2009 Jul-Aug Issue

COFFEE AND CAKE 85c takes on Starbucks

EUROGROUP

Buying for Europe

CUSTOMS BROKING The ins and outs

SUPPLY CHAIN RISK Managing the dangers

JULY/AUGUST 2009

QUALITY ASSURED Through the supply chain

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THE MAGAZINE FOR GLOBAL SUPPLY CHAIN LEADERS

一本为全球供应链管理人士倾力打造的专业杂志

Green or greenwashed?

Behind the hype 媒体背后的真相 真环保还是形象工程?

WESTERN DIGITAL HAS FREDERICK ANTONY. Facing a surge in worldwide demand for their hard-drives, Western Digital asked Agility’s Frederick Antony to ramp up inventory velocity. With little lead time, he planned and executed a substantial expansion of their Malaysian distribution center that increased capacity, improved pallet position, and added the efďŹ ciencies of advanced tracking software. In doubling their output, Frederick showed the high-tech leader that he shares their passion for storage and speed.

WESTERN DIGITAL HAS AGILITY.

Frederick Antony Sr. Logistics Manager Agility, Malaysia

agilitylogistics.com

FROM THE EDITOR Circulation Manager Carl Pan Event Manager Giselle Yang Photographers Grant-Oh! Buchwald Jackson Lowen Contributing Writers Jack Buffington, Namrita Chow, Nicholas Herbert, Rebecca Kanthor, Tielman Nieuwoudt, Damon Paling

Managing Editor & Publisher Russel Beron Editorial Advisor Max Henry Art Director How Xu Graphic Designer Acco Fang Staff Writer Ethan Epstein Finance Manager Jenny Kim

Editorial Advisory Board Jeff Broadhurst, Vincent Chang, Chris Deans, Marnix Ettema, John D. Van Fleet, Jean Luc Laboucheix, JP Sexton, Aldo Spaanjaars, Yann Teste, Guy Tran CHaINA Sponsorship For information on sponsorship opportunities with CHaINA Magazine, please contact: Russel Beron rberon@supplychain.cn DISTRIBUTION We distribute CHaINA free by direct mail to subscribers in Greater China who are involved in all aspects of supply chain management, manufacturing and logistics. Our target subscribers are logistics, warehousing and transportation directors and managers; sourcing, procurement and purchasing directors and managers; and manufacturing executives at foreign and domestic Chinese companies.

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

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

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

“Green shoots” is the cliché of the season, referring to hopeful signs of economic recovery. The theme of this issue is green, but from an environmental rather than an economic angle. The words sustainability and green are thrown around to no end, but we wanted to know if anything meaningful is happening. We look at everything from energy use, product design, resource and material use to sourcing and CSR practices.

The picture is blurry, but like the economy and its green shoots, sustainable supply chains show unmistakable signs of optimism. While some companies might be just painting a green façade, in the words of one source, “green is now a competitive advantage.” In the near future, companies that evade the issues will become dinosaurs and their products will be shunned by informed consumers.

The auto industry is a case in point. We’d be best off taking pointers from Warren Buffet, who is investing in BYD Auto, the Chinese battery power and electric/ hybrid car company, not in the dying American auto industry. Even GM realized that as a mass consumer vehicle, the Hummer is a relic, salvaged by the Chinese for its technology, not for its fuel efficiency.

The shifting economic equilibrium powered as much by necessity as by crisis and conscience, has left a question mark for Chinese auto suppliers. While American auto manufacturers and suppliers struggle to pick up the pieces, Chinese suppliers have taken the opportunity to expand their technological base.

Signs of China’s climb up the value chain are evident in every sector from auto, where they are buying up assets of troubled suppliers and OEM’s, to aerospace, where they are expanding manufacturing and assembly of aircraft such as the Airbus A320.

Quality is still a concern, but by all accounts it seems to be improving as the competition heats up among suppliers that have survived the downturn. Nobody wants a product recall. As with the green label, receiving a meaningful stamp of “quality assured,” also puts you ahead of the competition.

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: comment@supplychain.cn

Russel Beron Publisher and Managing Editor CHaINA Magazine

Chaina magazine’s sponsors:

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

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FEATURE STORY

How green is your supply chain?

An inside look

EXECUTIVE PROFILE

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Interview with Stuart Harrison, VP of SCM and Operational Excellence, Asia Pacific at diversified industrial manufacturer, Eaton.

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COMPANY PROFILE

AUTO FOCUS

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35

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Profile of Eurogroup, a European buying office for various retail chains in German, Austria, Switzerland and Finland.

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THE MAGAZINE FOR GLOBAL SUPPLY CHAIN LEADERS

JULY/AUGUST 2009

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CONTENTS

THE NUMBERS 6 China gets its wings

35 GM’s fall: the aftermath for Chinese auto suppliers

COMPANY PROFILE 8 Interview with Peter Zhu, head of Factory Affairs at 85c a fast growing Taiwanese bakery chain NEWS ROUNDUP 16 The Big Picture - A roundup of news relevant to business operations in China 18 Issue Focus - The Great Thirst: China’s water crisis 20 Supply Chain Management - A roundup of supply chain news 22 Chinese Media - A selection of articles from the Chinese media 24 India Roundup - A selection of news relevant to operations in India 25 Vietnam Roundup - A selection of news relevant to operations in Vietnam GREEN FOCUS 33 Employing supply chains for environmental benefits MOVERS & SHAKERS 38 A review of executive movement

VIETNAM VIEW

INSIDE VIEW 42 Customs Broker management: Saving costs, ensuring compliance and setting key performance indicators AMERICAN VIEW 45 How to jumpstart the American economy BOOK FOCUS 46 The New Silk Road, by Ben Simpfendorfer EVENT UPDATE 47 Managing supply chain risk 50 Dangerous goods and cargo 51 Goodyear on global sourcing GADGET PAGE 52 China products first light helicopter PRODUCT RECALLS 54 Consumer product recalls in the U.S. QUALITY FOCUS 56 How to better utilize QA and QC in your supply chain 58 CLASSIFIED LISTINGS 62 COMPANY INDEX 62 EVENTS CALENDAR

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Vietnam’s changing retail environment

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5

Chinese flight attendants from Sichuan Airlines pose in front of the first China-assembled Airbus A320 after arriving at Chengdu Shuangliu International Airport in Chengdu city, in southwest China’s Sichuan province on June 23, 2009.

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THENUMBERS

CHINA GETS ITS WINGS In a major milestone for China’s burgeoning aerospace industry, Airbus delivered the first A320 aircraft assembled at its Final Assembly Line China (FALC) in Tianjin, on June 23, 2009. The aircraft will be leased to and operated by Sichuan Airlines. The FALC is a joint venture between Airbus and a Chinese consortium comprising Tianjin Free Trade Zone (TJFTZ) and China Aviation Industry Corporation (AVIC).

11 4 600 6300 100 million

- The number of A319 and A320 aircraft scheduled for delivery in Tianjin in 2009.

- The number of aircraft the FALC will produce per month by the end of 2011.

- The number of A320 aircraft that Chinese airlines have ordered in total.

- The quantity of Airbus A320 family aircraft that have been sold worldwide, making it the world’s best-selling commercial jetliner ever.

– T h e projected number of Chinese tourists who will travel internationally on an annual basis by 2020.

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COMPANYPROFILE

Watch out Starbucks, 85c is the new kid in town Peter Zhu is Assistant General Manager and head of the factory affairs department at 85c, a bakery and coffee chain originating in Taiwan and now growing at a blinding pace on the mainland. CHaINA Magazine spoke with him about their business and operations strategy in China. : What are your responsibilities?

Peter Zhu (PZ): I’m one of the shareholders of the company and was also among the 10 cofounders of 85c. All 10 of us are directors of different departments. I’m the Assistant to the General Manager as well as the head of the Factory Affairs department.

Why is the brand called 85c?

PZ: We found that the best coffee is made at 85 degrees Celsius, then by accident, we found most bread is baked at 85 degrees Celsius as well, so that’s where the name comes from.

When did you start the business in China?

PZ: We opened our first store in Shanghai 2 years ago. We now have 42 stores, 31 are in Shanghai and the rest are in Hangzhou and Suzhou. We are planning to open another 91 stores in Shanghai by the end of the year. We built our factory in Song Jiang in June last year. Before that we had no factories. We made everything at the back of the store.

Why did you choose Song Jiang as the location of the factory?

PZ: We needed a place big enough to accommodate us. We have around 6,500 square meters, which has the capability to supply 60 stores.

Since we are growing so fast, a key issue that we face is how to supply the growing number of stores. We have already found a venue in Hangzhou which is 10,000 square meters in size and we’ll soon build another factory there.

Why so many factories?

PZ: We can’t build a factory that is too big, because we need to supply to the stores every day. If the distance between the store and the factory is too far, then the transportation costs will go up.

In Shanghai, our factory’s distance to each store won’t exceed

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100 kilometers.

When our business started, we did the calculation in Taiwan that our operation would be profitable only when our factory there can supply more than 60 stores. To make 50 crates of cakes takes almost the same time as making 300 crates of cakes. Your business might only become profitable when the quantity is as big as 300.

How do you manage logistics to each store?

PZ: Currently our 42 stores make their orders every day before 10 a.m. based on their previous day’s sales. Then our factory works 24 hours a day to make the delivery before the following morning since our products have a short shelf-life. We need to pre-set product specifics on each item into our ERP system. So if I need to produce 1,500 pieces of cake today, then the system will tell me how much butter and dough we need and so on.

Before 4:00 pm the same day, the products will be ready and around 7:00pm, we’ll make the delivery of the frozen cakes from factory to each store. At 2:00 am, we’ll make the second delivery of the day of normal-temperature cakes.

Do you outsource your logistics or manage it yourself?

PZ: We do most of the distribution to the stores on our own.

We also have over 110 suppliers including importers and canning factories which we deal with directly or through a dealer and they help us to make the delivery to the warehouse.

Where do your coffee beans come from?

PZ: The ones we use are from Guatemala, same as the ones we use in Taiwan. In Taiwan, this coffee bean can only be found in either five star hotels or our stores.

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COMPANYPROFILE Is bubble tea a big seller?

PZ: Most bakeries we see here only sell bread and cake, which makes 85c unique. The sales of bubble tea and coffee make up to 30-40 percent of the revenue. The net profits for coffee and bubble tea are higher than cake and bread.

What is the difference with your operations in China versus Taiwan?

PZ: The basics are almost the same, except we have 340 stores in Taiwan. We started our business there 5 years ago by making coffee, cakes and bread. In Taiwan, most customers go to our store for coffee, while in Shanghai we find people like bubble tea better than coffee, but of course, we see growth in coffee consumption. Taiwan is a mature market for us with coffee consumption taking up to 80 percent of our business. There are also other difference such as Chinese preference for bread and buying habits. In Taiwan, the sales volume for cake increases at Mothers’ Day, since it’s a tradition, but in China people buy cakes during Spring Festival.

Compared with bakeries like Paul, Christine and others, what is the 85c advantage?

PZ: The media has called us Pin Jia She Hua (low price luxury) in Taiwan. In light of the current economic situation, one alternative to maintain business is to offer customers a quality product at a lower price. The ingredients we use for making bread and cake are top quality ingredients imported from France and New Zealand. Most of our bakers were used to making cake or bread at

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5 star hotels and the cake might cost TWD100 in the hotel but in 85C we sell it at TWD30; same thing with coffee.

Another advantage is our new store opening speed. In Taiwan, we had a record of opening a new store in 2 days. In 10 consecutive months, we opened 16 stores per month. Our target in China is the same, but sometimes getting the permission for a new store takes longer. In Shanghai, currently we can open up 7 stores per month.

What’s the average sales revenue of a store?

PZ: The best shop can have revenue of RMB1.9 million per month in Shanghai, while our store in the US, can do in excess of USD 400,000 per month.

Has the economic slowdown impacted your business?

PZ: Not very much. The least affected sector is the food industry.

People may cut down their budget for buying clothes and entertainment but not their budget for eating.

What’s the plan for the future?

PZ: To be honest, we shareholders could just stay in Taiwan and stick with the business there and have a steady income. We see how the market is flooded with Western brands like KFC, McDonald’s and Pizza Hut and given our success in Taiwan and China, we feel we can build this Chinese brand and promote it elsewhere. We see the opportunity, but we still need to enhance our management experience and that takes time.

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Shanghai World Expo:

The $44 billion opportunity cost Forbes reported that the city of Shanghai is spending 44 billion U.S. dollars on infrastructure for the 2010 World Expo. CHaINA investigated what else the Chinese government could have bought for $44 billion:

10

11 billion

1674 km

30,000 building

55 billion

doses of TB vaccine, nearly enough to provide two doses to everyone in the world.

maglev train connection from Shanghai to Harbin, halving travel time between the two cities.

weather proofings, reaping huge environmental, energy and cost savings.

servings of instant noodle soup. This could provide lunch for the entire world for 9 days.

JULY/AUGUST 2009

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COMPANYPROFILE

ourcing with a conscience

Most people have probably not heard of Eurogroup, a sourcing company whose European shareholders have a combined annual turnover of over 60 billion Euros. While Eurogroup mostly flies under the public radar, it prides itself on being highly active in CSR activities and unlike some companies seems to be more green than greenwashed. CHaINA’s Editor, Russel Beron spoke with Robert Kronhofer, Eurogroup’s Deputy Managing Director and Christian May, Organization and Logistics Manager in Shanghai to find out more about the company’s approach.

What background do you both come from?

Robert Kronhofer (RK): I am from Austria originally and used to be a DIY store manager there before moving into a sourcing role about eight years ago. My experience in retail obviously comes in handy in the sourcing work we do.

Christian May (CM): My background is more in logistics. Before joining Eurogroup, I did my thesis on optimization of supply chains. My work now focuses on processes, quality assurance and integrating IT with our supplier base.

What is Eurogroup?

Eurogroup is one of the largest European buying offices with four shareholders, Rewe Group, BauMax, Coop Switzerland and most recently, Finnish DIY retailer, Rauta Kesko. The companies are separate entities, but work together to gain buying synergy. The retailers that Eurogroup serves have a combined annual retail turnover of 60 billion Euros. Rewe is Germany’s fourth largest retailer, with over 12,000 stores, while Coop is Switzerland’s second largest cooperative retailer, with over 1500 stores.

Can you talk about your activities in China?

Eurogroup Far East Limited acts as the buying agent for all the shareholders and is able to create value by combining product

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buys to gain an economy of scale. Employing 100 buyers, the buying office uses its knowledge of the Asian market to source products and suppliers, manage orders and provide shipment control and quality assurance. The company also ensures social accountability and green compliance on behalf of its customers.

How does a supplier get to work with you?

We maintain a large supplier database and any supplier can offer products. We pre-screen suppliers who provide matching products before we place any orders. We trade over 11,000 individual items and work with over 1,000 suppliers.

Individual suppliers are audited and assigned to a risk group. For example baby toys for below three years of age are assigned to a high risk group. These groups are then audited and monitored much more closely.

What types of green and CSR initiatives has Eurogroup undertaken?

We do everything from introducing initiatives to reduce packaging, comparing the environmental impact of changing materials, to doing a lifecycle analysis to understand energy consumption through the life of a product. We have found ways to produce green friendly products that are not necessarily more expensive.

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COMPANYPROFILE Companies have a lot of pressure to go green from increasingly informed consumers and being green is now a competitive advantage. For example organic cotton is very popular. We work with independent farmers who participate in an organic cotton farming initiative where farmers can make a decent living and consumers can feel good about what they are buying.

We believe in giving back to the communities where we work and are most proud about the work we have done in education. We have built a primary school in Southern China which serves around 2000 students. We have also built a training centre in Thailand for refugee kids and have projects in Bangladesh and Mumbai for street kids.

Eurogroup has also set up a trust fund to find meaningful projects to support.

Managing suppliers is one thing, but how do you ensure that sub-suppliers are complying with quality and CSR standards?

The product part is easier since we have measures in place to check this. The CSR part is harder and requires monitoring the whole supply chain right from the beginning. For the BSCI Audits (a European standard initiated by the FTA, BSCI= Business Social Compliance Initiative) we work with the goal that 80% of the supply chain has to comply and we do spot checks on factories to ensure compliance. One of our roles is to develop suppliers and work with them to ensure both the supplier and the sub-suppliers are able to work to certain standards. Our internal and external quality assurance staff are constantly at the supplier sites/factories to ensure a high quality level. We do 6000-8000 QC Measurements per year

for product and supplier quality control.

Are things improving?

Overall things are getting better especially compared to 8 years ago. Suppliers have upgraded themselves and are eager to follow up on the suggestions ourselves and other buyers have made. Especially in this market, suppliers have to be very competitive in order to succeed and being CSR compliant makes them more competitive.

Has the sourcing environment changed in the face of the global economic crisis?

One of the biggest things we’ve seen recently is a lot of factories closing. The first wave came with the Mattel toy recall which raised red flags on quality issues and prompted a closer look at the quality of suppliers. The second wave came with the financial crisis last year. At least 4,000 suppliers went bankrupt and we’re not sure how many sub-suppliers have been impacted.

What trends do you see happening in global sourcing?

One of the biggest trends we have seen is an upgrade in quality driven by suppliers and buyers. For example at this year’s Canton Fair, we saw a lot of innovation in product design because of the pressure on the market. This goes along with the impetus we have seen for companies going green. There is also a big focus on creating an integrated supply chain which means companies are calculating their order sizes more closely and managing their inventory better. There is an incredible amount of innovation in the market.

Eurogroup management visit the school they built in Southern China.

