of 385 Institutional investors with $57 trillion assets under management – with Chinese companies now being targeted for carbon emissions reporting. “We have to be content for the moment that only five out of 100 Chinese companies responded to the call, but it’s a start and a significant one at that” Ironside said.

New initiatives are driving change More concrete’ evidence of the nation’s escalating social responsibility is China’s recent acknowledgement of the National Climate Change Programme and its own 5-year 20% energy reduction target by 2010.

Both moves coincide with the recent requirement for China Steel Corporation subsidiary Dragon Steel to pay Taiwanese $1.5 billion (US $ 45.5 million) a year for a plant expansion to cover 60

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emissions costs under the Greenhouse Gases Reduction Act in Taiwan, which has already revealed a 15% emissions reduction target by 2014.

Ironside’s comments come as the Solihull-based software developer and consultancy approaches the end of its first full year with a permanent Beijing consultancy base – a move that has already resulted in significant software and licensing gains for the company based on its network modelling tool CAST, inventory optimisation tool Optimiza and the carbon optimization module CAST CO2.

Addressing more than 200 delegates at the important CHaINA supply chain event in Shanghai in November 2008, Ironside said that growing social responsibility by the BRIC nations - Brazil, Russia, India and particularly China, in part driven by their recent inclusion into the Carbon Disclosure Project – is a significant development and a welcome boost to the Bali Roadmap formalised a year ago to find a UN Climate Treaty successor to Kyoto, pegged to conclude with the Copenhagen Summit in Dec 2009.

“Carbon measurement and reduction is now a global concern at board level for all the companies in the Carbon Disclosure Project and for the first time, Chinese companies are included in that list” he told delegates in his Green Stream presentation at the event.

Business opportunities presented by ‘being seen to be green’ emerge as the likeliest drivers behind the growing social awareness now being

Barloworld Optimus’ Global Business Development, Director Fraser Ironside says that China is really going green.

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CSRFOCUS demonstrated by China, Ironside noted. Pressure on tackling carbon exposure from the government, corporations and increasingly consumers, is likely to help companies’ share prices while still creating long-term competitive advantage.

The Beijing Games have been hailed as a social and political triumph for the nation whose trade volume last year reached a record high $2.1 trillion up 23% compared to the previous year; according to latest World Bank figures, China’s per capita GDP is now $2,460 – up from $1,740 in 2005; and at the same time, the Federation of Logistics and Purchasing has put China’s total logistics cost in 2007 at 4,540 billion Yuan – a rise of 18.2% compared with 2006.

Inefficiency spells opportunity But, he says, at around 10% of GDP, total logistics costs in China remain much higher than in America or Europe and on average, 90% of a manufacturer’s time is spent on logistics, with only 10% on manufacturing.

“We’ve calculated that in China, a product is typically handled 27

times between supplier and end-customer durThe last few years have seen ing the distribution process, and on average, huge amounts invested in a trucks only deliver 2740 tons a year with very new highway network with a low full-truckload percentage. But at last, clear plan to achieve evidence is emerging of its willingness to actively tackle the situation.”

“The last few years have by 2010, seen huge amounts invested in a new highway network with a plan to achieve 65,000 by 2020, km by 2010, 85,000 km by 2020, 120,000 km by 2030, and 175,000 km by 2050 by 2030, and – a staggering total when compared to the US’ existing by 2050.

Interstate highway network of 75,000km. In response Chinese companies are now intent on re-examining their supply chains with a view to . deciding the optimal approach The total logistics costs in to get their products to their China remain much higher than customers, and at the same in America or Europe. time they’ve been listening to the sustainability message.

Technology is now playn average, of a ing the lead role in reducing manufacturer’s time is spent on carbon as tighter new regulalogistics, with only tions governing carbon emison manufacturing. sions take effect in the wake of last year’s Bali summit.

Across the rest of the world, recent sustainability measures include the UK Climate Bill demanding 60% reduction in emissions by 2050; EU agreement to cut emissions by 20% by 2020; debate of the LiebermanWarner Bill in Congress in the United States, aiming to reduce emissions by 63% of 2005 levels by 2050; independent California legislation implementing Carbon Taxes and requiring a 25% reduction by 2020; and a British Columbia Carbon Cap and Trade legislation introduced in Canada in April this year Barack Obama’s plans to invest in alternative fuels and renewable energy – including a plan to increase America’s energy efficiency and create 5,000,000 new ‘green’ jobs – are also positive news. Other measures on the cards in the wake of the US presidential election include a speeding-up of federal carbon reduction targets as well as the introduction of local taxes and other measures including carbon trading.

Despite only being launched in March this year, major deals using Barloworld’s “green” friendly technology have already been struck with Colgate Palmolive, Safelite, DHL Exel, CEVA, Lexian, Belron to name a few.

In China, a product is typically handled 27 times between supplier and endcustomer during the distribution process.

65,000 km 85,000 km

120,000 km 175,000 km

10% of GDP

O

90%

10%

A worker walks past rolled steel at a factory in central China’s Hubei province. China Steel Corporation subsidiary, Dragon Steel had to pay Taiwanese $1.5 billion (USD $45.5 million) a year for a plant expansion to cover emissions costs under the Greenhouse Gases Reduction Act in Taiwan, which has a 15% emissions reduction target by 2014.

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AWARDNOTICE

Received an award recently, let us know at info@supplychain.cn

Excellence across the supply chain

Dow, Eaton, PG Logistics and Wal-Mart honored with their partners at the 2008 CHaINA Awards For the fourth year in row, the Council presented its CHaINA Awards to celebrate best practices and superior achievements enabled by supply chain management in China. The CHaINA Awards are aimed to recognize industry practitioners; nominations are jointly submitted between the manufacturers, retailers and their service providers. For more info, visit the event page at http://www.supplychain.cn/en/cev/354 Wang and Li wins Recruitment Firm of the Year award Wang & Li Asia Resources was recently named the 2008 Recruitment Firm of the Year in China at the 11th Annual Human Resources Awards in Shanghai sponsored

by China STAFF magazine. Wang & Li was recognized for this award over six other distinguished recruitment firm finalists. Short listing for the award was determined by a leading panel of human resources industry executives.

