2008 Nov-Dec Issue

CHINA CUSTOMS Navigating the red tape

TNT

High hopes for express

KFC CHINA

A success story

SHARMOON GARMENTS High-end suit maker

DOW CHEMICAL

Takes long view on China

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THE MAGAZINE FOR GLOBAL SUPPLY CHAIN LEADERS

SUPPLY CHAIN TECHNOLOGY The Gift That Keeps On Giving

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INSIGHT

Booz & Company study finds China is the largest net importer of R&D funds capturing over US $24 billion from other countries’ R&D investment Booz & Company’s fourth annual study of the world’s 1,000 largest publicly corporate research and development spenders, released in late October, found that these corporations continue to invest aggressively in R&D -- spending a total of US $492 billion on research and development in 2007, a 10% rise over the previous year.

Key findings of the study included: China was the top net “importer” of R&D spending.

Companies that invested more in Low Cost Countries like China performed better.

India and China-based companies are still small R&D players – but they are growing fast.

MAKING BUSINESS FLOW

Top Chinese companies on the Innovation 1000 list included

1 2 3

Petrochina China Petroleum & Chemical Corporation

ZTE.

Top 10 global R&D spenders in 2007 in descending order

1

No.

Toyota

2

No.

3

No.

General Motors Pfizer

4

No.

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

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

5

No.

Johnson & Johnson

6

No.

7

No.

8

No.

9

4

NOVEMBER/DECEMBER 2008

Ford Microsoft

No.

www.cevalogistics.com

Nokia

Roche Holding AG Samsung Electronics

10

No.

GlaxoSmithKline

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Managing Editor & Publisher Russel Beron rberon@supplychain.cn Art Director How Xu hxu@supplychain.cn Graphic Designer Franck Meyer Finance Manager Jenny Kim Key Account Manager Wendy Yu

Account Manager Carl Pan Circulation Manager Giselle Yang Special Projects Amina Khayat Photographers Grant-Oh! Buchwald Jackson Lowen Contributing Writers Chris Deans, Marnix Etterna, Damon R. Paling, John D. van Fleet, Frances Wang, Michael Yee

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

Max Henry Founder and Executive Director, Global Supply Chain Council

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

Vanessa Guo VP Sales, Runbow Logistics

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

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

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

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

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

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

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

FROM THE EDITOR All the world is talking great depression, but China seems barely to have noticed - yet anyway.

A recently released Booz Study shows China to be the top importer of R&D spending, grabbing US$ 24 billion from other countries. Everyone from automotive companies to pharmaceutical, electronics and chemical companies are increasing their R&D spend in China.

As many of the articles in this issue indicate, China is moving further up the value chain in R&D, sourcing, manufacturing, services – you name it. To cite another study, by the Georgia Institute of technology, China recently surpassed the United States in the added value the country provides to manufacturing – an indicator of the progress made in the past decade.

Sure companies are bracing for the impact of a slowdown which is being felt already.

But the numbers guys are saying China’s GDP growth will slow down to around 9% from 11%. Not too shabby, considering the Chinese government has been trying to find a way to cool down the economy and stimulate domestic consumption only for the solution to fall in their lap.

Although with the sharp drop in exports due to the economic crisis and their own policies, Beijing appears to be getting a little worried.

In a sudden about face, as of November 1, the government reintroduced some of the VAT tax rebates (on 3,500 products) it cut not long ago driving many low-cost manufacturers either out of business or out of town to other low cost countries.

Hopefully this won’t mean those low margin short term profit oriented manufacturers will be back

On the plus side, corporate social responsibility and green issues continue to have a season’s ticket in the front row and whether they are genuinely concerned or because it makes for good publicity, companies are not likely to cut back in this area. In China, change is the watchword, the only way to survive is to go with it.