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EXECUTIVEPROFILE

Eaton rides the China wave

Founded in 1911 as a truck axle manufacturer, U.S. based Eaton Corporation is today a diversified power management company with 2008 sales of $15.4 billion.

Eaton has diversified into five distinct segments: Electrical, Aerospace, Hydraulics, Truck, and Automotive. CHaINA sat down with Stuart Harrison, Eaton’s VP of SCM & Operational Excellence Asia Pacific, in his Shanghai office. : Tell us a bit about your background.

Stuart Harrison (SH): I’ve been with Eaton 25 years this year.

I joined the company in 1984 in the UK at a truck manufacturing facility as a commercial trainee, spent time on the shop floor and worked in engineering, marketing, product development, finance, and supply chain. At the end of the two year training period, I was given the opportunity choose a career path and moving over to new product development which was heavily aligned at the time with the supply chain group. I then moved into the supply chain with a buying function in late 1988, and spent several years moving through the European organization. In 1999, I moved to America as the North American supply chain leader for the truck business and then in 2004 I moved to world headquarters where I became the global commodity manager for Eaton for metals. I came here in late 2006 with the directive of building a regional supply chain organization.

What was the Chinese supply chain like when you arrived, and what are your responsibilities here?

SH: There was very little in terms of supply chain. We had a global sourcing organization that was established maybe 6 years ago here and in India, and we had regional supply chain staff in our facilities, but it really wasn’t coordinated or cohesive. Our focus has been to start a regional supply chain organization and to build organizational capability around supply chain management in Asia.

This led to developing capabilities in logistics, procurement, supply quality, and global sourcing as well as responsibility for operational excellence, environmental health and safety for the region, and, more recently, enterprise risk management.

Schneider Electric, one of your competitors has moved its global sourcing headquarters to China. Is Eaton making a similar move?

SH: Well, we do have an infrastructure here, but we are not planning to consolidate all of our global sourcing to one location.

Eaton’s strategy 5 or 6 years ago was to migrate up to 40 percent of its sourcing outside of traditionally high cost regions: the

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Americas and Europe. So we now have global sourcing in more competitive areas of the world such as Mexico, Eastern Europe, the Middle East and Africa, India, and China. The plan at this stage is to maintain that balance.

Are you aiming to move a similar percentage of manufacturing to lower cost regions as well?

SH: There’s no specific target for manufacturing, but what we’ve done more recently is regionalize our businesses. We used to have a huge focus on command and control from North America, but we now recognize that 55 percent of our sales revenue comes from outside the U.S., so we have a need to build infrastructure and organizational capability outside of North America. A lot of our senior leaders are moving out of the US and into regional leadership positions to build capability globally. There is a heavy focus on growing Asia for the next few years. China is going to be one of our biggest growth markets.

Out of your various industry sectors, which do you expect to see the most growth from?

SH: Our largest business here in Asia is the electrical business, and that is probably still the fastest growing sector. But they are all fast growing!

Has Eaton been hit hard by the crisis in car manufacturing?

SH: Yes, the automotive business has taken a hit globally. We’ve seen a dramatic downturn as a result of activities at GM and Chrysler. That said, over the years, Eaton has tried to position itself with a diverse portfolio of customers to protect ourselves, so

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EXECUTIVEPROFILE

This Eaton manufacturing facility in Changzhou, China, produces vacuum circuit breakers and other electrical switchgear components.

we are not wholly dependent on the Big Three. Take the Japanese car companies, who now have a large presence in North America: we have strategically developed business with them to diversify our customer base. Eaton’s products represent technologies that help auto manufacturers improve fuel economy and reduce emissions. Our valve actuation technology helps auto OEM’s deactivate cylinders and our super chargers can help make a smaller engine deliver the same performance as a larger displacement engine.

We are working with a number of local automotive OEM’s using these technologies.

I imagine you still have possibilities with Chinese automakers?

SH: Yes, we supply to auto manufacturers here in China, and there is still a lot of potential. More so for the valve business than the supercharger business, because the chargers are for the high end segment of the market, which really are not being manufactured here in China in any mass way. But they will come.

Do you see quality in China improving?

Over the last five years we have seen a significant improvement in the quality of our suppliers, and that is probably reflective of a lot of the tools, processes, and techniques that we brought here to our suppliers. The suppliers are realizing that this is not a cheap and cheerful market anymore: they have to have the accreditations and manufacturing capability. Many years ago, you would come to China and people would tell you they were ISO approved they may have had the certificate on the wall - but they really didn’t have the capability. In a global market, they realize that they have to have the systems, processes and tools in place to guarantee product quality.

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What do you see as the biggest opportunity for improvement for Eaton’s operations in China?

SH: Resources, people. When you try and hire people here, they tend to be very narrow in their capabilities. As a leader, I see this as an opportunity for improvement. The environment here has traditionally been very functionally focused, and that’s a little bit of a risk for us. However, there is more available talent in the market due to the downturn. But, if I look at certain functional areas such as environmental health and safety, it is difficult to find those types of individuals, because the field is relatively new and developing.

HR will become a huge issue again once the recovery hits, and that’s why Eaton is actively developing organizational capability this year.

Are you seeing any industry wide progress on CSR issues in the region?

SH: Absolutely. Sustainability is probably the word that is used more than any other today. Two years ago, nobody really understood what sustainability was, but key suppliers that we work with are now actively pursuing sustainability. They are concerned about the environment, concerned about energy, water waste etc. They are making sure that they have very efficient health and safety standards in place.

Do you see any signs of an economic rebound?

SH: Maybe to some extent some stabilization, but I would not say at this point that we have seen a huge pickup in demand. We are predicting that things will pick up later this year and into 2010, but we do not expect to see any more of a slide downwards from where we are today.

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NEWSROUNDUP

The Big Picture A roundup of news relevant to operations in China

Economy

Chinese construction workers pour concrete at the site of the second reactor of the Fuqing Nuclear Power Plant in Fuqing city, Southeast China’s Fujian province.

Chinese Premier pledges to pump more cash into economy While visiting Hebei Province on June 19th and 20th, Chinese premier Wen Jibao pledged to pump more money into the country’s financial system. In a bid to spur growth and encourage lending, the Chinese government will maintain a “proactive” fiscal policy, he said. The cash infusions will come as part of the Chinese government’s 4 trillion yuan ($585 billion) stimulus plan.

- Bloomberg

World Bank expresses cautious optimism on Chinese growth prospects A new report from the World Bank predicted that the Chinese economy would grow 7.2% this year, a positive revision

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from its previous expectation of 6.5% growth. The predicted expansion, however, is nearly entirely attributable to government stimulus spending on infrastructure projects. The report concluded that in order for Chinese economic growth to be sustainable, the rest of the world economy will need to display signs of recovery.

- Radio Australia

Energy UN: China takes lead on green energy According to a new report from the United Nations Environmental Programme, China is now leading Asia in the development of green energy sources. The report notes that China invested more than $15.6 billion on alternative energy in 2008, an

increase of 18% over 2007. China has now become the world’s second largest wind power market and the world’s biggest photovoltaic (a form of solar energy) manufacturer. The report also predicted that Chinese investment in wind and solar power would continue to increase healthily this year.

- China Sourcing News

China starts construction of second generator unit of Fuqing Nuclear Plant The Construction of Fuqing Nuclear Power Plant, China’s ninth nuclear power plant, started last November. It is planned to be equipped with six sets of 1,000 megawatt generators, and will receive a total investment of around 100 billion yuan (US$14.63 billion).

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NEWSROUNDUP

Legal Russian Far East Customs Chief sentenced to prison for aiding Chinese smugglers The former chief of Russia’s Far East Customs Directorate was sentenced to five years in prison for helping companies smuggle Chinese goods into Russia.

Ernest Bakhshetsyan was accused of setting arbitrary rates to import containers of Chinese goods and ordering his deputies to allow three unidentified companies to import containers without any inspection.

The companies imported over 500 of these uninspected containers, therefore failing to pay 450 million rubles ($14.5 million) in customs duties. According to prosecutors, while the companies declared that they were importing buckets, planks and shower curtains, they were in fact importing leather clothing, shoes, pearl jewelry and other luxury goods.

- Moscow Times

Top 10

Internationally known Chinese brands

As Ranked By www.china-10.com

1. Lenovo 2. Haier 3. Tsingtao Brewery 4. Air China 5. China Mobile 6. Bank of China 7. GREE 8. Wuliangye 9. Huawei 10. ZTE

Integrated Logis�c Solu�ons for China 㓐ড়⠽⌕᳡ࡵଚ Dajin Logis�cs is a leading Chinese logis�cs service provider with a broad network in Tier 1, 2 and 3 ci�es and extensive experience serving both foreign and local clients.

Local knowledge applied to interna�onal standards Wide China network coverage Tailor-made supply chain solu�ons Warehousing, road, rail and barge transporta�on Project logis�cs, dangerous goods, cold logis�cs Interna�onal Freight Forwarding Sophis�cated IT systems Address: 3000 South Lianhua Road, Minhang District, Shanghai, China, 201109 Phone: 8621-34306999 Fax: 8621-34305794 Contact person: Sarah Zhang Email: sarah.zhang@dajin.com.cn

www.dajin.com.cn

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ISSUEFOCUS

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ISSUEFOCUS

Water crisis looming China’s demand for clean water is projected to rise to 585 billion cubic metres 8% per day by 2010. That is equivalent to 22% 1,000 times the daily volume of water ap20% proaching Niagara falls’ during peak flow 18% season.

Bubble size= 16% Brazil Amongst BRIC developing countries, TARWR(m3) per capita 45,570 14% India’s and China’s water resources are 12% very much below what will be needed to Russia 10% support their populations adequately.

31,650 8% Growing water scarcity and greater China 6% willingness by China’s central and local 2,140 USA India 4% governments to utilize market-based 10,270 1,750 2% mechanisms to resolve the problem are 0% good news for Chinese water treatment 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 22% 24% firms such as China Everbright, China Water Affairs Group, Guangdong Investment, Source: FAO-AQUASTAT, 2005, Fusion Consulting analysis Beijing Capital Company and Tianjin CapiNotes: TARWR = Total Actual Renewable Water Resources, an index that reflects the watal Environmental Protection Company. ter resources theoretically available for development from all sources within a country exOpportunities also exist for foreign firms pressed in km3/year. such as Véolia Water, Suez and Berlin Water, as they collaborate with municipalities in building or upgrading water treatment facilities.

Demand-based solutions that better manage demand and improve resource efficiency such as recycling and reclamation technologies or multi-tier pricing will be in vogue. Supply-based solutions, such as desalinization or reallocation schemes (e.g. South-to-North Water Diversion) will also continue apace.

- Source: Global Intelligence Alliance

TARWR Volume

Total Actual Renewable Water Resources

War for water

To find out more about the global water crisis, we recommend the following viewing and reading.

Blue Gold Based on a book by Maude Barlow and Tony Clarke, this documentary by Sam Bozzo follows numerous worldwide examples of people fighting for their basic right to water, from court cases to violent revolutions to U.N. conventions to revised constitutions to local protests at grade schools. Corporate giants force developing countries to privatize their water supply for profit. Wall Street investors target desalination and mass bulk water export schemes. Corrupt governments use water for economic and political gain, setting the stage for world water wars.

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Flow This award-winning documentary is an investigation by Irena Salina’s into what experts label the most important political and environmental issue of the 21st Century - the world water crisis. Salina builds a case against the growing privatization of the world’s dwindling fresh water supply with an unflinching focus on politics, pollution, human rights, and the emergence of a domineering world water cartel. The film introduces many of the governmental and corporate culprits behind the water grab, while begging the question “Can anyone really own water?”

China’s Water Crisis Written by Ma Jun, China’s most well known environmentalist, this book has been compared to Rachel Carson’s classic work, Silent Spring, which called attention to America’s environmental crisis.

Ma Jun documents the persistent drought conditions in the southeast, the impact of pollutants on the Tibetan plateau, the defects in China’s large-scale reservoirs, steadily diminishing underground water tables, and the growing abuse of aquifers for urbanization and industrialization. The findings are bleak, but his message is that something can still be done.

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Supply Chain Management A roundup of supply chain news

Manufacturing Sweet Green Fields opens Chinese factory Sweet Green Fields, a US-based producer of a sweetener called Reb-A , has opened a 160,000-square-foot extraction plant in China. The plant will allow SGF to double its production. SGF’s natural sweetener is considered to be up to 300 times sweeter then sucrose. It is an all-natural, high-intensity and zero calorie, low glycemic sweetener extracted from the stevia leaf. Reb-A is one of 10 glycosides in the stevia plant, native to Paraguay. Stevia in its raw form has been used as a natural sweetener for centuries in South America.

- China Daily

R&D Chinese developed supercomputer hits worlds top 10 A domestically developed supercomputer, the fastest electronic brain in Asia, started regular operations 15 June 2009 in Shanghai, marking a major milestone in Chinas information technology industry.

The Shanghai-based machine, called the Magic Cube, boasts a peak performance of 200 teraflops, or 200 trillion calculations per second, 20 times faster than the previous model. It ranks No. 10 on the worlds list of speedy computers, and is the only one made outside the United States to earn a place in the top 10. The supercomputer, code-named Dawning 5000A, cost 200 million yuan (US$29 million), with the central and Shanghai governments each contributing half the investment.

Chinese workers are seen operating the Magic Cube (code-named Dawning 5000A) supercomputer at the Shanghai Supercomputer Center in Shanghai.

and scientists. According to a company spokesman, the facility will focus its research on search, advertising, cloud computing, and other personal Internet tools and technologies. Before the establishment of the Beijing center, Yahoo had just two global R&D centers, one at its US headquarters in California, and the other in Bangalore.

- China Daily

Top entrepreneur award to Chinese auto glass tycoon Cao Dewang, Chairman of Fuyao Glass Industry Group, has been named the Ernst & Young World Entrepreneur Of The Year 2009. Cao was picked from among the 43 entrepreneurs vying for the title, each of whom had already been named the Ernst & Young Entrepreneur Of The Year in their home countries. Founded in 1987 in Fuzhou, Fuyao Glass is Chinas leading automotive glass manufacturer, with more than half of the overall domestic market.

The company is also an approved original equipment manufacturer for automakers based around the globe, including Audi,

Yahoo opens Beijing R&D center The American internet giant Yahoo has opened a new R&D center in Beijing, tapping into China’s deep pool of engineers

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Cao Dewang, chairman of Fuyao Glass Industry Group

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A�er five years of successful opera�ons in China, FM Logis�c is proud to announce the opening of its second owned warehouse facility in Taicang, a short driving distance from Shanghai.

The state-of-the-art warehouse features: 24,000 m2 in opera�on now, eventual capacity of 100,000 m2 High-level racking Loading/unloading cages to guarantee maximum security Unmatched fire safety according to Na�onal Fire Protec�on Associa�on and FM standards Advanced, 24/7 security systems and measures FM Logis�c offers transporta�on services through a pan-China network using its own Volvo fleet and state of the art TMS and GPS tracking. FM’s first warehouse complex (6,000 m2), in the Pinghu area west of Shanghai serves as a key-hub for reverse logis�cs and other warehousing services.

Hyundai, Volvo and Ford.

Chinese company takes over Hummer In related news, as part of its restructuring, GM has sold its Hummer brand to the privately-held Chinese company, Sichuan Tengzhong Heavy Industrial Machinery Co., Ltd. Until now, the Sichuan Provincebased company has been a manufacturer of road, construction, and energy industry equipment. Tengzhong has announced that it has no plans to manufacture Hummers in China, and will instead continue to use the current facilities in the US. Analysts suspect that Tengzhong is investing not in new manufacturing capacity, but in Hummer’s research and development capabilities.

- China Sourcing Blog

Logistics Grand China Logistics places one of the largest shipbuilding

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orders in Chinese history Zhoushan Jinhaiwan Shipyard has secured a massive order for 30 ships from the fast emerging Grand China Logistics, one of the largest ship orders in Chinese history. With a total contract price of above $2 billion, the ships are scheduled to be delivered between the third quarter of 2010 and the second quarter of 2012.

- Steelguru

China’s own Jade Cargo takes on Lufthansa In a challenge to the dominance of the German carrier Lufthansa, China’s Jade Cargo has signed up a general sales agent to market its capacity in Europe. The Shenzhen-based cargo airline appointed Air Logistics Group as its general sales and service agent in 14 countries across Europe, from the UK and Germany to Turkey and Portugal. In the meantime, Jade is also preparing to reach into Eastern Europe through an alignment with Austrian Cargo, the air freight division of Austrian Airlines.

- Cargonews Asia

Maersk Logistics rebrands under Damco The A.P. Moller-Maersk Group is all set to merge its supply chain management business Maersk Logistics and freight forwarding brand Damco, under a single brand, Damco. Under the new brand, Damco seeks to provide customers with

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a wide range of logistics services, covering A-to-B forwarding, time sensitive reefer logistics to advanced supply chain management solutions, and consultancy.

The transaction is to commence in September. In the interim period, the supply chain services will continue under the brand, Maersk Logistics and the forwarding services will continue to be delivered under the Damco brand.

Rolf Habben-Jansen, CEO of Maersk Logistics and Damco, said: “Under the new, single brand our primary drivers remain our passion for customers and our dedication to service delivery. And our teams across the globe will become even easier to do business with than before.”