Schaeffer receives 2008 “AI Outstanding Product Award�

Schaeffer received the award alongside companies such as Toyota Material Handling, Jungheinrich, Rockwell, Mitsubishi and others. The award scope included a variety of equipment, software and systems. This activity was hosted by Automobile IndustryChina, co-hosted by MM-China.

Agility wins Supply Chain Innovation Award Agility won the prestigious Supply Chain Innovation Award at the recent Supply Chain Asia Awards in Shanghai. Agility landed the highlight award of the evening, beating competition from other leading global logistics companies. Award judges included academics and logistics industry leaders from across the Asia Pacific region.

CEO, Larry Wang, along with GM, Rita Dong, of Wang & Li Asia Resources.

Soh Bin Tian, Regional Manager, SSI Schaefer Systems International (Kunshan) Co Ltd.

Award presented to Olaf Tauschke, Agility Senior Vice President, APAC by Neil Morrison, Partner - Supply Chain, Stones International.

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With talent at a premium, CHaINA keeps an eye on which executives are moving where.

Barbara Kux joins Siemens board as Head of Supply Chain Barbara Kux is to become the first woman on the board of electronics and engineering company Siemens in 160 years. The former Philips CPO joins the firm next Monday to take control of the group’s new supply chain management group.

Her position will also make her the only female board member of any company trading on the DAX 30, Germany’s stock market of the country’s top 30 firms.

As head of supply chain management she will be responsible for the group’s €42 billion (£36 billion) worldwide procurement spend. She will also become the company’s Chief Sustainability Officer, a role she also held at Philips. Kux worked at Philips from 2003 until September this year and has also worked at Ford, Nestlé and consultancy McKinsey.

In 2007 she was ranked as Fortune magazine’s nineteenth most powerful woman in business.

www.supplychain.cn

CB Richard Ellis appoints Cary Chan as Senior Director of Retail Consultancy As Head of Retail Consultancy for CB Richard Ellis, Greater China Cary Chan will drive the Company’s strategy on retail consulting and collaborate synergies across the region. Ms. Chan has over 12 years of experiences in the retail property industry. Prior to joining CB Richard Ellis, she was Head of Retail Consultancy for Jones Lang Lasalle’s Hong Kong office, where she was responsible for driving retail development concepts as well as strategizing on marketing and leasing initiatives.

Cary obtained her MBA degree from University of Warwick and Bachelor of Arts Degree form the University of Hong Kong. She is a member of International Council of Shopping Centres and a holder of Estate Agent’s License.

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SOURCINGFOCUS

Low-Cost Country Sourcing – the past, the present. The future?

Guillaume de Roquefeuil For decades, low-cost country sourcing (LCCS) has been one of the most popular sourcing strategies. In Europe or US, there doesn’t seem to be an industry that hasn’t benefited in some way: from labour-intensive manufactured products produced using Chinese labour, call centres staffed with low-cost English-speaking workers in India, and IT work performed by low-cost programmers in both India and Eastern Europe.

Huawei expects Asia Pacific contract sales (excluding China) to reach USD3.9 billion in 2008. The company is doing increasing R&D in China.

According to a recent IDG report by Simon Ellis, LCCS should be than damning the supplier, the question arises as to whether adconsidered a shortsighted strategy in the long-term. Ellis suggests equate checks were put in place by Mattel to ensure that its high that the focus shouldn’t be on LCCS but ‘profproduction standards were met. And as Mattel itable proximity sourcing’ (PPS), which encourfound out, it, not the factories, became legally High-cost countries, ages organisations to look at “balancing cost vulnerable when this came to light and the scanespecially those and service, with green or sustainability also indal damaged its brand significantly. whose exports creasingly playing a role in the decision-making This type of high-profile scandal is extremeprocess.” Examining the chain in this way can ly damaging to low-cost countries, even though compete with lowcertainly show that organisations can be blindin this case it was the responsibility of Mattel cost countries will be ed by initial savings associated with LCCS, withto stipulate what processes should be used and extremely threatened out considering whether there may be a more to regulate their suppliers. When selecting supin coming years and cost-effective and ethical alternative in the longpliers in low-cost countries, Western organisawith good reason term. But this fails to take into account the detions can be guilty of perceiving Asian supplivelopments and innovations that countries that ers as having low standards, therefore opting to provide LCCS are undertaking, that still make these countries excelsource from Eastern European countries. lent options for organisations in the West.

Low standards from LCCS – an unfair assumption?

Problems with production However this perception of low process standards in Asian low– who’s to blame? cost countries is undeserved. Countries such as China are becomThis is not to say that there are not problems with sourcing from ing more competitive as training schemes for labourers are now LCCS suppliers and there are instances where problems arise, parproducing more highly-skilled workers and factories that operate to ticularly in terms of quality control regarding materials. For examEU and US standards and at lower costs than Eastern European prople, in August 2007, Mattel’s Fisher-Price division announced it was duction can deliver. Even tasks such as high-tech laboratory work, recalling 1.5 million preschool toys because of lead paint used in which were previously perceived as too technical for these counproduction by one of the company’s suppliers in China. But rather tries, are increasingly being catered for. At the end of September 64

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SOURCINGFOCUS 2008, Huawei, a Chinese firm specialising in telecoms solutions, had over 96,000 employees, of whom 44 per cent were dedicated to research and development.

Overcoming the challenges of LCCS – who you gonna call?