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

Chaina magazine’s sponsors:

Russel Beron Editor and Publisher CHaINA Magazine

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

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NOVEMBER/DECEMBER 2008

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FEATURE STORY

Supply Chain IT and Software Solutions The gift that keeps on giving

28

COMPANY PROFILE

37

Interview with Lelio Gavazza, General Manager of Sharmoon EZ Garments Co. Ltd. 6

NOVEMBER/DECEMBER 2008

3PL FOCUS

43

TNT’s Greater China CEO presents at 3PL lunch group

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THE MAGAZINE FOR GLOBAL SUPPLY CHAIN LEADERS

NOVEMBER/DECEMBER 2008

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CONTENTS INSIGHT 4 Booz & Co. Innovation Study THE NUMBERS 8 Exporters come to terms with Global slowdown INDUSTRY VOICES 10 China’s tainted milk scandal CSR FOCUS 12 In conversation with Leslie T. Chang, author of FACTORY GIRLS SCM GADGET 14 Skysails - Powering container ships using wind SPONSORED FEATURE 15 LowendalMasai case study – Strategic sourcing of Titanium Sponge NEWS ROUNDUP 16 The Big Picture - A roundup of news relevant to operations in China Supply chain Management – A roundup of relevant supply chain news FEATURE STORY 18 Supply Chain Technology: The gift that keeps on giving EXECUTIVE INSIGHT 27 Managing a global logistics career MOVERS & SHAKERS 32 With supply chain talent at a premium, CHaINA keeps an eye on which executives are moving where

INSIDE VIEW

56

Managing the customs function

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SPECIAL FEATURE 33 Supplier satisfaction: making suppliers work for your success

PRODUCT RECALLS 41 Recent consumer product recalls in the U.S.A. 3PL FOCUS 43 TNT’s Greater China CEO presents at 3PL lunch group EVENT UPDATE 44 Hangzhou – A powerhouse in its own right KNOW HOW 46 The Flat World Platform COMPANY PROFILE 48 Dow Chemical takes the long view on China BOOK REVIEW 50 KFC in China: Secret Recipe for Success, Warren K. Liu FACE OFF 51 Lenovo versus Dell INSIDE VIEW 53 Interview with Yuelin Shen, Assistant Professor of Operations, Management at Shanghai University of Finance and Economics 54 Opportunities and challenges in sourcing and selling 56 Managing the customs function 58 CLASSIFIED LISTINGS

61 COMPANY INDEX 62 EVENTS CALENDAR

COMPANY PROFILE 37 Interview with Lelio Gavazza, General Manager of Sharmoon EZ Garments Co. Ltd.

NOVEMBER/DECEMBER 2008

7

Female Chinese factory workers manufacture clothes to be exported to the United States at a garment factory in Huaibei city, east China’s Anhui province.

8

NOVEMBER/DECEMBER 2008

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THENUMBERS

EXPORTERS COME TO TERMS WITH GLOBAL SLOWDOWN With the combined effect of the slowing global economy and weakening demand in major markets, China’s rise in foreign trade is tapering off. As global economic problems mount, exports to major markets such as the US are slowing China’s export growth.

3,500 3.3 30 10 6.1

- The number of products the Chinese government has raised export VAT rebates on in a reverse policy move to help lowmargin industries such as textiles.

percent - The year-on-year drop in Chinese exports, from 25.7 percent in 2007 to 22.4 percent or $937.7 billion in 2008

percent - The jump in Chinese imports, to $785.7 billion, a 10.4 percent year-on-year increase .

billion USD - The shrinking in China’s export trade surplus from last year. The surplus decreased to $152 billion over last year.

Imaginechina

www.chainaonline.com

percent - The year-on-year drop in Chinese exports to the United States. Shipments to Europe and Japan were down 5 percent and 3.9 percent year-on-year respectively

NOVEMBER/DECEMBER 2008

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INDUSTRYVOICES

China’s tainted milk scandal might be simmering down, but it’s left a lot of people wondering what’s next? CHaINA Magazine, asked industry experts whether better supply chain management might have helped prevent the scandal.

Norman Katz, Owner, Katzscan Inc.

Greed and corruption likely caused the tainted product scandal to happen, but what allowed it to perpetuate through the supply chain was a lack of controls and oversight.

Tom Napier Senior Account Manager, Automation Division at PSI Engineering

Unfortunately, there is no SCM practice that cannot be defrauded. We need to believe there are responsible, ethical people within manufacturing, especially food processing.