Retail Nokia feels the heat as Chinese retailers boycott their products More than 100 cell-phone wholesalers in Hunan and Shandong provinces have sent a letter of protest to the Finnish

Real pain No sector has been safe from the global recession, including industrial and logstical real estate. Shanghai, due to its position as a logistics hub for Asian exports, has been particularly hard hit by the slowdown in North America and elsewhere. In contrast, domestic logistics hubs such as Chongqing have fared better. Take a look at how the global real estate giant CB Richard Ellis’ industrial and logistical properties in Shanghai have done over the past year:

Q2 2009

3-mths Change

6-mths Change

12-mths Change

Land Price (RMB/sm)

1,207.6

+0.8%

-3.1%

-5.7%

Average Rent (RMB/sm/mth)

47.5

-2.5%

-7.0%

-6.7%

Factory Rent (RMB/sm/mth)

26.2

-3.8%

-12.8%

-21.9%

Warehouse Rent (RMB/sm/mth)

26.4

-4.0%

-5.4%

-8.4%

Business Park Rent (RMB/sm/mth)

90.1

-1.6%

-5.6%

-0.6%

A roundup of logistics related news China Investment Corporation invests AUD 200 million in Goodman Group

China Chengtong Group to cooperate with China Railway Container Transport Co., Ltd.

CNPC buys holding company’s gas pipe asset for RMB 9.7 Billion

Beijing Times

China Shipping Gazette

Zhengyi Wu, Shanghai Securities News

Australia’s Goodman Group recently announced an investment it received from China Investment Corporation (CIC) and Macquarie Bank Limited of AUD $485 million; CIC committed AUD 200 million of it..

“We view a relationship with CIC as highly strategic and believe that together we can capitalize on the significant opportunities created by current market conditions,” Greg Goodman, chief executive of Goodman Group said.

China Logistics Corp., a subsidiary of China Chengtong Group, has reached a strategic corporation agreement with China Railway Container Transport Co., Ltd. Both sides said that they will use the agreement to corporate more effectively in the railway container business. Currently China Chengtong Group is seeking cooperation opportunities to ensure their large size warehouses, location advantage, and professional operation skills are put to effective use.

CNPC announced its plan to purchase its holding company’s gas pipe asset for RMB 9.7 billion. On June 18th, CNPC’s Board of Directors consented for its pipeline branch to reach an agreement with China Petroleum Pipeline Co., Ltd., another subsidiary of CNPC’s holding company.

The asset acquisition includes one crude oil pipeline and one refined oil pipeline that lie between Urumqi and Lanzhou, 1858 kilometers in length.

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phone giant Nokia, accusing the company of monopolizing prices to reap windfall profits. Meanwhile, at least 40 wholesalers in Shandong have begun a general boycott of the company. The wholesalers claim that Nokia’s policies, such as the heavy fines, not guaranteeing the quality of products sold outside specific areas, and dividing sales regions, are an effort to monopolize prices and the marketplace.

A distributor from Hunan Province said he is forbidden to sell Changsha county’s Nokia products in Xiangtan county, even if the two counties are only 40 kilometers apart. And if a single cell phone is sold outside of a distributor’s assigned sales area, Nokia will fine him 10,000 yuan ($1,460). Distributors can only receive their commissions if they meet their targets within their regions, but the problem they face is that they can only meet their quotas by selling outside their assigned sales areas. Nokia said its policy is a way to manage unauthorized distribution outside a distributor’s sales area.

- Xinhua

Wal-Mart enters convenience store market in China U.S. supermarket chain Wal-Mart has entered Chinas convenience store market by opening three shops in the southern city of Shenzhen. Wal-Mart opened the three convenience stores as a pilot program,

from the Chinese Media Geely acquires DSI in first overseas acquisition by a Chinese automaker in 2009 Yi Zhao, China Business News

The completion ceremony for Geely’s acquisition of DSI, the Australian autoparts maker was held on June 15th, in Melbourne, Australia. “Auto companies in developed countries getting acquired by those in developing countries will be a trend in the reshuffling of the global auto industry.” Shufu Li, president of Geely said at the ceremony. Geely proposed to bail DSI out immediately after hearing the news of their bankruptcy, winning the deal from 14 other competitors.

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A Wal-Mart convenience store in Southern China.

and has maintained a low-key approach up to now. Both 7-Eleven and Tesco are also getting into the crowded convenience shopping market which is dominated by the likes of Lawson and All-Days.

Compiled by Carl Pan

Tsingtao Beer’s brand value increases to RMB36.6 billion Haiming Liu, Shanghai Securities News

A list of Top-500 most valuable Chinese brands has been released recently in Beijing. Tsingtao Beer topped the list with a brand value of RMB36.6 billion. The brand had a 30 billion increase in terms of brand value from 2001 to 2009. Zhiguo Jin, president of Tsingtao Beer Corporation told a reporter that “As well as enhancing the brand’s influence in the market, we want to profit from the rise in the brand’s premium.”

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India A roundup of news relevant to operations in India Indian economic growth projected to surpass China in 2010 The World Bank has projected an 8% growth rate for India in 2010, overtaking China’s expected 7.7% growth. This will mark the first time that India has been the world’s fastest growing economy.

- Economic Times of India

Airbus looks to India for new manufacturing plant

Airbus is considering building an Indian aircraft assembly line, which would be its second such unit outside Europe after China. Karnataka and Tamil Nadu are the two states being considered by for the assembly line, which would include a 2,600 meter long runway and facilities for painting and testing aircraft. Depending on specific requirements and other costs, Airbus may have to invest around $600 million in establishing the facility in India and employ anywhere between 600 and 1,000 people across various processes. The company said it is seeking to reduce its production costs by at least 20-30% and serve the Indian mar-

Retail industry in India poised to beat global slowdown Size of retail industry in India (INR bn), 2002-2010 14.478,8 8.290,6

8.682,5

2002

2003

9.042,6

9.806,9

2004

2005

16.986,6

12.076,5 10.414,2 11.120,5

2006

2007

2008e

2009f

2010f

f -forecast

Private consumption alone accounts for more than one third of India’s GDP. Modern retailing formats accounted for only 2.1% of the total grocery sales in India in 2007, but this is set to change as relaxed FDI rules bring foreign investment and local retailers boost their presense.

ket better. The plant would take three to four years before it would be operational.

- Economic Times of India

India considers allowing more foreign investment India may allow greater overseas investment, sell stakes in state-run companies, and inject more capital into lenders to stoke economic growth, Indian President Pratibha Devisingh Patil said. “Foreign direct investment needs to be encouraged through an appropriate policy regime,” Pa-

til said in New Delhi, as she spoke about the global recession. The government will also develop a roadmap for selling stakes in state-run companies, she said.

- Bloomberg

India frets over Chinese iron ore discovery The Chinese Bureau of Geology and Mineral Resources Exploration in Liaoning Province has announced it that has found an iron ore deposit with an estimated reserve of more than 3 billion tons. This is a major concern for India, because more than half of India’s exports to China are iron ore. While it will be some time before the material is extractable, judging by its current level of usage, the deposit is enough to satisfy China’s requirement of iron ore for 25 years, sources said.

An iron ore mine in China; China may displace India as a leading source of the material.

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Vietnam A roundup of news relevant to operations in Vietnam Hanjin commences direct shipping route between Vietnam and the US South Korean shipping giant Hanjin has begun a direct service between Vietnam and the US. The new service will take advantage of the prosperous Vietnamese and Southeast Asian markets, which are showing growth despite the global recession. Six 4,000-TEU container ships will travel from Port Kelang in Malaysia to Ho Chi Minh City, head across the Pacific Ocean to Long Beach and Oakland, California, and then sail back to Port Kelang via Tokyo.

- Thanh Nien News

networks. The carrier also told a news conference it had signed a memorandum of understanding for two additional widebody A350-900s worth $480 million. Vietnam Airlines currently operates a fleet of 52 aircraft and flies to 19 domestic and 23 international destinations.

- Reuters

Vietnamese legislature lowers growth targets Vietnamese legislators have lowered the country’s economic growth target to

around 5% in the face of an economic slowdown. 90% of deputies in the communist-dominated assembly agreed to lower the target from 6.5%, as the government requested. Production, trade, investment, job creation, and revenues have been hit by the slump, leaving most targets unattainable, the government said. Vietnam’s economy grew by 6.18% last year, its lowest level in almost a decade, and Hanoi said first-quarter growth was 3.2%, the lowest on record.

- AFP

Vietnam Airlines places $1.9 Billion Airbus order In a rare bright spot at an otherwise dismal Paris Air Show, Vietnam Airlines placed an order for 16 single-aisle Airbus A321 aircraft worth $1.4 billion, as it seeks to expand its regional and domestic route

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FEATURESTORY

Green or Green Washed 7 lessons in green supply chain management

By Rebeca Kanthor

“It’s not easy being green,” said Kermit the Frog of his amphibian existence.

Talk to sourcing managers, auditing firms, and NGOs and you’ll hear it’s not so easy being truly green in supply chain management either. To the average consumer with a do-gooder instinct, but with no insider experience, it’s hard to understand what “green” really means in the corporate sector. Rebecca Kanthor did an investigation for CHaINA into the topic and discovered that greenwashing, outright lies, and fake documents are a few of the dirty secrets of green supply chain management.

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FEATURESTORY Lesson 1: In the financial downturn, more than ever it’s all about the bottom line.

Green is the new gold, the current adage says.

Paul McCann, Director and China General Manager of Smurfit-Stone, a US company providing packaging solutions for companies manufacturing in China, says interest in sustainability has been a growing trend among his company’s clients for the last year or two.

Why the sudden interest? Most companies’ commitment to greening their supply chain is no more than a commitment to efficiency and cost-cutting, with green being an added bonus. It’s not that companies suddenly have the urge to go hug a tree; it’s because financially these changes made sense. 2008’s booming commodities market had a huge impact on companies’ interest in reorganizing their supply chains. Rising oil costs impacted the price of other commodities and made recycling materials and reevaluating sourcing locations smart financial moves.

Industry insiders say that in this uncertain economic climate, greening efforts by most companies have to impact on the company’s bottom line; otherwise it is not a financially viable direction.

“Practically speaking, in this financial situation it’s going to be tough for companies to pay more money to be more environmentally friendly,” McCann says, “so I think companies will start with opportunities where becoming more environmentally friendly also saves them money. It makes sense right?”

If green is code for cost-cutting, is much of anything in the way of environmental sustainability actually being achieved? Not much, says one director of an industrial goods manufacturer who asked to remain unnamed. “If you’re just the normal company sourcing in China, you have zero control over where it is green, and that’s not your concern. Your concern is best price.”

From the supplier standpoint: “You’re damned if you do and damned if you don’t.

If they [suppliers] became super compliant, the price would just rise and they wouldn’t get any new buys. All the factories would close.”

He concludes, “Everything about green is PR now.” He acknowledges that for companies with large amounts of capital to inject into Chinese supplier infrastructure, perhaps the claims of greening

efforts have some legitimacy. But in his experience that’s the extreme minority.

Lesson 2: Risk-prevention is a motivator Greening is also motivated by risk prevention.

Speaking from experience working with multinationals, the industrial goods manufacturing director says, “Only until you get caught doing something or are worried about getting caught doing something do you worry about green.”

Case in point: Wal-Mart. Wal-Mart’s foray into greening its supply chain has begun to slowly change its reputation from a giant bully with poor labor practices, to a leader in environmental innovation.

Companies seeking to avoid risks often look to incorporate corporate social responsibility, including environmental responsibility, into their supply chain management. But making a commitment to these concerns means that any revelation that they are failing to live up to these promises can be a major risk itself.

Ma Jun, director of the Institute of Public and Environmental Affairs, has created maps of air and water pollution in China, and says companies using them to track suppliers do it to protect their image. “The potential risk from using very bad polluters, the scandals, provides another source of incentive,” he says.

But do Chinese companies feel the same sort of risk?

While the 2007 Xiamen PX Plant protest mobilized more than 8,000 residents in a move to shut down a chemically polluting plant there is still not as much awareness of green supply chain management in China. Aside from Esquel, a Hong Kong shirt making company that has a good record for sustainability, most Chinese companies have not incorporated CSR in their marketing, Ma Jun says, so in turn they don’t feel as much pressure to live up to the hype. “I think that it makes sense that those who make an open commitment to take a step forward, to step ahead of the others.”

If you’re just the normal company sourcing in China, you have zero control over where it is green, and that’s not your concern. Your concern is best price.

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Lesson 3: Greenwashing is prevalent.

Green. Eco. Environmentally-Friendly.

These

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FEATURESTORY

This is not about greenwashing.

This is the real deal.

Ross Farnsworth, Wal-Mart China’s Senior Director of Merchandising

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phrases have become tossed around in the public domain for the past few years. Marketing campaigns touting green initiatives are a firmly established trend. Alongside these buzzwords is another term: Greenwashing.

While concerns for the bottom line often are in line with environmental efforts like near-sourcing and more efficient packaging designs, and can bring real results, there is a fair amount of false information to wade through. How do we figure out what is PR and what is actual innovative practice?

At the Green Product Forum held in Shanghai this past May, Chris Terry of Hoffman Agency highlighted the problem for participants, focusing on several types of greenwashing that companies are guilty of, whether intentionally or not. Using a survey by TerraChoice, she explained how green claims often mask a trade-off, where the company is doing well in one area, but not in others.

Even companies that are known sustainability leaders can be perpetrators of greenwashing. Timberland is an excellent example. The major American footwear brand is known for its green initiatives, even creating a Green Index rating to measure the environ-

mental impact of their products and disclosing the names of their suppliers.

Ma Jun says the truth isn’t so pretty. “That is a company that talks a lot about CSR. [But if they did the research], they could easily find that one of their suppliers has six years of records on our air pollution database consecutively, one year after another.

And another has 3 years of records on our water site.”

Wal-Mart is considered an innovator in green supply chain management, both leading the way in innovation, and putting pressure on suppliers and competitors to keep up. The company is

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HP, Lenovo, and Dell have fallen well short of Greenpeace’s expectations for failing to live up to their promises. All three had said that they would eliminate vinyl plastic (PVC) and brominated flame retardants (BFRs) in their products by the end of this year, but they’ve now told Greenpeace that they won’t be able to meet that timeline. Only Lenovo has set a new deadline (the end of 2010).

The big winner, on the other hand, is Philips, which has jumped from 15th place to 4th as a result of some new recycling initiatives.

Nintendo is once again dead last.

proud of all it has achieved.

“This is not about greenwashing. This is the real deal,” Wal-Mart China’s Senior Director of Merchandising Ross Farnsworth says, speaking of his work sourcing fresh fruit from local farmers. “As we got into this sustainability effort back in 2005, at first we did it from a defensive standpoint. But what we’ve learned as we’ve gotten into it, it just makes sense.”

On the other hand, Kathee Rebernak, who runs Framework:CR, a leading corporate responsibility and financial communications firm, says Wal-Mart has much to improve if it wants to avoid greenwashing claims. Her article “What’s wrong with Wal-Mart’s Sustainability Reporting” argues that the company is taking a PR approach instead of embracing transparency by speaking broadly about goals without tackling specifics.

Lesson 4: Transparency is key What’s a company to do? There’s no way for it to track of all its suppliers in China, right?

Actually that’s becoming less true with the development of greater transparency in China, albeit very slowly. The data Ma Jun uses in his organization’s air and water pollution maps is provided by the government, which a year ago passed new measures on disclosure of environmental information. He introduces the maps to multinational and Chinese companies and shows them how they can be utilized.

Companies like Nike, GE, Wal-Mart and Esquel use the maps as a tool for keeping track of their suppliers and finding known polluters. Others, he

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says, including Timberland, prefer to be ignorant even though they know the tool is available.

But while the pollution maps can help a company sustainably manage their supply chain, it’s not always so clear-cut. An underlying problem is that suppliers often contract out to other factories, making the supply chain links a bit fuzzy. The industrial manufacturing director believes that compliance is much harder in China than in factories in smaller Southeast Asian countries. “There are so many factories here, there’s no way they can regulate every one,” he says.

Lesson 5: The system of accountability doesn’t work.

It’s absolutely unrealistic to expect suppliers to measure up to client company’s standards.

Pierig Vezin, CEO of Wethica

Speaking from years of experience dealing with suppliers and client companies, the director maintains that most companies pressure their suppliers for the cheapest price and then expect compliance on environmental standards. Suppliers are struggling to survive and don’t want to lose money either, so they satisfy their client companies with fake documents. When scandal breaks, companies blame their suppliers for lying to them. As it did in 2007 with a rash of tainted product scares and more recently with reports of tainted drywall, the blame goes to Made in China, and not Poorly Managed Supply Chain.

Even if a company does put pressure on its suppliers to adhere to environmental standards, oftentimes lack of follow-through on these standards leads to a chain of fakes and lies.

According to Pierig Vezin, CEO of Wethica, which conducts long-term social responsibility audits for

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FEATURESTORY

Supply chains are like balloons: if you squeeze them in one place they pop out somew here else, so there’s a clear need for collaboration.

Frances Way, Carbon Disclosure Project

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client companies, it’s absolutely unrealistic to expect suppliers to measure up to client company’s standards. “If you ask a factory to be 100% compliant,” he says, “you ask it to kill itself.”

“There is really a faking business,” he says.

“You have some buyers who want to buy in fully compliant factories. You have some factories that have become experts in making fake documents, in teaching the workers how to answer the auditors. And you have some auditing companies that have become expert at the way to say things that leads [to] ‘ok this factory is compliant,’ even if they haven’t said it really.”

Independent and in-house audits and inspections almost never lead to a company cutting a supplier, says Vezin. Instead there’s a back and forth of recommendations and reports. According to the manufacturing director, these communications sometimes never lead to any real change.

Even those documents that aren’t faked are sometimes not credible.

Independent and in-house audits and inspections almost never lead to a company cutting a supplier, says Vezin. Instead there’s a back and forth of recommendations and reports. According to the manufacturing director, these communications sometimes never lead to any real change. “I know that 70-80% of the products going through are not compliant.”