It is clear that suppliers from low-cost countries are evolving and that they should not be discounted when it comes to the global sourcing of higher-calibre products. But this is not to say that it is an easy process for organisations to assign suppliers within these countries. Indeed, a 2007 report from AMR Research points out that low-cost country sourcing readiness includes “understanding and dealing with the additional risk of cultural differences, currency, time zones, connectivity, distance, logistics constraints, language and political instability. Doing low-cost country sourcing right involves more than just looking at costs and companies must revisit the strategy regularly.” As such, many medium-to-large sized organisations can struggle to get their sourcing right if they decide to tackle all of these issues themselves.

This Article was contributed by BravoSolution, an international leader in Supply Management solutions and consultancy services, www. bravosolution.com. The company has a network of 12 offices operating in Italy, France, Spain, UK, China, USA, the Netherlands and Mexico, manned by a team of 400 professionals from as many as 24 countries.

Photo by ImagineChina

The challenges for LCCS in 2009 Global concerns such as increasing energy prices, political alliances and the import legislation of bodies such as the EU can also significantly affect how an organisation sources and it is with these concerns that organisations need to decide where LCCS fits within their overall global sourcing strategies. For example, a high cost of transportation could mean that although manufacturing a product in Taiwan is cheaper, production in Eastern Europe is a more viable choice for a European organisation due to the high cost of shipping.

Other recent global changes have also affected sourcing. In-

creasingly, more consideration is being given by the EU and other governing bodies to issues such as green legislation, which can result in fines for the buyer if a product made with the wrong process is shipped into the region. As such, Ellis’ argument for ‘profitable proximity sourcing’ appears stronger, but again many suppliers in low-cost countries are making great strides in improving their green credentials and so opting for a low-cost provider can still meet these requirements.

In 2009, as the credit crunch continues to bite, there will be an increase in this type of issues- based decision-making. Sourcing from low-cost countries will be highly relevant as receiving a high return on investment is still a pertinent aspect of global sourcing. Highcost countries like Japan who are looking to compete on a global level will find themselves threatened by their low-cost country neighbours and competitors whose production costs, particularly labour, are so low they make price wars almost unwinnable. Indeed, many organisations from higher-cost countries such as Japan will continue to shift their production to lower-cost countries in order to stand a chance of competing on price.

High-cost countries, especially those whose exports compete with low-cost countries will be extremely threatened in coming years and with good reason. LCCS has been the focus for many organisations for many years and continues to do so. There is no reason that this will not be the case in the future as well.

After Mattel’s Fisher Price division recalled 1.5 million toys in August 2007, questions arose whether Mattel should be monitoring suppliers more closely.

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CLASSIFIEDLISTINGS

LOGISTICS SERVICE PROVIDERS

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ALLWINGS LOGISTICS 1688 Sichuan North Road, 26/F Fude Business Centre South Shanghai 200080, People‘s Republic of China +86 21 6306 3134 www.alls-sh.com

CEVA LOGISTICS

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LOGISTICS SERVICE PROVIDERS

KERRY EAS LOGISTICS No 21,xiaoyun Road,North Dongsanhuan Road,Chaoyang District,Beijing,100027 北京市朝阳区东三环北路霄云路21 号大通大厦，100027 +86 10 6461 8899 www kerryeas.com

Shanghai DAJ N LOGISTICS 3000 South Lia-hua Road, Prologis Logistics Park,Minhang,Shanghai,201109 莲花南路3000号，普洛斯闵行物流园区内。 邮编：201109。 +86 21 6309 8336/3430 6999 www.dajin.com.cn

KUEHNE & NAGEL Block 1, 11-16F 1868 Gong He Xin Road Shanghai 200072, P R. China 共和新路1868号大宁国际商业广场 第一幢11-16楼, 邮政编码：200072 +86 21 2602 8000 www kuehne-nagel com

DERET LOGISTIQUE Suite 1703 Shanghai Bund International Tower, 99 Huangpu Road, Shanghai, 200080 上海市黄浦路99号 上海滩国际大厦 1703室，200080 +86 21 6307 5086 www.trans-access com cn DHL 18/F, Tomson Commercial Building, 710 Dong Fang Road, Shanghai 200122, China 上海市东方路710号汤臣金融大厦18楼邮编 200122 +86 21 5058 1111 www.dhl com ELEE 375 Kefu Road, Nanxiang Town, Jiading District, Shanghai, China 中国上海嘉定区南翔镇科福路375号 +86 21 39124360 www.eleechina.oom FM LOGISTIC 2099 Xinqun Road,Pinghu EDZ, Zhejiang Province. 浙江省平湖经济开发区新群路2099号 +86 573 8527 3072 www.fmlogistic com

THE MAGAZINE FOR GLOBAL SUPPLY CHAIN LEADERS

Editorial Intern Wanted

CHaINA Magazine, Asia’s leading operations magazine is looking for an enthusiastic and talented intern to join our editorial team.

Entering our third year, CHaINA Magazine is a bimonthly trade publication focused on supply chain and logistics in China and other developing markets in the Asian region. The magazine is distributed in print and online to senior executives in trade, manufacturing and a range of other functions. We have a strong focus on content and rely on freelancers and industry people to provide high quality content.

Job Duties: The candidate will have the opportunity to research, write and edit articles, do interviews, cover events, develop story ideas and get involved in all aspects of magazine production.

Excellent opportunities will be provided for meeting and networking with a wide range of senior executives providing exposure to many companies and industries.

