2008 Jul-Aug Issue

FINISHED VEHICLE Exports are rising

YANGTZE RIVER

Opens up China’s interior

SICHUAN EARTHQUAKE

Impacts logistics and manufacturing

BEIJING OLYMPICS Halts cargo flow

JULY/AUGUST 2008 www.chainaonline.com AUS$7.50 EUR€5 HK$40 RMB40 SG$9 UK£3.50 US$6

THE MAGAZINE FOR GLOBAL SUPPLY CHAIN LEADERS

The New Face of Chinese 3PL’s Sinotrans Integrated Logistics restructures for growth

Managing Editor & Publisher Russel Beron russel@chainamagazine.com Art Director Colin Dizengoff colind@imprintasia.com Graphic Designer How Xu Finance Manager Jenny Kim Key Account Manager Wendy Yu

Account Manager Carl Pan Circulation Manager Giselle Yang Special Projects Amina Khayat Photographers Grant-Oh! Buchwald Jackson Lowen Contributing Writers Jamie Bolton, Jack Buffington, Chris Deans, William Dodson, Chris Horton, David Lammie, Michael Mackey

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 Vice President Sales Runbow Logistics

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

Nis-Peter Iwersen Vice President, Danfoss 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 russel@chainamagazine.com DISTRIBUTION We distribute CHaINA free by direct mail to subscribers in China, Hong Kong and Singapore 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.

Please email any comments to the Editor at: russel@chainamagazine.com

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FROM THE EDITOR Who would have thought that two weeks of sports activities could bring the middle kingdom to a standstill? That is until the Olympics came to China.

Visa restrictions -- ostensibly due to the Olympics --have limited entry of foreign business people and cleaned out most foreigners not in China on an official work visa. Olympic logistics restrictions have put a stop to many kinds of cargo movement and brought delays for most others, while economic activity and tourism has slowed dramatically.

This has been a tough year so far for China, record snowstorms, followed by an earthquake, an economic slowdown in the US and heavy inflation in China. April’s Canton fair was a bust due to over the top security resulting in a lack of orders and limited trading activity. Then the government finally yielded to oil price pressure, raising prices almost 20%, though oil is still heavily subsidized.

Sometimes you have to wonder what’s behind the thinking in Beijing.

What does this all mean for China? The easy days are over, both for foreign manufacturers and for local suppliers. China is starting to look more like any other market, where healthy competition drives out the weaker players and pushes cost cutting and efficiency. Really this spells opportunity for Chinese players, like the local 3PL’s we talk about in our cover story. Offering value added service is a sure way to stay competitive in this market. As some of our other stories suggest, the need for first class logistics and increased supply chain efficiency will only increase.

Markets like Vietnam, which has its own growth problems to deal with, are picking up some of the manufacturing slack due to the Olympics and becoming more viable for certain types of production, but there is no ready replacement for China in the foreseeable future. It will be interesting to see what happens in the wake of the Olympics as the country gears up for Expo 2010, hopefully Beijing will learn from their mistakes.

Russel Beron Editor and Publisher 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. www.chainaonline.com

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THE MAGAZINE FOR GLOBAL SUPPLY CHAIN LEADERS

JULY/AUGUST 2008

www.chainaonline.com

CONTENTS REGULAR FEATURES INSIDE VIEW 6 China yeilds to ongoing oil price pressure 10 Sculpting “Performance Anatomy” in China 12 New Rules for Chinese Suppliers in Working with the U.S. 8 THE WORD 9 STARS & DUDS NEWS ROUNDUP 14 The big picture 15 Supply Chain Management 25 SCM GADGET

50 SPECIAL FEATURE An Olympic sized headache 52 EVENT UPDATE 54 QUESTION & ANSWER Yann Teste of Knorr-Bremsy 57 EXECUTIVE INSIGHT Q&A with James Podovan 58 COMPANY PROFILE James Gagne talks about Agility’s expansion 60 KNOW HOW Its all in the plan 61 PRODUCT RECALLS

33 GLOBAL VIEW China & Chile ports join hands

62 CLASSIFIED LISTINGS

46 PORT FOCUS Q&A Meishan

66 EVENTS CALENDAR

65 COMPANY INDEX

48 BOOK REVIEW Managing the Dragon

INDUSTRY FOCUS

China’s finished vehicle sector charges ahead

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www.chainaonline.com

COVER STORY

THE

RISE OF

CHINESE

3PL s ’

A variety of factors will determine if China’s 3PLs can continue to increase their competitiveness

26 REGIONAL FOCUS

China’s interior open’s up

SPECIAL FEATURE

34 44 www.chainaonline.com

Logistic infrastructure suffers in earthquake area JULY/AUGUST 2008

5

INSIDEVIEW

China

yields to ongoing oil price pressure

Oil and utility prices are heavily subsidized in China, however as global oil prices approach $140 US per barrel, government subsidies and price controls are increasingly hard to sustain.

16-18 3,000 19.8

% – The percentage increase in the retail prices of gasoline and diesel oil from June. Prices have been raised to 6,980 yuan and 6,520 yuan per ton. The price rises translate into mark-ups of 0.8 yuan and 0.92 yuan per liter

RMB (US $435) –The amount that Chinese oil refiners lost for each ton of production before the recent 18 per cent price rise.

This was due to the widening gap between the frozen domestic and soaring global prices. billion RMB – The subsidy, China’s Ministry of Finance will give for grain producers, public transportation and the fishery and forestry sectors as a measure to ease the cost pressure on some low-income groups and the public service industries exerted by the fuel price adjustment.

7.7% 80

– China’s official inflation rate in May 2008, down from a 12-year high of 8.7 percent in February.

RMB – The price per ton increase of coal prices in the past two years according to official statistics. The price has gone up by 60 Yuan since the beginning of the year. More than 80 percent of all the power generation companies suffered losses in the January-May period due to power-coal price rises

1.4

billion – The reduction in the number of highway miles Americans drove in April 2008 relative to April 2007 – a direct response to gas price increases.

A Chinese factory worker checks oil barrels at an oil refinery of CNPC Lanzhou Chemical Company, a subsidiary of CNPC (China National Petroleum Corporation), known as PetroChina, in Lanzhou city, northwest Chinas Gansu province.

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THEWORD

Supply Chain Management Stronger than Ever Manufacturers, retailers and trading companies operating in China are undergoing one of their most drastic shifts ever - a major inflationary trend that’s re-defining the way products are being sourced, made, shipped and distributed.

Transportation costs are getting higher than ever with oil prices passing well over US$ 140 per barrel and Goldman Sachs’ predictions of $200 a barrel oil sometimes in 2009 and maybe sooner. Other energy costs are also on the rise with coal prices that have tripled in the past year, meaning higher operating costs for energy to run factories and warehouses.

Raw materials are also reaching historical levels. From 2002 to 2007, steel rose 117%, copper 360% and aluminum 95%. Prices for example of iron ore increased an astounding 70% or so this year, which will lead to huge increases in steel costs. Recently, the giant mining company Rio Tinto disclosed an average 85% price increase in iron ore for its Chinese customers.

MAKING BUSINESS FLOW

Regulation around the globe is getting heavier - not easier - and stringent new regulations are asking China-based manufacturers to do more, with less environmental strain. While most may be good, they are creating a choke hold on the supply chain in total, or rather the effort to comply is sucking resources that should/ could be used for real supply chain activities.

Week after week, companies from Kodak to Starbucks to Kraft announce weak earnings and forecasts blamed largely on rising commodity prices and increasing challenges. In the face of rising competition in China, companies looking to maintain their savings will need to introduce new complexities in their supply chain strategies.

For all these reasons, companies need to think smarter, bigger and bolder to embrace these changes, and ensure that efficiency, agility, speed but flexibility are well communicated and adopted in their sourcing, production and logistics teams in China.

CEVA designs, implements and operates complex supply chain solutions on a national, regional or global scale for medium to large enterprises.

With more than 52,000 dedicated professionals CEVA maintains 614 warehouses globally with a combined space of approximately 8,6 million square meters and operates an extensive global network in over 100 countries.

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The good news is that it makes the supply chain more important than ever.

The fact that demand for supply chain talent continues to outstrip the supply shows that this supply chain expertise is here to stay for the long term.

Max Henry Founder & Executive Director Global Supply Chain Council www.chainaonline.com

STARS&DUDS

Stars

& Duds

Our stars and duds section takes a look at some of the individuals and companies in and around China that are on their way up and others who on their way down or out.

Merger creates nation’s largest steel maker

Did B&Q miss their middle class?

China’s largest steel maker came into being on Monday as two leading companies formally merged in the northern province of Hebei, which encircles Beijing. The new group, Hebei Iron and Steel Group Co, was created from the combination of Tangshan Iron & Steel Group and Handan Iron & Steel Group. The conglomerate is expected to have an annual capacity of 31.58 million tons of iron and steel, overtaking Shanghai-based Baosteel to become the nation’s largest, and the world’s fifth-largest, producer.

Retailer B&Q is closing at least 5 stores in China and downsizing another 3 after losing money in the housing decorations market. This challenge comes despite a building boom in many of China’s cities and the great promise of China’s burgeoning middle class.

Reportedly, some management will be cut and a new head of the slimmeddown B&Q Asia will come in.

Bertelsmann Backs Away From China

Five Major Airlines Agree to Pay Price Fixing Charges

Five major airlines—Air France, KLM, Cathay Pacific, Martinair Holland, and SAS Cargo—have each agreed to each plead guilty and pay criminal fines totaling $504 million for participating in a multi-year conspiracy to fix prices for air cargo rates.

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After 12-years of trying to crack China’s publishing industry, German media giant Bertelsmann Bertelsmann announced over the weekend the closing of its 36 bookstores in 18 Chinese cities, all under its Beijing 21st Century Book chain. Bertelsmann serves as an expensive case study for other multinationals harboring unrealistic dreams for profiting from China’s vast market. Shutting down the bookstore chain in China is the latest step in Bertelsmann’s revamp of its struggling Direct Group book business, which has been bleeding cash in the United States.

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INSIDEVIEW

Sculpting “Performance Anatomy” in China

O

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

ur two most-recent columns looked at how Chinese companies can raise profitability by refining “market focus and position” ( January/February) and developing “distinctive capabilities” (March/April). These capabilities represent two of three planks that Accenture research has determined are vital to the achievement of high performance.

The third is “performance anatomy”—perhaps the most important but hardest to define and enact. In simplest terms, performance anatomy means building, nurturing, combining and leveraging the core components (e.g., leadership, strategy, people, technology) that are common to every business.

As of 2006, China Pharmaceutical has developed more than 50 new medicines. Concurrently, it is building an excellent network to supply qualified products and services to customers worldwide.

To fully sculpt their performance anatomy, companies also must work obsessively to identify and multiply talent. In China, it is hard to overstate the importance of managing human resources appropriately. Despite a plentiful supply of labor, the country’s shortage of experience is acute— especially skilled managers and technical staff.

The government has committed to doubling spending on education and to better aligning that system with the needs of businesses. However, companies should not expect overnight changes in the quality or quantity of available talent. The best Chinese businesses will continue to make their own significant investments in people.

Given its esoteric but essential nature, the challenge of excelling at performance anatomy is considerable. However, because performance anatomy is fundamentally Consider the example of concerned with interaction a Chinese high performer “one key is for Chinese and integration, one key is businesses to maintain the right in the food industry, whose for Chinese businesses to strategy is to “take in, train, balance between market making make good use, award maintain the right balance and disciplined execution” between market making and keep.” More than 40 and disciplined execution. percent of its workforce A one-dimensional focus (either we can optimize consists of technical experts, yet the company’s current returns with existing people and assets recruitment activities still concentrate on mining or we can invest in tomorrow’s products and talent from more than 50 colleges and scientific services) is fatal. You avoid this trap by stocking the research institutions. Staff training is plentiful organization with talented individuals who excel and the commitment to retention is intense: The at managing current realities, and strategizing and organization uses a portion of sales revenue investing for the future. to reward people who contribute to technical Consider how China Pharmaceutical is innovation and new product development. implementing “two vertical strategies,” which it describes as “going up to the top for technology and going down to the bottom of the market.”

This means pursuing leading-edge technology to support R&D processes and operational processes.

Not surprisingly, mastering performance anatomy requires companies to position technology as a strategic asset. Such a mind-set is critical in China, where growth is often frenetic and enterprises frequently seek to leapfrog several

Percentage of respondents who mentioned asset

100% 80%

FIGURE 1

86%

85% 76%

60%

64%

62%

40%

45%

43%

20% 16% 0% Intellectual Property

Brand

Corporate Reputation

Customer Loyalty

Credit Rating

External Relationships

Supplier Loyalty

Other

Intangible assets measured by Chinese companies, according to recent Accenture research.

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INSIDEVIEW international counterparts in identifying those intangibles that best mirror their corporate values.

A good international model for this behavior is Best Buy, which regularly measures workers’ commitment to the job and to the company.

Best Buy then uses the scores to analyze how those variations relate to each store’s financial performance. Store managers are made aware of employee commitment and satisfaction levels, and of the importance Best Buy attaches to these numbers. Chinese companies would do well to follow the example set by this leading retailer— determining which intangible assets should be tracked on an ongoing basis and which assets have the largest impact on their revenues, profits and shareholder returns.

generations of IT hardware and applications. This contrasts sharply with the situation faced by CIOs in much of the rest of the world, where complex legacy IT challenges slow the pace of change and divert funds into upgrades and maintenance.

However, Chinese businesses also must understand the importance of intangible—nontechnology—assets. Accenture research is encouraging in this regard: Chinese companies are establishing disciplined performance measures for today’s widely recognized intangible assets (Figure 1). However, most still lag behind their

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In the most basic sense, performance anatomy is a strategy for creating a unified, focused organization. As Chinese businesses work to take their hard-earned place in the global economy, attention to performance anatomy will become increasingly key.

On a personal note, I’d like to thank CHaINA and each of you readers for your ongoing interest and support. I’d also like to introduce you to Michael Yee, who will be assuming my role in leading Accenture’s Supply Chain Management practice in China. Please stay tuned for future columns from Michael, who will continue to share our latest insights from Accenture.

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INSIDEVIEW

New rules for Chinese suppliers in working with the U.S.

Jack Buffington, a former Management Consultant is Director of Supply Chain Logistics for Molson Coors Brewing Company. He is also the author of a new book, Easy Out: Corporate America’s Addiction to Outsourcing.

hether or not it has been declared as such in the general economy, the United States manufacturing sector is in a recession. Manufacturing industrial production declined on a quarter by quarter basis by .6% for 2007, and 1.4% in the first quarter of 2008. The forecast for manufacturing growth in the United States for 2008 is either slightly negative or slightly positive, depending upon the source of prediction.

W

The good news

However, in looking at the statistics, there are clear differences of growth, depending upon the industry. For instance, anything related to housing starts in the U.S. (appliances, wood products, paint, carpet, furniture, and ventilation) has fallen dramatically, and auto manufacturing has fallen as well due to lower demand and higher gas prices. On the other hand, anything related to energy manufacturing and exploration is growing, as well as metals, due to high international demand.

How the Americans respond to this challenge will impact both the U.S. and Chinese economies in general. And how Chinese companies and its markets respond to similar questions will determine what happens as well. As prices and costs continue to rise in China, multinational corporations (MNC’s) will make decisions on where to source their production based upon such cost pressures. Will operations in China be able to improve their efficiencies and labor in order to reduce the cost of its products in order to be competitive again? Will these Chinese operations be able to improve their quality and logistics control for improved service and price?

In general, the manufacturing sector is in a slump in the U.S., and this is bad for Chinese suppliers. If you are a Chinese manufacturer, it will be very important for your company to understand a set of new rules for your continued growth in the U.S.

Chinese manufacturing shifts There are growing cost and regulatory pressures in China’s exporting of goods to the United States. Between wage pressures of over 10%, increases in commodity prices even higher, and upstart competition (places like Vietnam), the China Price is becoming increasingly less competitive, particularly with a declining value of the U.S. dollar (15% decrease in 2008). Beyond costs, there are changing business and regulatory requirements (environmental, labor, quality, etc.) in China that are placing even greater pressure on Chinese manufacturers.

But the reality of the situation in the U.S. isn’t gloomy at all: exports are on the rise, with China being the country of greatest growth. This is the good news of the U.S.-China trade relationship.

Will America choose a model of free trade with a growing, vibrant partner, like China, or will we bury ourselves in our fears (irrational or not) that China is adversely impacting the U.S. economy?

Good relations key for both US and China If Chinese suppliers cannot make progress on service, cost and quality factors, it is increasingly likely that MNC’s will divert their operations to even lower cost nations, such as Vietnam. And moving production facilities away from China due to cost is bad for both the U.S. and China for the following reasons: one, uprooting a supplier impacts service, and quality, and even cost in the short-term.

Second, by diverting trade away from China there will potentially be less U.S. export growth to China, which is an important factor for assisting America out of this recessionary slump that is impacting the

On top of this, with U.S. public concern regarding International Trade with the upcoming U.S. Presidential election, you have a perfect storm brewing of a slowdown in trade between our two nations. An oft question posed in the United States is this: are we better off or worse off today as a function of building a strong trade alliance with China? With U.S. unemployment posting its largest jump in twenty two years to 5.5%, and consumer confidence very poor, there is a growing sentiment of gloom over the impact of globalization to our country.

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INSIDEVIEW Americans are looking to potential President Barack Obama to guide them through a recession

world economy. Growth between these two nations is a key for moving the U.S. out of the recession, not less trade growth. And trade growth can only be driven by an improvement in the manufacturing operations in China and the U.S. The tightly linked trade relationship between the U.S. and China has moved forward so rapidly that it has made many in both nations uncomfortable with the results. Americans are increasingly leery of China’s growing manufacturing presence, particularly in how they believe it impacts their employment market.

China is uncomfortable in some sense as well, particularly in its reliance on the U.S. to be a stable trading partner to fuel its burgeoning economy. While we cannot ask our nations to feel comfortable with the prospects of trade today, we can ask our officials to promote trade that enables a win-win proposition between us.

For instance, when America threatens China with tariffs, this is mercantilism, and not engaging its trading partner with a win-win proposition.

Likewise, when Chinese markets pressure U.S. companies to open R&D centers as a quid pro quo for selling in the Chinese market, it is mercantilism as well. Companies on both sides of the partnership must focus on working to improve the productivity, efficiency, service and capacity of its own operations as a function of this arrangement.

If this happens, and our nations understand how important the other is to each other’s economy, www.chainaonline.com

growth and prosperity will happen. But the rules of the game have changed, and no longer can Chinese suppliers just show up and gain U.S. market share: they must compete, innovate, and become more efficient. And U.S. companies must understand local Chinese markets to gain entry, as a function of adding value to this relationship.

Cooperation versus protectionism Simply put, to be a Chinese manufacturer seeking to grow in the U.S. market, you will need to apply these “new rules” of productivity to reduce costs, create value, reduce waste, improve quality, and provide a win-win environment between you and your trading partners. It will no longer be possible for you to muscle your way into the U.S. market through lower wages alone, if it is even possible today. Today’s manufacturing recession is a valuable lesson for companies and operations on both sides of the relationship.

The business case for “Made in China” must be more robust than ever. American companies must earn their entry into Chinese markets. And both nations’ manufacturers must make an honest plea to its nation that winning isn’t getting all the business, but rather earning the business via a true value proposition. Americans are frustrated with a trade picture with China that seems to be unfair, if only for the reason that the value proposition was brought forth solely as a function of lower wages, not greater value.

Gaining markets through value, innovation, and productivity will be the charge for both nations’ manufacturers as an evolutionary path in our business relationship. Wise companies in both nations will be the first to profit from these new rules of the economy. And the quicker that more companies on both sides of the ocean figure this out, the sooner the citizens of both nations will see its value, and will adopt the U.S.-China commerce relationship as one of the very most important to both countries.

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NEWSROUNDUP

THE BIG PICTURE A synopsis of key news relevant to business in China HR IBM gets a taste of new labour law IBM is getting a taste of China’s new labour law, after firing a sick employee unjustly, state media reports.

The company now has to fork out RMB57,332 in compensation.

After it was established that the employee suffered from depression, he tendered his resignation to the company, but IBM suggested that he take an extended sick leave instead.

While receiving therapy during his leave, health professionals proposed he return to work while continuing to receive therapy. IBM however was not in favour of this and threatened to terminate his labour contract suggesting that he was disturbing the company’s “normal” work order. After a failed suicide attempt the employee proceeded to sue IBM, accusing them of discriminating against him for suffering from depression.

Shanghai Pudong New Zone Labor Arbitration Commission has reportedly ruled that IBM China must continue to implement the labour contract with the R&D Engineer, while also paying him four month’s salary and bonuses totalling RMB57,332.