Sometimes it is easier for certificates to be granted even if factories are not compliant. The industrial manufacturing director says that Yiwu, “filled with thousands of factories that couldn’t be

inspected,” is such an example. “They have a fumigation chamber in Yiwu but the chances of your getting a fumigation certificate are nil.” If all the factories adhered to the proper certification processes, either the goods or the factory would fail the inspection, pushing the prices up.

“I always fight with some of my supply chain guys and I tell them I don’t want to buy fake documents,” he says. “And they go, they’re not fake. They’re real. They just didn’t go through the process.”

The director says, “When I talk to the guys in the bigger companies, and these guys are in charge of the whole supply chain, they have no idea this is going on.” It is credibility and authentication issues like these that make it nearly impossible for companies, even those with internal auditing systems to make good on their claims of green supply chain management.

Lesson 6: Green is a smart long-term solution Still, efforts to affect change are having some impact. Frances Way, of the Carbon Disclosure Project, which partners with client companies pressure suppliers to disclose carbon emissions, believes that progress is being made. “It’s very much a business approach,” she says. “When you’re dealing with supply managers you’re not dealing with marketing; this is clearly something that’s embedding itself in the company.”

Of course, she understands that simply pressuring suppliers will not effect much change.

“Supply chains are like balloons: if you squeeze them in one place they pop out somewhere else, so there’s a clear need for collaboration.”

What’s important, say many of those who work with companies to improve their sustainability practices, is not to be using 100% compliant suppliers, but to be willing to be work with honest suppliers and be willing to improve. “The key issue is not about whether a company is perfect or not,” says Ma Jun. “The most important things is when you have a problem, how do you respond to it.”

For some companies, pressure from their client companies is a reason to make changes. Wal-

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FEATURESTORY

Ma Jun is one of China’s most prominent environmentalists. His book, China’s Water Crisis, has been compared to Rachel Carson’s classic work, Silent Spring, which was instrumental in driving environmental change in the United States.

Mart’s Packaging Scorecard has had an impact on suppliers. One sourcing manager from a large US food company that sources to Wal-Mart says the scorecard has provided some clear guidance and also some pressure to improve.

Beyond the risks of scandal, Way of the CD Project highlights an even greater risk to the sustainability of a company- the risk of being unprepared in a changing global climate.

“The worst thing that can happen to a procurement department is disruption to supply,” she points out.

She warns companies that there are aspects of climate change that will affect their ability to source raw materials. Flooding, storms, and extreme weather all will influence a company’s long term sustainability. She suggests companies that research their options earlier rather than later.

So far that message has not reached many of the suppliers her client companies work with. 58% of the suppliers her client companies work with did not perceive a risk from changes related to climate change.

She maintains, “The longer you wait, the harder it will be to change the raw materials, and the

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more likely you are to have a more expensive option of change.”

Lesson 7: But in the end it has to pay to go green.

But from a longer term perspective, those who embrace sustainability are positioning themselves for a market that increasingly favors green. “I think that in the end customers that are prioritizing are very savvy, because it does eliminate costs but it also helps them with their brand,” says SmurfitStone’s McCann. “As you talk about positioning a brand to a next generation of consumers, it’s very smart.”

Until the cheapest price is no longer the goal, greening efforts may not go much further than those that double as cost-cutters. For a company to go green, Ma Jun believes that environmental groups need to work to ensure that there is enough financial incentive for supply chains to be better managed. “If we keep allowing those who cut corners to gain the competitive edge in China than we will not be successful in our efforts to protect the environment.”

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GREENFOCUS

Influencing social responsibility through supply chain development

By Bradley A. Feuling, CEO, Kong and Allan With the short-term economic outlook strengthening, companies expanding in low cost manufacturing must turn their strategic operations focus to service level and lead time. Sourcing and supplier management practices have evolved, yet many companies continue to underestimate these areas in relation to total cost models. Each of these supply chain considerations also importantly contribute to social responsibility and sustainability.

With extending global supply chains, many people and communities influence a product between the raw material supplier and the end-customer. To better understand total costs and improvements in sustainability, one therefore needs to delve deep into supplier development. A key focal area for each company should be operational efficiency.

ing the throughput, the usable life of the machine was also lengthened, which improved the time to realize a ROI. When considering upstream operations, these tangible cost savings may be partially passed on to the buyer.

Packaging In addition, we might also consider new product and packaging development. Companies such as Procter & Gamble realize this fact. With the recent decision to concentrate Tide detergent, the company reduced material requirements for both input materials and packaging leading to higher productivity, lower manufacturing utilization and energy consumption.

Cube utilization Operational efficiency Similarly, cube utilization is becoming an important operaGlobal supply chains magnify challenges related tional metric. Fresh Daily C’s transition to rectangular box to longer lead times. If inventory placement is not packaging increases the transportation utilization adjusted as new suppliers are added, the risk of rate by roughly 36%. Hewlett-Packard has been a stock-out increases. This often results in in-transit leader focusing on postponement in final packexpedited freight, which increases the carbon aging to reduce global freight shipments. Cost footprint. To improve environmental sustainabilsavings are $3 million USD per month with an ity and reduce costs, demand and production increase in cube utilization of 250%. When planning must be synchronized. This involves considering the end-to-end supply chain imcycle time planning, lead time mapping, and pact, the overlapping influence is clear. improved coordination with suppliers.

Brown-Forman Corporation is one example Sustainable cost of a company who has tied this together. The Costs became a key factor for many company re-evaluated their supplier network companies during the recent financial crisis. considering inventory, lead time, and procureMany companies are currently restructuring, ment costs. The improvements made served to yet many of these transitions are directed at create environmental benefits. Stronger demand internal operations instead of process and By concentrating their Tide forecast accuracy resulted in lower carbon emis- detergent, Proctor and Gamble material flow improvements. With a global sions and fuel consumption through a decrease reduced material requirements supply chain, it is critically important to note leading to higher productivity, how interwoven total costs and environmental in expedited airfreight shipments. lower manufacturing utilization sustainability are. Significant opportunities exand energy consumption.

Energy Usage ist when supplier operations, material flows Another closely related consideration surrounds CO2 emissions and sustainability are carefully reviewed. and energy usage. If a factory improves throughput by 10% due Companies building these processes are enjoying competitive to stronger sales and operations planning (S&OP), a direct sav- advantages and are positioning themselves well for when the upings in energy consumption should be achieved. In China, most turn begins. Social responsibility is no longer being solely being manufacturers operate around the clock believing that revenue driven by customer demand. Operational improvements are vital and throughput are linear. With a more comprehensive view of to building a sustainable advantage as global supply chain operations, we realize that the relationship between competition intensifies. profit and throughput is actually parabolic.

Bradley A. Feuling is the CEO of Kong and Allan, Haworth, a global leader in office furniture applied this concept based in Shanghai, China. Kong and Allan is a conin their painting process. By increasing the throughput, the facilsulting firm specializing in supply chain operations ity reduced energy usage by 9.1%. This creates a direct savings and global corporate expansion. www.kongandallan.com contributed to utility payments and factory overhead. By increas-

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AUTOFOCUS

GM’s fall: the aftermath for Chinese auto suppliers

By Namrita Chow

Now dubbed “Government Motors” as it enters Chapter 11 bankruptcy procedures in North America, with the US government as the majority 60 percent shareholder, will General Motors go down, pulling all its suppliers with it? Or will the smaller GM, minus Hummer -- sold to Chinese heavy machinery manufacturer Sichuan Tengzhong Heavy Industrial Machinery -- emerge a stronger player pulling its suppliers into a new era of lucrative deals? This article looks at the effect of GM’s bankruptcy on Chinese suppliers.

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AUTOFOCUS

GM India still assessing impact of U.S. crisis GM, which sourced components worth around $300350 million last year from India, had earlier announced a target of $1 billion by 2010. By February, it was clear that this target would be tough to meet. Component makers say the extent of how badly sourcing out of India will be hit will depend on products, platforms and markets that the new good GM retains. The bulk of India’s parts exports go to the US. But there are component makers who supply to GM’s European operations as well, including Opel which is now being sold off, said a GM official. Post restructuring, one will have to negotiate with the new owners of GM brands that are being sold off.

For GM India -- which has invested over $1 billion in India to date and directly employs more than 4,000 people at its operations at Halol, Talegaon, Bangalore and Gurgaon -- the official position is that it’s business as usual. We have already made the required investments in India and we don’t plan to lay off a single employee,” said GM India spokesperson P Balendran. Yes, with marketing slowing down globally, our sourcing plans have slowed down but that’s all. We don’t even depend on Detroit for models and technology.

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n a small village in Zhejiang province, China, back in 1991 a small time spare parts entrepreneur, Ye Jin Rui, and his friend, a local village headman Han Yu Ming, set up an aluminium die casting factory and called it Ruiming Group Co. Jump a decade and a half to 2007---Ruiming entered General Motors’ supply chain, but down the ladder as a Tier 2 supplier.

In the automotive industry a Tier 1 supplier has orders directly from the automaker. A Tier 2 supplier is commissioned by a Tier 1 supplier to produce certain parts, which the Tier 1 assembles with other parts to supply to the automaker. A Tier 3 supplier is further down the supply chain, and supplies a Tier 2 supplier, and so on. All suppliers aim to be Tier 1 suppliers, so they can get the best price for their parts and cut out the other suppliers from the supply chain. But, for a Tier 2 or Tier 3 supplier to enter Tier 1 status is tough. Winning a Tier 1 contract means someone else has lost potential business. And no one wants to have to close shop as orders dwindle. Competition in quality and price is cutthroat today, with confirmed orders the only way to survive the global downturn.

Tier 1 dreams Today, the small local manufacturer of metal parts, Ruiming Group is celebrating. They are now Tier 1 suppliers to General Motors. Having invested 300 million yuan in new facilities, spanning 136,000 square meters in China’s Zhejiang province, they have everything to lose if their work with GM disintegrates. Endless production lines will lie empty, staff will have to be laid off, machinery will rot, and bank loans will inflate with heavy interest rates and fines. Stories of bankruptcies and losses span across the automotive supplier industry: Visteon Corp, Delphi, ArvinMeritor, and GKN. But these are large global supplier companies with facilities across the globe, profits pulled down by large global automakers cutting back on orders, and running out of money to pay for parts.

“Harsh changes for some mean opportunities for others,” muses senior analyst Duan Chengwu of Global Insight, a leading global think tank. For smaller local supplier companies, this is the mo-

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AUTOFOCUS

ment they have been waiting for. Having stuck at Tier 2 and Tier 3 levels in the supply chain for years, many now have the technical knowhow and quality control mastery to compete for Tier 1 contracts directly from the automaker.

For the local supplier company Ruiming, the sun is rising bright and strong, or so it seems. “Everything I said back in 2007 has come true,” says Steven Sung, Ruiming’s head of exports and new business. “Ruiming is now a Tier 1 supplier to GM.” But is that a good thing given GM’s current shatky situation? “GM is still strong.

We have forecasts for GM for July and August, 35,000 pieces in July and August for cars in North America. GM is still strong even in North America, I feel. And in China it is even better,” says Sun enthusiastically.

Chinese automaker Shanghai Automotive Industry Corp. (SAIC) agreed last year to extend their joint venture, Shanghai GKN Drive Shaft Co., for a further 50 years in order to expand and cater to automakers in China. SAIC is also General Motors’ joint venture partner in China.

Technology whets Chinese appetite Cash rich but technologically weak compared to their global rivals, China’s local automakers and parts makers are eager to buy technological know-how as international suppliers affected by dwindling sales in the developed world put themselves and subsidiaries up for sale.

“Now is a good time to buy technology they don’t have,” says Frank Chou, vice president of business development at The PAC group, which supplies engineering and management solutions to automakers.

Chinese automaker Zhejiang Geely Automobile Group set the trend with its recent acquisition of Australian transmission company, DSI. DSI entered bankruptcy proceedings in mid Februarydue to its main customers SsangYong Motor Co., Ford Motor Co., and Chrysler LLC significantly reducing orders.

“Geely needs automatic transmissions,” says a Geely source involved in the negotiations, “so it works well for them to acquire DSI.” In Australia, DSI covers a total plant area of 36,000 square meters, and has an annual output capacity of 180,000 automatic transmissions. The acquisition will help Geely by reducing the automakers need to buy from Tier 1 suppliers.

“Through the acquisition, Geely can enhance its R&D as well as production abilities on automatic transmissions and can also expand the transmission product line-up,” says Geely.

For local automakers, now is the time to buy technology and assets , but not the time to buy an entire foreign automaker, says PAC Group’s Chou. “Buying an automaker at the moment is too difficult to run,” says Chou. How well Chinese heavy machinery manufacturer Sichuan Tengzhong Heavy Industrial Machinery succeeds with its Hummer revival, is a test case a lot of eyes will be focused on.

We are investing in China to be close to customers, to have short lead times and to reduce costs.

An uncertain future Does this small local supplier have reason to be so overtly positive? “I think they have just become Tier 1 suppliers recently,” says Global Insight analyst Duan Chengwu. “They have managed to get GM to cut the larger western supplier out of the supply chain ---so it’s a big thing for them,” explains Duan.

But who is Ruiming cutting out of the supply chain? “No one,” says Sun. “Our order as a Tier 1 supplier for GM is for new business, for GM in India.” New projects in the emerging world bode well for Asia. But large Western conglomerates are taking heed.

With joint ventures or WOFE’s in China, international supplier firms are not going to let smaller firms edge them out.

Swedish supplier SKF Group’s China president, Magnus Johansson, sums up why they are quickly localizing production here: “We are investing in China to be close to customers, to have short lead times, and to reduce costs.” In North America, global auto parts maker GKN Plc., closed down plants as orders from its North American automotive customers dwindled. As car sales in North America took a harsh nose dive, supplier firms rapidly closed plants.

So things in Asia are not quite as bleak as they could be. “While everybody here is sorry that GM went into Chapter 11, China seems to be a harbor in the storm. Contrasting the big downturn for GM in the US, Shanghai GM, for example, increased 50% in the first 4 months in comparison to the same period last year. Our order book slowed down a little bit, but on the whole our China market is healthy,” says Haixiang Wang, GKN Group’s chief representative in China and business development director. GKN and

Everything I said back in 2007 has come true.

Ruiming is now a Tier 1 supplier to GM.

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Namrita Chow has lived in China for close to 6 years, specializing in the automotive industry. She also writes for Automotive News and Tire Business.

JULY/AUGUST 2009

37

MOVERS&SHAKERS

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

38

Robert E. Socia to lead Global Purchasing and Supply Chain

CBRE appoints Chris Brooke as President & CEO, Asia

General Motors President and Chief Executive Officer Fritz Henderson announced that Bob Socia, currently Executive Vice President of Shanghai General Motors (SGM), will be appointed GM’s Vice President, Global Purchasing and Supply Chain, effective July 1. Socia, 55, joined GM in 1975 at the Cadillac Division in Detroit and worked in both the finance and materials management areas. He earned his master’s in Business Administration from the University of Detroit Mercy. Prior to his current assignment, Socia was president and managing director of GM South Africa from 2004 to 2007.

CB Richard Ellis Group, Inc. announced that it has appointed Mr. Chris Brooke as President and CEO, Asia, effective 1st July 2009.

A Chartered Surveyor with almost 20 years of experience in the real estate services industry, he is currently President & CEO of CB Richard Ellis in Greater China, based in Beijing. In his expanded role as President & CEO, Asia, Mr. Brooke will oversee the overall business operations of CB Richard Ellis throughout Asia (excluding India and Japan), focusing on corporate strategy, new business opportunities, client development, and cross border initiatives.

JULY/AUGUST 2009

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VIETNAMVIEW

Vietnam’s changing retail environment

By Tielman Nieuwoudt

While Vietnam is no longer the flavor of the month, indicators suggest that retail growth holds similar promise as it does for China. The challenge in Vietnam is getting consumers to switch their buying habits from wet markets to retail stores.

etail developments The Vietnamese retail market has seen significant changes in the last couple of years. Neighbourhoods in Ho Chi Minh City and Hanoi have been transformed as Vietnamese shoppers demand more from their retailers and retail experience.

However, even when compared to other major Asian economies, the retail market remains in its infancy with a great potential for growth. Despite the current economic downturn, the retail market remains attractive. “Double digit growth is attractive in any market”, notes Eckart Dutz, Managing Director of Cartridge World. “I don’t see the current global economic downturn as a major barrier for sustained growth”, he says. “The retail sector will continue to grow just like any other market as the Vietnamese consumer searches for a more specialized shopping experience”, he continues. Beth Owen, General Manager of Indochina Research, mentions a recent retail interview her company conducted in Vietnam. “There is still a lot of optimism and many retailers expect an upturn within the next six months.”

Phi Van Nguyen, Managing Director of the Future Sense Group who brought international brands such as Gloria Jeans Coffee and Yogen Fruz to Vietnam predicts that as the retail market continues to grow we will see more international

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brands coming to the market. She notes that a number of Asian franchises have entered the market. However she mentions that for some big international brands it will take time to enter the market as they struggle with regulatory issues. Dutz also notes that there is a trend towards modern trade and convenience shopping. However, he questions whether retailers have yet found the right model for Vietnamese convenience shopping. “It is important that convenience marts get the assortment right and make people want to go there. Currently it is not that attractive for Vietnamese consumers”, Dutz explains.

“For most Vietnamese consumers, convenience shopping already exists, it is just a traditional model.”