Requirements: Native English speaker with background in Journalism, English or communications Strong interest in business issues in China and region Competence in writing, editing and attention to detail Resourceful and able to work independently Able to work as part of team in a deadline environment Compensation: Monthly stipend

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Contact Russel Beron: rberon@supplychain.cn www.supplychain.cn

LOGISTICS SERVICE PROVIDERS

CHINDEX INTERNATIONAL 2F, Tower B, China Arts&Crafts Building, 103 Jixiangli, Chaoyangmenwai, Beijing, 100020 北京市朝阳区朝阳门外吉祥里103号中国 工艺大厦B座2层 邮编:100020 +86 10 6552 8822 www.chindex.com

HAVI FOOD SERVICES 6 Xingsheng Jie, Beijing Economic & Technological Development Area, Beijing, 100176 北京经济技术开发区兴盛街6号,100176 +86 010 6788 3335 HMG GROUP Suite B-E, 10F International Shipping & Finance Building,No.720, Pudong Avenue,Shanghai, China 中国上海浦东大道720号国际航运金 融大厦10楼B-E座 +86 21 5036 8000 www.hmglog.com ID LOGISTICS Room 19D, Dong Tai Plaza, No.309 Tanggu lu,shanghai 上海市塘沽路309号19D +86 21 6306 7083 www.id-logistics com IDS LOGISTICS 8/F Tower Block, LiFung Plaza NO.2000 Yishan Road, shanghai 201103 上海市闵行区宜山路2000号利丰广场 主楼8楼，201103 +86 21 2416 4700 www.idslogistics com IPS LIMITED 01-11 YouYou International Plaza 76 Pujian Road, Pudong Shanghai, China 200127 +86 21 6165 9288 www.ipssupplychain.com

LINFOX ROAD TRANSPORT 26-F, Cross Region Plaza, 899 Ling Ling Road, Xuhui District, Shanghai 200030, China 上海市徐汇区零陵路899号飞洲国际广场26 楼F座 +86 21 5150 6699 www linfox.com LINKSTAR LOGISTICS 49A, 199 North Riying Road, Waigaoqiao Free Trade Zone, Shanghai, 200131 上海市外高桥保税区日樱北路199号49A, 200131 +86 21 5046 1666 www linkstarlogistics com LOG FASHION 375 Kefu Rd, Nanxiang Town, Jiading District, Shanghai, 201802, China +86 13917614568 www logisfashion.com Maersk Logistics 24/F, Tian An Centre, No. 338 Nanjing Road, Shanghai, 200003 中国上海黄浦区南京西路338号天安中心24 楼 200003 +86 （21）23062666 www maersk-logistics.com MENLO Golden Eagle Mansion, 1518 Min Sheng Road, Tower A 13th Floor, Shanghai, P.R.China 中国上海浦东新区民生路1518号金鹰大 厦A座13楼 +86 21 6160 1190 www menloworld.com PTL 1603, Kun Yang Plaza, No. 798 Zhao Jia Bang Rd, Shanghai, China 200030 上海市肇家浜路798号坤阳国际商务广场 1603室 邮编200030 +86 (21) 6445 3190 www ptl-group.com RUNBOW LOGISTICS Office #207, Building 39 No. 2688 Yindu Road 201108 Shanghai, China +86 (21) 5443 1002 www runbow-logiitics com SCHENKER Room 3802-3806, Raffles City (Office Tower) No 268 Xi Zang Zhong Road, Shanghai 200001, P R.China 上海市黄浦区西藏中路268号来福士广场 3802-3806室邮编：200001 +86 21 6170 8888 www schenker.com.cn SCHNEIDER LOGISTICS UC Tower,Suite 1605,No 500 Fu Shan Road,Shanghai,China 上海浦东福山路500号城建国际中心1605室 +86 21 5058 7970 www schneider.com

www.supplychain.cn

CLASSIFIEDLISTINGS

Director Procurement, China Our client has grown to become one of the largest global producers of flexible printed circuits (FPC) and flexible printed circuit assemblies (FPCA). With operations in USA and China, and offices in Europe and the Pacific Rim, they offer a global service and support base for the design; manufacture and assembly of flexible interconnect solutions.

Global MNC U Senior Sourcing Role U Suzhou, China Based Reporting to the Vice President and Managing Director, China and working closely with other regional functional leaders, you will be responsible for directing and managing all activities related to the procurement of materials, parts, components and equipment as well as site logistics and warehousing functions for China. As a key member of the Senior Management Team your key tasks include driving significant cost reduction for both direct and indirect materials, improvement of product quality and consistent material supply.

You must have a minimum of 10+ years of significant material engineering/procurement experience with exposure to a high technology, high volume, global manufacturing organisation. Industry knowledge is highly desirable. An independent and proactive selfstarter, you will have acute commercial sense with an outstanding track record of financial savings and strategic procurement. Exceptional communication and negotiation skills are essential for the position as well as written and verbal fluency in English and Mandarin.

To apply for this position, please go to www.michaelpage.com.cn/apply quoting reference number H326770 or call Josh Hollway on (+86 21) 3222 4758 for further details. Data collected will be used for recruitment purposes only.

Shanghai Tian Cai Network Co. Ltd., under license from Michael Page International Group PLC.

LOGISTICS SERVICE PROVIDERS SHENZHEN ST-ANDA LOGISTICS 18/F, Times Plaza, No. 1 Taizi Road, Shekou, Shenzhen, PRC 518067 深圳蛇口太子路1号新时代广场1801室 邮编518067 +86 755 2681 9188 www.st-anda.com TOLL AUTO LOGISTICS D1/E2, 31F, East Building, Hi-Tech King World, No. 668 Beijing East Road, Shanghai Postcode 200001 China 中国上海市北京东路668号 科技 京城东楼31楼D1/E2 邮编：200001 +86 21 5308 2266 www.tollgroup.com

SINOTRANS 7th Floor, Contract Logistics Division, Sinotrans Plaza A, A43, Xizhimen Beidajie, Beijing 100044 北京西直门北大街甲43号 金运大厦A座7层 合同物流事业部100044 +86 10 6229 5600 www.SinoTransOne.com

www.supplychain.cn

LOGISTICS SERVICE PROVIDERS UPS 23F and 33F China Insurance Building, 166 Lujiazui Dong Road, Pudong, Shanghai, 200120 上海市浦东新区陆家嘴东路166号中国保险 大厦23楼,200120 +86 21 3896 5599 www.UPS.com