By Wayven Pienaar, BizChinaUpdate

China get tough on toy safety

CSR/GREEN Greenpeace protests U.S. e-waste dumping in China Greenpeace activists have reportedly boarded the Yang Ming Success, a ship transporting e-waste from the United States, off the coast of Hong Kong to prevent the offloading. The NGO says importing electronic waste is illegal in China but also admits that according to Hong Kong’s law, e-waste can enter the territory as long as it makes its way on to China.

Greenpeace estimates that every year, 20 to 50 million tonnes of e-waste are generated worldwide and much of it “find its way to the scrap yards of countries like China”, Lo Sze Ping, Greenpeace China Campaign Director, said in a statement.

FOOD & PRODUCT SAFETY China better on toy safety but can do more China has taken steps to tackle toy safety concerns after a string of recalls last year, but authorities should tighten supervision of the sector further, an independent report commissioned by the EU concluded recently.

The European Commission at one point last year threatened to ban toy imports from China after millions of toys had to be recalled because of excessive levels of lead paint and other unsafe components.

The report found that small players -- from Chinese manufacturers to European importers -- tended to be the “weak link” in the supply chain and that final product testing alone was not enough to guarantee safety.

“Chinese enforcement authorities should continue to strengthen the supervision efforts vis-a-vis the Chinese toy industry, especially focusing on the weaker manufacturers,” the report by independent experts concluded.

“Despite the many efforts undertaken by the various actors in the toy supply chain ... there are still too many unsafe toys appearing on the EU market,” European Consumer Affairs Commissioner Meglena Kuneva said in a statement.

Greenpeace activists protest against e-waste

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By Mark John, Reuters

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CORPORATE SOCIAL RESPONSIBILITY “Made in Asia” label helps, hinders luxury goods makers Luxury goods makers say they regularly inspect suppliers and sever ties when a supplier is found to violate labor laws. However, it is not always easy to keep tabs on outsourcers.

“The supply chain is long and often the headquarters doesn’t even know who really makes one small part of the product because it doesn’t have any relations with the last manufacturer on the list,” said Captain Edoardo Marzocchi at the tax police in Prato.

a UK-based fair trade fashion firm that works directly with knitters and weavers in Nepal, Peru, India and Bangladesh.

“We’re working in close partnership with our suppliers -- and it builds enormous brand loyalty among our customers.”

By Sophie Hardach, Reuters

NUMBERS Research in China publishes new report on China logistics

Some fashion companies say the solution is to drastically shorten the supply chain and use manufacturing in developing countries as a selling point for “ethical consumers” in the West.

China’s total value of logistics in 2007 reached CNY75.2282 trillion, up 26.2% year on year, boosted by continuous rapid growth in China’s economy. According to the conservative estimation by the China Federation of Logistics and Purchasing, China’s logistics industry is expected to have a compound annual growth rate of 16 percent in the forthcoming three years.

“Our clothes are hand-woven, handembroidered, hand-embellished,” said Safia Minney, founder of People Tree,

In 2007, the added value of China logistics industry was CNY1.7 trillion, up 20.3% year on year, accounting for

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17.6% of the total of China’s service industry and 6.9% of China’s GDP. In 2007, China’s total cargo transport volume was 22.53 billion tons and its turnover volume of freight transport was 10.1 trillion tons/kilometers, up 10.7% and 11.8% year on year respectively. As for the distribution by modes of transportation, water transportation occupied 67 percent of China’s turnover volume of freight transport, railway transportation 22.5 percent, road transportation 10.5% and aviation transportation 0.1 percent.

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NEWSROUNDUP

SUPPLY CHAIN MANAGEMENT A synopsis of relevant supply chain management news.

The leader of the study, Vivek Wadhwa, a fellow at Harvard Law School and executive in residence at Duke University, said: “Globalisation is happening faster than people think. Having India and China conduct such sophisticated research and participate in drug discovery was unimaginable even five years ago.

SOURCING

R&D SMIC to build fabs, R&D center in Shenzhen China foundry Semiconductor Manufacturing International Corp. (SMIC) will build two production lines and an R&D center in Shenzhen. With a $1.58 billion investment, the company will build SMIC (Shenzhen) in the city, consisting of an IC R&D center and two production lines for 8-inch and 12-inch wafers, respectively.

The first-phase construction of the 8-inch line is scheduled to be completed at the end of 2009 with an initial monthly output of 30,000 to 50,000 wafers. The second phase of the 12inch wafers production line will follow using IBM’s technology.Shenzhen Mayor Xu Zongheng commented that SMIC’s establishment of the production lines in the city will make up for the shortages in the electronic information industry chain of the entire South China.

The study also found Indian and Chinese firms to be heavily dependent on major multinational corporations for commercial development of new intellectual property. This was because they rarely have the capital and the regulatory expertise to develop a drug beyond phase II clinical trials, it said.

The Ewing Marion Kauffman Foundation-sponsored study shows that big companies such as Merck, Eli Lilly and Johnson & Johnson are now counting on India and China for advanced R&D as well. In 2006, 5.5 percent of all global pharmaceutical patent applications (WIPO PCT applications) named one inventor or more located in India, and 8.4 percent named one or more located in China. This is a fourfold increase since 1995.

AMR research study finds U.S. and China are riskiest places for sourcing and manufacturing AMR Research recently released a study that found the United States and China are the regions that present the most supply chain risk for manufacturers.

The United States was the top geography cited for supply chain risk at 35%, with China at 28%, and the Middle East and Africa at 12%.

In addition to geographies with the highest risk, the report identified rising transportation costs (51%), volatile commodity prices (43%), and weakening consumer spending (37%) as top supply chain concerns.

In the wake of ever-increasing supply chain volatility, companies have begun seeking a more balanced portfolio by moving to new regions, namely other

Reported by ChinaTechNews

India and China new pharma R&D hubs India and China are the new pharmaceutical research and development (R&D) hubs, with India having an edge in the race, an industry study on globalisation of the pharma industry revealed recently.

While India is more mature in chemistry and drug-discovery activities than China, Chinese firms are more prevalent in less lucrative segments such as pre-clinical testing, animal experimentation and manufacturing, the study showed.

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China is attracting significant pharma R&D

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NEWSROUNDUP news@chainamagazine.com

Perfect storm brewing for certain retailers Retailers that made hay out of cheap imported goods are seeing that heyday come to a close, said analysts at Citigroup, noting that inflationary pressures in China and India are impacting the cost of products for certain retailers, such as Macy’s Inc. and Target Corp.

Deborah Weinswig, an analyst at Citigroup, says retailers are heading for a so-called “perfect storm,” stemming from an “inflationary sourcing environment, combined with a U.S. consumer slowdown.” As a result, small to medium-sized department stores are likely to get hit with the brunt of this. Large apparel companies will be in better shape due to “their scale and ability to push back on their supplier base, as well as their diversified sourcing structures.”

But not all of them will escape. Macy’s, Ms. Weinswig notes, sources about 40% of its goods from China, and Target gets about 50% of its goods from China, on the high end for the broadline retailers. Price pressures have taken hold in that nation, as China’s national bureau of statistics reported that in May, its producerprice index for manufactured goods rose 8.2% from the year-ago period.

For both companies, a significant percentage of their revenue comes from apparel, which will “cause them to experience more inflationary pressures than many of their competitors,” Ms. Weinswig writes. In trading, shares of Macy’s fell 1.8%, while Target lost 1%.

By David Gaffen Asian-Pacific countries, Eastern Europe, and near-shore countries.

MANUFACTURING

Survey respondents indicated that despite rising transportation costs, an aging logistics infrastructure, and a softening economy, many companies are still sourcing and manufacturing in the U.S.

Foxconn International to shift production to North China

Keeping manufacturing close to home allows companies better visibility into their supply chains and increased oversight into day-to-day operations. 34% of companies are planning to near-shore their sourcing and manufacturing due to increasing costcompetitiveness, while 15% indicated lessened supply chain risk due to proximity to market as their primary reason to near-shore.

“Globalization is coming home partly because so much risk is associated with spreading the supply network around the world,” explained Noha Tohamy, research director at AMR Research.

But for manufacturers selling products in the U.S., the lure of China still exists. Despite significant risks, like product quality issues and political unrest, China still makes sense because of cost advantages (49% of respondents that plan to source from China cite lower labor costs as their primary reason) and reach to vast consumer markets.

To further mitigate risk, companies have begun building better IT-based supply chain visibility (42%), employing multisourcing strategies (27%), and building performancebased collaborative relationships with suppliers (44%). www.chainaonline.com

Shenzhen-headquartered mobile phone manufacturing provider Foxconn International Holdings Ltd. (SEHK: 2038, FIH) plans to shift its production capacity to the northern part of China, where the cost is less, an executive of the company said recently.

FIH’s new plants in Langfang and Taiyuan, two northern Chinese cities, will be put into production in the third quarter of 2008 and are expected to see their production capacities enlarged later. The combined maximum production capacity of the two plants will be 50% larger than that of the Shenzhen plant when the plants start operation, according to the executive.

The company’s overall production capacity will stand 20%-30% larger in 2009, said the executive, noting that FIH is scheduled to put its new plant in Vietnam into trial production at the end of this year, and will extend the production in its Yantai plant.

Meanwhile, FIH’s Shenzhen headquarters will turn into a R&D base while maintaining its existing production capacity.

LOGISTICS DSV buys ABX Logistics for 750 million euros COPENHAGEN, June 21 (Reuters) Danish transport group DSV has entered into an agreement to acquire 100 percent of shares in XB Luxembourg Holdings, the mother company of ABX Logistics Worldwide, for 750 million euros.

In a combined statement on Saturday, DSV and ABX Logistics said the acquisition would strengthen the group’s Road activities, particularly in Italy, Germany, France and Spain.

‘It is a great pleasure that we have succeeded in uniting ABX and DSV. The match between the two companies is nearly ideal, both geographically and in terms of the activities. ABX has in a number of years been on top of the list of potential merging partners,’ CEO of DSV, Kurt Larsen said in the statement.

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The agreement had been entered into with 3i Group Plc and 3i Funds, the management of ABX Logistics and other shareholders, DSV said.

In 2007, DSV and ABX Logistics had a combined pro forma turnover of about 6.5 billion euros and some 25,000 employees. Their combined transport networks covered over 60 countries. In 2007, ABX Logistics had a turnover of 1.8 billion euros, DSV said.

Dubai World to buy Wal-Mart’s Gazeley for US$585 million DUBAI World, the Dubai government fund that owns DP World port operator, will purchase Gazeley, one of the largest distribution and property development companies, for EUR360 million (US$585 million), reports the UK’s Transport Intelligence.

Gazeley, the UK-based Wal-Mart subsidiary, was put on the block earlier this year and will now be run from Jebel Ali Free Trade Zone ( JAFZA).

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This ends weeks of speculation and numerous bidding interest for the developer with property in China, India, Mexico and Europe.

Cargo throughput in the Jiangsu ports up to Nanjing, located 300 kilometres from the sea, accounted for two-thirds of the Yangtze’s total in 2007, said the report.

Yangtze River Report, says boxes up 38pc and big spending opens interior

Dredging at the mouth of the Yangtze is one factor that has contributed to the surge in overall shipping volumes. Indeed, massive investment along the length of the river along with its supporting road,

DUBLIN’s Research and Markets has announced the publication of a detailed report called “Yangtze Transport 2008: Accessing China’s Interior”, a guide to transport infrastructure along the river valley and assessment of logistical challenges facing foreign investors.

“Container traffic volumes on the Yangtze River surged to a record high of 5.54 million in TEU in 2007,” said the report, an increase of 38 per cent over the previous year.

“Despite these upward trends, however, the river is underutilised,” said the report. “Traffic remains heavily concentrated in the lower reaches where the shipping conditions are better, the local economies are more dynamic and access to the sea is easier.”

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rail and air cargo network is rapidly changing China’s economic landscape, according to the report.

By summer 2009 when the Three Gorges Dam is completed, Beijing will then have an all-year-round shipping channel to allow 10,000-ton barge fleets to sail from Chongqing to Shanghai - 2,500 kilometres - within seven days. Huge sums of money are also being spent to build a riverside expressway and railway.

Agility edges closer to acquiring Shenzhen’s Cosa Freight Global logistics firm Agility has signed a conditional agreement to acquire Cosa Freight, a full service ocean freight forwarder with offices in six locations in mainland China and a presence in Hong Kong, USA and Canada.

The company said in a statement that the acquisition will further strengthen its network capability in China and increase the range of services on offer in major trading and manufacturing centres across the country.

Cosa Freight focuses on the transPacific trade by providing services to the retail sector, including origin consolidation/upstream inventory management programmes in China and warehousing, trans-loading, and delivery in the US. With a staff size of over 200 and six offices in China, Cosa Freight’s network is expected to significantly increase Agility’s ability to offer customers the services they require.

Agility acquires Cosa Freight

“We are committed to strengthening our network in China and other strategically important countries in the region and also expanding our range of freight and logistics services throughout the country in order to better meet customer demand.

The acquisition of Cosa Freight will help us achieve those goals,” said Wolfgang Hollermann, chief executive officer, Asia Pacific for Agility.

James Zhang, president of Cosa Freight, said: “The acquisition by Agility will enable Cosa Freight to expand its outlook on a global scale and focus on much greater growth opportunities. We already have a strong position in China and we will now be able to share and leverage Agility’s global network and resources to improve our position and add further capability to serve Agility’s customers in China.”

Sinotrans to seal merger with Yangtze Transportation (Group) Corp.

Sinotrans, the Chinese firm partnered with DHL in China, will secure a deal to merge with the country’s top rivershipping operator this year, creating a $15 billion logistics firm and cementing its lead in the domestic industry, a source familiar with the deal said.

If it goes ahead, the move would create a sprawling transport corporation operating everything from marine, oil and river shipping to express delivery, freight forwarding and warehousing, as Beijing spurs consolidation of a large but fragmented sector. Both firms hope

Sinotrans to merge with Yangtze Transportation Group Corp.

to complete their merger deal before the year-end, after which they estimate they would take two to three years to restructure the merged entity to focus on shipping and logistics.

Analysts believe the merger will open opportunities for Sinotrans’ listed units -Sinotrans Ltd and Sinotrans Shipping Ltd -- to buy assets from their state parent in future, though it will not have an immediate impact on listed firms. After merging with Yangtze Transportation, which had total assets of 41.2 billion yuan ($5.8 billion) in 2007, Sinotrans would become the nation’s largest shipping and logistics conglomerate after the marineoriented COSCO group.

Sinotrans and Yangtze Transportation, which controls two mainland Chineselisted firms -- Nanjing Tanker and Changjiang Phoenix -- will form a group named the China Logistics Group to hold the interests of both parties, media reports said last week. ($1=6.870 Yuan) (Reporting by Ruth Wong; editing by Rory Channing).

Reuters Construction starts on Northeast China’s first bonded logistics park The first bonded logistics park in northeast China’s hinterland, owned by a joint venture property developer of Dalian Port Group and ProLogis, has commenced construction in Shenyang city, Logistics Week reported.

The US$50 million facility will take up 300,000 square metres to offer distribution, manufacturing, processing and trade services.

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Dalian has been looking to expand the business coverage of its Dayaowan Bonded Port Area to the northeast China since the bonded area was approved in August 2006. The port city plans to set up bonded logistics facilities in important hinterland cities of Shenyang, Changchun, Harbin and Manzhouli in order to form a bonded logistics network in the region.

The Investor of the facility, Shenyang ProLogis Container Logistics Development Co Ltd has spent more than $80 million on developing the 200,000 square metre warehousing space at the Dalian Dayaowan Bonded Port Area, becoming one of the largest investors.

China invests $1.6 billion to improve inland rail connections Shippers in China can expect to benefit from a US$1.6 billion makeover of the country’s container rail system, which will see truck waiting times and train transit times reduced and connections to the inland regions improved.

While sceptics may sneer at the news of yet another attempt to improve the country’s rail network, this latest venture appears to have the momentum and backing necessary to see the project through.

The massive undertaking, which is at the forefront of China’s 11th Five Year Plan, is an initiative of China’s Ministry of Rail, which is working together with an international joint venture company to build and operate 18 container rail terminals stretching across 16,000 kilometres of track by 2010.

RETAIL McDonald’s raises China prices on labor, food, power

McDonalds raises prices by 2.7%

signaling that the government is confident that inflation pressures are easing, even as oil and commodity costs surge.

“Energy prices will continue to rise as the government gradually relaxes price controls,’’ said Wang Qian, an economist at JPMorgan Chase & Co. in Hong Kong. ``Inflation is going to remain a problem for the next two or three years.’’

The forecast is outlined in the company’s latest study, China’s Retail Landscape. This report, published in the Global Retailing Program of the Retail Forward Intelligence System™, also assesses China’s retail landscape, profiles the country’s leading retailers and delivers shopper insights about the Chinese shopper.

China to become second largest retail market by 2012

“While China’s short-term retail outlook is vulnerable because of pressures ranging from inflation to heightened government regulation, the continued entry of new retail banners is evidence that China remains one of the best retail opportunities in the world, with strong growth forecast across retail categories,” comments Frank Badillo, Senior Economist and Manager of the company’s Global Retailing Program.

TNS Retail Forward has forecast that China will sustain double-digit nominal retail sales growth in the next five years despite short-term pressures. This will push the size of the retail market in China to more than $1.4 trillion by 2012, surpassing Japan to become the second-largest retail market in the world behind the US.

China’s leading domestic retailers remain focused on aggressive expansion, but they are also showing the effects of competitive pressures. Foreign retailers in China continue to plan for aggressive expansion but more often have fallen behind plan. “Carrefour’s small-format focus has helped give it an advantage over

McDonald’s plans to add at least 125 restaurants in China this year for a total of more than 1,000, Schwartz said toda.

It aims to add at least 150 in 2009 and 175 in 2010.

By Li Yanping, Bloomberg

McDonald’s Corp., the world’s largest restaurant company, said it increased prices in China for the second time this year based on increases in labor, food and electricity costs in the world’s fastestgrowing major economy.

“Not only in China but worldwide there is a great deal of concern about rising food costs and higher utility costs, such as oil,’’ Jeff Schwartz, chief executive officer of McDonald’s China, said in Beijing.

The 2.7 percent increase doesn’t fully cover higher costs and McDonald’s may raise prices again this year, Schwartz said.

China increased fuel prices last week, 20

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Small format supermarkets beat big box retailers

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Wal-Mart’s big-format focus,” according to Badillo. “While Taiwan-based RT-Mart, a partner of Auchan, has quietly built up a sizeable presence in China, Tesco is only now gearing up its expansion. Kingfisher is reorganizing and Best Buy is ramping up slowly,” he adds.

“Of course, competition in China is strong,” said Karl Tragl, a Bosch Rexroth executive board member for sales and marketing. “That just means we have to customize, or develop, our products so that they are suited specifically to the Chinese market.”

By Paul Carrel, Reuters

“In line with our growth strategy, AMB is very excited to have these two new properties come on stream given the limited availability of Industrial Property in big cities such as Shanghai. Ningbo and Kunshan are well located, have excellent surrounding transportation infrastructure and offer a timely solution

INDUSTRIAL PROPERTY

for our customers,” said Thomas F. Marquis, managing director of AMB Property China.

German companies rely on quality in competing in China Even as a U.S. economic downturn fans fears of a global slowdown that will hurt China, and in turn its overseas suppliers, German companies are trading on a reputation for high-quality capital goods to get ahead in a stillgrowing emerging market.

Peter Schaaf, president and chief executive of Messer Cutting Systems, a German group that makes precision lasercutting equipment for industry, said his company was doubling Far East production, mostly for China, in 2008. “Business in China is excellent,” he said. “For this year and for next year, as far as we can see into the future, we see no grounds at the moment for concern in China.”

High quality German manufacturers such as Bosch Rexroth are doing well in China

New AMB properties approach completion AMB Property Corporation, a leading global developer of industrial property, recently announced the approaching completion of two new projects in Kunshan and Ningbo, both of which were showcased at the Transport Logistic China tradeshow in Shanghai.

German business ties with China are of growing importance, buoying the export sector that has powered growth in Europe’s largest economy in recent years, when the rising exchange rate of the euro was already causing trouble for some. German exports to China in the first quarter of 2008 rose 19 percent from a year earlier.

Bosch Rexroth, a German manufacturer of high-end industrial engineering equipment like machine tools and assembly systems, has found that meeting standards specific to the Chinese market is crucial to its success there. www.chainaonline.com

The Kunshan Bonded logistics Logistics Center, a light steel structure, with 19,124 sqm of net rental area, will be completed on June 30, 2008.