Trung Thu Luong, National Sales Manager for La Vie mineral water, notes that even though modern trade is growing for package goods companies, traditional trades will remain a dominant force. Beth Owen supports this view. “We are still seeing growth in traditional trade and the retail market remains highly fragmented”, she says. Owen mentions that there is still a perception in Vietnam that modern trade is the shopping place for the upper classes, with higher prices than traditional trade.

She notes that some aspects of traditional trade have changed little and that consumers continue to shop at wet markets. “The structure of the city is not friendly to mod-

ern trade and research shows that people are not willing to travel far for products and services”, said Owen. “However, with time and planning, all of this can be overcome, just like any other markets in Asia”, she continues.

Focus on Tier One In a number of growing emerging markets, a lot has been made of the growth potential of tier two and three cities. However, compared to China and India, the focus for Vietnamese retailers remain tier one cities. Phi Van Nguyen notes that living standards outside of Ho Chi Minh City and Hanoi are still low. “Even in tier two cities the market is just not big enough for more than one big retail complex,” she explains.

However, she mentions that her company has developed a clear growth plan for the six major cities in the country.

David France, Managing Director, Distribution Division of Highlands Coffee mentions that the focus for most retailers

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VIETNAMVIEW

Modern western grocery and convenience stores have yet to penetrate successfully in Vietnam. Traditional wet markets such as the one pictured above provide a level of convenience and freshness that continue to satify local shoppers.

remains the two biggest cities. Highlands Coffee has an expanding retail base in the country and a growing package goods distribution arm to retailers. “Ho Chi Minh City and Hanoi continue to grow and the two cities hold significant growth potential for companies”, France notes. He mentions that the same level of development is just not visible outside of the two major cities and that some cities are stagnant because of the ongoing global crisis. Trung Thu Luong brings another perspective, noting that package goods companies with the right product category and price points are increasingly looking outside of the two major cities. “To sustain growth we have to go outside of the big cities.” However, for most companies, the major urban areas will remain the playground.

Information is key A growing retail sector will increasingly rely on information technology to make decisions. Companies also need a more

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sophisticated way of doing business. Few suppliers and distributors in Vietnam have information available at the retail level. Phi mentions that local companies are still far behind when it comes to information technology. “Many companies don’t see the benefits of information technology and some companies are still standing in the dark.” Dutz alludes to the fact that with relatively cheap labour, many companies are reluctant to invest in information technology. “For some businesses it is difficult to make the case for technology.” However he notes that information management is critical for success.

“Without the information required, some companies just push things in the shop and then see what happens”, said Dutz.

Owen notes that the retail market is starting to demand more and some high end retailers are putting pressure on companies to improve technology. France notes that if distribution companies want to succeed at the retail level, they require technology

to assist them in this task. “Above 25 sales people it becomes very difficult to manage employees and companies lose control of their sales people”, said France.

“Many companies only cover about 60% of their retail base.” Even with the current economic climate, the Vietnam retail market will remain an exciting prospect for many investors. Retail space will continue to be challenge in the near future and it will take some time for consumers to change their behavior. Some might argue that the speed of change has been slower than projected. However, retail change does not happen overnight. “It will take time for people to migrate from traditional trade, time to learn, like it and make it a habit”, said Phi. Based in Vietnam, Tielman Nieuwoudt runs the Supply Chain Lab, a consultancy which focuses on improving supply chains in emerging markets.

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INSIDEVIEW

Customs Broker Management:

Saving costs, ensuring compliance and setting key performance indicators

By Damon R. Paling

Due to the current economic climate and business model changes, enterprises are re-evaluating how they manage their customs brokers. As a trend, we see the number of customs brokers being reduced.

Due to increasing audits being performed by the Customs Authority, enterprises are also placing new emphasis on customs brokers to ensure compliance with corresponding key performance indictors being introduced. Best practice methodologies for enterprises to select, appoint and evaluate the performance of their customs brokers can be adopted in order to ensure effective management. perating Environment The customs broker’s principal role of assisting with the crossborder clearance of goods as the agent of an importer/exporter means

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they provide a key link with customs and other authorities.

While enterprises outsource customs brokerage functions to a third party service provider, such as a customs broker

or freight forwarder or a third-party logistics provider, in many instances, little or no monitoring is conducted. In China, enterprises engaged in both general trade and processing trade are heavily reliant on the

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INSIDEVIEW Customs Broker in terms of their technical expertise and professional skills. However, in practice, the following challenges exist: • The technical knowledge and competence levels of customs brokers varies greatly, ranging from highly trained specialists to unskilled clerical assistants • The internal controls and standard operating procedures of customs brokers vary greatly, ranging from best-in-class to non-existent • Key decisions may be taken by junior staff with insufficient knowledge, with their focus being on minimizing clearance times rather than compliance.

• So-called “informal solutions” and “informal arrangements” may exist In practice, the importer/exporter is normally held liable for any actions undertaken by a Customs Broker on its behalf, since it is assumed that actions are undertaken at the direction of the importer/exporter. In particular, the importer/exporter typically remains responsible for all import and export taxes, and any noncompliance with Customs requirements. The potential implications to a business of non-compliance include: • Seizure of goods • Interruption to the supply chain and consequent production delays • Additional assessment duty, interest and financial penalty • Clearance under cash deposit • Negative publicity • Damage to company reputation

ker attributes 2. Review and evaluate the performance of the current customs broker, whether external or internal, against defined requirements: • Use an external customs broker questionnaire • Use an in-house Customs Broker questionnaire Note: This step also includes the review of current arrangements, to identify alternatives that may deliver efficiencies

broker function, at regular intervals Benefits The benefits of using a best-practice methodology include: • Confidence that the customs broker is competent to provide their services to the standard required and does not create additional compliance risks • Best-practice procedures and key performance indicators are added to the broker function and compliance costs are reduced • The risk of serious potential implications resulting from noncompliance are mitigated

While enterprises outsource customs brokerage functions to a third party service provider, such as a customs broker or freight forwarder or a third-party logistics provider, in many instances, little or no monitoring is conducted.

Customs Broker Evaluation An outline of a best practice methodology for companies to select, appoint and evaluate the performance of their customs brokers is as follows. The separate but inter-related steps that can be “mixed and matched” to meet particular needs.

1. Define exactly what is required from the customs brokerage function: • list customs broker compliance functions • list essential and desirable Customs Bro-

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3. Select a competent customs broker using a comprehensive process to test and evaluate technical expertise in relation to the cross border movement of goods, professional skills and sound business practices and commitment to providing a high quality service: • Use a customs broker selection package (e.g, briefing paper, statement of company’s requirements and a broker selection questionnaire) • Use a customs broker selection matrix 4. Create a customs broker contract to best protect the company’s interests 5. Review the performance of the customs

Case Studies Case #1 Description: A consumer product manufacturing and distribution company has 7 factories and 2 regional distribution centers in China. The annual volume is 2,000 imported containers and 8,000 export containers. There were over 10 customs brokers used across 6 cities in China and 4 customs brokers were used in the Regional Distribution Center.

Solution: By reviewing the desired brokerage services, including compliance, competency and technical expertise, the company standardized all Key Performance Indicators (KPI) per the practice of each local Customs jurisdiction.

The number of service providers was reduced, which saved costs, improved clearance cycle times, and compliance levels. Consolidation of service providers took place whilst sill acknowledging and adhering to local requirements.

Case #2 Description: A liquid-display system manufacturer had more than 40 material suppliers around world. A Vendor Managed Inventory (VMI) hub was considered as a supply-chain solution to improve cash flow, minimize inventory levels, and enhance supply-chain efficiency and flexibility. To implement the VMI hub, the manufacturer

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INSIDEVIEW required closer cooperation with customs brokers in order to streamline the process and conduct a flawless execution.

Solution: The manufacturer formed a strategic partnership between with a 3PL that also provided brokerage services. By adopting a best-practice methodology for the brokerage service, the manufacturer was able to realize a cost-effective and customs compliant door-to-door service from the suppliers to the factory dock.

The manufacturer, by thoroughly evaluating and selecting appropriate brokerage services, could use the 3PL for handling inbound/outbound declaration and commodity inspection formalities, attaining customs compliance and cost efficiency throughout.

Summary Best-in-class customs broker management can generate cost savings, ensure compliance and enable key performance indicators to be set.

• Start by defining requirements including: essential and desirable attributes, compliance functions and establishing a weighted scorecard

• Prepare a summary report assessing the competence levels of current Brokers from a high-level review, together with recommendations and a copy of each completed customs broker questionnaire.

• Prepare a summary report of the results of the contract review together with recommended additional matters that should be included in a new contract • Prepare a summary of recommendations

following consideration of the company tender process.

• Use a customs broker selection package for each prospective service provider.

• Prepare a summary report from the evaluation of tenders, including recommendations and a suggested short list of possible candidates.

• Prepare a summary report of the results from testing and evaluating the claims and competence of each short-listed service provider, indicated key performance indicators, with recommendations and a completed customs broker selection matrix.

PricewaterhouseCoopers has developed a customs broker Evaluator (CBE) solution that provides a best practice methodology for companies to select, appoint and evaluate the performance of their customs brokers.

Damon R. Paling is a partner at PricewaterhouseCoopers. Based in Shanghai, he consults on customs, trade and supply chain issues.

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AMERICANVIEW

How to jumpstart the American economy The debacle on Wall Street is widely viewed as the primary culprit for the current U.S. recession. However, there are other contributors: government regulators who didn’t prevent excesses from happening, politicians who supported damaging economic policies, and consumers who borrowed beyond their means. As policy analysts and government leaders debate how to get the U.S. economy out of this recession, jumpstarting the U.S. manufacturing sector isn’t being sufficiently considered. As the financial services industry continues to shrink, and government spending rises to scary levels, the industry that should be viewed as most important to a recovery is being left out.

America’s manufacturing decline didn’t happen overnight, but today’s severe drop is still alarming. In 2000, U.S. exports were more than three times larger than Chinese exports, but in 2008, Chinese exports were 25% larger. In 2000, the U.S. exported twice as much to Asian countries as China, while in 2008, Chinese exports to the region were twice that of the U.S. Although it isn’t surprising that Chinese exports would grow during this time, the magnitude of this bilateral transformation is unprecedented. At the end of the 20th century, America’s economy began to diversify away from manufacturing, and grow strongly in the services sector. By the 21st century, America was at the point where manufacturing constituted only around 10% of economic output.

America’s manufacturing dilemma Housing-related manufacturing has fallen by almost 40% during the recession. Meanwhile, automobile production is down by 32%, and iron and steel products are down by over 50%. According to a Manufacturers Alliance/MAPI study, no manufacturing industry has a positive outlook for 2009 and only housing starts and automobiles have a positive outlook for 2010. These are primarily industries for domestic consumption. Industries that used to be prominent exporters, such as aerospace and high tech industrial machinery, aren’t showing much promise. U.S. stimulus

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funding will provide some life to the manufacturing sector, but it is unlikely that this will prove sustainable.

The largest element of the U.S. trade deficit is related to manufacturing. Q1 trade between the U.S. and China had an export ratio of 7.3/1 in favor of the Chinese. Furthermore, the United States has lost market share within Chinese exports over the past ten years, and is now a distant fifth (at 8.2%) behind Japan (17.7%), the EU (15.6), Taiwan (12.4%), and South Korea. The US used to dominate higher technology sectors, but is now struggling to compete with upstart Asian nations. For example, there has been a dramatic loss of optical and precision equipment exports (21.7% of China’s imports in 2000 to 7.2% in 2008), to South Korea (3.4% in 2000, and 21.1% in 2008). Many in the U.S. may see negative manufacturing statistics as a cry for ‘fair trade,’ but the loss of market share in a developing nation like China is not a call for ‘trade liberalization’. Really, the call should be to Americans to restore the importance of manufacturing to their economy.

Many question whether America can restore its manufacturing presence in the world economy, but it is possible for developed nations to grow in this sector. Successful industrialized developed nations, in contrast to the U.S, place a public/private focus on manufacturing as a strategic national interest. Unfortunately, over the past two decades, American manufacturing has placed strategic importance on financial services and housing over manufacturing. The current recession makes clear that American business leaders and politicians must redouble their efforts, and make manufacturing important to the U.S. economy again.

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

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BOOKFOCUS

The New Silk Road

Ben Simpfendorfer is the man of the hour. Since the Royal Bank of Scotland’s Chief China Economist’s new book; The New Silk Road: How a Rising Arab World is Turning Away From the West and Rediscovering China came out, he’s been interviewed by the New Yorker, the International Herald Tribune, and drawn favorable reviews of his book from opinion leaders like the Wall Street Journal. Russel Beron sat down with him in Shanghai to discuss his new book.

What compelled you to write the book?

I feel that we’ve stopped asking the right questions about China. There are so many academics and economists talking about China’s relationship with Europe or the United States, and there is limited set of questions that we can ask. I thought if I could ask what the Arab world thinks of China and vice versa, we would arrive at a new set of answers.

Why the Arab World in particular?

Central to the book is the fact that China has now overtaken the United States as the world’s biggest exporter to the Middle East. It did so earlier this year.

This is quite impressive when you realize that what the United States exports to the Middle East is SUVs and aircraft; you don’t have to sell many to reach a 60 billion dollar figure. The Chinese sell DVD players and pajamas! That is to say: low value added goods. So these exports constitute huge volumes. Even more intriguing is that there is no Arab Wal-Mart.

Nobody is placing bulk orders of these goods, only individual traders. This book talks a lot about those individuals: this is not just a work of facts and figures.

How did those Arab traders end up in China in the first place?

Arab traders first started arriving in China in 2002, after visa restrictions were imposed on them in the United States. In conjunction with the U.S. clampdown on Arab visas, China relaxed requirements, so there was a surge in the Arab presence in China.

There is a town 4 hours drive from Shanghai called Yiwu which is now a virtual Arab market town. 200,000 Arab nationals visit Yiwu each year: the main street has over a dozen Arab restaurants.

Most come to the town to buy cheap consumer goods. Yiwu has now built a mosque and an Islamic kindergarten to invite Arab traders. China’s entry into the WTO and its relaxation of visa restrictions have allowed this to happen, and, in turn, reshaped global trade patterns.

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Are there any other contributing factors?

Islam is important to this phenomenon as well. There are roughly 1,000 Chinese Arabic translators in Yi Wu, and most of them learned Arabic for religious purposes. But they now see it as a way to lift themselves out of poverty and make a better life.

Of course we think of oil when we think of the Middle East. How important is that to this story?

Oil is actually not that important. Obviously China imports more oil than it sells consumer goods to the Middle East, but it has very little ability to invest in the oil sector there. Big Middle Eastern oil companies have invested in only two oil refineries in China.

What effect has this development had on Middle Eastern countries themselves?

China has provided a new growth model for Middle Eastern countries like Syria.

It’s not all that different from the growth model recommended by the IMF, but China has shown that you can pursue economic reform without regime change. That gives countries like Syria enormous confidence.

Syria just opened up its first stock market, because they’ve seen what’s happened in China and they realize they can open up a stock market and cut trade barriers without the world ending.

So it seems like a net positive for both sides?

There are multiple trajectories here. Let me give an illustration: China’s exports to the Middle East have surged, particularly in the last six months! This comes at the risk of factory closures in the Middle East. There are no ways to cushion the effects of factory closures in the Middle East. Closures mean unemployed young men who contribute to social instability. We know this is a huge problem in the Middle East. So it’s possible that rising Chinese exports contribute to social unrest in the Middle East! If only, say, 1 percent of Chinese manufacturing was moved to the Middle East that could have a hugely positive effect.

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EVENTUPDATE

Risk:

the 80/20 factor

By Russel Beron

When business is booming, eyes are more on the next deal than on the next business threat. The word “crisis” has been an effective catalyst to getting people thinking about risk. On June 17, the China Supply Chain Council organized a one day summit on the topic of supply chain risk management where the most current risks and mitigation strategies were discussed.

Supply Chain risks vary according to the issues of the day. Last year the Olympics in China raised supply chain concerns, next year it will be the Shanghai Expo. Ongoing risk factors include security, quality issues, natural disasters and diseases such as swine flu.

Right now the biggest issue of the day is probably supplier risk management. According to Duane Bolinger, managing director of BBK Consulting, 15% of Chinese manufacturing companies are distressed, while in the U.S., 55% of all private suppliers are financially distressed. For some companies who depend on one or two suppliers, supplier viability can mean the success or failure of a business.

Where are the Risks?

Sectors such as such as toys, textiles and the automotive industry are often in the risk spotlight; they are close to the radar of consumers. In fact most businesses face risk of one form or another and it is perhaps the hidden or veiled risks that should

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raise the biggest red flags.

Lily Zhou, Logistics Director at Herbalife, which makes weight management products, says that “one of the biggest risks for their business is food safety and quality.” The difficulty she says is in complying with regulations and potential recalls. Herbalife operates in 65 countries and needs to comply with each country’s regulations and laws. Often it is difficult to understand the laws and setting up systems to manage this is cost prohibitive.

James Cranford, Director of Procurement at Ammex, which makes latex/ rubber gloves among other products, faces similar compliance issues, in that they need to meet FDA requirements. If products are held up due to a compliance issue, it can disrupt their supply chain, forcing them to stock more product or not be able to supply orders. Another risk Ammex faces is the need to understand the product supply, given the limited supply of latex/

JULY/AUGUST 2009

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EVENTUPDATE rubber in certain markets.

The risk that Ammex and most other companies are facing in the current climate is pressure to cut material costs and reduce inventory resulting in greater pressure on their supply chains to run more efficiently. According to Bolinger of BBK, in the current climate, 75% of companies surveyed are pursuing material savings targets of at least 10%. This will be increasingly challenging for companies, given that the supply base has become much more unstable.