LOGISTICS SERVICE PROVIDERS

CONSULTING FIRMS

YATFAI Logistics (Holding) Limited 39H, Fortune Building, 88 Fuhua San Road Futian District, Shenzhen, Guangdong Province, P.R.C. 广东省 深圳市 福田区 福华三路88号, 财富 大厦 39楼 H座 +86 0755 3336 6898 www.yatfai.com

DELOITTE CONSULTING Room 2701-2704 Bund Center, 222 Yan An Road East, Shanghai 200002 上海市延安东路222号外滩中心 2701-2704室200002 +86 21 6141 8888 www deloitte com

CONSULTING FIRMS

YRC LOGISTICS Room 1307-08 Lan Sheng Building No. 8, Huai Hai Road (M) Shanghai 200021, P.R.C. 上海淮海中路8号兰生大厦 1307-08室 邮编： 200021 +86 21 6137 7668 www.yrclogistics.com WERNER GLOBAL LOGISTICS South 23/F Harbour Building 1 Fenghe Road, Shanghai, China 上海市浦东新区丰和路1号港务大厦南23楼 +86 21 3887 9520 www.werner com

ACCENTURE 30F, Central Plaza, No. 381 Huaihai Road, Shanghai, 200020 上海市淮海中路381号中环广场30楼 邮编：200020 +86 21 2305 3333 www.accenture.cn ARAIA Supply Management Consultants Suite 1709, No. 93 Huai Hai Zhong Road Shanghai 200021 Republic of China 中国上海市淮海中路93号大上海时代广场办 公楼1709室, 200021 +86 21 6391 8356 +86 139 16217254 www.araia.com BAKER & McKENZIE Suite 3401 China World Tower 2 China World Trade Center, Jianguomenwai Dajie Beijing 100004, PRC +86 10 6535 3800 www.bakernet.com BARKAWI A 705, Dong fang Road, Eton Place, Pu dong New District, Shanghai, P.R. China 200120 上海东方路裕景国际商务广场A705室 +86 21 6859 9686 www.barkawi.com

CHA NALYTICS G9 Gamma Tower, Sigma Soft Tech Park, 7 White Field Main Road, Bangalore, Karnataka, India, 560066 +91 80 4125 4309 www chainalytics.com

DEMAND MANAGEMENT SYSTEMS PO Box 6180, Norwest Business Park, Baulkham Hills BC NSW 2153 Sydney, 2153 Australia +612 9659 4555 DRAGON SOURC NG Suite 1502, Jin Tian Di International Mansions 998, Renmin Road Shanghai, 200021, P.R.China 上海市人民路998号今天地国际大厦 1502室, 20002 +86 21 61413955 www dragonsourcing com ET2C International Inc 13F, East Tower, King World Hi-Tech Building, 668 Beijing East Road, Shanghai 200001 上海北京东路668号科技京城西楼13F 200001 +86 21 5308 1220 www et2cint.com

JANUARY/FEBRUARY 2009

67

CLASSIFIEDLISTINGS

CONSULTING FIRMS ESTABLISH Room 609, Tian An Centre No. 338 West Nanjing Road Shanghai 200003 上海南京西路338号天安中心609室 邮编 ：200003 +86 21 6359 1980/0486 www.establish cn HUDSON Unit 2302, 23/F Hongyi Plaza 288 Jiujiang Road Shanghai, China 200001 上海市九江路288号 宏伊国际广场23楼2302室 +86 21 2321 7888 www.hudson com BM GLOBAL BUS NESS SERVICE 北京市朝阳区工体北路甲 2号 盈科中心 BM 大厦，25层 邮编：100027 +86 10 6361 8888 www.ibm com/cn/zh/ NTEGRATED DECISION SYSTEMS CONSULTANCY No 511-1-302, Jingsong Wu Qu, Chaoyang District, Beijing, China 100021 中国北京100021 朝阳区劲松五区511-1-302 +86 134 6675 0455 www.idsc com sg LLOYD ‘S REGISTER 20F Ocean Towers, 550 Yan An Dong Road, Shanghai 200001 上海市延安东路550号海洋大厦20楼， 邮编：2000012 +86 21 5158 5700 www.lr.org LOGISTICS RECRUITMENT 2B, Apollo Building No. 1440, Yan An Road © Shanghai 200040 上海市静安区延安中路1440号 阿波罗大厦2B 邮编： 200040 +86 21 6248 8606 www.logisticsrecruitment.com.cn LOWENDALMASAI 1505-1506 Hai Tong Tower, 689 Guangdong Road, Shanghai, 200001 上海市黄浦区广东路689号海通证券大厦 1505/1506室, 200001 +86 21 6341 1255 www.lowendalmasaichina.cn MANPOWER 36F, Xinmei Union Square, 999 Pudong Road (S), Shanghai, 200120, China 上海市浦东南路999号,新梅联合广场36楼 邮编200120 +86 21 5878 2618 www.manpower com cn MB SIM TECHNOLOGY Bldg. 8, 865 Changning Road, Shanghai 200050, P.R. China 上海市长宁路865号8号楼5楼, 200050a