Kunshan is a city in Jiangsu province conveniently located less than 1 hour drive from downtown Shanghai. AMB Kunshan BLC is located on No. 312 state highway and Kunshan EPZ Zone B gate and has several special functions and policies including VAT refunding, monthly Customs entry and a testing and maintenance center.

AMB’s Beilun Port Distribution Centre in Ningbo, available in September 2008, is also located within close driving proximity of Shanghai thanks to the recent completion of the Hangzhou Bay Bridge which cuts the driving time from Ningbo to Shanghai to 2 hours from 4 hours.

This 37,811 sqm facility is only 2km from Ningbo Beilun Port Phase 3 and only 4km from the Tongsan Expressway.

HIGH TECH GS1 Hong Kong offers complete chain visibility with ‘ezTrack’ GS1 Hong Kong has announced the launch of ezTrack - a global trackand-trace platform using EPC/RFID standards and designed to provide companies with real-time visibility of goods from point of origin to point of sale, according to the non-profit group’s press release.

“The ability to track and trace goods and information and quickly respond to market needs is the key to managing a modern logistics supply chain,” said GS1

GS1 improves visibility

JULY/AUGUST 2008

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to offer complete, localized industry solutions, such as the recent launch of Infor Automotive Essentials in China, is a key selling proposition for Chinese companies seeking business software to help them succeed in domestic and international markets.

Within the past 12 months, key representative wins for Infor in China include: t ,VOTIBO 'FJMJ 4UPSBHF 4FSWJDF $P Ltd. – a leading 3PL based in Jiangsu province chose Infor SCM Warehouse Management to replace its custom warehouse software

Hong Kong chief executive Anna Lin. “What is needed is a globalised track and trace capability to provide real-time visibility of goods and information. “GS1 Hong Kong has taken the initiative and extended it into a community-wide service designed to provide a reliable and robust EPC/RFID-based track and trace platform to facilitate wide-scale adoption of the technology,� said the release.

Founded in 1989, GS1 Hong Kong is a not-for-proďŹ t industry support organisation committed to enhancing Hong Kong enterprises’s competitiveness through the provision of global supply chain standards.

Lawson wins “Excellent Solution for Garment & Textile Industry� award Lawson Software announced that it was selected as the sole winner of the “2007 Excellent Solution for the Garment & Textile Industry� award in the 2007 China ERP Software Competition sponsored by AMT. It was also voted as a Top 10 Vendor of Business Software in the Garment and Textile Industry in China, in the same competition that was organized by AMT Academy and supported by the China Software Association. Lawson’s client, Zhejiang Yaying Garment Co Ltd, also won the “Best Application Benchmark for the Fashion Industry� award.

In this competition, Lawson received recognition from both experts and web surfers with its professional service skills and customer successful practices, and won several awards. Lawson is recognized as a leading solution provider for fashion industry. Since it entered China more than 22

JULY/AUGUST 2008

10 years ago, it has helped more than 70 large and notable fashion, accessory and footwear companies to achieve effective management and streamline their complex supply chain. Its customers include TAL, MIZUNO China, Youngor Group, Taizilong Finery Group and Belle Footwear.

Infor shows strong growth in China Infor recently a 30 percent increase in new customers over the past 12 months compared to the previous ďŹ scal year, conďŹ rming its ongoing growth. Infor made the announcement in conjunction with Infor CEO Jim Schaper’s visit to the country, highlighting China’s importance as one of the company’s fastest growing markets.

Infor’s strength in China mirrors its rapidly industrializing economy, with robust customer growth in industrial equipment & machinery (IE&M), high tech & electronics (HT&E), automotive, ďŹ nancial services, textiles, third-party logistics (3PLs), and across many other vertical areas of manufacturing, distribution and services. Infor’s ability Infor continues to win new business

t 4NBSU 4IJSUT -UE o B TVCTJEJBSZ PG The Youngor Group, a $2 billion leading Chinese fashion and apparel enterprise, Smart Shirts is a top 10 Hong Kong-based contract apparel manufacturer that is an existing customer of Infor ERP System21 and Infor PLM Runtime t ;IPOHYJOH "VUP o B MFBEJOH EPNFTUJD automotive manufacturer, including the Zhongxing SUV and Pickup Truck series, selected Infor EAM Enterprise Edition, extending its original investment in Infor ERP LN, which it selected in early 2007 t (FPCZ 1BSBHPO o QBSU PG (00%#"#: Group, China’s largest manufacturer of infant and children’s products, this company selected Infor ERP LN as its enterprise resource planning system to support its manufacturing operations that include bicycles, electric bikes, wheelchairs, and baby beds.

INDIA Samsonite looking to make India key sourcing hub Global luggage company Samsonite is looking to make India a key sourcing hub as China loses its cost advantage due to the appreciation of its renminbi currency and stricter labour laws.

Samsonite, which currently sources one-lakh units of luggage per month from its manufacturing unit in Nasik and through long-term agreements with other manufacturers, will more than double this over the next three years, Samsonite president (Greater Asia) Ramesh Tainwala said. “Till last year, sourcing from India was done only for risk diversiďŹ cation, as we did not want to put all our eggs in the China basket. Now, however, we feel India has a competitive edge with China getting more expensive,â€? he said. www.chainaonline.com

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Sourcing from India will reach 2.5-lakh units per month by 2011, accounting for 40% of Samsonite’s global total. New brands and product categories will also be introduced in the growing Indian market, which Mr Tainwala said is the fifth biggest in the world for Samsonite.

As Samsonite tries to gradually insulate itself from the ups and downs in the travel market to become a lifestyle brand, it is planning to launch the Timberland brand of backpacks in India by the end of the year and expand into fashion accessories such as eyewear, watches, perfumes and toiletries.

Its range of shoes and bags, introduced recently, will also be expanded.

“Samsonite is very closely linked to the airline industry and any slowdown in air travel affects us in a big way. We gradually want to move away from that,” Mr Tainwala said.

capacity so as to allow these trucks to come into and go out of ports as they pleased, then imagine the difference.

Adding to the inefficiency, in some ports these trucks are not allowed to operate during the day, in a bid to avoid any unnecessary traffic congestion on the main roads during peak hours.

India struggles with logistics

India’s intermodal challenge DEVELOPING world class ports is simply not enough, says maritime consultant, S.N Srikanth of Hauer Associates. India will need to improve its intermodal connectivity as well if the country hopes to successfully manage the anticipated hike in container traffic.

Already India is struggling with congestion problems, with lines of trucks waiting outside container terminals stretching several kilometres at times at all major ports during the height of the peak season. This situation creates a major headache for the nation’s importers and exporters, who should be thriving right now as India’s container traffic volumes continue to increase.

Samsung shifts sourcing to India

The usage of the roads with all kinds of vehicles is just exploding, Mr Srikanth said. If we had highways of sufficient

You need to have good connectivity, you need to have good roads leading up to the ports, and you need to have railway lines, Mr Srikanth said. And that is just what India is attempting to do through projects like the Indian Highway Development Program, one of the largest projects of its kind in the world.

VIETNAM Vietnam facing inflation shock Vietnam is exposing signals of an inflation shock, Merrill Lynch said in a report entitled “Vietnam: Anatomy of an inflation shock.” Merrill Lynch indicates that the fast rising inflation causes the central bank to have a strong reaction by tightening monetary policy.

Also tight liquidity and high interest rates worsen the economic growth outlook. Prices in the stock market and real estate market are in turn affected. Finally, the domestic currency may appreciate if the monetary policy tightens up, or may depreciate sharply if an economic recession takes place and foreign capital flows out.

NIIT to set up training hub in China With the objective of increasing its presence in China, Indian software training company NIIT has signed a memorandum of understanding with Chinese real estate developer Shui On to set up training operations in at its upcoming Dalian Tiandi Software Hub. NIIT already has a presence in China with 172 locations in 65 cities with about 50,000 students graduating from NIIT centres in China every year.

“China is very strong in the manufacturing sector and aims to go up the value chain and develop its software and services sector as well. Its physical infrastructure is well developed but to grow as a knowledge economy, it needs to develop its human infrastructure. NIIT wants to be a leading supplier of IT talent for the software industry in China, which requires first-day first-hour ready professionals,” said Vijay K Thadani, chief executive, NIIT. Vincent HS Lo, chairman, Shui On, said: “We want to create an environment of work, play and learn at the Dalian Tiandi Software Hub. We have, hence, tied up with NIIT to ensure talent development and supply for the companies that would set-up operations here.”

The park is also expected to get investment from several Indian IT companies. The companies as well as professionals working in this park would get several tax incentives from the Chinese government, including income tax rebates for individuals working there, Lo added.

www.chainaonline.com

Vijay K Thadani, Chief Executive, NIIT

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Merrill Lynch says that Vietnam is also different from other Asian countries in fighting inflation, as the country has a current account deficit. Foreign capital inflows into Vietnam last year account for a big amount of GDP, and it has low reserves of foreign currency, big foreign debts and an unsound state budget.

The report says that Vietnam is only a tiny economy in Asia because its US$70 billion GDP is equivalent to 1% of total GDP of Asia, excluding Japan.

The inflationary situation in Vietnam is an example of inflation shock, Merrill Lynch said, like China in the spring of 2004 and autumn of 2007, India in early 2008 and Indonesia in summer 2005. Vietnam’s economy, like China, which is a new member of WTO, has high growth thanks to export and investment. However, Vietnam is facing a more difficult inflation battle, because the country has receives more capital than it can absorb.

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Aussie firm starts up “form-a-wall” factory in Vung Tau Australia’s Alderley Coatings Co Limited has inaugurated a factory in the southern province of Ba Ria-VungTau to manufacture form-a-wall products used for residential and commercial construction.

The US$4.5 million factory in Dong Xuyen Industrial Zone, Ward Rach Dua, Vung Tau City will produce

120,000 tons of products per year for local sale during the start up years.

Later it will export some 50% of output to Australia.

Form-a-wall is a panelized building system which was developed by Sterling Construction in 2001.

“We are licensed by Sterling Construction and Development Corp and are part of a world push to bring the most cost effective and longest lasting form of housing to a much broader market,” says Daryl Sutherland, director of the company.

The factory produces permanent housing, relocatable homes, site offices, remote area housing and low maintenance fencing for most applications.

“The economy of Vietnam is developing quickly and demand for construction is also increasing high. With a potential market like Vietnam, that is the reason the company has invested in the country,” Mark Taylor, chair of Sterling Construction Systems Ltd told the Daily at the opening ceremony last week.

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THE

RISE OF

CHINESE

3PL s ’

A variety of factors will determine if China’s 3PLs can continue to increase their competitiveness Written by Chris Horton

COVERSTORY

C

hina’s inc increasingly central role in

the global supply chain has been a major driving force behind the country’s third-party b logistics market in recent years, with 2008 providing no shortage of challenges for supply chain managers.

Some of this year’s supply chain challenges have been natural disasters – the winter storm in southern China, the Wenchuan earthquake – while others are market-based, such as rising fuel costs and the expansion of supply chains into central and western China.

These challenges make it imperative to select the right 3PL provider for one’s operations in China. Here’s the catch: at this point in the game, neither domestic nor international 3PLs are capable of delivering comprehensive logistics services at every step in the supply chain.

Domestic 3PLs have a home field advantage, but are faced with massive challenges when trying to provide services outside China’s borders. International 3PLs are established and highly competitive outside of China, but on the mainland they are forced to either develop their national operations on their own – which is both costly and time-consuming, or outsource some of their operations to smaller local companies that may not be able to meet international service standards.

More than six years after China’s entry into the WTO, the 3PL landscape has evolved rapidly, with major international players competing with a small number of domestic companies with the vision – and the capital – to raise their service levels and competitiveness. Not to be overlooked, a massive pool of small-scale domestic logistics providers will also have a major impact on developmental trends in China’s 3PL market.

Domestic players raising their game The story of domestic 3PL player Sinotrans is highly illustrative of the development of logistics services on the mainland over the last 58 years. Early on in the plannedeconomy days, the company was a land transport company whose primary international business was with the Soviet Union, Mongolia, North Korea and Vietnam.

Zhang Jianwei, Executive Director and President of Sinotrans Limited, has been with Sinotrans for 28 years.

Over nearly 30 years, he has been a part of the company’s transition from a road and rail operation to a group with three listed companies: Hong Kong-listed Sinotrans Limited, Sinotrans Shipping and Sinotrans Air. Zhang told CHaINA that although China and Sinotrans are relatively new to global logistics, there has been a sharp learning curve. w www. www.chainaonline.com chai cha hainaon naa line li .com c

JULY/AUGUST 2008

27

COVERSTORY “We started to understand the concept of logistics about 15 years ago in China,” Zhang said, “Sinotrans was one of the pioneers in grasping how integrated logistics is different from traditional freight forwarding.”

“Before we come to understand integrated logistics, we’d already developed business in freightforwarding business including ocean forwarding, air forwarding and also some multi-purpose, multimodal transportation that gave us some initial ideas about integrated logistics,” he said.

“After the introduction of integrated logistics from the outside, what we came to know as integrated logistics is a kind of method of supply chain. Logistics providers should provide onestop service, with the necessary IT system in place, and with solutions for all the needs of our customers.”

Zhang partially dismissed the common complaint among foreign manufacturers that at present China is incapable of providing true international levels of logistics rather than just transportation.

“Some of them are right, some of them are wrong. Why I say some of them are wrong is because in our experiences, we provided real logistics services for our client Michelin which in my understanding are already international standards logistics services. And some of them are right, because too many traditional Chinese freight forwarders became logistics players overnight. How, with a simple change of their name - but in terms of the nature of their services, there was no change.”

Sinotrans has made the transition from SOE to market-oriented major player – today, the company’s clientele includes many multinationals and it also has joint ventures with DHL and Korean Air.

Australia-based Blackwoods has been a client of Sinotrans for the last year and a half. Will Lin, International Logistics Manager at Blackwoods’ Shanghai office, said that there was little room for risk-taking when dealing with 3PL services in China.

“For Blackwood, supply chain is one of the most important aspects of our business, as is operational efficiency,” Lin said, “It’s important to make the right choice. Uncertainty is a key concern – it’s crucial to strictly control one’s China operations.”

In a high stakes business environment such as China, the flexibility of domestic 3PLs and their desire to raise their service levels to new heights have made a deep impression on Lin. “Chinese logistics companies love to learn, they love to cooperate and adapt to new cultures and new expectations,” he said, “And they offer competitive rates.”

In addition to Sinotrans, there are other domestic 3PLs such as Runbow Logistics and Elee Logistics – both based in Shanghai – that are parlaying their local expertise and upgraded technological and HR capacities into greater appeal to international clients with operations in China.

France-based sports retailer Decathlon –which has 15 stores on the mainland – started out in China managing its own logistics and supply chain. According to Decathlon North Asia Transportation Manager Heber Sun, the company realized that its operational efficiency could be enhanced by hiring upper-tier local 3PLs, including Runbow Logistics.

“At Runbow, most people have had overseas experience, they know about international standards and what an international company means,” Sun said, “And they know how to manage a Chinese trucking company.”

Sinotrans Limited celebrates the signing of a new contract with Hankook Tires

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COVERSTORY said of Elee, which counts Carrefour among its clients. “The company relies on teams of IT, logistics and customer service professionals working hand-in-hand to implement solutions of value to our customers.”

“We operate on a set of processes which are consistently measured through monthly score cards,” he added. “A proprietary flexible and scalable system solution provides Elee with the unique competitive advantage of designing logistics solutions built up around the customers’ requirements and not according to the capabilities of an existing information system design format.”

Vanessa Guo, Vice President, Runbow Logistics

“Local companies always maintain close relations with our customer offices – and they are aware of policy and rule changes, which enable them to adapt quickly and adhere strictly to new regulations,” he added.

Finding a 3PL capable of effectively tailoring solutions to their clients’ unique needs is increasingly becoming a theme among large companies with operations in China. B&Q China National Buying Manager Jack Zhou told CHaINA that the ability to manage and control 3PL is one of the competitive advantages for retailers looking to thrive in their market and stay profitable. Among its mainland network, China B&Q uses domestic 3PL provider Chic, which was recently acquired

by Menlo/Conway.

“On-site monitoring is critical – to achieve win-win results for the company and its 3PL, both parties need to not only clarify operational

Vanessa Guo, Vice-President - Key Accounts Manager at Runbow Logistics, is representative of the new face of upper management in the more dynamic domestic 3PLs. Guo has over 10 years of experience in Europe and has worked as a supply chain consultant for larger Chinese companies including FAW, TCL and Tsingtao Beer. A Chinese native fluent in English, French and Italian, she earned her MBA in France.

Guo said that Runbow’s international composition and company culture provides the company with a competitive advantage and makes it more appealing to international clients such as Decathlon, Adidas and IKEA. “I think the biggest opportunity for us is our unique position in this market,” she said, “It’s not only language issues that can lead to disconnect in a supply chain, it can also be issues of mentality. From the company’s beginning we have employed a large number of Europeans from different backgrounds. Our interest is to bring these professionals in to work together with us, to change the mentality of our workers – not only our management but also for basic supervisors and workers.”

Elee Logistics founder and Managing Director Jean-Pierre Roquet told CHaINA that the average Chinese 3PL has four major areas that must be addressed to compete for international clients – the general lack of understanding of international customer service requirements, management issues, measuring performance and attention to detail.

“Our approach to the market consists of deploying solutions of value to our customers while balancing a complex blend of local sensitivity with global knowledge,” Roquet www.chainaonline.com

Runbow Logistics serves big clients such as IKEA

standards but also execute cooperation,” Zhou said.

with

seamless

“In order to enhance efficient communication and monitoring, having professionals stationed in a 3PL is a must for a company.”

Foreign competition As Chinese 3PLs gradually move up the value chain and continue to offer new levels of service to international clients, international 3PLs are dealing with their own challenges from how to compete in terms of price to how to manage client relationships.

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COVERSTORY “As in any environment like this one, there are significant cultural barriers that Western organizations must overcome,” said Jack Gross, Senior Vice President at Schneider’s Shanghai office.

“Most Western organizations try to comply with very difficult global standards versus what is generally accepted practice in Asia,” Gross said.

“Although exactly the correct thing to do, it does create issues and cost.”

Schneider’s Gross added that even with their current high competitiveness, Chinese 3PLs would have to adapt to market shifts or suffer the consequences.

“Domestic organizations compete very well today – my opinion is that the industry will advance rapidly. As the economy moves off of the coast and into the central portions of China, supply chains will become longer and more complex to compete well. Then domestic companies will have to be able to change and adopt more global standards and practices.”

The wild card: small firms So how will China’s 3PL market develop over the mid- to short-term? Before placing your bets on homegrown players or international giants, it may be time to consider the lower end of the market.

There are literally tens of thousands of registered logistics companies in China, the vast bulk of which are extremely small scale, essentially ‘Mom and Pop’ outfits, said Lee Perkins, CEO of the

Jean Pierre Roquet, Founder and Managing Director, Elee Logistics

That said, some foreign 3PLs have their own competitive advantages vis-à-vis their domestic competitors, he said.

“Most western organizations do bring significant logistics expertise that is valued by larger clients over here. Expertise in areas like routing and scheduling, visibility and general supply chain design are all strengths of western organizations. In addition there are very few large transport organizations, so in many cases western organizations bring improved business practices, policy and procedure. These practices are not yet widely accepted, and certainly not always valued so it is a matter of finding the more progressive organizations that do in fact value these tools.”

Jack Zhou, B&Q China National Buying Manager

China Intel Group, the China branch of Transport Intelligence, a provider of research and analysis dedicated to the global logistics industry.

“The bulk of these small enterprises have no access to capital, and almost no registered funds,” Perkins told CHaINA. “They are essentially self financing and survive ostensibly via their capacity to meet the changing needs of their client base. Compared with larger, more formalized enterprises, these small businesses generally have a more flexible mode of operation, lower prices and tend to provide very reliable services – this in itself is indicative of the need to maintain steady business relationships, as these companies have very limited capacity to attract new customers and so primarily rely on client retention.”

These small scale enterprises operate a wide variety of vehicles ranging at the bottom end from electric bicycles to small fleets consisting of a handful of trucks. Many such companies are well regarded by their clients who often rely on a single or small number of permanent suppliers.

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COVERSTORY left many enterprises with an inability to finance expansion and cover operational costs, like replacing or upgrading equipment and facilities,” he added. “Given the large levels of under agglomeration in the industry and the fact that the central government is likely to make low cost loans available to the express delivery sector in the near future, it is likely that some of the larger enterprises engaged in the industry will take advantage of this and aggressively expand their networks.”