Once that trust has been broken, then drastic measures and consequences are required.

Baiju Krishnan VP at Citigroup

The simple answer to your question would be ‘Yes’, a better designed supply chain and a more comprehensive regulatory environment would have eliminated the disaster.

Globalization of manufacturing demands that countries partner with one another to create an effective global regulatory environment.

Hsien-Hui Tong Vice President, Emerging Technologies at Wassax Inc. “Having been in the sourcing business previously I know how hard it is to be fully in control of all points on the supply chain.

There is always a trade-off between cost and benefit. In this case, the milk was being doctored with melamine which is essentially harmless in small quantities. To all intents and purposes, tests at every stage of the supply chain, both within China and outside China, would not detect this contaminant. Economics will always drive decisions and ethics.”

A Chinese woman feeds her 8-month-old grandson who was fed with Sanlu milk powder (containing melamine).

Imaginechina

10

NOVEMBER/DECEMBER 2008

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CSRFOCUS

In Conversation with Leslie T. Chang, author of FACTORY GIRLS Publisher: Spiegel & Grau On-Sale: October 7, 2008

L

eslie Chang’s recent book, Factory Girls gives an inside look at the conditions in some of Southern China’s Dongguan textile factories. A former Beijing based Wall Street Journal correspondent, Chang tracked several young women migrant workers over the course of a few years. In this interview, Chang talks about some of the issues that came up in her research and in the process of writing the book.

12

view of the world and their expectations of life. When I first met Min, a young woman who became one of my book’s main characters, she told me she would work in the city for seven years and then return home to get married. Over time, as she became more established and more ambitious, those plans went out the window.

Early in your book, you meet two young women who had come out from their village twenty days before “and already they were changed.” How does going to the city change them?

For most of these young people, working in the factory marks the first time in their lives that they have ever earned cash. That immediately changes their relationship with their parents - having money gives them a lot more leverage in family decisions, for example. It makes them think more carefully about what skills they need to move up, and also what kind of person they might marry, or how they want to raise their children someday. Over time, the experience of working in the city can completely transform their

Both Min and Chunming, the two young women who are the book’s main characters, end up rising from the factory floor into better-paying work. Did you choose them because they were success stories?

Actually, I wasn’t looking for any great successes or great failures when I started my reporting. Both Min and Chunming had pretty typical profiles—they came from poor farming families, they had not attended high school or college, and they had come out to the city as teenagers to work in the factories. Beyond that, the main reason I ended up focusing on them was because they were engaging and open and easy to talk to, and they were willing to have me follow them around for what ended up being three years.

NOVEMBER/DECEMBER 2008

Photo by Jorge Anchondo

There’s been a lot written in recent years on the sweatshop conditions inside Chinese factories. Yet in Factory Girls, you describe a job on the assembly line in terms of adventure, opportunity, even liberation.

Doesn’t this contradict the reality of factory life?

Certainly conditions in the factories are tough. Most of the young women I got to know while researching this book worked thirteen hours a day, seven days a week when they first started out. Their wages were often late; many had no idea how much they would be paid from month to month, because the factory charged fees for all sorts of things over which they had no control. But you have to remember that the world looks very different when you’re coming from a Chinese farming village. What we think of as miserable living conditions—bad food, tedious labor, living twelve or fifteen to a room—are a given to these workers.

Their response is usually not to complain or protest, as a typical American might, but to look for any slight advantage that would lead to an improvement in their situations. I think that’s the reason you see a lot less protest in these factories than you might expect. These workers are constantly calculating what is in their own best interest. Usually they decide that talking a boss into giving them a raise or jumping to a different job is a better option than challenging the factory directly.

Leslie Chang

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CSRFOCUS Is this open-ended reporting easy to do in a place like China?

I think China today is really an ideal place for the kind of reporting that follows someone in real time.

Because people’s lives are changing so dramatically, if you are willing to spend a year or two with someone, you are basically guaranteed to see change and transformation. That’s true all along the economic spectrum, but probably most pronounced in the lives of the rural poor, which is one reason I wanted to write about them.