CONSULTING FIRMS +86 21 6240 5529 www.mbtech-group com MICHAEL PAGE INTERNATIONAL 601-603 Shanghai Kerry Centre 1515 Nanjing Road (West) Shanghai 200040, China 上海南京西路1515号嘉里中心601- 603 邮编200040 +86 21 3222 4758 www.michaelpage com cn Resources Global Enterprise Consulting (Beijing) Co., Ltd Shanghai Branch Company Room 2705-06, Lippo Plaza, 222 Huaihai Middle Rd, Lu wan District, Shanghai, 200020 上海市卢湾区淮海中路222号力宝广场 2705-06室 Tel: +86 21 6386 8700 Fax: +86 21 6386 8712 www.resourcesglobal.com 7 ROCK INVESTMENT ADVISORY 7/F Crystal Century Tower, 567 Weihai Lu, Shanghai 200041 上海市威海路567号晶彩世纪大厦7楼 200041 +86 21 6288 8766 www.sevenrock.com SUPPLY CHA N CONSULT NG Suite 404, 20 Donghu Road, Xuhui District, Shanghai, CHINA 200031 上海市徐汇区东湖路20号404室 +86 21 5404 0818 www.supplychain-consulting.com TUV RHE NLAND 5-6/F AZIA Centre, 1233 Luijiazui Huan Lu, Shanghai,200120 上海市陆家嘴环路1233号汇亚大厦5/6楼, 200120 +86 21 6108 1188 www.chn.tuv com

PricewaterhouseCoopers Zhong Tian CPAs Limited Company 11/F PricewaterhouseCoopers Center, 202 Hu Bin Road, Shanghai 200021, China

中国上海市湖滨路202号普华 永道中心11楼 +86-21-2323-8888 www.pwccn.com

REAL ESTATE SERVICES

REAL ESTATE SERVICES

AMB PROPERTY CORPORATION Suite 2908, Plaza 66 II, 1366 Nanjing Road West, Shanghai 200040, China 中国上海南京西路1366号恒隆广场二座 2908单元 +86 21 6135 1688 www.amb.com

Suite 805, Kerry Centre, 1515 Nanjing Road (W), Shanghai, 200040 上海市南京西路1515号嘉 里中心805室 200040

CB RICHARD ELLIS Suite 3201 K Wah Center 1010 Middle Huaihai Road Shanghai 200031 上海淮海中路1010号嘉华中心3201室 200031 +86 21 2401 1200 www.cbre.com.cn

BAOWAN INTERNATIONAL LOGISTIC +86 21 3379 4008 www.blogis.com.cn COLLIERS NTERNATIONAL PROPERTY CONSULTANS 16/F Hong Kong New World Tower, 300 Huaihai Zhong Road Shanghai, 200021, PRC 中国上海淮海中路300号 香港新世界大厦16楼 邮编 200021 +86 21 6141 3688 www.colliers.com/china DTZ 42-43F,Plaza 66, Tower 2, 1366 Nanjing Road West, Shanghai 200040, China 中国上海南京西路1366号恒隆2期42-43楼 邮编200040 +86 21 2208 0213 www.dtz com/cn

+86 21 5298 6622 www.gazeley.com KNIGHT FRANK Rm 1208 Evergo Tower, 1325 Middle Huaihai Road, Xuhui District, Shanghai 200031 中国上海市徐汇区，淮海中路1325号，爱美 高大厦1208室，200031 +86 21 6445 9968 www knightfrank com NEW CITY INVESTMENT MANAGEMENT Room 2602 Bank of Shanghai Tower, 168 Yin Chen Middle Road, Shanghai, China, 200120 上海银城中路168号上海银行大厦2602室, 200120 +86 21 3896 6388 www newcitycorp.com PROLOGIS water Port Business Plaza, Luchaogang, Nanhui, Shanghai 201308 上海南汇芦潮港上海深水港商务广场B座10 楼，201308 +86 (21) 6528 1992 www shtslp.com

GOODMAN GROUP 2107 - 2109, Shui On Plaza, 333, Huai Hai Road (M) Shanghai 200021 P.R.China 上海淮海中路333号瑞安广场2107-2109室 邮编：200021 +86 21 6133 2000 www.goodman com GSE 27C Industry Building, 18 Cao Xi Bei Lu, Shanghai, 200030 上海市徐家汇漕溪北路18号实业大厦27C, 200030 +86 21 6427 9180 www.gsegroup com JONES LANG LASALLE 25F, Plaza 66 Tower 2, 1366 Nanjing Road West, Shanghai 200040 上海市南京西路1366号恒隆广场2期25楼 200040 +86 21 6393 3333 www.joneslanglasalle.com.cn

MAPLETREE LOGISTICS TRUST MANAGEMENT No 500 Zhangyang Road, Pudong New District Level 14 Unit A-D, China Resources Times Square Office Tower Shanghai 200122 上海市浦东新区张杨路500号华润 时代广场办公楼14楼ABCD单元 200122 www.mapletreelogisticstrust.com

SourceMakeDeliver

Game Simulation

The Council

invites you to discover the benefits of this learning solution.

®

CLASSIFIEDLISTINGS

MagicBusCreative Grant-oh! Buchwald

Portrait photos • Event coverage • Product shots • Onsite/Facility photography

BARLOWORD OPTIMUS 35/F UOB Plaza 1, 80 Raffles Place, Singapore 048624 +65 6248 4722 www.barloworldoptimus com BRAVOSOLUTION BravoSolution China CO., Limited 19F-08, 129 Yan An Road West, Chinese Overseas Building Shanghai 200040, PR China 上海市静安区延安西路129号华侨大厦19楼 08室,200040 +86 21 6145 8500 www.bravosolution com DESCARTES SYSTEMS 4106 China Development Bank Tower, No 500 Pudong Road (S), Shanghai, 200120, P.R. China 中国上海浦东南路500号国家开发银行大厦 4106室 200120 +86 21 6109 5785 www.descartes.com NFOR 15 F Raffles City Office Tower 268 Xizang Zhong Road Shanghai 200001 上海市西藏中路268号来福士广场15楼 +86 21 5359 9666 www.infor.com EMPTORIS Emptoris, Inc. PO Box 173, Clementi Central Post Office, Singapore 911206 +65 6778 6395 www.emptoris.com JDA SOFTWARE 2905 United Plaza, 1468 Nanjing Xi Road, Shanghai 200040 上海市南京西路1468号 中欣大厦2905室 200040 +86 21 6289 7979 www.jda.com MANHATTAN MANHATTAN ASSOCIATES SOFTWARE Unit 2110, 21/F, Shui On Plaza, 333 Huaihai Zhong Lu, Shanghai, 200021 Shanghai, 200021 China 上海淮海中路333号瑞安广场21楼2110室 www.manh.com