Looking ahead Jack Gross, Senior Vice-President, Schneider Logistics

Perkins said that despite their small size, these small companies occupy a large share of the mainland 3PL market. Taking the Shanghai market as an example, there are over 12,000 companies with express or similar services included in their business registration, the majority of which are small enterprises. With 120,000 employees spread between these companies, the average number of employees hired by these small enterprises is around ten. The primary bulk of this employee base remains low cost migrant workers consisting mainly of laid-off state, ex-state, or industry employees.

“At present it is estimated that 80 percent of the intra-city express market, and 50 percent of the regional express service market is occupied by such companies,” he said. “In terms of cargo originating in the Shanghai region, such enterprises have achieved a 70 percent market penetration in terms of deliveries to the wider regional and national markets and a 95 percent penetration in terms of the intra-city market.”

In terms of the likely trends for the future, Perkins says the market is ripe for a period of widespread merger and acquisition activity. This is largely because many companies have seen profit margins eroded by rising costs and an inflexibility in pricing such as customer unwillingness to accept rising prices and intense competition between enterprises and the low-cost, small-scale ‘family’ enterprises.

“A general decline in profit margins across the medium domestic provider sector has

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The short term prospects for Chinese 3PL firms are somewhat mixed. There is little doubt that some will not survive as margins shrink and competition continues to intensify. Firms with strong client retention that offer value and high standards of service - while operating in the black – will likely emerge as attractive M&A candidates for international firms as well as larger domestic 3PLs. Zhang Jianwei, Executive Director and President of Sinotrans Limited

“The nature of this process depends greatly on forthcoming legislation and the desire of the Chinese government to protect small and medium scale enterprises in the sector,” China Intel Group’s Perkins said.

“Whatever happens, it seems likely that market developments in the near future will either eventually be forced to lead to increased profit margins in one way or another. Whether this is achieved through increases in pricing or consolidation of the industry remains to be seen.”

Foreign MNC’s such as Carrefour increasingly prefer Chinese 3PL’s

www.chainaonline.com

GLOBALVIEW

China

and

Chile

ports join hands

Chile´s Valparaiso port is well aware of the long-term advantages offered by a soon-to-be-signed sister port agreement with Guangzhou and is keen to act on it.

T

he deal is important to Valparaiso´s port authority Empresa Portuaria Valparaiso (EPV) because it sets up mechanisms by which ports swap information. This is Valparaiso´s second with a Chinese port, last year it signed a similar deal with the Port of Shanghai.

port. The relationship with the Chinese ports is very important in providing this information,” said Jaeger. An additional benefit for China is the sister port agreement is a two-way street allowing them to access the expertise ports like Valparaiso have built up in other fields.

“It’s important for us to know how we can be more competitive” said Harald Jeager, General Manager of EPV in an interview with CHaINA Magazine. The information exchanged via the sister port agreement will help make this as smooth a process as can be.

One example cited was security. “We can assure those authorities that the cargoes moving through the port comply with norms and procedures for assuring that,” said Jeager.

One issue Valparaiso had to confront is the issue of a city centre port where space was at a premium and needing to manage the logistics of access to the port through and across busy, busy cities. As a solution, the port launched, ZEAL, or to give it its full title the Logistical Support Extension Zone is a modern facility for the reception, inspection, control and coordination of cargo vehicles travelling to and from Valparaiso Port berths.

Valparaiso was the first South American port to comply with ISPS norms and was also the first port in the Southern cone of South America to sign a sister agreement with Shanghai port at the end of last year.

All the activities that support import and export flows will, from August this year, be done at a site 11 kilometres from the port. The site can hold 540 trucks and includes access and exit controls for cargo vehicles as well as 34 standard platforms for customs and phytosanitary checkings. It will also host the offices of the National Customs Service, the Agricultural and Livestock Service and the US´s USDA among others.

Another important issue, especially for those who ship out of Guangzhou is the development angle.

Moving on from simple assembly the outbound mix from Guangzhuo looks set to change and require more than just a well run container terminal as it will likely include cars and high-value larger pieces. Containers will still be a large chunk of it, and Valparaiso´s expansion plans cover that, but it needs to liase in detail with Guangzhou to cover the diversity of products and the number of containers coming their way.

“We have to consider what kind of cargoes in the medium and long term will be served by our www.chainaonline.com

Michael Mackey is a freelance writer who covers supply chain and trade issues across the globe.

Truck drivers will clear all their goods here in the future and then drive on to the terminals to deliver their cargo, something that eases waterside congestion and its attendant economic costs.

“ZEAL from our point of view is a pioneer process,” said Jaeger. “We can control and organise all the logistics for the port outside so we can use 100% of the port area only for cargo storage.”

Adapted to Asia it might save many a consignment and many a headache.

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China’s

interior

Ships and barges move freight up the Yangtze River into China’s interior 34 JULY/AUGUST 2008

www.chainaonline.com

REGIONALFOCUS

he Yangtze River and its supporting road, rail and air cargo networks are being developed at a rapid pace. Already, central government planners are close to realising their goal of creating an all-year-round shipping channel for barge fleets of up to 10,000 dwt all the way from Chongqing to Shanghai. By summer 2009, when the Three Gorges Dam project is completed, the average river journey time between these two cities will be halved to no more than seven days. A non-stop container service already exists that takes as little as five days.

To support an anticipated surge in shipping activity, money is being poured in to expand and modernise the river’s major ports. In Chongqing, which is located further upstream than any other significant port on the Yangtze, a new container terminal is being built 6km from the city centre.

Cuntan Terminal will be the largest and most modern container terminal on the upper Yangtze when it is completed in 2009.

As well as on the river itself, huge sums of money are being spent to build a Riverside Expressway, a Riverside Highway and a Riverside Railway -- all running parallel to the Yangtze and all connecting Chongqing with Shanghai.

The Riverside Railway will cost Rmb20bn and is scheduled to be completed by 2010, as will the Riverside Expressway. Another expressway connecting Shanghai with Chengdu, the capital of Sichuan province, is also under way. Operation is expected to commence some time after 2010.

The 2,500km-long Riverside Highway will also speed up connections, in particular eradicating the bottleneck between Wanzhou in Chongqing municipality and Yichang in Hubei province. It currently takes around 14 hours to cover this 560km stretch of second-class road.

open’s up In addition to these major national projects, money is being poured in at a local level. Over the course of the current five-year plan (20062010), Chongqing will spend Rmb44bn on road building and Rmb14bn on railways. It aims to construct expressways connecting 90 per cent of its counties in the Three Gorges area, so as to facilitate the dispersal of cargo from the fastexpanding port of Wanzhou, situated roughly halfway along the Three Gorges Reservoir.

These initiatives are key to China’s ‘go west’ campaign, which aims by the middle of the www.chainaonline.com

century to eliminate poverty and help to close the yawning economic gap between the coast and central and western provinces.

By investing in the Yangtze and its supporting road and rail network, the central government is preparing the ground for manufacturers to access the vast and largely untapped market in China’s interior, helping to facilitate an efficient and effective supply of raw materials, components and finished products into and out of the region.

Shifting operations deep into the interior would be a big step for many manufacturers to take, although rising wage and land costs on the coast are starting to focus minds in this direction.

Several major domestic companies, such as home appliance manufacturing giant Midea, have already shifted some of their production capacity from the coast to Wuhan and Chongqing on the middle and upper reaches of the Yangtze. Among big name foreign companies, Unilever was one of the early movers. Back in 2003, the Anglo-Dutch multinational shifted its China manufacturing base from Shanghai to Hefei, Anhui province. The company says the move has yielded annual cost savings of 30 per cent. Further west, pioneers in Chongqing include BP, Ford and ABB. The majority of investors, though, have adopted a more cautious strategy, preferring to take a wait-and-see approach or choosing to invest in cities far enough away from the coast to enjoy cost savings but close enough to benefit from decent land transport connections to sea ports.

While it is likely to take some time for an influx of manufacturing investors in the interior to materialise, there are signs of increased activity.

For example Wuhan, capital of Hubei province, reaffirmed its status as the leading centre for FDI in central China, attracting utilised foreign direct investment (FDI) of US$2.25bn in 2007. Further west, in Chongqing, utilised FDI increased 56 per cent to reach US$1.085bn in 2007.

The recently published Yangtze Transport 2008 profiles around 100 FIEs operating away from the coastal areas. Their experience differs markedly, according to the location and nature

David Lammie is Publisher/Editor at Yangtze Business Services. He has been involved in China-related business publishing for more than 15 years. He is organizing a fact finding mission to Chongqing in October to assess the potential of the area.

For more information on Yangtze Transport 2008, visit www.

YangtzeBusinessServices.com or email dl@YangtzeBusinessServices.com.

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35

REGIONALFOCUS

of their business. In some cases, manufacturers have established smooth and efficient supply chain solutions, while in others there are frequent reports of transport delays, and higher levels of shrinkage and bureaucracy than in coastal cities.

In the middle reaches of the river, in the city of Yueyang, A.O. Smith operates a plant that makes electric motor and water heating equipment. The cost of transporting its finished products from Yueyang to Shanghai by road is more than twice “Chongqing will spend RMB as expensive as using the In general terms, the 44bn on road building and river. However, in common further from the coast, the with most manufacturers Rmb14bn on railways” greater are the logistical and operating in high value other challenges such as or time sensitive sectors, corruption and outdated management practices. In the company goes with the road option because the city of Luzhou, Sichuan province, the problems are very apparent. Users of the container terminal have to of the time savings – one day and two nights to contend with poor access to road and rail networks Shanghai compared with six to eight days by river.

This fast turnaround helps A.O. Smith to operate and a seasonal river tide range of 14 metres. tightly on capacity and to meet its customers’ Terex of the US has a mobile crane joint venture in challenging lead times. the city, and logistics is one of its major headaches.

The lower reaches of the river have been a much It does not use Luzhou’s port to transport finished more favoured investment destination, particularly products because it lacks both a ro-ro terminal and the special vessels needed to transport cranes. downstream of Nanjing, where low bridges prevent vessels of 10,000 dwt from passing. However, cities Instead, Terex Changjiang trucks the cranes to its customers in eastern China, a distance of 2,000km. such as Suzhou have long been investment hotThe company’s management team is looking into spots where rising costs and diminishing land the option of using the ro-ro terminal at Chongqing. availability are almost as pressing as they are in Shanghai. The question now facing many FIEs in It will also consider using the Yangtze in future China, as they consider the location for their future if it decides to import or export components by manufacturing plants, is whether the time is right container to the US or Europe. to look further west.

Changan Ford Mazda Automobile (CFMA) is one of the largest investors in nearby Chongqing. Last year, some 42 per cent of its output was transported using a combination of road and river transport to markets such as Wuhan, Nanjing and Shanghai. It prefers to use the Yangtze because this is the cheapest and least polluting mode of transport.

Despite being a satisfied user of Chongqing port, the company’s supply chain has been affected by the region’s unpredictable and sometimes extreme weather conditions over recent years. For example, CFMA was inconvenienced on four or five occasions by the Yangtze being blocked by vessels that had run aground during the winter drought of 2006-07.

Winter fog also causes supply chain delays, as did last year’s heavy summer rains.

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China’s

ďŹ nished vehicle

sector charges ahead

Written by Russel Beron

This year’s fifth annual Automotive Logistics China

conference, held for the first time in Beijing, brought together both foreign automotive manufacturers and suppliers and a record number of representatives from over 26 domestic car manufacturers.

INDUSTRYFOCUS

F

inished Vehicle Logistics was probably the key topic of the conference, which reflects the growing attention that the finished vehicle sector in China is attracting.

While most of these exports are going to emerging markets, mature markets such as the US are also thinking of the longer term potential for Chinese finished vehicle exports.

Everyone, from LSP’s, ports, shipping lines, and suppliers around the world are eying China’s automakers hungrily, most of them thinking export. Logistics providers from Kazahkstan, Russia and other developing markets as well as representatives from West coast American ports such as Vancouver, Tacoma and Portland were at the conference, it seems primarily to court Chinese automakers into moving their product through their respective channels.

The Chinese Auto industry With the majority of industries in the world’s biggest factory facing maturity, the auto sector is an exception. Big foreign automakers are dramatically increasing their parts sourcing operations in China for export to both mature and developing markets, the Chinese government is fully behind the automotive industry and all eyes are on the growth in China’s vehicle exports.

The pressure is on though. Bloomberg reported that car prices in China fell by one third during 2000-2007, while during the same period, prices for raw materials, fuel and power increased by 36%. Shrinking margins are not impeding growth however. According to Shen Jinjun, SecretaryGeneral of the Automotive Logistics Association of the CFLP (China Federation of Logistics and Purchasing) in 2007, China produced 8.8 million cars, a figure expected to grow to 10 million cars by 2010. To put things into perspective, in 2001, there were 18 million vehicles in China; only 6 years later, in 2007, there were 42 million vehicles, making China the number three automaker, behind the US and Japan.

Finished Vehicle Exports The most interesting numbers are in the import and export figures for finished vehicles. In 2007, according to the CFLP, China exported 614,412 cars, representing year-on-year growth of 79%.

Chinese OEM’s like Brilliance are developing rapidly

One of the issues around exports of finished vehicle exports are export quotas or licenses to export. The government has implemented strict regulations about exports in order to ensure the reputation of Chinese cars abroad and both foreign and Chinese companies need to have the right license in order to export.

It’s clear that finished vehicle logistics brings its own set of challenges. “Not until very recently did China begin to focus on finished car exports, so we are thinking of how to design policies to help finished vehicle exports,” said Yong Wei, Economic Operation Bureau, Transport and Logistics Division Chief, NDRC. In the meantime, companies have to navigate their way through the procedures.

Finished vehicle import logistics The CFLP also reports that in 2007, China imported 314,130 vehicles – a year-on-year growth of 38%.

“Sometimes it is difficult to get the real data in terms of actual sales volume,” said Zengrong Ma, the CFLP’s Vice General Secretary. “The government will not always share the exact figures.” This explains the variance in numbers from different

Chery exports large volumes of cars to Eastern Europe

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INDUSTRYFOCUS

SVW cars are loaded onto ships for export

sources. For example, according to Cliff Chen, Logistics Manager at BMW, at the end of 2007, the total import volume reached 250,000 units, up from 150,000 units the year before. Whichever numbers you follow though, the writing is on the wall, both import and export of finished vehicle will continue to experience double digit growth.

One has to remember that while China’s market is opening very fast it is still very much centrally controlled and the auto sector is one of the country’s “pillar” industries. “China has opened its market for importing cars,” says Mr. Chen, “But because the values are so huge, the government has a close eye on the import car business. The import car business is used as a political tool.”

This means that when Beijing wants to retaliate against increasing foreign criticism, they can bring pressure in areas such as vehicle imports.

Fragmentation and Consolidation One of the biggest challenges in China’s automotive industry is still fragmentation. According to Mr. Ma, there are more than 1000 OEM’s in China in the automobile market. He predicts in the future that there will be considerable consolidation. Recent big mergers of Chinese OEM’s include Shanghai/ Nanjing Automobile and Hafei/Dongfeng.

Until extensive consolidation happens though, fragmentation compounds logistical problems in the country.

Consolidation is also required for finished vehicle logistics providers. Laurent Sik, Business Development Manager, GEFCO, described how “push and pull policies” help in consolidation and create efficiencies among the transportation hubs. Through choosing push or pull policies, vehicles can be channelled to the right places helping to consolidate smaller volumes of cars in the hubs.

The infrastructure challenge Another ongoing challenge in China is the high cost of logistics. In a snapshot survey at the conference, 48% of delegates felt that logistics infrastructure is the biggest challenge facing automotive logistics in China.

While the government continues to invest greatly in infrastructure, it seems the private sector lags in this regard. “Many service providers haven’t invested enough in the China market, particularly the international players, mostly they don’t own their own trucks and warehouses,” says Cliff Chen.

Owen Xie, Deputy Managing Director, NYK Logistics, among others stressed the need for developing infrastructure in China, including ro/ro and rail capacity. Certainly rail cargo is increasing. “In 2007, the volume transported by rail increased by 44.9%,” said Zhang Xiaodong, a professor at Beijing Jiao Tong University. But it is not enough to meet demand.

The government’s 11th five year plan states the intention of building 90,000 km of rail by 2010. However, one of the problems at the moment is that China’s railway is mostly single rather than double line and the government’s priority is always passenger transportation. According to Mr. Xie though, even though it is relatively costly, road transportation is still the best solution over sea and rail to ensure optimal lead time for finished vehicle transportation.

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INDUSTRYFOCUS Capacity Crunch In an audience survey in the finished vehicles stream of the conference, more than half of delegates felt that capacity is the biggest challenge facing finished vehicle logistics in China, followed closely by infrastructure.

“Managing peak volumes is also a big issue,” said Cliff Chen. “In reality there are not enough quality service providers.” Aside from quality service providers, there is also the ongoing shortage of ro/ro capacity which companies have to find ways to address.

Meeting capacity needs still seems to be a chicken and egg situation. In order to invest, there has to be enough demand, while in order to meet demand, there has to be enough capacity. Rail is only partly a solution. But, in regard to rail Chinese rail car capacity, Mr Xie noted that significant investment at this point in rail is not viable until volumes of cars shipped increase.

The service quality challenge Related to the capacity challenge for finished vehicle logistics, are issues around quality control. “The schedule for our cars coming in is decided by the shipping lines,” says Cliff Chen.

“Because the car is on the sea for a long time, the batteries need maintenance. This brings a challenge for the service providers and for the VDC operators.”

Sound Bites “OEMs are supplying very poor visibility. We want to have real time visibility.”

– David Zhang, Delphi Automotive System

“Supply Chain Management means that the efficiency can only be improved by sharing information and by mutual planning.” -- Dr. Joerg Mosolf “There have been tremendous improvements over the past 5 years, but inland infrastructure is still immature. We’ve not worried about export, but more about the capacity in receiving ports.”

-- Robert Strain, General Motors

“Ideally we’d like to see true third party logistics service providers who can provide integrated nationwide service without sacrificing quality at a reasonable cost.” -- Cliff Chen, BMW “Ro/Ro in China is still very small in comparison to developed markets, but it will grow.”

Owen Xie – NYK Logistics

“Some LSPs profits are too low and the return on investment too long to invest in the assets even if the OEMs have the capacity to fill them. “ -- Peter Reinshagen, Gefco “If $70 is the logistics cost per car, than $55 is infrastructure costs, and the rest is waste.”

-- Greg LehmKuhl, VP, Global Auto, Menlo

Another challenge says Chen, is managing subcontractors. “We have a lot of service providers, but they don’t have enough capacity. A lot of service providers also don’t follow the guidelines.”

Clearly service levels in China have a lot of catching up to do. There was a good deal of talk at the conference about 4PL’s, but it seems in reality this level of service is some ways from being achieved. “Being a 4PL is our goal,” says Owen Xie, “but in the meantime, we are focusing on improving our 3PL logistics services.” www.chainaonline.com

The standardization challenge Hand in hand with the issue of fragmentation in the market is the lack of standardization of everything from equipment to procedures. This means great variance in truck sizes, pallet sizes, IT systems and critical areas in the supply chain. For finished vehicle logistics this challenge is not easy to address.

“Lack of truck standardization is really affecting the effectiveness of the transportation companies,” says Mr. Chen. “If you have smaller trucks, the costs JULY/AUGUST 2008

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INDUSTRYFOCUS be lessons for the Chinese market. “Supply Chain Management means that the efficiency can only be improved by sharing information and by mutual planning,” said Dr. Mosolf. “If you don’t do that in the end, efficiency will be limited.”

The fact that 74% of delegates at the conference felt that more collaboration would increase the level of service that logistics service providers give to carmakers, is a a good indicator of service levels in China. “Since we don’t have nationwide service providers, we need good communication between us and our service providers,” noted Cliff Chen of BMW. “OEM’s, government and service providers have to work out long term solutions for the auto logistics industry in China, but in the meantime, service providers need to work hard to look into their internal processes and operations and to better utilize their existing resources,” says Chen. are higher. We hope there will be a breakthrough from the government side.”

Coupled with the truck size challenge is the fact that cars are getting bigger and bigger. “The size of the cars brings a challenge to the space and it is difficult to reduce damages,” says Mr.Chen.

Learning to Communicate In his presentation which mostly talked about European standards for finished vehicle logistics, Dr. Joerg Mosolf noted several points which could

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Managing Costs Before companies could profit from lower labour costs and other China specific advantages, now these advantages have been eroded, with labour policy changes and astronomical fuel prices.

Yichen Zhao, Head of Commercial China, Wallenius Wilhelmsen Logistics, detailed some of the reasons why costs are increasing, including bunker costs and shipbuilding costs, which are putting pressure on outbound

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INDUSTRYFOCUS

In the numbers • 1000 – the number of OEM carmakers in China – some exporting only 1 or 2 cars per year • 2 – The number of Chinese carmakers in the top 10 by output ( Chery # 5 and Changan #6) • 10 million – the number of cars China will produce by 2010 (CFLP) • 79% - the year-on-year growth in finished vehicle exports from China (614,412 cars were exported in 2007 – around 300,000 were imported.