While some risks such as the onset of a natural disaster or swine flu, can be mitigated but predicted, other risks, such as a disruption in supply or business operations due to an event such as the Olympics can be planned for. Mike Liao of Tyco, had a contingency plan when the Olympics forced their factories to shut down. They moved their tooling out of the effected area and were able to continue their business.

One of the problems that Neal Beatty, General Manager, Beijing for risk consultant, Control Risks highlighted was that many companies don’t have an effective risk management strategy which includes lacking a risk register or contingency plan such as Tyco did.

Mitigating risks There are plenty of warning signs you should be on the lookout when dealing with suppliers in the current climate, says Bolinger.

This includes late payment to their suppliers, expedited shipping and looking at the company’s overall operational efficiency. BBK will work with suppliers to improve their cash flow and reduce the need for bank borrowing by improving inventory management of Chinese suppliers.

Other approaches to mitigating risk can include employing the services of companies such as Exclusive Analysis, which use business intelligence and other methods to deflect risk. Simon Sole, CEO, Exclusive Analysis, noted that “Certain techniques such as modeling can be used to predict risk and prevent disruptions on supply change disruption.” He cites the example of power cuts in Argentina in July 2007, which forced a U.S. company to cut production by 50%. The power cuts were a result of reduction in Bolivian supply of oil to Argentina. Such threats can be avoided by identifying potential regional threats to a particular industry.

Risk trends Bolinger predicts that the current economic environment will

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accelerate consolidation among suppliers in China. For example there are over 100 aluminum wheel manufacturers in China. Capacity is 100 million vehicles per year whereas global demand is only around 70 million. Also, local suppliers that have 70% of their revenues tied to export will face distress.

Khalid Mazid, an Account Manager at Dragon Sourcing has observed a shift in the global climate for sourcing as a result of the economic crisis. This has resulted in spare export capacity, a reduction in logistics costs, stabilization of labor inflation and re-introduction of export subsidies. To stay competitive, companies need to be aware of these changes. According to Simon Sole, companies also need to be aware of the shift in economic and political power that is happening globally. For example the new finance center will not be London and the new power brokers will be countries such as China and Qatar.

Recommendations One of the biggest mistakes a company can make, says Marnix Ettema, Interim Manager Operations and Supply Chain, is mishandling a crisis. He cites the example of case where Johnson and Johnson, which owns the Tylenol brand, affectively handled a case of tampering with Tylenol tablets by inserting cyanide which resulted in 7 deaths. Johnson and Johnson’s effective handling of this case by recalling the entire product and redesigning a new tamper proof bottle actually created a lot of goodwill for the company. If handled badly this could have meant a major blow to the brand.

Is there is a bright side to all this risk talk? Robert Kronhofer of Eurogroup, a European buying made the point that the folding of certain suppliers has given bigger incentives for them to negotiate and push their policies on the approximately 1,000 suppliers they purchase from. Kronhofer notes that the better suppliers hopefully will survive and will drive up quality. But in China, the climate for suppliers will improve and this will bring new risks, such as low capacity. For Yann Teste, Director South East Asia of Purchasing & Supplier Management, for Knorr Bremse’s Truck division, they are getting ready for a rise in commodity prices along with a fight for capacity which will happen as the economy picks up.

So it seems there will always be risk, no matter the economic or political situation. According to Mark Jarman, VP, Risk Management Services, Lloyd’s Register Asia, 80% of risk comes from 20% of the risks identified. In that case, the best companies can do is to be prepared, know their business, understand the risks and have a plan to manage them.

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EVENTUPDATE

The rising importance of dangerous goods air transportation This article is a summarized translation of an article by Jiang Ming Sheng, based on a recent conference on dangerous goods transportation organized by China Eastern Airlines and Worldwide Logistics Group, a dangerous goods transportation specialist.

A

s the high-tech and heavy chemical industries develop, the quantity of dangerous goods and need for transportation is increasing in turn. Currently, there are many airlines engaged in dangerous goods’ air transportation. With the increase in airline capacity and the improvement in the quality of shippers, dangerous goods cargo could see an annual growth rate of 30%.

Air transport has benefits and risks: speeds increase, but security issues intensify. Indeed, dangerous goods have played a role in many plane crashes. One of the main reasons is that that the dangerous goods manufacturers or their agents were not familiar with air cargo regulations and processes. They also deliberately misrepresented dangerous goods.

Therefore, the National Aviation Bureau and airlines are implementing strict management of dangerous goods to prevent further aviation accidents.

China Eastern Airlines has discovered this problem in their daily transport operations. They found that even though air transport of dangerous goods has a solid legal system, mature transport conditions and low transportation costs, most goods manufacturers and their agents are unaware of the dangers. To remedy this situation, China Eastern Airlines organized a seminar to provide information on the legal system, relevant regulations, transport conditions, and process of moving dangerous goods.

As early as 1988, China Eastern provided dangerous goods air freight on international routes in accordance with International Air Transport Association regulations. The transportation coverage of the company has now reached to North America, Europe, Asia, Southeast Asia and other regions.

Jin Wen Yue pointed out that China Eastern Airline follows IATA

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DGR regulations, which gives flexible policies to credible enterprises in chemical reports, packaging certification, and related approvals. The airline also helps coordinate with the Health Inspection and Quarantine Bureau and the Environmental Protection Bureau.

A clear system of laws and regulations is the key to dangerous goods air transport. On the first level, strict compliance with the Convention on International Civil Aviation requirements enables airlines to better comply with international standards and improve their service levels and risk control. The second level is state laws and regulations.

The third level is the business standard and governmental regulations of dangerous goods transport, which were developed by the Transport Bureau and the Civil Aviation Authority. Airlines must strengthen the supervision of dangerous goods, actively train personnel, and control every aspect of transportation.

Li Jing, the director of the dangerous goods laboratory of the National Quality Supervision Center, has said that the outer packaging of dangerous goods could effectively reduce the leaking risk of dangerous goods if their inner packaging is damaged. Right now the requirements for packaging are different, depending on the category of the dangerous goods.

The security and stable development of dangerous goods’ air transportation requires a joint effort from airlines, management authorities, freight agents, and producers. If the manufacturers lack professional knowledge on dangerous goods, freight agents must rely on their expertise and ability to help manufacturing enterprises to complete the safe air transport of dangerous goods.

Safety should be the primary goal for all parties involved.

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EVENTUPDATE

Auto companies try to dodge the ditch

T

By Ethan Epstein

he ailing global auto industry still has no healthy Mehta called the “Nike model,” produce tires under Goodyear prognosis. While American giant GM has declared specifications. Goodyear is now sourcing a billion dollars worth of bankruptcy, a fate that Ford only narrowly avoided, materials and tires out of China. the once-mighty Chrysler While Goodyear has enjoyed success has been forced into a in China, Mehta did warn of trouble signs merger with Fiat. Even the poster child on the horizon: for one, the United States of success, Japanese automaker Toyota, Senate is considering a bill to sharply limit has posted the first loss of its 59 year the number of Chinese tires that can be imhistory. ported into that country. He also expressed It was under these dark clouds that the trepidation over the possibility of RMB apGlobal Supply Chain Council organized a preciation, which would decimate the cost workgroup of top auto industry executives savings that sourcing in China has brought from top tire, auto supply, and car manuto Goodyear. On a positive note, however, facturing companies at a quiet Shanghai Mehta noted Goodyear’s Asian operations lunch spot in late June.

Manoj Mehta, the general manager remained healthy, primarily due to domesGoodyear is one company that has tic demand in the massive markets of China for global sourcing for Goodyear moved aggressively in Asia. Manoj Mehta, and India. the general manager for global sourcing for Goodyear and the Attendees from other segments of the auto industry also refeatured speaker at the luncheon, reported that his company is ported informally on the fortunes of their respective companies. A currently putting the finishing touches on a new plant north of representative from Delphi, the auto parts manufacturer, said that Dalian. This is set to be the largest tire factory in the world for his company is in a strange position; the market for auto parts for Goodyear, which controls roughly 20% of the world tire market, cheap, smaller cars has never been stronger. On the other hand, selling around 200 million tires per year. the parts for luxury cars are hardly selling at all.

Mehta noted that the mantra of his company is to “earn busiUnsurprisingly, many of the participants were interested in hearness, not expect it” – something Goodyear has been doing with ing from GM China’s representative, who assured the crowd that, evident success since it stepped up its presence in China in 2005. despite the troubles of its American parent, GM China “has not As of today, Goodyear can source every component needed to been affected and stands on its own.” The Global Supply Chain produce tires directly from China: from raw materials to machin- Council is planning on hosting more auto sourcing work groups in ery. Indeed, Goodyear can even source fully completed tires from the months ahead, to give local leaders a chance to stay abreast China. A number of Chinese companies, practicing under what of the ongoing issues in this troubled sector.

www.chainaonline.com

JULY/AUGUST 2009

51

GADGETPAGE

Qingdao rolls

out first Chinese-made light helicopter Designed for use in border and security patrol, business flying, scientific exploration, medical and disaster rescue, aerial photography and flight training, the B-2B light helicopter is the main product of Qingdao Haili Helicopters Co., Ltd. The company is co-invested by U.S. Brantly International Inc, Qingdao Wenquan International Aviation Investment Co., Ltd. and Qingdao Brantly Investment Consultation Co., Ltd. The company’s main product is a 2-5 seat light helicopter.

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www.chainaonline.com

DON’T MISS OUT! List your company in the most comprehensive directory of supply chain & logistics related services in Asia

VENDORS’ DIRECTORY

•Logistics Services •Professional Services •Real Estate Services

Q3/Q4 Edition to be published in August 2009 Deadline for listing, July 15, 2009

•IT & Software Solutions •Equipment Providers

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

FM Logistic

弗玛仓储（太仓）有限公司 n Corporate HQ 公司总部 Phalsbourg, France 法国

法尔斯堡

n Established in China 在中国成立于 2004 年 n Legal status in China 企业性质 WOFE 外商独资企业 n China head office 中国代表处总部 3 Guangzhou West Road, Taicang EDZ, Jiangsu Province 江苏省太仓市经济开发区广州西 路3号 ) +86 (512) 8889 8601 7 +86 (512) 8889 8604 8 www.fmlogistic.com

u Key Contacts Aymeric Chandavoine ) +86 (512) 8889 8607 7 +86 (512) 8889 8604 + achandavoine@fmlogis

tic.cn

Tony Wu 吴重宁 ) +86 (512) 8889 8609 7 +86 (512) 8889 8604 + twu@fmlogistic.cn

Who should list in the VENDORS’ DIRECTORY? Any company that provides services, solutions, equipment in the field of supply chain and logistics and procurement should be listed.

How much does a company listing cost?

A 12-month company listing costs only US$ 750 (or US$ 450 for Council members).

Because the directory is re-printed every 6 months, we give companies the opportunity to update their profile online, meaning your company information will always be up-todate.

u Highlights • Global leader with years of experience in China • Direct ownership of assets give clients more control • Sophisticated transportati on and warehouse IT systems and use of GPS equal greater reliability • The power of focus – we excel in warehousing and distribution • Specialized in transportati on and distribution for major global FMCG and retail clients in China • 携全球物流多年经验的领导 • 自有运输团队和仓库给客户带来 了更大的 便利 • 先进的运输以及仓储IT系统和全 球定位系统 的运用具有更大的可靠性

u Company Introduction With 40 years of logistics leadership, FM Logistic has been in China for now, bringing from its five years European home base its proven model of focus portation and warehousing on trans, plus direct ownership of trucks and warehouses clients in the mainland. , to In April 2009, FM will open a new warehouse in Shanghai’s Taicang later in the year will open district, and another, in Yanjiao, achieving space and an even wider 100,000 square meters of range of service options.

FM Logistic offers the gold standard in cost-perform ance, bringing a new quality and timeliness level of to warehousing and distribution.

Call us to learn more. 携40多年的欧洲物流业领先地 位和已被证明的先进的运输和仓 储模式, 加上在中国自建的车队和仓 储设施, 弗玛物流已经为中国大陆地区的 客户提供了五年的优质物流服务 .

2009年4月，FM将在上海附 近的太仓开始我们的物流操作， 随后还将在北京附近燕郊建立大 有仓库。10万平方米的仓库面 型自 积提供了广阔的服务空间。 FM中国为物流业的成本效率树 立了很好的标准, 将仓储和配送服 务的质量和时效性提高到一个新 水平. 请联系我们以获取更多的信息. 的

u Services and Solutions • Domestic road transportati on

• Warehousing

• 国内公路运输 • 仓储

• Distribution • Supply chain managemen t optimization • Transportation manageme nt systems and logistic software developmen t

• 配送 • 供应链管理 • FM2i，FM专门的软件开发 部门，为供应链 管理提供完全 的IT技术支持 ，目标是物流 及 信息流的持续改进

• 专注于我们的优势—仓储和配送 • 在中国从事主要的全球快速消费 品和零售业 的运输和配送

32

Our FM-owned facilities, open

since 2008, offer state-of-the-ar

t warehousing solutions

LOGISTIC S SERVICES

Who relies on the 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 Asia. These are the people that decide which supply chain and logistics service providers to use.

How is the 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 Asia who request a copy (companies are only asked to cover the mailing cost). The Directory will also 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 Asia, please contact: ) +86 (21) 51021617 or 51021618

+ directory@supplychain.cn

8 www.supplychains.com

PRODUCTRECALLS

DANGER! The U.S. Consumer Product Safety Commission (CPSC) 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.

Campbell Hausfeld recalls air compressors The U.S. Consumer Product Safety Commission (CPSC), in cooperation with Campbell Hausfeld announced a voluntary recall of 16,000 units of Campbell Hausfeld Air Compressors. Consumers were urged t0 stop using recalled products immediately. The compressor thermal overload, which shuts the unit off when it overheats, can fail. This can lead to overheating, melting of parts and a risk of fire.

Manufactured in China, the product was sold at Wal-Mart stores from January 2009 through June 2009 for about $250.

Wagner Spray Tech recalls heat guns The U.S. CPSC, and Wagner Spray Tech Corp., of Minneapolis, Minn. announced a voluntary recall of 300,000 Heat Guns. The product poses a fire and burn hazard as an electrical component failure can cause them to continue to produce heat after the power switch is turned off. The firm has received nine reports of the heat guns overheating. Sold at hardware and home improvement stores in the U.S. from November 2004 through April 2009 for about $40, the product was manufactured in China.

Laceration Hazard prompts recall by Starbucks of coffee grinders Starbucks Coffee Co., announced a voluntary recall of about 530,000 units of Starbucks Barista Blade Grinders and Seattle Best Coffee Blade Grinders. Manufactured by Tsann Kuen (Zhangzhou) Enterprise Co. Ltd. of China, the product was sold at Starbucks and Seattle Best Coffee stores from March 2002 through March 2009 for about $30. The firm has received 176 reports of grinders that failed to turn off or that turned on unexpectedly, including three reports of hand lacerations that occurred when the grinders turned on unexpectedly during cleaning.

Digital Clamp Meters recalled by Fluke In cooperation with Fluke Corp., of Everett, Wash., the U.S. CPSC announced a voluntary recall of the 52,000 units of Fluke Digital Clamp Meters.

The meters can fail to give an appropriate voltage reading, resulting in the operator falsely believing the electrical power is off, posing a shock, electrocution, or thermal burn hazard. Manufactured in China, the product was sold by industrial distributors, electrical wholesalers and hardware stores from January 2008 through February 2009 for between $150 and $375.

Trek recalls bicycles The U.S. CPSC and Trek Bicycle Corp., of Waterloo, Wisconsin, announced a voluntary recall of about 16,000 bicycles with JD suspension forks. The recalled bicycle fork can lose alignment causing the front wheel to turn unexpectedly, causing the rider to lose control and crash. There have been four reports of misaligned forks. Made in China (the forks only), the bike was sold at trek bicycle dealers from August 2008 through April 2009 for between $640 and $940.

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Asia’s leading air cargo event is back in 2009

AsiaWorld-Expo, Hong Kong September 8-10, 2009

Part of the world’s only regional B-to-B event for commercial aviation and civil aerospace on China’s doorstep.

The well-attended tea breaks, buffet lunches and cocktail parties are back on the exhibition floor.

Unique networking opportunities with the world’s leading airlines, airports, IT providers, equipment manufacturers and many others.

And, of course, the two-day Conference with speakers and delegates from Asia, the Middle East, Europe and the USA. Mornings only.

55 Co-located with Asian Aerospace 2009 - www.airfreightasia.com www.chainaonline.com

JULY/AUGUST 2009

QUALITYFOCUS

How to better utilize QA/QC throughout your supply chain

By Nick Herbert

taken place on the floor when moving the product from concept to reality. When production starts up in China the new supplier does not have any of this past knowledge, combine that with potential changes in materials, measurement systems, and a general lack of experience in dealing with your company or customer’s requirements and you end up with a product made to spec but completely wrong.

2. You are only as successful as your partner: Supplier lacks capabilities: Just because the factory makes vacuum cleaners does not mean they should make your vacuum cleaners. Number one thing to do is visit the supplier. You need to insure before placing a major order they have the people, systems and machines in place to create your product. Trying to use or convert a B or C quality level supplier to one that makes A level product consistently puts you at risk of losing time and money as rework erodes any cost benefits you had by using them in the first place.

A

common China tale: The story goes as follows; you have located a supplier through a business contact, the internet or a trade show. Product drawings are sent and with competitive pricing and shipped samples that are acceptable, full production is okayed. Minor production delays aside, the product passes the pre-shipment inspection and after a month in transit arrives in the warehouse. You crack open the boxes and the product is wrong…now the fun begins.