MATERIAL HANDLING EQUIPMENT +86 (21) 6124 9688 - 866/862 www.lxe com

LOSCAM PACKING EQU PMENT LEAS NG Room 508, No. 707 ZhangYang Road, Pudong, SHANGHAI 200120 上海市浦东新区张扬路707号508室 200120 +86 21 6104 8156 www.loscam com

SCHOELLER ARCA SYSTEMS Schoeller Arca Systems 舒乐阿卡 Shanghai China 上海 中国 Unit 5/A Guangdong Development Bank Tower No. 555, Xu Jia Hui Road 徐家汇路555号,广东发展银行大厦5楼A 座 200023 +86 21 6390 1261/62 www.schoellerarcasystems com

LXE Room 03B,5/F Office Tower Huaihai Road(C) 200031 Shanghai, China 上海市淮海中路1045号淮海国际广场办公楼 0503室

phone: +86 136 4165 6924 email: magicbuscreative@mac.com www.flickr.com/photos/gmartini IT SOLUTIONS AND SOFTWARE

MATERIAL HANDLING EQUIPMENT +86 21 6317 8830 www.bps-group net

To take out an ad in CHaINA, contact us: tel: +86 (21) 5102 1617/18 email: ads@supplychain.cn

IT SOLUTIONS AND SOFTWARE REDPRA R E Cloud-9 Mansion 7F 711 No.1118, West Yan‘an Road Shanghai 200052, P.R.China 中国上海市延安西路1118号 龙之梦大厦7楼711室 邮编：200052 www.RedPrairie.com SEEBURGER 1409B Cimic Tower800 Shangcheng Rd. Shanghai, PRC, 200120 中国上海浦东新区商城路800号斯米克大厦 14层1409B, 邮编：200120 +86 21 5835 4735 www.seeburger cn TRADECARD F1101-02, Block A, Hailrun Complex, No 6021 ShenZhen Blvd, ShenZhen.

P.R.C. (518040) 深圳市福田区深南大道6021号喜年中心A座 1101-02室（518040） +86 755 8830 9030 www.tradecard.com MATERIAL HANDLING EQUIPMENT BPS GLOBAL GROUP Unit 3104,Tower 1 Kerry Everbright City 218 West Tian Mu Road 200070 Shanghai, China 上海市闸北区天目西路218号嘉里不夜城第 一座3104室 邮编200070

CHEP 40/F, Suites 8-10, 2 Grand Gateway, 3Hongqiao Road, Shanghai, 200030 上海市虹桥路3号港汇 二座40楼08-10室邮 编：200030 +86 21 6127 2488 www.chep.com

THE MAGAZINE FOR GLOBAL SUPPLY CHAIN LEADERS

Key Account Manager CHaINA Magazine, part of the Global Supply Chain Council, www.supplychain.cn, is looking for a Key Account Manager to handle sales for the variety of media products we offer to a diverse set of clients.

Entering our third year, CHaINA Magazine is a trade publication focused on supply chain and logistics in China and other developing markets in the Asian region.

Job Duties: With major responsibilities involving selling both print advertising space in the magazine and banner ads in our electronic media, the position will involve promoting and selling conference sponsorship package, directory listings and other account management activities.

Requirements: Knowledge of advertising, trade publications or trade show industry is advantageous At least two years of sales or business development experience recommended Good communication skills in both English and Mandarin Business contacts in Shanghai useful Individual should be: able to work independently, highly motivated, goal oriented and have an ability to build relationships with clients over the long term Compensation: Base plus commission Contact Russel Beron: rberon@supplychain.cn

SourceMakeDeliver® is a unique hands-on business simulation created specifically for the Chinese market that will engage your team to effectively implement your Supply Chain strategic vision.

• How does your Supply Chain capture the dramatic growth of your market?

• What do you need to effectively implement your Supply Chain strategy?

• How do you engage your people to deliver the right product at the right time to the right place at the right price?

COMPANYINDEX

Accenture �������������������������� 32 Access Asia ����������������������� 37 Adidas ������������������������������� 38 Agility ����������������������������� 20,62 ALLE Intl. Trading ��������������� 38 Alvarez & Marsal ���������������� 33 AMB ������������������������������������ 45 AMD ������������������������������������ 16 AMR ������������������������������������ 54 Amway (China) ������������������� 20 AP Moller-Maersk �������������� 16 Armani ������������������������������� 38 B&Bs Consulting ��������������� 37 Baker & Mckenzie ������������� 33 Barloworld Optimus ����������� 60 BBK ������������������������������ 13,25 Biz China Update �������������� 39 Blogis ��������������������������������� 35 Blue Dragon Logistics ������� 45 Boutique BIA ���������������������� 37 Burberry ����������������������������� 38 Bureau Veritas ������������������� 19 BYD ����������������������������������� 18 CB Richard Ellis ���������������� 63 CEVA ��������������������������������� 52 China Mobile ��������������������� 14 Coach �������������������������������� 38 Coca-Cola ������������������������� 45 Concor ������������������������������� 22 Control Risks ��������������������� 32 CooperNature �������������������� 45 Daimler ������������������������������� 43 Dalla Costa Alimentare ������� 10 Delta Enterprise Corp., ������� 40 DHL ������������������������������� 12,16 Dow Chemical ���������� 16,18,62 Dragonomics ���������������������� 37 Dupont �������������������������������� 45 EADS ���������������������������������� 43 Eaton ���������������������������������� 62 Electrolux ���������������������������� 45 Emerson ����������������������������� 45 Ernst & Young ��������������������� 37 Evergreen Group ���������������� 19 FESCO ������������������������������� 34 GAP ������������������������������������ 38 Gazeley ��������������������������� 2,39 Geely Automotive ��������������� 45 General Power Products ���� 40 Geodis �������������������������������� 21 Georgia Inst. of Technology �� 5 GIFI France ������������������������ 45 Globe Express �������������������� 45 Gome ���������������������������������� 14 Goodyear ���������������������������� 33 Hembly Intl. Holdings ��������� 20 Hewitt ��������������������������������� 47 Hicon ���������������������������������� 45 Hitachi. ������������������������������� 20 Homelite ����������������������������� 40 HSBC ��������������������������������� 14 Huawei ������������������������������� 64 IBM ������������������������������������� 21 Intellectual Assets �������������� 10 Jindal Steel & Power ���������� 28 Jones Lang LaSalle ������������ 21 Jungheinrich ����������������������� 62