• 44.9% - the increase in volume of cargo transported by rail in 2007 – Zhang Xiaodong, • China’s 11th 5 year plan – by 2010 a length of 90,000 Kms will be reached, with a rate of 45% double track and electrification

identified by Kong Xiang Ning of Changjiu Logistics a JV partner of GEFCO are Russia, Syria, Ukraine, South Africa and Vietnam. South Africa followed by Vietnam show the biggest growth potential, with each having over 300% increase in exports in 2007.

Although an audience survey confirmed that Russia is strongly considered to be the hottest growth markets for finished vehicles from China – hence the increase in trade routes both by sea and land from China to Russia.

The issue of shipping routes to Eastern Europe for finished vehicles was debated extensively in one session, with GEFCO presenting a number of solutions, including a deep sea route from Shanghai to Moscow with a trans-shipment in Zeebrugge, a rail solution across Mongolia, while the third route is by short sea to Zarubino, followed by block trains from Zarubino to Moscow. While there is question of capacity, it is apparent that capacity for finished vehicles is gearing up rapidly.

With shortage of capacity by sea – some routes have only one sailing per month from China to Russia -- and some advantages in transit time by rail, “The solution via trans-Siberian railway is an optimal one, since we will increase the number of block trains, reduce costs and improve capacity,” said Laurent Sik of GEFCO.

• 300,000 vehicles and 30k Knock Downs, 2011 production goal for Korean OEM, Ssangyon Motor • 40% - the increase in vessel operating costs over past 6 years (Willenius Wilhelmsen Logistics) • 582% the year-on-year percentage increase of cars exported to South Africa (Changjiu/ Gefco) vehicle logistics. Some solutions include better forecasting, network design and improved supply chain efficiency.

Mr. Chen at BMW also made the point that “Companies that have invested in warehouses and trucks have a better chance to manage their costs.” It seems that lower logistics costs in China will require both the support of business as a well as government.

Emerging Markets According to Yichen Zhao, by 2010, emerging markets will account for more than 50% of global auto sales and assembly.

The top five export destinations for Chinese finished vehicles in order of export volume, www.chainaonline.com

The way forward Clearly there is a strong need for integrated logistics and for quality services and companies need to manage their costs. Chinese companies don’t know enough to deliver the services required, while international service providers don’t know enough about the market to deliver services locally.

“Ideally we’d like to see true third party logistics service providers who can provide integrated nationwide service without sacrificing quality at a reasonable cost,” said Cliff Chen at BMW, echoing the feelings of probably everyone in the audience.

According to Zengrong Ma, in the same way that Anji-TNT serves both GM and Volkswagen, the future should see the emergence of larger OEM’s and also large logistics companies emerging to serve them.

JULY/AUGUST 2008

43

SPECIALFEATURE

Logistic infrastructure suffers in earthquake area

landslides.

The Sichuan region does not have oil refineries, and so it is dependent on shipments of petroleum products from outside the region.

Local manufacturers recover

T

he earthquake that struck Sichuan Province in China on May 12th was immediately destructive and disruptive to manufacturing and logistics operations in the area. Recovery of the infrastructure has been slow and initially focused on support for relief efforts.

Almost immediately, the Chengdu airport closed and diverted flights to other regional airports, stopping or diverting 169 inbound and 108 outbound flights. Within a day, the airport was inspected and service was restored.

Toyota Motor Company, which operates a production plant in Chengdu, suspended production while it inspected its plant. That stoppage was initially extended as the company inspected a crack in the paint line to determine whether safety requirements could be satisfactorily met and to determine whether the damage would affect production quality. The initial shut down affected production of 200 vehicles.

The Ministry of Communications immediately allocated RMB 10 million ($1.43 million) in emergency funds to restore transportation to quake-hit areas. Efforts were begun to restore access for rescue and recovery efforts, and the 312 National Highway leading to Chengdu was repaired within a couple of days and other roads leading to the disaster area were at least partially restored. (The 312 highway spans 3,000 miles from Shanghai to Xinjiang.)

A rail line from Shaanxi to Chengdu was damaged by the earthquake, causing a cargo train carrying petroleum products to derail and burst into flames.

A petroleum pipeline that was initially closed for inspection was reopened, allowing petroleum products to flow to the affected area. In addition, oil transport was arranged by truck, although initial moves were hampered by blocked roads due to 44

JULY/AUGUST 2008

Intel has significant operations in the earthquake hit area

www.chainaonline.com

CASEFEATURE “Within our plant, the safety of our employees is top priority,” said a Toyota spokesman.

“Another requirement for resuming production is the status of our suppliers and the state of the logistics infrastructure,” the Toyota representative continued. As the company examined its own operations, ensured the safety and well being of its employees and its suppliers, it committed RMB 10 million ($1.43 million) in aid and provided 10 Land Cruiser Prados for the recovery effort.

Construction was expected to start soon on the Chengdu Railway Container Center. The RMB 2 billion ($286 million) investment was expected to create a terminal with a throughput of over 2 million twenty-foot-equivalent units (TEUs) per year. It would open direct lines to Shanghai, Guangzhou, Shenzhen, Qingdao, L i a n y u n g a n g

Linksys, a division of Cisco Systems Inc., had announced on April 24, 2008 that it

More than 60,000 people are reported to have died in the Sichuan Province earthquake

established a logistics center in Chengdu with ModusLink Corp. The center provides logistics services to five Linksys product change centers in Chengdu, Beijing, Guangzhou, Shenzhen and Shanghai. Its goal was to change problem products in five to seven days vs. the previous period of three weeks to one month.

Chengdu boasts an industrial development zone that includes major multinationals such as IBM, Nokia, Alcatel, Motorola, SAP and Microsoft as well as local high-tech manufacturer Lenovo. Intel’s Chengdu factory is its second after Shanghai and the first large-scale foreign investment in the electronic industry in the interior mainland of China.

A high growth area The region has seen substantial investment recently and has been growing its manufacturing base. From January to November of 2007, Chengdu approved 157 projects using foreign capital investment.

Foreign direct investment jumped 91.2% to $1.15 billion over the past year. Many infrastructure projects were in their beginning stages at the time of the earthquake.

and Tianjin ports and shorten transport times from the current five or six days to just 48 hours.

Along with the Chengdu International Container Logistics Park, the development was slated to create the largest inland port in Western China when completed.

The city of Chengdu recently reported its gross domestic product (GDP) hit RMB 76.2 billion ($10.9 billion), up 15.1% year on year. While agricultural and meat production had increased substantially, the industrial sector showed a 25.8% increase over the prior year. Software and information service businesses increased by 50% in the period. Service industries were up 13%, and income from tourism rose 7.9%.

With whole villages leveled, infrastructure issues will continue to plague the recovery. As Paul Lim of Supply Chain Asia observed, referring to the dual disasters in Myanmar and China, “Logistics is a major issue in our region, even without these natural catastrophes and both the government of Myanmar and China are finding it hard to cope.”

This article originally appeared in the online version of Outsourced Logistics.

Toyota’s operations were suspended as a result of the earthquake

www.chainaonline.com

JULY/AUGUST 2008

45

TIERTWO

Deep water, and a good location attract Ningbo, only 2 hours from Shanghai with the new Hangzhou Bay Bridge, boasts a new port which will rival Shanghai’s Yangshan Port.

I

Cargo

t’s a long way to Meishan Free Port right now. The last few kilometers into China’s newest Free Trade Port are spent slowly driving a temporary bridge tiled with thick steel plates followed by winding gravel roads. Visitors driving those last tortuous bends must make way for the constant stream of dump trucks that return from filling ocean with landfill. By 2010, the small island off the coast of Zhejiang , an hour’s drive west of Ningbo city, will rival the Yangshan Port near Shanghai for the volume of containers the Port will support.

Dongjiang, Dalian Dayaowan and Hainan Yangpu. Currently the island is only about 27 square kilometers, with 7 kilometers of coastline. Its shores are natural deep-water ways, and a logical supplement to Beilun Port, a network of ports on the northern shore of Zhejiang Province. Beilun has ranked second of all ports in China since the beginning of the millennium, and fourth place in the world, according to Ningbo administrators. Meishan Free Trade Port was only recently approved by the state government on February 24th, 2008.

Ningbo Meishan Free Trade Port Area is the fifth free trade port area China’s Central Government has approved; other Port Areas being: Yangshan, Tianjin

Through an extensive landfill project, the local government will enlarge the island to 36 square kilometers.

Interestingly, the island already has a

46

JULY/AUGUST 2008

population of 150,000. The primary industries on the island until the construction of the Port facilities began in February this year were fishing and salt processing. Indeed, the foot prints of old salt processing facilities can be found along the rough route to the government offices, on the east coast of the island.

“The advantage of free trade ports is that ships can dock, off-load their cargo and processing can be done right at the Port, then re-loaded on other ships without customs duties paid and VATs tabulated,” according to Jeffrey “Casper” Yu, a senior administrator in the Promotion Bureau for the Free Port.

Yu worked for nearly five years in the Ningbo Free Trade Zone, and so has a

www.chainaonline.com

TIERTWO put into operation, as well as completion of Meishan Bridge, the construction of a main thoroughfare Maishan Boulevard, and the Container Truck Highway. The project also plans to have complete by 2010 an additional 9 square kilometers inning project to expand the land area to 36 square kilometers. By 2020 the Port should be complete and in full operation, with an annual throughput of 5-6 million TEU. Mr. Yu explained, “The Meishan Free Trade Port will not compete with Yangshan Free Trade Port for business. The plan is for Meishan Free Trade Port to cover port requirements for Zhejiang Province, Anhui Provinde, Jiangxi Province and Fujian Province. Meanwhile, Yangshan Free Trade Port will be address many of the containers coming down the Yangtze River from river port towns, and north China, including Jiangsu Province, Shandong Province and Henan Province.

great deal of experience in developing tourism – including the development a bonded zone in China. “Another of an international cruise ship port in point is that domestic companies that the north of the island; and convention sell into a Free Trade Port can apply and exhibition of import and export for VAT rebate,” he explained, “while commodities among others.” The Island’s those that sell authorities will into Free Trade entertain “The advantage of free trade ports also Zones are not commercial is that ships can dock, off-load eligible.” and logistics their cargo and processing can be real estate U l t i m a t e l y, projects. done right at the Port. ” the island will have three bridges spanning the half-kilometer of water that separates it from the mainland. The current make-shift bridge will disappear, Yu said, “The Island will serve several roles: to serve as a port logistics hub; to support service industries such as customs, port affairs, ship inspections, finance, law firms, audit firms and the like;

www.chainaonline.com

The island has been slated to be developed into several areas, including: International Transfer; International Distribution; International Purchasing and Export Processing, among others.

By 2010 the first phase of the Port will be put into operation. The first phase will include two 100,000-ton container berths

Bill Dodson is General Manager of Asia Base A/S, a European company in China that provides corporate legal services and investment feasibility studies to Western enterprises. He writes the popular blog This is China! (www.silkrc.com/ chinadialogs). You can contact him at mail@ asiabase.com.

JULY/AUGUST 2008

47

BOOKREVIEW

Leadership Success in China

An Expatriate’s Guide

By Dr. Yue-er Luo, Erik Duerring, William Byham and The DDI China Team ©Development Dimensions International, Inc., 2008, DDI Press, Bridgeville, PA, USA 255 pages employees. You ccan expect different generations of Chinese Chin to react quite differently to situatio situations at work. Having this powerful insight helps you maximize the effectiveness o of your otherwise inscrutable Chinese team.

Reviewed by Chris Deans

F

rom the outset, “Leadership Success in China – An Expatriate’s Guide” is an entirely pragmatic and highly useful guide for expatriate managers leading Chinese employees in China. Written primarily for managers about to embark on their first assignment in China, it should also be required reading for those who are China experienced as well as those who are still merely contemplating such a bold move. The purpose of the book is to give expatriate managers the insights and tools they need to quickly become highly successful managers in China.

Practical step-by-step step-b guidance is provided for n navigating the often murky waters wate of recruiting, retaining, training, coaching, performan performance management, mentorin mentoring and building local Chinese leadership.

Speci Specific insights and sugg suggestions are provided, supp supplemented with reale life examples, for dealing with Chinese workforce characte characteristics such as in guanxi, ethics, information hoarding, face, communication communications and loyalty. Traps d pitfalls itf ll off a Western W and management style are also clearly explained so they can be avoided.

Each chapter stands on its own, so you can use the book like an owner’s manual. If you want insights into team dynamics, turn to Chapter 7 – ‘Getting Your Team to Act Like a Team’; for recruiting, read Chapter 3 – ‘Attracting Qualified Applicants’.

If you have recently received your first assignment

Dr. Yue-er Luo

to China, read Chapter 13 – ‘Getting Off to a Fast Start’; you will find the information there invaluable not only as you prepare to leave for China, but also as you immerse yourself in your work when you arrive. The entire book is filled with mini case-studies from the authors’ actual experiences living and working in China.

Well written, succinct, practical, brimming with actual examples and useful tables, lists, and guides of what to do and what to avoid, this book is highly recommended.

The book unabashedly addresses the key concerns Western businesses encounter managing Chinese employees today. It begins with a succinct description of what is driving the talent shortage in China and how this will likely impact their organization.

Valuable insights are garnered from brief descriptions of China’s rich, deep cultural heritage as well as the dramatic historical events and tremendous change of the past 60 years that influence today’s Chinese 48

JULY/AUGUST 2008

www.chainaonline.com

DON’T MISS OUT! List your company in the most comprehensive supply chain services directory in China

VENDORS DIRECTORY 2008 •Logistics Service Providers • IT & Software Solutions •L •Real Estate Services •R •Consulting Firms •C

• 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 LowendalMasa

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u Highlights

Any China-based company that provides services or solutions to the supply chain and logistics industry should be listed.

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A 12-month company listing costs only RMB4,000 (or RMB2,500 for China Supply Chain Council members). Because the Directory is re-printed every three months, we give companies the opportunity to update their profile online, meaning your company information will always be up-to-date.

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by Thierry Fournier and François-Xav ier Terny • 1996-2004: 120 experts in 6 offices in Europe, in Japan and the United States and 7 sourcing offices in developing countries • 2004: openin g of the first office in China in Shang hai • 2006: acquis ition by Lowen dal group of Masaï . Masaï becom LowendalMa es saï

22

u Company

Introduction

Lowe ndalM asaï China is a consultancy Optimization company speci and Opera tional Perfor Purchasing alized in Cost mance. Its , Global Sourc territories are ing, Value Supply Chain Strategic Analysis, Indus Optimization trial Process .

Global Sourc and ing projects includ (purchasing maturity, saving e a Strategic Analysis of LCC poten innovation, s potential, tial capacity and LCC oppor tunities such compensat solutions like ion), and as hosting and LCC organ office set up isational Lowe ndalM abroad. asaï China helps client qualif icatio n, the contr s, in the actua lisatio selec tion, best Chine n, and the the se supp liers. devel opme nt of the

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tions In line with contin uous effort s to funct ion has achie ve a majo r role to play in imple savin gs, the Purch asing cost optim izatio n proje ct. Lowe ndalM ment ing a comp any-w both consu ide ltancy and asaï China opera tiona bring s toget made soluti l suppo rt in her on to the order to provid comp any’s e a tailor need s.

GLOBAL SOUR CING • Global Sourc ing Strategy / Diagnosis • Supplier Selec tion / Qualif ication / Developme nt • Sourcing Operations Ramp-Up • Internationa l Purchasing Office Set-U p / Organisation Coaching / COST OPTIM IZATION • Supply Chain Design / Optim ization • Retail Life Cost Optim ization • Design To Cost • Analytical Costing OFFSHORE PURCHASI NG OFFIC • Added-Valu E e Hosting

CONS ULTIN

G FIRM S

Who reads the 2008 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 2008 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 2008, 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: Wendy Yu

) +86 (21) 5102 1617/18 + directory@supplychain.cn

8 www.supplychain.cn

SPECIALFEATURE

An

Olympic

size

headache Rather than a showcase for the new China, the Olympics have turned into a major headache for both foreign and locals. These two weeks of activities have brought visa restrictions on foreigners, increased security measures, and are proving neither good for business nor tourism. Tourism in China was down over 20% in May and many hotel rooms for the Olympic are not booked contrary to expectations. The event is also proving difďŹ cult for moving goods in and out of China. In fact many companies will not be able to ship at all, especially if the cargo is sensitive in any way.

The Event Opening / Closing: Aug 8 / Aug 24 Locations: Beijing, Shanghai, Shenyang, Qinhuangdao, Tianjin, Qingdao, Hong Kong Sport / Events: 28 / 302 Gold Medals: 302 Athletes: 10708 Competition Venues: 31 in Beijing / 6 outside Beijing Olympics Village officially opens: Jul-27

Regulations on Cargo Trucks t'SPN +VM UP 4FQ OPO MPDBM DBSHP USVDLT are prohibited from entering Beijing City. Cargo trucks destined to Beijing direction will be prohibited onto highways as from Zhangjiakou and Chengde and guided to skirt around Beijing. t'SPN +VM UP 4FQ USVDLT XJUI USBOTQPSU licenses can run within the 6th ring of Beijing city during AM 0:00 – AM 6:00 without odd/even plate number control, and run outside 6th ring all day according to odd/even plate number control. t5IF DPOUSPM BSFB XPVME CF SFEVDFE UP XJUIJO the 5th ring road during the Paralympics. t$BSHP USVDLT XJUI 0MZNQJD 1FSNJUT DBO SVO JO designated areas and designated time. t$BSHP 1JDLVQ BOE %FMJWFSZ $BSHP DBO U CF delivered in certain designated areas (most likely within 1 or 2 miles around Olympic stadiums) as there is access limitation for vehicles without access permit. t$BSHP PWFSXFJHIU XJMM CF TUSJDUMZ DIFDLFE t$FSUBJO NFBTVSFT XJMM CF JNQPTFE PO DBS parking time and waiting time in certain areas.

Information provided by

Capacity situation starting June 2008

Sinotrans, DHL, and Schenker

t"EEJUJPOBM TFDVSJUZ DIFDLT GPS FYQPSU DBSHP will increase lead times by 48h.

50

JULY/AUGUST 2008

t1VSF GSFJHIUFS TFSWJDFT BSF FYQFDUFE UP CF QVU on hold during Olympics. t*ODSFBTJOH QBTTFOHFS WPMVNFT NJHIU JOnVFODF lower deck capacities.

Safety Control Security Inspection in Terminal/Airport t'SPN .BS BMM DBSHP NVTU HP UISPVHI security inspection machine as per requirement from CA Terminal, BGS Terminal & Hongyuan Consolidation Warehouse. t$BSHP XIJDI DBO OPU HP UISPVHI TFDVSJUZ inspection machine (e.g., oversized or odd-sized cargo, etc) has to be kept in Terminal for over 24 hours and checked manually for security purpose. t"JS DBSHP XJUI CBUUFSJFT TVDI BT NPCJMF phones and laptops is requested by Beijing BGS terminal to be companied with non-dangerous goods certiďŹ cate, and unpacked for inspection in some case.

Customs Inspection t0MZNQJD HPPET XJMM CF USFBUFE TFQBSBUFMZ XJUI normal goods by Customs authorities. t#FJKJOH $VTUPNT BOE JOTQFDUJPO BVUIPSJUJFT would raise the inspection ratio from current 5% to 10- 30% on import commodities during the

SPECIALFEATURE

Olympics period. For export, there would be a pre- inspection before customs declaration.

Olympic effects on logistics in greater Beijing Further measures may affect the neighboring provinces t" TIVU EPXO PG DFSUBJO DPNQBOJFT JT FYQFDUFE to be last from July 20th until September 20th. t5IF TIVUEPXO XJUIJO B LN [POF IBT NBKPS inuence on industrial production and supply for the region.

t#FJKJOH 4IPVHBOH $POTUSVDUJPO .BUFSJBM Chemical Factory t#FJKJOH 7FIJDMF 'BDUPSZ PG $IJOB 4PVUI Vehicle Group t#FJKJOH -PDPNPUJWF 'BDUPSZ PG $IJOB North Vehicle Group Beijing trafďŹ c, will be highly restricted during the Olympics

t5IF BSFB JT XJUIJO UIF WJDJOJUZ PG LN around Beijing (Tianjin, Tangshan, Baoding and other signiďŹ cant locations will experience impacts on their industrial production). t5IBU BSFB NJHIU CF FYUFOEFE JO DBTF PG MFTT effectiveness up to 300km.