With the above scenario common, it is easy to see how quickly the delays, product rework and lack of customer satisfaction can quickly turn the total cost of bad quality into a 6 zero problem. So the question remains, how does this happen?

There are countless issues that can influence the overall quality of your product but some of the most common and easiest to correct are as follows: 1. Quality starts with design: Non-updated drawings: Typically when a product’s production is moved to China the drawings that are sent have never been updated to capture all the small engineering changes that have

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Supplier does not want your business: As simple as this statement sounds, it is a basic question that rarely gets asked. If you order volume is too low or quality requirements too high it is possible the supplier simply does not have an interest in the business.

3. Get QA/QC involved early: Correct samples does not mean quality product: Even though samples check out it is of utmost importance to be active in the pre-production and production runs of a product. Whether it is with on the ground inspections by yourself or a 3rd party it is important to assure that the line is checked during production. A common problem is that samples are often made in-house but during full production the factory will outsource parts or processes.

By having pre-production or in-process inspections you can assure that the same quality of parts used in the sample are being used in production.

Quality suggestions: Quality, especially in China, starts from the conception of the relationship with a supplier and the design of the product, not with

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QUALITYFOCUS the final shipment inspection.

Verify your drawings are correct, Physically audit your suppliers, Be active in monitoring the production process, Never assume, especially in the early stages of developing a supplier, everyone is on the same page and you can go a long way to not only developing a good relationship with the supplier but also saving money in quality costs.

Nick Herbert works in Business Development & Project Management at USActive Manufacturing, assisting manufacturers (SMEs & MNCs) with sourcing, QA/QC, facility set-up, import & export, and local distribution in China. He can be reached at: Nicholas_Herbert@usactive.com.

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From the trenches: A story of quality gone wrong Case: In order to stay price competitive in their market, a $40 million a year manufacturer of high end commercial vacuum cleaners moves production to China.

Supplier selection: They started by locating a supplier very active in the manufacturing of household vacuums. The supplier provided very competitive pricing, the ability to handle large volumes and a history of dealing with US clients. On the surface this was an excellent choice. With samples that met specs the supplier was chosen and tooling and full production started.

However, with over USD 2 million of product on order, production ran into problems.

Inferior parts: The competitive pricing led to the supplier cutting costs on outsourced parts.

Parts used for the assemblies were good enough for standard home use vacuums but not nearly of the quality required for the clients’ high end product.

Insufficient volume: The supplier had the capac-

ity to easily handle the company’s quantities but since the company’s order quantities and frequency were well below the level of other client’s of the supplier, they found themselves kicking and screaming to get attention paid to the developing problems.

Quality gap: The supplier was familiar with US companies and US standards but they only traditionally dealt with low to mid end product. The supplier’s management and processes were not at the level to consistently make a product at the quality level required by the client.

The result: The end result of not performing through audits or exploring alternative options was that the client not only needed to invest in having one of their engineers full time in China to assist with monitoring production but also had to invest additional funds to outsource incoming, in-process, and outgoing quality control (IQC, IPQC, & OQC) to a 3rd party provider.

JULY/AUGUST 2009

57

CLASSIFIEDLISTINGS

LOGISTICS SERVICES

LOGISTICS SERVICES 上海鲁班路600号江南造船大厦19楼 +86 21 5302 9988 www.cevalogistics.com

19/F Broadway Centre, 93 Kwai Fuk Road, Kwai Chung, NT, Hong Kong, China

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

香港新界葵涌葵福路93号 百汇中心19楼 +852 2211 8668 www.agilitylogistics.com

3000 South Lianhua Road, Prologis Logistics Park, Minhang, Shanghai, 201109

莲花南路3000号，普洛斯 闵行物流园区内。 邮编：201109

ALLWINGS LOGISTICS 1688 Sichuan North Road, 26/F Fude Business Centre South Shanghai 200080, People‘s Republic of China +86 21 6306 3134 www.alls-sh.com APL LOGISTICS 5F Raffles City Office Tower, 268 Xizang Zhong Road, Shanghai 200001 上海西藏中路268号来福士办公楼5 200001 +86 21 2301 2800 www.apllogistics.com

B-1F XingHong Science & Technology Industrial Park, Feng Huang Gang Village, Xi Xiang, BaoAn District Shenzhen 200231

深圳宝安区，宝安西乡前 进二路凤凰岗村星宏 科技园，邮编200231 +86 (755) 3386 1666 www.arvatoservices.com.cn

+86 21 6309 8336 +86 21 3430 6999 www.dajin.com.cn DERET LOGISTIQUE Suite 1703 Shanghai Bund International Tower, 99 Huangpu Road, Shanghai, 200080 上海市黄浦路99号，上海滩国际大厦 1703室，200080 +86 21 6307 5086 www.trans-access.com.cn

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

DHL 18/F, Tomson Commercial Building, 710 Dong Fang Road, Shanghai 200122, China 上海市东方路710号汤臣金融大厦18楼邮编 200122 +86 21 5058 1111 www.dhl.com

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

DSV LOGISTICS 38F, 1 Grand Gateway 1 Hongqiao Road Shanghai 200030 +86 (21) 5406 9800 www.dsv.com www.dsv.com.cn

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

BDP INTERNATIONAL Unit 2102-2106, Shanghai Bund Int’l Tower, 99 Huangpu Road, Shanghai 200080, China 上海市虹口区黄浦路99号上海滩国际大厦 2101-2110室，邮编：200080 +86 21 6364 9336 www.bdpinternational.com LOGWIN AIR + OCEAN CHINA LTD. Room 618, Ocean Towers, 550 Yanan Dong Lu, Shanghai, 200001 上海市延安东路550号海洋大厦618 室，200001 +86 21 5352 4766 www.birkart.com CEVA 19/F, Jiang Nan Shipyard Building 600 Luban Road, Shanghai 200023

58

LOGISTICS SERVICES ELEE 375 Kefu Road, Nanxiang Town, Jiading District, Shanghai, China 中国上海嘉定区南翔镇科福路375号 +86 21 39124360 www.eleechina.oom

JULY/AUGUST 2009

2099 Xinqun Road, Pinghu EDZ, Zhejiang Province.

浙江省平湖经济开发区新 群路2099号 +86 573 8527 3072 www.fmlogistic.com

LINFOX ROAD TRANSPORT 26-F, Cross Region Plaza, 899 Ling Ling Road, Xuhui District, Shanghai 200030, China 上海市徐汇区零陵路899号飞洲国际广场26 楼F座 +86 21 5150 6699 www.linfox.com LINKSTAR LOGISTICS 49A, 199 North Riying Road, Waigaoqiao Free Trade Zone, Shanghai, 200131 上海市外高桥保税区日樱北路199号49A, 200131 +86 21 5046 1666 www.linkstarlogistics.com LOGIFASHION 375 Kefu Road, Nanxiang Town, Jiading District, Shanghai, 201802, China 上海市嘉定区南翔镇科福路375号，201802 +86 13917614568 www.logisfashion.com

LOGISTICS SERVICES MAERSK LOGISTICS 24/F, Tian An Centre, No. 338 Nanjing Road, Shanghai, 200003 中国上海黄浦区南京西路338号天安中心24 楼 200003 +86 （21）23062666 www.maersk-logistics.com MENLO Golden Eagle Mansion, 1518 Min Sheng Road, Tower A 13th Floor, Shanghai, P.R.China 中国上海浦东新区民生路1518号金鹰大 厦A座13楼 +86 21 6160 1190 www.menloworld.com PTL 1603, Kun Yang Plaza, No. 798 Zhao Jia Bang Rd, Shanghai, China 200030 上海市肇家浜路798号坤阳国际商务广场 1603室邮编200030 +86 (21) 6445 3190 www.ptl-group.com RUNBOW LOGISTICS Office #207, Building 39 No. 2688 Yindu Road 201108 Shanghai, China +86 (21) 5443 1002 www.runbow-logiitics.com

Room 3802-3806, Raffles City (Office Tower) No.268 Xi Zang Zhong Road, Shanghai 200001

上海市黄浦区西藏中路268 号来福士广场3802-3806室 邮编：200001 +86 21 6170 8888 www.schenker.com.cn SCHNEIDER LOGISTICS UC Tower,Suite 1605,No.500 Fu Shan Road,Shanghai,China 上海浦东福山路500号城建国际中心1605室 +86 21 5058 7970 www.schneider.com

7th Floor, Sinotrans Plaza A, A43, Xizhimen Beidajie, Beijing 100044

北京西直门北大街甲43号 金运大厦A座7层 合同物流事业部100044 +86 10 6229 5600 www.SinoTransOne.com

www.chainaonline.com

CLASSIFIEDLISTINGS

LOGISTICS SERVICES SDV PRC INTERNATIONAL 20F, East Building, New Hualian Mansion, 755 Middle Huai Hai Road Shanghai 200020 上海市淮海中路755号新华联大厦东楼20 楼，邮编200020 +86 (21) 3395 0600 www.sdvchina.com

PROFESSIONAL SERVICES BAKER & MCKENZIE Suite 3401 China World Tower 2 China World Trade Center, Jianguomenwai Dajie Beijing 100004, PRC +86 10 6535 3800 www.bakernet.com

SHENZHEN ST-ANDA LOGISTICS 18/F, Times Plaza, No. 1 Taizi Road, Shekou, Shenzhen, PRC 518067 深圳蛇口太子路1号新时代广场1801室 邮编518067 +86 755 2681 9188 www.st-anda.com TOLL AUTO LOGISTICS D1/E2, 31F, East Building, Hi-Tech King World, No. 668 Beijing East Road, Shanghai Postcode 200001 China 中国上海市北京东路668号 科技 京城东楼31楼D1/E2 邮编：200001 +86 21 5308 2266 www.tollgroup.com UPS 23F and 33F China Insurance Building, 166 Lujiazui Dong Road, Pudong, Shanghai, 200120 上海市浦东新区陆家嘴东路166号中国保险 大厦23楼，200120 +86 21 3896 5599 www.UPS.com WERNER GLOBAL LOGISTICS South 23/F Harbour Building 1 Fenghe Road, Shanghai, China 上海市浦东新区丰和路1号港务大厦南23楼 +86 21 3887 9520 www.werner.com YATFAI LOGISTICS (HOLDING) LIMITED 39H, Fortune Building, 88 Fuhua San Road Futian District, Shenzhen, Guangdong Province, P.R.C. 广东省深圳市福田区福华三路88号，财富 大厦39楼H座 +86 0755 3336 6898 www.yatfai.com YRC LOGISTICS Room 1307-08, Lan Sheng Building No. 8, Huai Hai Road (M) Shanghai 200021, P.R.C. 上海淮海中路8号兰生大厦1307-08室， 邮编：200021 +86 21 6137 7668 www.yrclogistics.com PROFESSIONAL SERVICES ACCENTURE 30F, Central Plaza, No. 381 Huaihai Road, Shanghai, 200020 上海市淮海中路381号中环广场30楼 邮编：200020 +86 21 2305 3333 www.accenture.cn ARAIA SUPPLY MANAGEMENT CONSULTANTS Suite 1709, No. 93 Huai Hai Zhong Road Shanghai 200021 Republic of China 中国上海市淮海中路93号大上海时代广场办 公楼1709室, 200021 +86 21 6391 8356 +86 139 16217254 www.araia.com ARVATO SERVICES 20F, Cloud Nine Tower, 1018 Changning Road, Shanghai 200042 上海市长宁路1018号-龙之梦大厦-20层， 邮编200042 +86 (21) 6161 1866 www.arvatoservices.com.cn

www.chainaonline.com

Are you a member of the Council?

17F Lippo Plaza, 222 Middle Huaihai Road, Shanghai,

中国上海市淮海中路222 号力宝广场17楼 +86 (21) 5396 5600 www.e-bbk.com BARKAWI MANAGEMENT CONSULTING A 705, Dong fang Road, Eton Place, Pu dong New District, Shanghai 200120 上海东方路裕景国际商务广场A705室 +86 21 6859 9686 www.barkawi.com CHAINALYTICS G9 Gamma Tower, Sigma Soft Tech Park, 7 White Field Main Road, Bangalore, Karnataka, India, 560066 +91 80 4125 4309 www.chainalytics.com DELOITTE CONSULTING Room 2701-2704 Bund Center, 222 Yan An Road East, Shanghai 200002 上海市延安东路222号外滩中心 2701-2704室200002 +86 21 6141 8888 www.deloitte.com

Join hundreds of senior executives like yourself who have come to rely on the Council for their supply chain management needs over the past 5 years.

DEMAND MANAGEMENT SYSTEMS PO Box 6180, Norwest Business Park, Baulkham Hills BC NSW 2153 Sydney, 2153 Australia +612 9659 4555 DRAGON SOURCING Suite 1502, Jin Tian Di International Mansions 998, Renmin Road Shanghai, 200021, P.R.China 上海市人民路998号今天地国际大厦 1502室, 20002 +86 21 61413955 www.dragonsourcing.com ESTABLISH Room 609, Tian An Centre No. 338 West Nanjing Road Shanghai 200003 上海南京西路338号天安中心609室 邮编：200003 +86 21 6359 1980/0486 www.establish.cn ET2C INTERNATIONAL INC 13F, East Tower, King World Hi-Tech Building, 668 Beijing East Road, Shanghai 200001 上海北京东路668号科技京城西楼13F 200001 +86 21 5308 1220 www.et2cint.com

Apply or renew your membership today!

Email: mship@supplychain.cn or call: +86 (21) 51021617/18

www.supplychains.com

JULY/AUGUST 2009

59

CLASSIFIEDLISTINGS

PROFESSIONAL SERVICES HUDSON Unit 2302, 23/F Hongyi Plaza 288 Jiujiang Road Shanghai, China 200001 上海市九江路288号 宏伊国际广场23楼2302室 +86 21 2321 7888 www.hudson.com

PROFESSIONAL SERVICES

IBM GLOBAL BUSINESS SERVICE 北京市朝阳区工体北路甲 2号 盈科中心IBM大厦，25层 邮编：100027 +86 10 6361 8888 www.ibm.com/cn/zh/

上海铁力路388号 11/F PricewaterhouseCoopers Center, 202 Hu Bin Road, Shanghai 200021, China

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

KORN/FERRY INTERNATIONAL Suite 3208, CITIC Square 1168 West Nanjing Road Shanghai 200041 上海市南京西路1168号中兴泰富广场3208 室，邮编200041 +86 (21) 6256 7333 www.kornferryasia.com

RESOURCES GLOBAL ENTERPRISE CONSULTING (BEIJING) CO., LTD SHANGHAI BRANCH COMPANY Room 2705-06, Lippo Plaza, 222 Huaihai Middle Rd, Lu wan District, Shanghai, 200020 上海市卢湾区淮海中路222号力宝广场 2705-06室 Tel: +86 21 6386 8700 Fax: +86 21 6386 8712 www.resourcesglobal.com

LLOYD’S REGISTER 20F Ocean Towers, 550 Yan An Dong Road, Shanghai 200001 上海市延安东路550号海洋大厦20楼， 邮编：2000012 +86 21 5158 5700 www.lr.org

7 ROCK INVESTMENT ADVISORY 7/F Crystal Century Tower, 567 Weihai Lu, Shanghai 200041 上海市威海路567号晶彩世纪大厦7楼 200041 +86 21 6288 8766 www.sevenrock.com

LOGISTICS RECRUITMENT 2B, Apollo Building No. 1440, Yan An Road © Shanghai 200040 上海市静安区延安中路1440号 阿波罗大厦2B 邮编：200040 +86 21 6248 8606 www.logisticsrecruitment.com.cn

SUPPLY CHAIN CONSULTING Suite 404, 20 Donghu Road, Xuhui District, Shanghai, CHINA 200031 上海市徐汇区东湖路20号404室 +86 21 5404 0818 www.supplychain-consulting.com

LOWENDALMASAI 1505-1506 Hai Tong Tower, 689 Guangdong Road, Shanghai, 200001 上海市黄浦区广东路689号海通证券大厦 1505/1506室, 200001 +86 21 6341 1255 www.lowendalmasaichina.cn MANPOWER 36F, Xinmei Union Square, 999 Pudong Road (S), Shanghai, 200120, China 上海市浦东南路999号,新梅联合广场36楼 邮编200120 +86 21 5878 2618 www.manpower.com.cn MB SIM TECHNOLOGY Bldg. 8, 865 Changning Road, Shanghai 200050, P.R. China 上海市长宁路865号8号楼5楼, 200050a +86 21 6240 5529 www.mbtech-group.com

60

TRACTUS ASIA Suite B, 22nd Floor Zhaofeng Universe Building 1800 Zhongshan West Road Shanghai 200235 上海中山西路1800号 兆丰环球大厦22楼B座，邮编200235 +86 (21) 6440 0990 www.tractus-asia.com TUV RHEINLAND 5-6/F AZIA Centre, 1233 Luijiazui Huan Lu, Shanghai,200120 上海市陆家嘴环路1233号汇亚大厦5/6楼, 200120 +86 21 6108 1188 www.chn.tuv.com REAL ESTATE SERVICES AMB PROPERTY CORPORATION Suite 2908, Plaza 66 II, 1366 Nanjing Road West, Shanghai 200040, China 中国上海南京西路1366号恒隆广场二座 2908单元 +86 21 6135 1688 www.amb.com

JULY/AUGUST 2009

REAL ESTATE SERVICES GSE 27C Industry Building, 18 Cao Xi Bei Lu, Shanghai, 200030 上海市徐家汇漕溪北路18号实业大厦27C, 200030 +86 21 6427 9180 www.gsegroup.com