70

EVENTSCALENDAR

KPMG ��������������������������������� 43 Land Rover ������������������������� 43 Lean Enterprise China �������� 32 Leap Frog Enterprises �������� 40 Lotto ����������������������������������� 21 Louis Vuitton ����������������������� 36 Lowe ����������������������������������� 59 Maersk Logistics ������������ 32,45 Mattel ���������������������������������� 64 McGraw Hill ������������������������ 47 Michael Page ���������������������� 67 Microsoft ����������������������������� 18 Mitsubishi ��������������������������� 62 MOL ������������������������������������ 22 Molson Coors Brewing ������� 49 MRI China �������������������������� 34 Nielsen China ��������������������� 39 Ningbo Steel ����������������������� 45 Nissan �������������������������������� 23 Oxfam Hong Kong �������������� 14 Parchim Airport ������������������� 12 Paul Smith �������������������������� 38 Pepsi ���������������������������������� 20 Performance Designed Products ���������������������������� 40 PG Logistics ����������������������� 62 Plimsoll ������������������������������� 19 Porsche ������������������������������ 37 Prada ���������������������������������� 38 Prologis ������������������������������ 21 PwC ���������������������������� 3,32,58 QCR ������������������������������������ 10 Qianhai Bonded Port ���������� 19 Rockwell ����������������������������� 62 Schaeffer ���������������������������� 62 SAIC ����������������������������������� 53 Shanghai Marriott Hotel ������ 31 Sharmoon EZ Garments ���� 38 Siemens ������������������������ 18,63 Sinotrans ���������������������������� 29 Sisley ���������������������������������� 21 Sony ����������������������������������� 18 Stonefly ������������������������������ 21 Suning Appliance ���������������� 21 Swiss Kuehne-Foundation � 50 Toyota Winglet �������������������� 24 Toyota Material Handling ���� 62 Trade Associates Group ����� 40 Transrussia ������������������������� 71 Tri Thuc Viet Education & Consultancy ����������������������� 34 Tyco Electronics ����������������� 41 UPFThompson ������������������� 43 UPS ������������������������������������ 19 VCI Legal ���������������������������� 34 Volkswagen ������������������� 43,53 Wal-Mart ������������������� 10,14,62 Wang & Li Asia �������������� 34,62 Xerox ������������������������������������ 6 Yuxin Logistics �������������������� 20 Zhengzhou Xin He Hua Kemao ������������������������������� 20

JANUARY/FEBRUARY 2009

2009 JAN.

THU

8

JAN.

FRI

9

2009 JAN.

THU

15

2009 FEB.

WED

11

2009 FEB.

WED

18

2009 FEB.

FRI

20

China's first credibility conference of cold chain logistics summit

Shanghai Venue:

to be confirmed Oganizer:

China Cold Chain Logistics Miles Organizing Committee

The Future of the Supply Manager Profession workshop

Shanghai Venue:

to be confirmed Oganizer:

Council

3PLs Luncheon luncheon

Shanghai Venue:

to be confirmed Oganizer:

Council

China Logistics Real Estate Workgroup workshop

Shanghai Venue:

to be confirmed Oganizer:

Council

Cost Optimization China Summit summit

Shanghai Venue:

to be confirmed Oganizer:

Council

Sourcing Firms Luncheon luncheon

Shanghai Venue:

to be confirmed Oganizer:

Council

2009 JAN.

THU

8

2009 JAN.

WED

14

2009 JAN.

FRI

13

2009 FEB.

WED

25

2009 FEB.

seminar

Beijing Venue:

Grand Millenniium Oganizer:

European Union Chamber of Commerce in China

Flow: For Love of Water Documentary Screening Shanghai Venue:

to be confirmed Oganizer:

Council

Security MON Importer Filing - 10+2 Seminar

26

2009 FEB.

Managing Customs in 2009

seminar

Hong Kong Venue:

Hotel Nikko Hong Kong Oganizer:

Hong Kong Shipping Gazette

Pharmaceutical Procurement & Sourcing Workgroup workshop

Shanghai Venue:

to be confirmed Oganizer:

Council

Supply Chain Automotive Workgroup workshop

Shanghai Venue:

to be confirmed Oganizer:

Council

Petrochemical THU-FRI China Focus 2009

26 27

summit

Shanghai Venue:

to be confirmed Oganizer:

China Decision Makers Consultancy

www.supplychain.cn

UNIT 2&3

TO BE DELIVERED

BY Q3 09

25000 sqm

TO LET Direct Access to the G312 National Highway 5 kilometers from the Shanghai-Nanjing Expressway

Sustainable Site 3 independent and divisible buildings are available Each complete with both warehouse and office accommodations To be subdivided into units of 4,000m2