Potential shut down of companies from July 20th to September 20th These companies need to meet the pollution emission standard and then further reduce 30% of their emissions. If the standard can’t be reached, these companies will be shut down. t4IPVHBOH (SPVQ t#FJKJOH &BTUFSO 1FUSPDIFNJDBM $P -UE t#FJKJOH 4IPVHBOH )POHZF 4UFFM $P -UE t#FJKJOH 'MBU (MBTT (SPVQ

t5IF OE 'JSFQSPPG .BUFSJBM $PNQBOZ PG Beijing Shougang

t#FJKJOH 4IPVHBOH $P -UE 'JSTU Electricity Line Factory

t5IF 4UFFM 'BDUPSZ PG #FJKJOH 4IPVHBOH (SPVQ

t#FJKJOH 2JOHDIBOH (MBTT $P -UE

t#FJKJOH 'BOH3VJ 'PVOESZ $P -UE

t#FJKJOH -V1BJ %BJMZ /FDFTTJUJFT $PNQBOZ

t#FJKJOH 'FJNFJUF 'PVOESZ $P -UE

t#FJKJOH $IBOHQJOOBOLPV (MBTT #PUUMF 'BDUPSZ

t#FJKJOH :BOTIBOH 1FUSPDIFNJDBM (SPVQ

t#FJKJOH 4IPVHBOH +JUBJBO "MMPZ $P -UE

t#FJKJOH +JOHOFOH 5IFSNPFMFDUSJDJUZ $P -UE

t#FJYJO $POTUSVDUJPO .BUFSJBM $PNQBOZ

t%BUBOH #FJKJOH (BPKJOH 5IFSNPFMFDUSJDJUZ $P -UE

t#FJKJOH 9JMJV 5SBEF $PNQBOZ

t)VBOFOH #FJKJOH 5IFSNPFMFDUSJDJUZ $P -UE

t#FJKOH +JBOHYJBOH 8BMM .BUFSJBM $P -UE

t(VPIVB #FJKJOH 5IFSNPFMFDUSJDJUZ $P -UE

t#FJKJOH 9JONJOH (MBTT .BUFSJBM 'BDUPSZ

EVENTUPDATE

Vietnam’s growth

comes with gold plated problems

V

ietnam is usually the “one” in the “China plus one” equation. However as recent developments in Vietnam, including inflation of around 25% due to the country’s inability to absorb large amounts of foreign direct investment show, the country is far from a perfect complement or alternative to China as a manufacturing centre.

The Global Supply Chain Council recently organized the first Vietnam Sourcing Summit on June 25 to discuss some of the issues around sourcing and manufacturing in Vietnam. More than 70 delegates attended this inaugural event from a diverse set of manufacturers such as Whirlpool, Votorantim, Briggs and Stratton, Pepsico, Caterpillar Asia, Kimberly Clark and BP.

Issues discussed included: how the current global credit crunch and high inflation in Vietnam are directly impacting foreign and domestic investment within the manufacturing sector, the Vietnam real estate market and general trends in the labour market. Why Vietnam is considered the next attractive sourcing location in Asia was also discussed along with how the new legal framework for trading is evolving.

Highlighted questions from the summit included: will Ho Chi Minh City still maintain its advantages of attracting manufacturing investment in comparison with Hanoi which has more hi-tech manufacturers like Honda, Ford, Canon and Panasonic. Another question posed was, can we source everything in Vietnam? Many summit delegates were also excited about the upcoming Vietnam Logistics Summit on August 27 in Ho Chi Minh City.

This event promises to provide a better idea about infrastructure development in Vietnam, one of the key concerns about sourcing there.

For more information about supply chain events in Vietnam, contact Nguyen Da Quyen, Operations Director, Vietnam Supply Chain Council: daquyen@ supplychains.com.

eyefortransport

F

or the 4th year, eyefortransport held their two day 3PL Summit in Shanghai on June 23-35. This event is focused on trends and opportunities for 3PL providers in China.

Many senior executives at 3PL’s in China attended the event which covered issues such as the role and future of 3PL’s in China, security across the supply chain, the evolution of logistics in China, updates on government regulations and M&A trends to name a few topics.

Dr. Xuejun Tian, Business Director, China Post Logistics gave a comprehensive update on the logistics climate in China.

He noted that the total logistics value in China in 2007 was RMB 74.8 Trillion, up 25.5% year-on-year, while logistics costs increased by 17.3% year-on-year. One of the key issues in China going forward remarked Tony Lin from Dimerco International 52

JULY/AUGUST 2008

summit updates 3PL climate Transportation is “How can private and public business work together.” This is a key issue in a country where standardization of trucks is a big issue, and transportation networks are so underutilized that 37% of companies return with an empty backhaul. The coming years should see big shifts in China’s 3PL market, with consolidation as the key trend. www.chainaonline.com

EVENTUPDATE

China Bets the farm

on innovation

W

ith China facing pressure from every direction including cost reduction, labour law changes, RMB appreciation, commodity price increases and a global economic slowdown, there is more need than ever for innovation in manufacturing and supply chain processes.

The China Supply Chain Council hosted an event on Supply Chain Innovation on April 23 to look at where China is on the innovation curve. The event brought together speakers and delegates from companies such as Dow Corning, JDA Software, Accenture, CHEP, Savi Performance and IBM.

need to respond quickly to consumer buying trends. Another challenge mentioned

by Fraser Jennings of Savi is the complexity of the supply chain, which can be reduced through better use of technology.

The summit raised a number of challenges which hamper innovation. “One of the real challenges is to create agility in the Supply Chain,” noted David Herridge, Senior Director, SC Strategy and Solutions, JDA Software Asia. Companies

Supplier management is another big area where opportunities exist for innovation.

Marnix Etterna a consultant from Alvarez Marsal Asia made an interesting point that supplier satisfaction is linked directly to company performance. This is clearly illustrated in the automotive sector. “American automotive OEM’s see their suppliers as a cost, whereas Japanese OEM’s partner with their suppliers to work together, so they are much more satisfied,” said Etterna. While American OEM’s are bleeding sales and profit, the Japanese OEM’s innovative approach to supplier management is helping to push companies such as Toyota and Honda to the front of the pack. Innovation is likely a word that will come up more often in conversations about China manufacturing.

Go West! Is it worth the trip?

T

he Chinese government’s has been pushing its Go West drive for several years. They want to balance out the wealth gap between East and West and shift some of the manufacturing inland. To this end, infrastructure such as rail, road and river transport have all been improved and incentives galore have been offered to companies willing to go there.

While certain companies, notably Intel, Motorola and Ford have shifted some production out west to cities such as Chongqing, Chengdu and Wuhan, the Go West drive has met with mixed success. The Supply Chains Go West Summit on May 22, organized by the China Supply Chain Council took a hard look at the current Go West climate. A range of speakers from companies such as Intel, Honeywell, CEVA Logistics, M&M freight forwarders and numerous others came together to discuss their experience in terms of the risks, opportunities and Jeff Liu, Intel China issues of moving inland.

www.chainaonline.com

“Intel has close ties with the central government which also helps to bring suppliers along with,” said Jeff Liu, Commodity and Global Supplier Manager at Intel China. “Most of the cost saving for Intel out West is in terms of labour,” he noted.

For many companies though, they have to weigh the cost of setting up an operation out West against the potential savings.

For companies who are serving customers in the region, it seems to make sense, but if production is just for export is may not, given high logistics costs. “The challenge is how to manage your supply chain, better, cheaper and faster,” said Jiao Bo, Director of Sourcing at Alcatel Lucent China. The Go West drive is clearly far from over and it seems logistics will continue to play a key role in the success of the initiative.

JULY/AUGUST 2008

53

QUESTION&ANSWER

Knorr Bremse

puts high-end brake systems on the china map

Yann Teste is the Head of Purchasing East Asia for Knorr-Bremse Systems for Commercial Vehicles, a provider of systems solutions for trucks. Russel Beron spoke with him about the company and their plans for Asia. : What exactly is Knorr-Bremse?

Yann Teste: The Knorr-Bremse Group

is the world’s leading manufacturer of braking systems for rail and commercial vehicles. For more than 100 years now the company has pioneered the development, production and marketing of state-of-the-art braking systems. Other lines of business include door systems, rail vehicle air conditioning systems and torsional vibration dampers for internal combustion engines. In 2007, the group posted sales of EUR 3.25 billion and employed a workforce of 14,000. : Who do you supply?

YT: Our colleagues in the rail business provide Knorr-Bremse system solutions to international heavyweights such as Siemens, Alstom, Bombardier as well as to some ambitious Chinese companies.

In the field of commercial vehicles, we supply companies such as Daimler-Chrysler, MAN, Volvo 3PIveco, International, Paccar, Caterpillar, Internationnal, Weifang Diesel, CNHTC and Wuxi diesel to name a few.

We are proud to be the Global market

leader with many of our products such as air-disc-brakes; many of our products set the technical standards in their area. : Most Chinese trucks are not highend trucks though and there is little standardization here. Do you think there’ll be a big shift towards more standardized European-like trucks?

YT: We are sure they’ll go this route. The

infrastructure in China is available and efficient, but it still takes a long time to go from one location to another - partly because trucks are slow or overloaded.

However, safety and environment will increasingly shape transportation in China. Therefore we are a value-adding partner to our customers, For example, we support high-end bus companies in the market with Air Disc Brakes and ABS (Anti Skid System) – increasing the road safety for end users. Our systems excel in reliability, user-friendliness and life-cycle costs. Besides that, there is no compromise even on our highest quality standards - if you source parts in China you have to be good at quality control.

Yann Teste, Knorr-Bremse

: Do you own the factories or do you outsource production?

YT: We own all our factories; this allows

us to have a very efficient control of the processes. Nevertheless we are not deeply vertically integrated as we think that our core know-how is more on assembling and systems solution providing. So we also rely on our suppliers’ know-how for a lot of operations. : How long have you been operating in China?

YT: Our Company has been in China

more than 7 years. We started by distributing parts, then we set up a global sourcing office about five years ago. I came to China in 2004 to take over the complete purchasing and Supplier Development activities and bring them to an international and Knorr-Bremse standard. In the mean time we have acquired and started up factories in Dalian, Guangzhou, Qingdao and Suzhou, Beijing and Shanghai.

The Air-Disk Brake, one of KnorrBremse’s most successful products

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: What percentage of your production in China is exported? www.chainaonline.com

QUESTION&ANSWER Thailand and perhaps later Indonesia.

We also have a powerful operation in India as well and have a global sourcing unit there as well exporting substantial volumes to the group. From my point of view, the search stops when there are no more places left to find lower costs with high quality. We always consider the Total Cost of Ownership. At this point, there are still options to find countries where we can reach our targets within Asia. : Do you have operations in Western China?

YT: No, we don’t have operations in the

YT: From the production point of view,

our target in China is to serve the local market. Our objective is to be close to our customers to serve them the best. : Who are your competitors?

YT: Globally mainly Wabco, in China the

large local brake system suppliers. : Are there any competent Chinese suppliers?

YT: Of course! Our expectations are very

high and we ensure train and trucks are able to brake without any failures and for this we need and we do have an excellent supplier base in China and the region.

We are working with our suppliers to continuously improve and develop the quality. It also takes a certain time and

attention to develop high-performing suppliers and to sustain the level. In any cases we always invest time and money to develop a lasting win-win relationship with our strategic suppliers. This for example leads to agree on risk sharing for raw material increase, export taxes increasing, VAT refund rates decreasing, and finally exchange rate impacts on component prices. : Where is the search for low cost suppliers going to end? Do you have operations in other Asian markets?

YT: 95% of our export turnover in

purchasing out of East Asia is generated in Mainland China, Taiwan and Korea.

But Vietnam is an interesting place to investigate, as well as Malaysia or

west yet, but we have suppliers in the areas of Wuhan and Chongqing. While we are not thinking about moving our operations west we do find more and more competent and cost effective suppliers in these places. : You take care of both sourcing and supply chain. Can you describe your job in more detail?

YT: My role is to manage the local purchasing for the plant and export purchasing for our plants in Japan, Europe, U.S., Russia or Brazil to name a few. On top of sourcing we have the responsibility to validate all suppliers in terms of process control, sampling, quality documentation and quality system before starting production for local or overseas Knorr-Bremse locations.

Recently I also integrated in my team the logistics projects focusing on logistics flow optimization.

A Knorr-Bremse Brake system is being tested in winter conditions

www.chainaonline.com

JULY/AUGUST 2008

55

EXECUTIVEINSIGHT

Executive

Insight

In this third article in the Executive Insight Series, global recruitment firm Michael Page International asks James Padovan, Commercial Director (China) at Tesco Stores Limited for his views on career development.

James Padovan is Commercial Director for China at Tesco Stores Limited, one of the world’s leading international retailers. He joined Tesco as a graduate in 1990 and spent the earlier years of his career in the UK developing his buying and marketing skills.

In 2000, he put his hand up for a new position and played a key role in setting up the Tesco business in Taiwan. Following two years in Taiwan he moved back to the UK to manage and negotiate global What are some of the factors that have made you successful in your career?

James Padovan: I have been fortunate to work for a company that has supported my career development and has always encouraged me to broaden my experience.

However, with new opportunities and broader challenges comes the added pressure of trying to do too many things and end up achieving nothing. One thing I learnt early on in my career is that you can’t achieve everything all at once. To be successful, you need to prioritise and work on the few things that will make a real difference and then focus on doing them exceptionally well. By being famous for owning and successfully launching a few key projects that add value to a part of the business, your name becomes known within the organisation and you will progress a lot quicker.

Pushing the boundaries and identifying newer, better, simpler and cheaper ways of doing things has also contributed to my success in the industry. I’ve never had the mentality that ‘it’s always been done this way.’ I enjoy identifying and implementing

vendor agreements with a number of blue-chip international suppliers.

In 2003 he accepted the position of Commercial Director for Tesco Taiwan. He then went to Turkey as Commercial Director, before assuming his current role in China last year.

In his position as Commercial Director for Tesco China, he is responsible for managing China’s regional buying teams across the fresh food and grocery categories.

process improvements and it is particularly rewarding when they lead to sales growth or greater cost efficiencies.

What do you look for when hiring new staff?

JP: While technical skills are important, there are two key things I look for when hiring new staff – attitude and team spirit.

We work in a dynamic, fast-paced industry so potential candidates must have energy and enthusiasm. I want people who are resilient under pressure and have a cando attitude. They need to be able to take the bad with the good as every day is different. I also look for people who are team players. There needs to be an instant rapport with the candidate and a sense of cultural fit. I look for people who can get along with others and communicate with all levels of the organisation.

Can you give some advice on how to progress to the top?

JP: To progress to the senior level, you need to take control of your own future and keep up with new technologies and trends to ensure you remain at the forefront of industry best practice.

I encourage young professionals to be proactive when it comes to training and professional development. Don’t sit around waiting for your manager to tell you what course to go on. Instead, research your options and then suggest how a particular course or conference will add value to you and the business.

It’salsoimportanttogainbroadexperience early on in your career. I encourage young professionals to expand their horizons and work in different countries as it gives you greater cultural awareness and exposure

www.chainaonline.com

James Padovan, TESCO China

to different business practices. Similarly, gaining experience across different parts of the supply chain will help you to better understand the wider business and put you in a prime position for a senior management role.

What are some of the changes and trends in the procurement & supply chain profession?

JP: One change I have certainly noticed is the amount of consolidation in the supply chain industry. As organisations focus on cost management and operational efficiency to maximise profit in a competitive business environment, we have seen a smaller number of dominant players emerge in the market.

I have also observed a growing focus on environmental awareness and corporate social responsibility. Companies are starting to take a longer-term view of their business operations and are placing greater emphasis on reducing their carbon foot print. I think this is a very promising trend and one that will continue as the industry becomes even more competitive.

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57

COMPANYPROFILE

Agility’s expansion drive pushes through the

Middle Kingdom

James Gagne is CEO of the Greater China region for Agility, a company formed in 2006 out of mergers between PWC Logistics, Translink, GeoLogistics and a number of other companies around the world. The expansion has been driven by strategic acquisitions to strengthen the company’s network and enhance its capabilities in key industry sectors. Prior to this role, Mr. Gagne was with Schenker and Bax Global.

CHaINA Magazine spoke with James Gagne at the recent Transpor t Logistic show in Shanghai about Agility’s strategy going forward. : Can you tell us a bit about

Agility?

James Gagne: We are within the top 10 global logistics providers, with over 32,000 employees in more than 550 offices in over 100 countries. We are publicly traded and our revenues were more than 6 billion US dollars at the end of last year. Around the Asia Pacific region we employ close to 7,000 people, in about 200 locations in all major trading and commercial centers in the region. : I understand Agility does a lot of

specialty logistics, can you talk about that?

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JG: We have three core operating units on the global level. One is the Global Integrated Logistics (GIL) unit, which houses our international freight forwarding and transport offering, taking care of contract logistics, warehousing and road transport. Another unit, Defense & Government Services (DGS) provides logistics fulfillment services to defense and government customers. We are involved in a special program in the Middle East, where we provide contract logistics services to the United States military in Iraq and other areas. We have a third operating unit which covers things like infrastructure investment and privatizations.

Within the GIL unit we have a significant Project Logistics business and are very engaged in that area, working with multinationals around the world, as well as a large amount of Chinese companies.

As part of our specialty Fairs and Events business we are proud to announce that we will be one of the very few leading logistics providers for the World Expo, 2010 in Shanghai. It is actually a milestone for us to be involved in this area and we see this as a major opportunity. : Agility was awarded the Asia Pacific Air Freight forwarder of the year last year by Supply Chain Asia. What was this based on?

www.chainaonline.com

COMPANYPROFILE : Agility recently announced the acquisition of Chinese freight forwarder, Cosa Freight. Can you talk a bit about this acquisition?

JG: Cosa is a freight forwarder based in

Shenzhen with six offices in China and more than 200 employees. This acquisition strengthens our network capability in China to a degree, but even more importantly, it adds to the range of services that we actually offer to the trading and manufacturing sectors. Cosa has key strengths on the Trans Pacific trade in terms of ocean freight. It also provides an end-to-end solution for the retail sector, which as you know is a global sector. More specifically, they provide a full range of services in terms of inventory management upstream, origin consolidation management and trans-loading services to and within the United States.

JG: We are a major player around the Asia pacific region and have a long and established presence in the region, which contributed to our nomination. Experts in the industry evaluated us based on our practices in different areas. Also the company is financially healthy and is listed on the Dubai stock exchange and we have been a major player on the intraAsia trade lane.

see ourselves as a major player in the Middle East trade, as well as in core markets such as Europe, the United States, Australia, and India.

: A lot of foreign 3PL’s are entering China, many of whom are struggling to make money. How do you see your selves making it work in China?

We don’t expect to be everything to everyone and don’t believe that we could be the best if we focused on too many different industries and products.

We want to be the best in a selective group of verticals as a foreign logistics firm. Our approach is to look to the China market in particular to grow and to realize our ambition through niche tuck-in additions.

JG: I’ll talk a little bit about our growth

strategy for both the international the domestic market. We are planning to grow dramatically over the next 3 to 5 years. Agility, as you probably already know, has been rebranded and has purchased a number of heavy-weight players in different sectors in the industry, including project logistics, international forwarding and contract logistics. These companies combined have resulted in the formation of a very big Agility today.

Our two part growth strategy includes one plan for organic growth where we will focus intensively on competitive solutions in the traditional forwarding and logistics sector, and also providing contract logistics to leading multinationals in verticals such as hitech, electronics, the auto industry, and the retail sector.

The other part of our strategy is to grow our international trade lanes. We are very much focusing on some of the emerging market trade links and www.chainaonline.com

In addition to that, we continue to look at opportunities to acquire local Chinese companies. We focus on private Chinese enterprises that offer a product advantage, a rich geographical network, or even a vertical sector advantage.

: To acquire a specific company in the industry, would you rebrand them under Agility or allow them to operate under their own brand?

Cosa fits into Agility’s portfolio by offering more competitive services to our clients on the Trans Pacific route as well providing value added services upstream such as picking and packing, shipping, and labeling.

The Cosa acquisition allows us to offer a more global solution for the retail sector, not only in China, but also for when the product finally arrives in the U.S. This helps us avoid the additional need for working capital and labor costs in the Unites States. We think this model can easily be replicated in other markets. : Does Agility have set growth targets for China?

JG: We are setting a target to be a billion dollar business in China in the next 3-5 years.

I see a big chunk of that growth coming organically and we will see China being a very big part of Agility’s global growth.

James Gagne, CEO of Greater China Region, Agility

JG: Our approach is to rebrand them.