388 Tie Li Road Bao Shan District Shanghai 201900

INTEGRATED DECISION SYSTEMS CONSULTANCY No 511-1-302, Jingsong Wu Qu, Chaoyang District, Beijing, China 100021 中国北京100021 朝阳区劲松五区511-1-302 +86 134 6675 0455 www.idsc.com.sg IVIE ASIA Room 1507, You You International Plaza, No. 76 Pu Jian Road, Pu Dong New District Shanghai, China 200127 中国上海市浦东新区浦建路76号由由国际 广场1507单元，邮编200127 +86 (21) 6165 9100 www.ivieinc.com

REAL ESTATE SERVICES

MICHAEL PAGE INTERNATIONAL 601-603 Shanghai Kerry Centre 1515 Nanjing Road (West) Shanghai 200040, China 上海南京西路1515号嘉里中心601- 603 邮编200040 +86 21 3222 4758 www.michaelpage.com.cn

+86 21 3379 4008 www.blogis.com.cn

JONES LANG LASALLE 25F, Plaza 66 Tower 2, 1366 Nanjing Road West, Shanghai 200040 上海市南京西路1366号恒隆广场2期25楼 200040 +86 21 6393 3333 www.joneslanglasalle.com.cn KNIGHT FRANK Rm 1208 Evergo Tower, 1325 Middle Huaihai Road, Xuhui District, Shanghai 200031 中国上海市徐汇区，淮海中路1325号，爱美 高大厦1208室，200031 +86 21 6445 9968 www.knightfrank.com

CB RICHARD ELLIS Suite 3201 K Wah Center 1010 Middle Huaihai Road Shanghai 200031 上海淮海中路1010号嘉华中心3201室 200031 +86 21 2401 1200 www.cbre.com.cn COLLIERS INTERNATIONAL PROPERTY CONSULTANS 16/F Hong Kong New World Tower, 300 Huaihai Zhong Road Shanghai, 200021, PRC 中国上海淮海中路300号 香港新世界大厦16楼 邮编 200021 +86 21 6141 3688 www.colliers.com/china DTZ 42-43F,Plaza 66, Tower 2, 1366 Nanjing Road West, Shanghai 200040, China 中国上海南京西路1366号恒隆2期42-43楼 邮编200040 +86 21 2208 0213 www.dtz.com/cn

Suite 805, Kerry Centre, 1515 Nanjing Road (W), Shanghai, 200040

上海市南京西路1515号嘉 里中心805室 200040 +86 21 5298 6622 www.gazeley.com

GOODMAN GROUP 2107 - 2109, Shui On Plaza, 333, Huai Hai Road (M) Shanghai 200021 P.R.China 上海淮海中路333号瑞安广场2107-2109室 邮编：200021 +86 21 6133 2000 www.goodman.com

500 Zhangyang Road, Level 14 Unit A-D, Times Square Office Tower Shanghai 200122

上海市浦东新区张扬路 500号华润时代广场办公 楼14楼ABCD单元 200122 +86 21 5298 6622 www.gazeley.com

18 Duangong Road, Nanjing, Jiangsu, 211100 +86 25 6698 8988

中国南京江宁区 端拱路18号 邮编：211100 +86 (25) 66 988 988 www.nsic.com.cn TONGSHENG LOGISTICS PARK 10th Floor, Unit B, Shanghai Deepwater Port Business Plaza, Luchaogang, Nanhui, Shanghai 201308 上海南汇芦潮港上海深水港商务广场B座10 楼，邮编201308 +86 (21) 6828 1992 www.shtslp.com

www.chainaonline.com

CLASSIFIEDLISTINGS

MagicBusCreative Grant-oh! Buchwald

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

EQUIPMENT PROVIDERS

IT & SOFTWARE SOLUTIONS

SCHOELLER ARCA SYSTEMS Schoeller Arca Systems čˆ’äš?é˜żĺ?Ą Shanghai China 上澡 中国 Unit 5/A Guangdong Development Bank Tower No. 555, Xu Jia Hui Road ĺž?厜湇衯555ĺ?ˇ,ĺšżä¸œĺ?‘ĺą•é“śčĄŒĺ¤§ĺŽŚ5漟A 座 200023 +86 21 6390 1261/62 www.schoellerarcasystems.com

+86 21 5835 4735 www.seeburger.cn TRADECARD F1101-02, Block A, Hailrun Complex, No 6021 ShenZhen Blvd, ShenZhen.

P.R.C. (518040) ćˇąĺœłĺ¸‚çŚ?ç”°ĺŒşćˇąĺ?—ĺ¤§é “6021ĺ?ˇĺ–œĺš´ä¸­ĺżƒA座 1101-02ĺŽ¤ďźˆ518040 +86 755 8830 9030 www.tradecard.com

PLACE AN AD

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

REAL ESTATE SERVICES

IT & SOFTWARE SOLUTIONS

BPS GLOBAL GROUP Unit 3104,Tower 1 Kerry Everbright City 218 West Tian Mu Road 200070 Shanghai, ä¸Šćľˇĺ¸‚é—¸ĺŒ—ĺŒşĺ¤Šç›ŽčĽżčˇŻ218ĺ?ˇĺ˜‰é‡Œä¸?ĺ¤œĺ&#x;ŽçŹŹ 一座3104厤 é‚Žçź–200070 +86 21 6317 8830 www.bps-group.net

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CHEP 40/F, Suites 8-10, 2 Grand Gateway, 3 Hongqiao Road, Shanghai, 200030 上澡市虚楼衯3ĺ?ˇć¸Żćą‡äşŒĺş§40漟08-10ĺŽ¤ďźŒ é‚Žçź–ďźš200030 +86 21 6127 2488 www.chep.com

Yupei Building, 2500 Jinchang Road, Shanghai 200331

ä¸Šćľˇĺ¸‚ć™Žé™€ĺŒşé‡‘ć˜ŒčˇŻ2500 ĺ?ˇĺŽ‡ĺ&#x;šĺ¤§ĺŽŚďźŒ é‚Žçź–200331 +86 (21) 6627 7577 www.yupeigroup.com

IT & SOFTWARE SOLUTIONS APPRISE SOFTWARE 6009 Changjiang Science Building No. 40 Nanchang Road Nanjing, China 210037 中国ćą&#x;č‹?çœ ĺ?—亏市ĺ?—ć˜ŒčˇŻ40ĺ?ˇé•żćą&#x;科技园大 厌6009ĺŽ¤ďźŒé‚Žçź–ďźš210037 +86 (25) 8345 5308 www.apprise.com

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CORE SOLUTIONS Unit 509, Core E, Cyberport 3 100 Cyberport Road, Hong Kong +852 2378 6300 +852 2575 5613 www.coresolutions.com

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LOSCAM PACKING EQUIPMENT LEASING Room 508, No. 707 ZhangYang Road, Pudong, SHANGHAI 200120 ä¸Šćľˇĺ¸‚ćľŚä¸œć–°ĺŒşĺź ć‰ŹčˇŻ707ĺ?ˇ508厤 200120 +86 21 6104 8156 www.loscam.com

for Global Supply

BRAVOSOLUTION BravoSolution China CO., Limited 19F-08, 129 Yan An Road West, Chinese Overseas Building Shanghai 200040, PR China 上澡市é?™ĺŽ‰ĺŒşĺťśĺŽ‰čĽżčˇŻ129ĺ?ˇĺ?Žäž¨ĺ¤§ĺŽŚ19漟 08厤,200040 +86 21 6145 8500 www.bravosolution.com

+86 21 6103 5715 www.ddslogistics.com/cn

+86 (21) 51021617 or +86 (21) 51021618

HORMANN BEIJING DOOR PRODUCTION 13 Zhong He Street, BDA, Beijing 100176 ĺŒ—äşŹçť?澎埀ĺ?‘ĺŒşä¸­ĺ’ŒčĄ—13ĺ?ˇďźŒé‚Žçź–100176 3/f, Qing Shui Wan Hotel Wing Office Building, 1309 Kaixuan Rd (N) Shanghai 200063 ä¸Šćľˇĺ¸‚ĺ‡Żć—‹ĺŒ—čˇŻ1309ĺ?ˇć¸…水暞大酒店睟ĺ?ˆćĽź 3ćĽźďźŒé‚Žçź–200063 www.hoermann.cn

The Magazine

BARLOWORD OPTIMUS 35/F UOB Plaza 1, 80 Raffles Place, Singapore 048624 +65 6248 4722 www.barloworldoptimus.com

Suite 2605, Level 26, Hong Kong Plaza, 283 Huaihai Road Shanghai, 200021 上澡市桎澡衯283ĺ?ˇéŚ™ć¸Ż ĺšżĺœş26漟2605ĺŽ¤ďźŒ é‚Žçź–ďźš200021

61

/ĺ›› ćœˆ

200

9

China

AUS$7.50 EURâ‚Ź5 HK$40 RMB40 SG$9 UKÂŁ3.50 US$6

COMPANYINDEX

EVENTSCALENDAR

7/11 �������������������������������������������� 23

HP ���������������������������������������������� 30

85c ��������������������������������������������� 10

Huawei ��������������������������������������� 17

Agility Logistics ��������������������������� 4

Hummer ������������������������������� 21, 35

Airbus ��������������������������������� 8-9, 24

Hyundai �������������������������������������� 21

Air China ����������������������������������� 17

Jade Cargo �������������������������������� 21

Ammex ��������������������������������� 47-48

Johnson and Johnson ��������������� 48

APL ��������������������������������������������� 2

Kong and Allan ��������������������������� 33

Bank of China ��������������������������� 17

La Vie ����������������������������������������� 40

BBK Consulting �������������������������� 47

Leonovo ������������������������������� 17, 30

Beijing Capital Company ����������� 19

Lloyd’s Register Asia ����������������� 48

Berlin Water ������������������������������� 19

Lufthansa ����������������������������������� 21

Brown-Forman Corporation ������� 33

Nike �������������������������������������������� 30

CB Richard Ellis ������������������� 22, 37

Nokia ������������������������������������� 22-23

Campbell Hausfield ������������������� 54

Procter and Gamble ������������������ 33

Cartridge World �������������������������� 40

Qingdao Haili Helicopters ���������� 52

Chengtong Group ���������������������� 22

Royal Bank of Scotland ������������� 36

China Eastern Airlines ��������������� 50

Ruiming Group ��������������������������� 36

China Everbright ������������������������ 19

SKF Group ��������������������������������� 37

China Investment Corporation �� 22

Shanghai GKN Drive ����������������� 37

China Mobile ������������������������������ 17

Smurfit Stone ����������������������������� 28

China Petroleum Pipeline ���������� 22

Starbucks ����������������������������� 10, 54

China Railway Container

Suez ������������������������������������������� 19

Transport ������������������������������������ 22

Sweet Green Fields ������������������� 20

China Water Affairs Group �������� 19

Tengzhong Heavy Industrial

Chrysler �������������������������������� 37, 51

Machinery ���������������������������� 21, 35

Control Risks ����������������������������� 48

Tesco ������������������������������������������ 23

CNPC ����������������������������������������� 22

Tianjin Capital Environmental

Dajin Logistics ���������������������������� 17

Protection Company ������������������ 19

Damco ���������������������������������������� 21

Timberland ��������������������������������� 29

Delphi ����������������������������������������� 51

Toyota ����������������������������������������� 51

DSI ��������������������������������������������� 23

Trek �������������������������������������������� 54

Eaton ������������������������������������� 12-14

Tsann Keun Enterprises ������������ 54

Esquel ���������������������������������������� 30

Tsingtao Brewery ����������������� 17, 23

Eurogroup ����������������������������� 14-15

Tyco �������������������������������������������� 48

Fiat ��������������������������������������������� 51

Veolia Water ������������������������������� 19

Fluke ������������������������������������������ 54

Vietnam Airlines ������������������������� 25

Ford Motors �������������������� 21, 37, 51

Volvo ������������������������������������������ 21

FM Logistics ������������������������������� 21

Walmart ��������������������� 23, 28-30, 46

Fresh Daily C ����������������������������� 33

Wagner Spray Tech ������������������� 54

Fuyao Glass ������������������������������� 20

Wethico �������������������������������������� 30

Geely ������������������������������������ 23, 37

Worldwide Logistics Group ������� 50

GM ����������������������������������� 35-38, 51

Wulianghe ���������������������������������� 17

Goodman Group ������������������������ 22

Yahoo ����������������������������������������� 20

Goodyear ����������������������������������� 51

Yubi Digital Technologies ���������� 57

Grand China Logistics ��������������� 21

Yupei ���������������������������������������������3

GREE ����������������������������������������� 17

ZTE ��������������������������������������������� 17

Guandong Investment Group ���� 19 Haier ������������������������������������������� 17 Hanjin Shipping �������������������������� 25 Haworth �������������������������������������� 33 Herbalife ������������������������������������� 47 Highland Coffee ������������������������� 40

2009 JUL

9

THU

Latest Regulations Affecting your Supply Chains Seminar Seminar

Shanghai Venue:

Pricewaterhouse Coopers Center

JUL

10 FRI

2009 JUL

15 WED

2009 JUL

16 JUL

23 THU

2009 AUG

6

THU

9

Organizer:

Cold Chain & Product Safety Workgroup

2009

Workgroup & Luncheon

Shanghai Venue:

Osteria Restaurant Organizer:

The Council China Logistics Real Estate Workgroup

Workgroup & Luncheon

Shanghai Venue:

Osteria Restaurant Organizer:

The Council F&T Forum Meeting Seminar

Nanjing Venue:

Sofitel galaxy Nanjing Organizer:

European Chamber

TUE

2009

JUL

THU

The Council

2009

2009

Seminar

Tianjin Venue:

Hotel Nikko Tianjin Organizer:

European Chamber Supply Chain Networking Mixer Mixer Party

Shanghai Venue:

to be confirmed Organizer:

The Council

Seminar

Beijing Venue:

Beijing Room, Kempinski Hotel Organizer:

European Chamber

JUL

10 FRI

2009 JUL

16 THU

2009 JUL

23 THU

Joint Seminar: Individual Income Tax Planning for Expatriates

China's New Tax Rules for Corporate Restructuring

2009 JUL

30 THU

2009 SEP

3

5 THU-FRI

Survey on Economic Downturn Social (Member Only)

Tianjin Venue:

EUCCC Tianjin Chapter Organizer:

European Chamber Supply Chain Roadshow in Suzhou Site Tour

Suzhou Venue:

Suzhou Industrial Park Organizer:

The Council Skincare & Cosmetics China Workshop

Workgroup & Luncheon

Shanghai Venue:

to be confirmed Organizer:

The Council Apparel & Fashion Supply Chain Workgroup Workgroup

Shanghai Venue:

to be confirmed Organizer:

The Council The 3rd China International Logistics Technology and Services Expo Roadshow

Jiangsu Venue:

SuZhou Expo Organizer:

Jiangsu Province Economic and Trade Comission

2009 SEP

10 THU

The Role of Quality in the Supply Chain Conference & Summit

Shanghai Venue:

Raissance Shanghai Zhongshan Park Organizer:

The Council

2009 SEP

23 WED

In Search of Best Value: India

Conference & Summit

Shanghai Venue:

Raissance Shanghai Zhongshan Park Organizer:

The Council

Hoffman Agency ������������������������ 29

62

JULY/AUGUST 2009

www.chainaonline.com

Land of Opportunities Offshore Sourcing and Supply Chain Management

机会之地 海外采购和供应链管理

China has emerged as one of the leading low cost markets for global sourcing. However, the recent economic downturn has created unprecedented risk for businesses and their supply chain managers.

Companies that are sourcing offshore have always needed to consider procurement holistically to be successful. Today, supply chain managers must be cognizant of a large number of risks that are difficult to detect in any market – but even more so in less developed markets. Gaining insight to and mitigating risks in this market requires a different set of tools than in a past. However, if managed effectively the opportunities and benefits remain achievable.

中国是全球采购重要的低成本市场之一。然而，当前全球金融危机 给公司及其供应链经理带来了空前的风险。 实施全球采购的公司必须通盘考虑以确保采购成功。当今，供应链 经理必须认识到在任何市场都存在大量难以觉察的风险，尤其是在 发展中国家的市场中。洞悉和管控风险需要用与以往不同的方法， 同时有效管理仍然可以带来吸引人的机会和收益。 普华永道利用其全球视野和本土知识经验，为企业提供创新的，切 实可行的解决方案，并为企业拓展业务和实现可持续发展提供新的 机遇。

With our global insight and local knowledge, PricewaterhouseCoopers provide innovative and practical solutions to address these key business challenges and turn them into opportunities to expand your business and result in sustainable growth.

了解更多的业务范围，请访问普华永道网站：pwccn.com，或联系：

To find out more on how we can address your needs, please visit pwccn.com or contact:

Damon Paling 电话:+86 (21) 2323 2877 电子邮件:damon.ross.paling@cn.pwc.com

Robert Barrett Tel: +86 (21) 2323 3818 Email: robert.barrett@cn.pwc.com Damon Paling Tel: +86 (21) 2323 2877 Email: damon.ross.paling@cn.pwc.com © 2009 PricewaterhouseCoopers. All rights reserved. “PricewaterhouseCoopers” refers to the China firm of PricewaterhouseCoopers or, as the context requires, the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.

Robert Barrett 电话:+86 (21) 2323 3818 电子邮件:robert.barrett@cn.pwc.com

Creative: Publicis Worldwide/Hong Kong - Photographer: Kin Hui

When you’re starving, anything looks appetising. Asia may have the world’s fastest growing economies, but it also has more hungry children than the rest of the world combined. Please help the UN World Food Programme in its battle against child hunger in Asia. To learn more about WFP, donate or to become a corporate partner, go to www.wfp.org. Give a hungry child a future.