Through our integration model we have a vested interest to our partners, our shareholders and our customers in preserving the fabric of success of these companies. Our business is about people and at the end of the day our approach to integration will be very much a peopleoriented approach. Before we even finalize an acquisition we discuss with our potential partner how the acquisition will actually look and where the benefit would be? We normally look at a sixmonth timeline or less for integration, depending on the size and the nature of the company.

JULY/AUGUST 2008

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KNOWHOW

Suppy Chain 101 Back to the Basics!

Chris R Deans is a seasoned supply chain executive, with over 25 years of experience in the Energy, Forest Products, Government and Consulting Industries. He has provided leadership and supply chain consulting and training for Fortune 100 corporations such as AT&T, Lucent and Kraft.

It’s all in the plan: Do you have one?

There are companies in China today who are not doing S&OP (Sales and Operations) planning—and some of them are relative large enterprises, not Shanghai sidewalk street vendors. S&OP planning does not have to be an arduous, overly complex process—the important thing is that you are doing some form of planning and forecasting, even if it begins very simply. We’ll take a look at the importance of S&OP planning, and give you some quick tips to start you on your S&OP journey in this edition of ‘Supply Chain 101—Back to the Basics.’

Masking the Problem A very frustrated Chinese Supply Chain manager related how his company stocked out of a strategic product last month angering many key customers because Operations was unaware of a large product promotion. A Supply Chain VP in another Shanghai company confided last week that her company does not perform forecasting. “The result”, she lamented, “is a lot of extra inventory, last minute changes, expediting, poor morale and a lot of angry customers”; in other words, a lot of extra cost. In an economy experiencing the type of growth that China’s has, these increased costs and resulting loss of profit are often masked by sheer revenue growth.

But not for long. Sooner or later bad business practices and the competition are going to catch up.

There is good news. S&OP planning will correct these problems and many others, and can begin with very little additional investment.

Although sophisticated software S&OP planning tools exist as part of ERP (Enterprise Resource Planning) packages, often all that is required is the will for cross-functional teamwork, good organizational communication, discipline-to-process and a little training.

Usually the lack of S&OP planning has its roots in the company culture.

Change the culture, change the minds

of managers, and the company will be transformed. An inspired CEO or GM can create the impetus for these changes and the spirit of teamwork with relatively little incremental cost. The results can be immediate and have a profound impact on profitability, performance and customer satisfaction, regardless of a company’s size or S&OP sophistication.

Where to begin? Let’s define terms first.

S&OP Planning – What it is and what it is not In its most stark form, S&OP planning is simply balancing product demand with product supply. It is a company’s Sales & Marketing and Operations groups, supported by the company’s other functional groups, working very closely together to develop a forecast anticipating which products are going to be sold in what quantities, where and when, and then developing a sourcing plan that supports that forecast. It is a highly collaborative effort, not one department dictating to another what to do. It informs Sales & Marketing of the cost realities faced by Operations, while letting Operations see the revenue opportunities Sales & Marketing is fighting to win. Both groups working together should focus on profit maximization.

S&OP planning is an iterative, on-going process. Meetings, at a minimum, are

held monthly. The planning horizon can be as short as a couple of weeks or as long as several years. Organizations adept at S&OP planning develop both long and short term plans. They can also react very quickly to changes in the market and changes in the Supply Chain.

Regular review and re-planning are key components of the S&OP planning process. As new information is gathered and shared, plans change. Effective communication within the company allows for the necessary adjustments to be quickly made and proper expectations set with the customers.

An S&OP Planning Guide Good S&OP planning following elements:

includes

the

t1FPQMF o 5IF SJHIU QFPQMF BSF involved— at a minimum, Sales & Marketing and Operations. Without the support of the CEO or GM, S&OP planning will likely fail. t1SPDFTT o .FFUJOHT BSF JNQPSUBOU CVU S&OP planning is much more than just monthly meetings. Performance metrics guide success and must be specified and agreed upon by all stakeholders. Gathering and disseminating critical, meaningful, actionable information is vital. t5FDIOPMPHZ o 4QSFBETIFFUT DSFBUFE in silos are counter-productive. Data and critical information must be crossfunctional, visible and real-time. t"MJHONFOU o #VTJOFTT QSPDFTTFT NVTU CF aligned with the overall business strategy.

This impacts service level policy as well as inventory policy. t&WPMWJOH (SPXUI o *U XJMM OPU CF QFSGFDU the first time. Do not give up. The S&OP planning process will evolve as more experience is gained. t'PDVT PO %FNBOE o .PTU VODFSUBJOUZ comes from outside the organization; practice contingency planning and learn the disciplines of Demand Management.

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www.chainaonline.com

PRODUCTRECALLS

Danger!

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.

Children’s Jackets and Hoodies with Drawstrings Recalled by Coolibar Inc. Due to Strangulation Hazard Coolibar In Inc., of St. Louis Park, Minn., is voluntarily recalling about 3,000 Children’s Bloc Jackets and Hoodies. The Sun Block garments have a drawstring through the hood, posing a strangulation hazard to childr children.

They were sold in children’s sizes 2 through 12. The jackets were sold in the following colors: tan, ston bayou blue, crisp blue, white, stone, ber and citrus. The hoodies were berry, sol in teal, kiwi, mandarin, aloe sold gre green, paprika, hibiscus, smokey bl blue, white, sherbet, cobalt, and st stone.

HewlettHewl Packard Co. Recalls Fax Machines Due to Fire Hazard

Nordstrom Recalls Girls’ Sandals Due to Choking Hazard Nordstrom Inc. of Seattle, W Wash., is voluntarily No recalling about 1,500 Nordstrom’s CadenceLea and Trio-Lea Girl’s Sandals.The flower embellishments o on the sandals can detach, posing a choking hazard to young ch children. They were sold in girls girls’ sizes 5 through 12. Nordstrom is printed on the Consu sandals. Consumers should take the recalled sandals away from chi children immediately and return the sandals to any Nordstrom store for a full refund.

RE CA LLE D

Hewlett-Packard Co., of Palo Alto, Calif., is voluntarily recalling about 367,000 HP Fax 0 0 aand d 1010xi 0 0 ac es. An internal 1010 Machines. electrical ure can cause component ffailure overheating of ing a risk of burn the product p posing or fire.

Consumers shou should immediately disc disconnect the recalled fax machine from the elec electrical power source and contact HP to rece receive a rebate.

Arctic Cat Inc., of Thief River Falls, Minn., is voluntarily recalling about 6,000 Model Year 2008 Arctic Cat 50cc and 90cc All-Terrain Vehicles (ATVs). The speed controller on the recalled ATVs could fail to return to the idle position when the throttle lever is released, or the speed controller could fail to be at idle on start up. This could result in loss of vehicle control, which could result in serious injury or death to the rider.

Polycom, Inc. Reca Recalls Wireless Conference Phone Batteries Due to Fire Hazard

Children’s Animal Tracking Explorer Kit Recalled by MindWare; Contains Chemical That Irritates Skin and Eyes

Polycom, Inc., of Pleasanton, Calif., is voluntarily recalling about 5,800 SoundStation2W Wireless Conference Phones with Lithium Ion Batteries.

The battery packs can overheat, posing a fire or burn hazard.

MindWare, of Roseville, Minn., is voluntarily recalling about 2,200 Animal Tracking Explorer Kit. The powder in the kit marked “plaster of paris” is actually calcium hydroxide, which poses a risk of skin and eye irritation to children using the product.

www.chainaonline.com

Arctic A r rc ctic Cat C at Recalls Model Year 2008 2 00 50cc and 90cc Youth Model ATVs Yout

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JULY/AUGUST 2008

FM LOGISTIC 2099 Xinqun Road,Pinghu EDZ, Zhejiang Province. á†‹ŕ˘…ŕ´żŕŻŁŢźŕŁŁŕ ˝ŕ¤žâ€ŤŮ†â€Źŕąźŕž”ŕ˛œŕŠĽ2099â€ŤŢƒâ€Ź +86 573 8527 3072 www.fmlogistic.com HAVI FOOD SERVICES 6 Xingsheng Jie, Beijing Economic & Technological Development Area, Beijing, 100176 100176ĐĄŕŁ&#x;ŕŁŁŕ ˝ŕ śŕś“ŕ¤žâ€ŤŮ†â€Źŕąźŕž?ྀࢎ6â€ŤŢƒâ€Ź +86 010 6788 3335 HMG GROUP Suite B-E, 10F International Shipping & Finance Building,No.720, Pudong Avenue,Shanghai, China ᇖ‍ݚ‏ŕ´?‍ݥ‏௟‍׹‏ս֨720â€ŤÝťŕĄ„ÝšŢƒâ€Źá„•ŕŁˆ ಼ս༷10ŕŠ“B-Eá‰? +86 21 5036 8000 www.hmglog.com

LOGISTICS SERVICE PROVIDERS ID LOGISTICS Room 19D, Dong Tai Plaza, No.309 Tanggu lu,shanghai ŕ´?â€ŤÝĄâ€ŹŕľŽŕ¸›â€ŤÜĄâ€ŹŕŠĽ309â€ŤŢƒâ€Ź19D +86 21 6306 7083 www.id-logistics.com IDS LOGISTICS 8/F Tower Block, LiFung Plaza NO.2000 Yishan Road, shanghai 201103 ŕ´?‍ݥ‏ྎáš?ŕž˘ŕąźá ™ŕł˝ŕŠĽ2000â€ŤŢƒâ€Źŕ§­â€ŤÝƒÚ…â€ŹÓ? á‡˝ŕŠ“8ŕŠ“Ć—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 KERRY EAS LOGISTICS ĐĄŕŁ&#x;ྎӛဤ๟‍׹‏ŕł&#x;ß“ĐĄŕŠĽŕ˝Şá„?੥21 â€ŤŢƒâ€ŹŐ˝ŕš Ő˝ŕźˇĆ—100027 No.21,xiaoyun Road,North Dongsanhuan Road,Chaoyang District,Beijing,100027 +86 10 6461 8899 www.kerryeas.com KUEHNE & NAGEL Block 1, 11-16F 1868 Gong He Xin Road Shanghai 200072, P.R. China â€Ťŕž”Ţ‹Ü’â€ŹŕŠĽ1868â€ŤŢƒâ€ŹŐ˝ŕ­¨â€ŤŕĄ„Ýšâ€Źŕ´Œá ƒÝƒÓ? ×‚á ‰Ôť11-16ŕŠ“, ႜᆌŃ?ઙƼ200072 +86 21 2602 8000 www.kuehne-nagel.com LINFOX ROAD TRANSPORT 26-F, Cross Region Plaza, 899 Ling Ling Road, Xuhui District, Shanghai 200030, China ŕ´?â€ŤÝĄâ€ŹŕľŽŕžžßżŕąźŕ¨łŕ¨şŕŠĽ899â€ŤŮ­Ţƒâ€Źá‡¤â€ŤÝƒŕĄ„Ýšâ€ŹÓ?26 ŕŠ“Fá‰? +86 21 5150 6699 www.linfox.com LINKSTAR LOGISTICS 49A, #199, North Riying Road, Waigaoqiao Free Trade Zone, Shanghai, 200131 ŕ´?â€ŤÝĄâ€ŹŕľŽŕşšŰĄŕą‰Đ“ŕśŹŕąźŕ˛ˇá‚?С੥199â€ŤŢƒâ€Ź49A, 200131 +86 21 5046 1666 www.linkstarlogistics.com LOSCAM PACKING EQUIPMENT LEASING Room 508, No. 707 ZhangYang Road, Pudong, SHANGHAI 200120 ŕ´?â€ŤÝĄâ€ŹŕľŽŕŻźâ€Ťŕž”×ąâ€Źŕąźá…­á€&#x;੥707â€ŤŢƒâ€Ź508ŕľ° 200120 +86 21 6104 8156 www.loscam.com MENLO Golden Eagle Mansion, 1518 Min Sheng Road, Tower A 13th Floor, Shanghai, P.R.China ᇖ‍ݚ‏ŕ´?â€ŤÝĄâ€ŹŕŻźâ€Ťŕž”×ąâ€ŹŕąźŕŤ˝ŕ´şŕŠĽ1518â€ŤŕŁˆŢƒâ€Źá‚‘Ő˝ ༷Aá‰?13ŕŠ“ PANALPINA 33/F POS Plaza, 1600 Century Avenue, Shanghai 200122 ŕ´?‍ݥ‏௟‍׹‏ྞेս֨1600â€ŤŢƒâ€ŹŕŻźŕ˝˘ŕ´Œŕź‡ÝƒÓ?

33ŕŠ“, á‚śŃ?ĆĽ200122 +86 21 6105 1500 www.panalpina.com

MAC SUPPLY CHAIN SOLUTIONS ! !

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CLASSIFIEDLISTINGS

General Manager, China Established over 100 years ago, our client is one of the most recognised business names in Asia. As a highly respected marketing and distribution organisation the Group is now looking to establish a firmer presence in the Mainland China logistics market.

Based in Beijing or Tianjin U Senior Logistics Management Position As a key figure in Mainland China and reporting directly to the Management Board, you will be accountable for steering the overall development of a leading edge warehouse facility located in the region’s main logistics park. The successful growth of this facility will provide the foundation to transform the business into a fully fledged 3PL with operations across Mainland China.

The role is ideal for someone with eight years plus experience who has hands-on warehouse operations exposure within a 3PL environment. With full P&L responsibility you must have proven General Management skills with the ability to both develop and implement the overall business strategy. Fluency in both Mandarin and English is a pre-requisite.

To apply for this position, please go to www.michaelpage.com.cn/apply quoting reference number H252030 or call Olly Riches or Rochelle Zhu on (+8621) 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 SCHENKER Room 3802-3806, Raffles City (Office Tower) No.268 Xi Zang Zhong Road, Shanghai 200001, P.R.China ഏ‫ݡ‬൮ߢ௼౼།Ҧᇖ੥268‫ރ‬দ‫ڥ‬൝݃Ӎ 3802-3806൰Ⴖѐƥ200001 +86 21 6170 8888 www.schenker.com.cn

SINOTRANS 7th Floor, Contract Logistics Division, Sinotrans Plaza A, A43, Xizhimen Beidajie, Beijing 100044 Сࣟ།ᆷ૑Сսࢮࡑ43‫ރ‬ ࣈᄕս༷Aቝ7ұ ‫ލ‬๤༅ੇൠ၃ҍ100044 +86 10 6229 5600 www.SinoTransOne.com

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LOGISTICS SERVICE PROVIDERS SCHNEIDER LOGISTICS UC Tower,Suite 1605,No.500 Fu Shan Road,Shanghai,China ഏ‫ݡ‬௼‫ڥױ‬೽੥500‫ރ‬ӳࢀ‫ࡄݚ‬ᇖྖ1605൰ +86 21 5058 7970 www.schneider.com SCHOELLER ARCA SYSTEMS Schoeller Arca Systems ඄ৈδ़ Shanghai China ഏ‫ ݡ‬ᇖ‫ ݚ‬Unit 5/A Guangdong Development Bank Tower No. 555, Xu Jia Hui Road ݃‫نױ‬ᅡႆྡྷս༷5੓Aቝ 200023 +86 21 6390 1261/62 www.schoellerarcasystems.com SDV INTERNATIONAL LOGISTICS Room 2602 Ciro‘s Plaze 388 West Nanjing Road Shanghai 200003 ହࣟ།੥388‫༽ރ‬ৈඵ݃Ӎ2602൰ ഏ‫ ݡ‬200003 +86 21 2308 0500 www.sdvchina.com SHENZHEN ST-ANDA LOGISTICS 18/F, Times Plaza, No. 1 Taizi Road, Shekou, Shenzhen, PRC 518067 മᎱട८ฅሷ੥1‫ྔރ‬൏ք݃Ӎ1801൰ Ⴖѐ518067 +86 755 2681 9188 www.st-anda.com WERNER GLOBAL LOGISTICS South 23/F Harbour Building 1 Fenghe Road, Shanghai, China ഏ‫ݡ‬൮௼‫ྔױ‬౼‫ދڅ‬੥1‫۝ރ‬༇ս༷ହ੓ 23੓ +86 21 3887 9520 www.werner.com

LOGISTICS SERVICE PROVIDERS TOLL AUTO LOGISTICS D1/E2, 31F, East Building, Hi-Tech King World, No. 668 Beijing East Road, Shanghai Postcode 200001 China ᇖ‫ݚ‬ഏ‫ݡ‬൮Сࣟ‫ױ‬੥668‫ރ‬ ग़࠶ ࣟӳ‫ױ‬੓31੓D1/E2 Ⴖѐƥ200001 +86 21 5308 2266 www.tollgroup.com UPS 23F and 33F China Insurance Building, 166 Lujiazui Dong Road, Pudong, Shanghai, 200120 ഏ‫ݡ‬൮௼‫ྔױ‬౼੫ࡌቐ‫ױ‬੥166‫ރ‬ᇖ‫ݚ‬Г ཉս ༷23੓,200120 +86 21 3896 5599 www.UPS.com YRC LOGISTICS Room 1307-08 Lan Sheng Building No. 8, Huai Hai Road (M) Shanghai 200021, P.R.C. ഏ‫ݡߐݡ‬ᇖ੥8‫ރ‬মഺս༷1307-08൰ Ⴖѐƥ 200021 +86 21 6137 7668 www.yrclogistics.com YATFAI LOGISTICS GROUP 39H, Fortune Building, 88 Fuhua San Road Futian District, Shenzhen, Guangdong Province, P.R.C. ݃‫ױ‬ി മᎱ൮ ‫้ڥ‬౼ ‫߆ڥ‬೟੥88‫ރ‬, Ҕ‫ڽ‬ս༷ 39੓ Hቝ +86 0755 3336 6898 www.yatfai.com

LOGISTIC SERVICE PROVIDERS

YRC LOGISTICS Room 1307-08 Lan Sheng Building No. 8, Huai Hai Road (M) Shanghai 200021, P.R.C. ഏ‫ݡߐݡ‬ᇖ੥8‫ރ‬মഺս༷ 1307-08൰ Ⴖѐƥ 200021 +86 21 6137 7668 www.yrclogistics.com CONSULTING FIRMS ACCENTURE Shanghai ഏ‫ݡ‬ 30F, Central Plaza, No. 381 Huaihai Road, Shanghai, 200020 ഏ‫ݡ‬൮ߐ‫ݡ‬ᇖ੥381‫ރ‬ᇖߓ݃Ӎ30੓ Ⴖѐƥ200020 +86 21 2305 3333 www.accenture.cn BAKER & McKENZIE 14/F, Hutchison House 10 Harcourt Road Hong Kong བྷ‫۝‬༸ᨛ֨10‫ࡁދރ‬ս༷14੓ +852 2846 1888 www.bakernet.com

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63

CLASSIFIEDLISTINGS CONSULTING FIRMS

CONSULTING FIRMS

BARKAWI A 705, Dong fang Road, Eton Place, Pu dong New District, Shanghai, P.R. China 200120 ‫ױ‬١੥ჭࣦ‫ࡄݚ‬ഌ༇݃ӍA705൰ +86 21 6859 9686 www.barkawi.com

LLOYD ‘S REGISTER 20F Ocean Towers, 550 Yan An Dong Road, Shanghai 200001 ഏ‫ݡ‬൮ဃτ‫ױ‬੥550‫ݡރ‬ဣս༷20੓Ɨ Ⴖѐƥ2000012 +86 21 5158 5700 shanghai-eandt@lr.org

DELOITTE CONSULTING Room 2701-2704 Bund Center, 222 Yan An Road East, Shanghai 200002 ഏ‫ݡ‬൮ဃτ‫ױ‬੥222‫ރ‬ບฌᇖྖ 2701-2704൰200002 +86 21 6141 8888 www.deloitte.com

LOGISTICS RECRUITMENT 2B, Apollo Building No. 1440, Yan An Road © Shanghai 200040 ഏ‫ݡ‬൮ࣨτ౼ဃτᇖ੥1440‫ރ‬ δѶઌս༷2B Ⴖѐƥ 200040 +86 21 6248 8606 www.logisticsrecruitment.com.cn

DEMAND MANAGEMENT SYSTEMS PO Box 6180, Norwest Business Park, Baulkham Hills BC NSW 2153 Sydney, 2153 Australia +612 9659 4555 DESCARTES SYSTEMS 4106 China Development Bank Tower, No.500 Pudong Road (S), Shanghai, 200120, P.R. China ᇖ‫ݚ‬ഏ‫ݡ‬௼‫ױ‬ହ੥500‫ࡌݚރ‬ा‫ن‬ႆྡྷս༷ 4106൰ 200120 +86 21 6109 5785 www.descartes.com DRAGON SOURCING Suite 1502, Jin Tian Di International Mansions 998, Renmin Road Shanghai, 200021, P.R.China ഏ‫ݡ‬൮ಭ૽੥998‫ࣉރ‬ๆ‫ࡄݚ׀‬ս༷ 1502൰, 20002 +86 21 61413955 www.dragonsourcing.com ESTABLISH Room 609, Tian An Centre No. 338 West Nanjing Road Shanghai 200003 ഏ‫ݡ‬ହࣟ།੥338‫ރ‬ๆτᇖྖ609൰ Ⴖѐ ƥ200003 +86 21 6359 1980/0486 www.establish.cn HUDSON Unit 2302, 23/F Hongyi Plaza 288 Jiujiang Road Shanghai, China 200001 ഏ‫ݡ‬൮ࣻࢅ੥288‫ރ‬ ި၏‫݃ࡄݚ‬Ӎ23੓2302൰ +86 21 2321 7888 www.hudson.com IBM GLOBAL BUSINESS SERVICE IBM ᇖ‫ݚ‬Ⴜདྷ‫܋‬ය Сࣟ൮ӛဤ౼‫܄‬฿С੥ࡑ 2‫ރ‬ ႛग़ᇖྖ IBM ս༷Ɨ25ұ Ⴖѐƥ100027 +010 6361 8888 www.ibm.com/cn/zh/

LOWENDALMASAI 1505-1506 Hai Tong Tower, 689 Guangdong Road, Shanghai, 200001 ഏ‫ݡ‬൮ߢ௼౼݃‫ױ‬੥689‫ݡރ‬๠ᆪ಑ս༷ 1505/1506൰, 200001 +86 21 6341 1255 www.lowendalmasaichina.cn MANPOWER 36F, Xinmei Union Square, 999 Pudong Road (S), Shanghai, 200120, China ഏ‫ݡ‬൮௼‫ױ‬ହ੥999‫ރ‬ ྔૃ৺‫݃ލ‬Ӎ36੓Ⴖѐ200120 +86 21 5878 2618 www.manpower.com.cn MB SIM TECHNOLOGY Bldg. 8, 865 Changning Road, Shanghai 200050, P.R. China ഏ‫ݡ‬൮Ӑ୨੥865‫ރ‬8‫ރ‬੓5੓, 200050a +86 21 6240 5529 www.mbtech-group.com MICHAEL PAGE INTERNATIONAL 601-603 Shanghai Kerry Centre 1515 Nanjing Road (West) Shanghai 200040, China ഏ‫ࡈݡ‬ৡᇖྖ601- 603 ହࣟ།੥1515‫ރ‬Ɨ ഏ‫ݡ‬Ɨ 200040 +86 21 3222 4758 www.michaelpage.com.cn 7 ROCK 7/F Crystal Century Tower, 567 Weihai Lu, Shanghai 200041 ഏ‫ݡ‬൮ຶ‫ݡ‬੥567‫ࣝރ‬Ҙ൞ࡇս༷7੓ 200041 +86 21 6288 8766 www.sevenrock.com SUPPLY CHAIN CONSULTING Suite 404, 20 Donghu Road, Xuhui District, Shanghai, CHINA 200031 +86 21 5404 0818 www.supplychain-consulting.com

INTEGRATED DECISION SYSTEMS CONSULTANCY No 511-1-302, Jingsong Wu Qu, Chaoyang District, Beijing, China 100021 ᇖ‫ݚ‬Сࣟ100021 ӛဤ౼ࣘළ໻౼511-1-302 +86 134 6675 0455 www.idsc.com.sg

TUV RHEINLAND 5-6/F AZIA Centre, 1233 Luijiazui Huan Lu, Shanghai,200120 ഏ‫ݡ‬൮੫ࡌቐߓ੥1233‫߿ރ‬࿷ս༷5/6੓, 200120 +86 21 6108 1188 www.chn.tuv.com

JPMORGAN CHASE VASTERA INTERNATIONAL TRADE CONSULTING 23/F Citigroup Tower, 33 Huayuanshi Qiao Lu, Shanghai, 200120 Shanghai, China www.jpmorgan.com/trade

AMB PROPERTY CORPORATION Suite 2908, Plaza 66 II, 1366 Nanjing Road West, Shanghai 200040, China ᇖ‫ݚ‬ഏ‫ݡ‬ହࣟ།੥1366‫ޡރ‬੏݃Ӎ‫ل‬ቝ 2908֍ჴ +86 21 6135 1688 www.amb.com

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REAL ESTATE SERVICES

CONSULTING FIRMS

Suite 805, Kerry Centre, 1515 Nanjing Road (W), Shanghai, 200040 ഏ‫ݡ‬൮ହࣟ།੥1515‫ࡈރ‬ ৡᇖྖ805൰ 200040

REAL ESTATE SERVICES COLLIERS INTERNATIONAL PROPERTY CONSULTANS 16/F Hong Kong New World Tower, 300 Huaihai Zhong Road Shanghai, 200021, PRC ᇖ‫ݚ‬ഏ‫ݡߐݡ‬ᇖ੥300‫ރ‬ བྷ‫ྔ۝‬൞ࢿս༷16੓ Ⴖѐ 200021 +86 21 6141 3688 www.colliers.com/china GOODMAN GROUP 2107 - 2109, Shui On Plaza, 333, Huai Hai Road (M) Shanghai 200021 P.R.China ഏ‫ݡߐݡ‬ᇖ੥333‫ރ‬೒τ݃Ӎ2107-2109൰ Ⴖѐƥ200021 +86 21 6133 2000 www.goodman.com

+86 21 5298 6622 www.gazeley.com

CB RICHARD ELLIS ഏ‫ݡ‬൮ߐ‫ݡ‬ᇖ੥1010‫߆ࡈރ‬ᇖྖ3201൰ Suite 3201, 32F, K. Wah Centre No.1010 Huai Hai Zhong Road Shanghai 200031 PRC +86 21 2401 1200 www.cbre.com.cn

BAOWAN INTERNATIONAL LOGISTIC +86 21 3379 4008 www.blogis.com.cn

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CLASSIFIEDLISTINGS

MagicBusCreative Grant-oh! Buchwald

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

IT SOLUTIONS AND SOFTWARE SAP SOFTWARE SYSTEM 12th Floor,Tower 2, China Central Place, No.79 Jianguo Rd, Chaoyang District. Beijing, 100025, China ᇖ‫ݚ‬Сࣟӛဤ౼ࢀ‫ݚ‬੥79‫߆ރ‬િᇖྖ2ቝ 12ұ,Ⴖѐƥ100025 +86 10 6589 8888 www.sap.com/china

IT SOLUTIONS AND SOFTWARE TRADECARD F1101-02, Block A, Hailrun Complex, No 6021 ShenZhen Blvd, ShenZhen.

P.R.C. (518040) བྷ‫۝‬࿷ฅિၥ़Ⴜདྷ‫܋‬යമᎱքѝ԰ മᎱ൮‫้ڥ‬౼മହս֨6021‫ރ‬༦୔ᇖྖAቝ 1101-02൰Ɠ518040Ɣ +86 755 8830 9030 www.tradecard.com

phone: +86 136 4165 6924 email: magicbuscreative@mac.com www.flickr.com/photos/gmartini REAL ESTATE SERVICES GSE 27C Industry Building, 18 Cao Xi Bei Lu, Shanghai, 200030 ഏ‫ݡ‬൮྾ࡌ߿ᜓ༞С੥18‫ރ‬൓၃ս༷27C, 200030 +86 21 6427 9180 www.gsegroup.com JONES LANG LASALLE 25F, Plaza 66 Tower 2, 1366 Nanjing Road West, Shanghai 200040 ഏ‫ݡ‬൮ହࣟ།੥1366‫ޡރ‬੏݃Ӎ2ఀ25੓ 200040 +86 21 6393 3333 www.joneslanglasalle.com.cn

MAPLETREE LOGISTICS TRUST MANAGEMENT Suite 801, AZIA Center,1233 Lujiazui Road, Shanghai 200120 ഏ‫ݡ‬൮௼‫ྔױ‬౼੫ࡌቐߓ੥ 1233‫߿ރ‬࿷ս༷ 801൰Ɨ 200120 +86 21 5840 0658 www.mapletreelogisticstrust. com

IT SOLUTIONS AND SOFTWARE BRAVOSOLUTION BravoSolution China CO., Limited 19F-08, 129 Yan An Road West, Chinese Overseas Building Shanghai 200040, PR China ഏ‫ݡ‬൮ࣨτ౼ဃτ།੥129‫ౌ߆ރ‬ս༷19੓ 08൰,200040 +86 21 6145 8500 www.bravosolution.com EMPTORIS Emptoris, Inc. PO Box 173 Clementi Central Post Office Singapore 911206 +65 6778 6395 www.emptoris.com HMIT 498 GuoShouJing Road, Building 21, Suite 212-214 Pudong District, Shanghai, China 201203 ഏ‫ݡ‬௼‫ݙױ‬൶࣪੥498‫ރ‬ ௼‫ױ‬೏ࡸჺ21‫ރ‬੓212-214൰ +86 21 5080 5055/91 www.hmit.com.cn JDA SOFTWARE 2905 United Plaza, 1468 Nanjing Xi Road, Shanghai 200040 ഏ‫ݡ‬൮ହࣟ།੥1468‫ ރ‬ᇖྒս༷2905൰ 200040 +86 21 6289 7979 www.jda.com MANHATTAN Unit 2110, 21/F, Shui On Plaza, 333 Huaihai Zhong Lu, Shanghai, 200021 Shanghai, 200021 China ഏ‫ݡߐݡ‬ᇖ੥333‫ރ‬೒τ݃Ӎ21੓2110൰ www.manh.com

NEW CITY INVESTMENT MANAGEMENT Room 2602 Bank of Shanghai Tower, 168 Yin Chen Middle Road, Shanghai, China, 200120 ഏ‫ݡ‬ႆӳᇖ੥168‫ރ‬ഏ‫ݡ‬ႆྡྷս༷2602൰, 200120 +86 21 3896 6388 www.newcitycorp.com

MODUSLINK SOFTWARE 9/99, Xiunan Jie, Xinxiu Estate, Shenzhen, Guangdong, 518002 ݃‫ױ‬ിമᎱ൮ઌ޼౼ྔྵկྵହࢮ99‫ׂࣻރ‬ ‫׶‬, 518002 +86 755 2511 1128 www.moduslink.com

PROLOGIS Room 2708 Azia Center, 1233 Lujiazui Ring Road, Shanghai, 200120 ഏ‫ݡ‬൮੫ࡌቐߓ੥1233‫߿ރ‬࿷ս༷2708 ൰, 200120 +86 21 6105 3999 www.prologis.com

REDPRAIRIE Cloud-9 Mansion 7F 711 No.1118, West Yan‘an Road Shanghai 200052, P.R.China ᇖ‫ݚ‬ഏ‫ݡ‬൮ဃτ།੥1118‫ރ‬ ੊ᆴ૚ս༷7੓711൰ Ⴖѐƥ200052 www.RedPrairie.com

IT SOLUTIONS AND SOFTWARE BARLOWORD OPTIMUS 35/F UOB Plaza 1, 80 Raffles Place, Singapore, 48624 , 48624 Singapore +65 6248 4722 www.barloworldoptimus.com

www.chainaonline.com

SEEBURGER 1409B Cimic Tower800 Shangcheng Rd. Shanghai, PRC, 200120 ᇖ‫ݚ‬ഏ‫ݡ‬௼‫ྔױ‬౼ഌӳ੥800‫ރ‬ඵૣय़ս༷ 14ұ1409B, Ⴖѐƥ200120 +86 21 5835 4735 www.seeburger.cn

COMPANY INDEX

APL .........................................................................................2 CNPC Lanzhou Chemical Company ..................................6,7 Goldman Sachs’ .....................................................................8 Rio Tinto ................................................................................8 Kodak .....................................................................................8 Starbucks ................................................................................8 Kraft........................................................................................8 ceva ........................................................................................8 Hebei Iron and Steel Group Co............................................9 Tangshan Iron & Steel Group ...............................................9 Handan Iron&SteelGroup .....................................................9 Baosteel..................................................................................9 Bertelsmann Direct Media.....................................................9 B&Q ..................................................................................9,29 Air France...............................................................................9 KLM ........................................................................................9 Cathay Pacific.........................................................................9 Martinair Holland...................................................................9 SAS Cargo...............................................................................9 Accenture ........................................................................ 10,11 Best Buy .......................................................................... 11,20 CBRE ............................................................................... 11,13 MolsonCoorsBrewing Company .........................................12 IBM .................................................................................. 14,45 Greenpeace ..........................................................................14 Yang Ming ............................................................................14 People Tree ..........................................................................15 SMIC .....................................................................................16 Ewing Marion Kauffman Foundation .................................16 Merck ...................................................................................16 Eli Lilly .................................................................................16 Johnson & Johnson .............................................................16 AMR ................................................................................. 16,17 Macy’s Inc ............................................................................16 Target Corp ..........................................................................16 Foxconn International .........................................................17 DSV ......................................................................................17 ABX Logistics .......................................................................17 XB Luxembourg Holdings...................................................17 YRC Logistics .......................................................................18 Dubai World.........................................................................18

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EVENTSCALENDAR

COMPANYINDEX Wal-Mart ......................................................................... 18,20 Gazeley ................................................................................18 Agility ......................................................................... 19,58,59 Cosa Freight .........................................................................19 Sinotrans ......................................................................... 19,27 Yangtze Transportation(Group) Corp ................................19 DHL ......................................................................................19 Sinotrans Ltd ........................................................................19 COSCO group ......................................................................19 Nanjing Tanker ....................................................................19 Changjiang Phoenix ............................................................19 Dalian Port Group ...............................................................19 ProLogis ...............................................................................19 ProLogis Container Logistics Development Co Ltd............20 McDonald’s ..........................................................................20 JPMorgan Chase & Co .........................................................20 RT-Mart ................................................................................20 Auchan .................................................................................20 Tesco ............................................................................... 20,57 Kingfisher .............................................................................20 Messer Cutting Systems .......................................................21 Bosch Rexroth .....................................................................21 Metro ....................................................................................21 AMB......................................................................................21 GS1 Hong Kong...................................................................21 Lawson Software..................................................................22 Zhejiang Yaying Garment Co Ltd .......................................22 TAL .......................................................................................22 MIZUNO China ....................................................................22 Youngor Group....................................................................22 Taizilong Finery Group .......................................................22 Belle Footwear.....................................................................22 Infor......................................................................................22 Kunshan Feili Storage Service Co.,Ltd. ...............................22 Smart Shirts Ltd. ...................................................................22 Zhongxing Auto...................................................................22 GOODBABY Group ............................................................22 Geoby Paragon ....................................................................22 Samsonite ........................................................................ 22,23 Merrill Lynch ................................................................... 23,24 NIIT ......................................................................................23 Alderley Coatings Co Limited .............................................24 Richards–Wilcox ..................................................................25 Michelin ...............................................................................28 Blackwoods .........................................................................28 Runbow Logistics............................................................ 28,29 Elee Logistics .......................................................................28 Decathlon.............................................................................28 Carrefour ......................................................................... 29,32 Menlo/Conway ....................................................................29 FAW ......................................................................................29 TCL .......................................................................................29 Tsingtao Beer .......................................................................29 Adidas ..................................................................................29 IKEA .....................................................................................29 Schneider .............................................................................30 China Intel Group ...............................................................30 Blogis ...................................................................................31 EPV .......................................................................................33 BP .........................................................................................35 Ford ......................................................................................35 ABB ......................................................................................35 Terex ....................................................................................36 Changan Ford Mazda Automobile (CFMA) ........................36 CFLP (China Federation of Logistics and Purchasing) ......39 BMW .......................................................................... 40,42,43 Shanghai/Nanjing Automobile ............................................40 Hafei/Dongfeng ...................................................................40 NYK Logistics.......................................................................40 Wallenius Wilhelmsen Logistics ..........................................42 Shanghai Yubi Digital Technology Co.,Ltd ........................42 Ssangyon Motor ...................................................................43 Changjiu Logistics ................................................................43 GEFCO .................................................................................43 Anji-TNT ...............................................................................43 Toyota Motor Company ......................................................44 Cisco Systems Inc., ..............................................................45 ModusLink Corp. .................................................................45 Nokia ....................................................................................45 Alcatel ..................................................................................45 Motorola ...............................................................................45 SAP .......................................................................................45 Microsoft ..............................................................................45 Asia Base A/S.......................................................................47 Development Dimensions International, Inc., ...................48 Supply Chain Council..........................................................49 Millennium Hotel .................................................................52 Hewitt Associate ..................................................................52 McKinsey..............................................................................52 Schneider Electric ................................................................53 Stanton Chase ......................................................................53 Ingersoll-Rand......................................................................53 Admark China ......................................................................53 Thelen law firm ...................................................................53 Knorr-Bremse.......................................................................55 Bombardier ..........................................................................55 Daimler-Chrysler ..................................................................55 MAN .....................................................................................55 Iveco.....................................................................................55 Dongfeng .............................................................................55 FAW ......................................................................................55 Shanxi Diesel .......................................................................55 Haldex ..................................................................................55 Meritor ..................................................................................55 Wabco ..................................................................................55 PWC Logistics ......................................................................58 Translink ..............................................................................58 Geo Logistics .......................................................................58 Schenker ..............................................................................58 Bax Global ...........................................................................58 Global Integrated Logistics (GIL)........................................58 Cosa Freight .........................................................................59 Hewlett-Packard Co.............................................................61 Polycom, Inc., ......................................................................61 Nordstrom Inc......................................................................61 Arctic Cat Inc., .....................................................................61 Gazeley ................................................................................67

66

JULY/AUGUST 2008

2008

July

TUE

8 2008

July

WED

9

Jul. 18

Consumer Insight 2008 July Focus Group Presents: Is Green for Real in China Forum Shanghai Organizer: British Chamber of Commerce in Shanghai

8

Operation 2008 July China–From Strategy to Execution Breakfast Seminar Beijing Venue: Grand Millenniium Organizer: EUCCC

1st Supply Chain Business Simulation in China

Global Sourcing Workgroup Shanghai Venue: to be confirmed Organizer: Council

2008

Basics of Supply August THU-FRI Chain Management nt Training Training HK Organizer: Council

14 15

2008

Vietnam Supply August SAT-WED Chain Road Show Vietnam Organizer: Council

23thru 27

WED

9

Training Shanghai Organizer: Council

Aug. 7

TUE

2008

July

WED

23 2008

August

10th Shanghai International Machine Tool Fair 2008 Venue: Shanghai New International Expo Center Organizer: Dongbo Exhibition

Aug. 19

August

TUE

26

July

THU

17

TUE

Aug. 12

Organizer: German Chamber

Shanghai Venue: d to be confirmed Organizer: Council

2008

2008

5

Fashion & Apparel Supplyy Chain Workgroup

11st China International Logistics Exhibition Guangzhou Venue: Guangzhou Jinhan Exhibition Center Organizer: CCPIT

3rd Annual Cold Chain & Safety China Summit Shanghai Venue: Millennium Hotel Organizer: Council

CITA2008 China 2008 International Forklift August & Parts Exhibition Shanghai Venue: Shanghai Everbright Convention & Exhibition Center Organizer: CCPIT

Business MON German Forum Beijing

11

Jul. 9

3rd Annual ConferenceStrategic Merger & Acquisitions Shanghai Venue: JW Marriott Hongqiao Organizer: JF Pearson

Sourcing & Procurement Committee Mixer Shanghai Venue: to be confirmed Organizer: American Chamber of Commerce in Shanghai

China Customs & Trade Compliance Seminar Seminar Shanghai Venue: to be confirmed Organizer: Council

Chemical Supply Chain Workgroup Shanghai Venue: to be confirmed Organizer: Council

Basics of Supply AugustTUE-WED Chain Management Training Training Guangzhou Organizer: Council 2008

19 20 Aug. 27

Vietnam Logistics Summit 2008 Summit Ho Chi Minh City Venue: Caravelle Hotel Organizer: Council

www.chainaonline.com

YOU NEED TO MOVE AT THE PACE OF TECHNOLOGY. YOU NEED MARTIN SCHLUECHTER. When does Agility’s Martin Schluechter consider a job done? When he develops a customized tracking software interface that shows product availability in real time? When he overcomes a sudden DSL modem shortage in the U.S. by flying in crucial components from Singapore? For Martin Schluechter, and more than 32,000 other Agility employees in over 100 countries around the world, success isn’t measured in products delivered or processes streamlined. Success occurs when our partners achieve their goals. It’s an intimate approach to logistics that demands individual attention and personal ownership. It’s how Martin Schluechter brings Agility to high-tech companies.

Martin Schluechter Department Head, LAX Key Account Agility Los Angeles

agilitylogistics.com