You were a journalist at the Wall Street Journal in China for ten years. How did this experience shape the research and writing of your book?

Definitely my reporting experience in China helped me. I knew how to find information, I knew which Chinese newspapers were useful, I could locate scholars if I wanted some background on what I was seeing. I find that when people come to China “cold” to report, they tend to have a subconscious sense that a lot of things are unknowable, but that isn’t usually true.

had more free time I decided to visit my ancestral village in northeastern China. I started piecing together the details of how my grandfather had left this tiny farming village in 1916 to attend school in Beijing, then to go to America and later to return to China, where he was assassinated shortly after the Second World War. My father basically retraced that journey forty years later—from Beijing to Taiwan to America—and then, forty years after that, I made the reverse journey from America back to Beijing. I realized that including my family’s history of migration and immigration would make the book more personal but also universal—after all, you could say that the story of people leaving home in search of a better life is really the story of all nations and all people.

You include your own family story in this book, even though your family background is very different from that of the migrant workers. How did this come about?

It started by chance. In the spring of 2005 while I was doing my factory reporting, I took a book leave from the Wall Street Journal, and because I

December 3, 2008

Shanghai

Organized in partnership with the Global Supply Chain Council The Global Supply Chain Council provides insights and information on the most current supply chain and manufacturing issues through publications, research, training seminars and hundreds of events every year in China, India and Vietnam. www.supplychain.cn

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NOVEMBER/DECEMBER 2008

13

SCMGADGETS

Applying old solutions to a new problem —

Wind powered container ships Green consciousness is bringing innovation to the shipping industry with the use of giant sails applied to offset fuel consumption.

Enterprising companies such as Skysails (www.skysails.info) and Kiteship (www.kiteship.com) have developed the technology to propel ships using large kites which, depending on wind conditions, can reduce annual fuel consumption by 10-35%. The sails have already been tested on ships such as the MS Beluga, a 462 foot cargo vessel which employed a 160 square metre kite. Skysails inventor, 34 year old German engineer, Stephen Wrage got the idea while flying a kite as a child.

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

SPONSOREDFEATURE

The value of strategic sourcing: European Aeronautics and Defense industry looks to China for supply Aeronautics and Defense This LowendalMasai case study takes a look at a strategic sourcing project the company undertook on behalf of a European leader in the aeronautics and defense industry to better understand the potential of Chinese suppliers to unlock the global bottleneck and fluctuation in Ti Sponge supply.

The Ti Sponge supply chain Ti sponge is in high demand by the global aeronautics and defense industry, which increasingly relies on its superior properties to produce a range of parts and components for jet engines, missiles and spacecraft. Ti sponge is one step downstream from Titanium Ore which is then made into semi-finished products (ingots, plates, sheets), followed by more detailed parts (landing gear), subassembly and then final assembly (for example a plane or engine).

The strategic sourcing process Strategic sourcing is a term that requires a distinct definition.

“The difference between global sourcing and strategic sourcing is that global sourcing has more of a cost savings target whereas the purpose of strategic sourcing is to map out future suppliers and determine their capacity,” said LowendalMasai Project Leader, Zheng Feng.

LowendalMasai was engaged by their client on the Ti Sponge strategic sourcing project around 2006 when the price of Ti Sponge exploded from an average of 100,000 RMB per ton to between 200,000 and 250,000 RMB per ton. The client wanted to get a sense of both the short and long term supply potential from China and also develop opportunities for collaboration.

The first phase of the project involved identifying the individual suppliers and understanding their capacity. Historically, China’s Titanium sponge capacity comes from Western and Northern China, traditional locations for military manufacturing. Historically, Ti Sponge suppliers are state owned companies, two of the most well known being the Zunyi and Fushun Titanium Companies, located in the provinces of Guizhou and Liaoning respectively.

With China’s economy liberalizing in recent years, the market has opened for private suppliers of Ti Sponge. The goal of LowendalMasai’s client was to understand the capacity for both private and state owned suppliers over the period from 2006 to 2010. From a list of 2,000 potential suppliers, 100 were shortlisted.

The list was then narrowed down to a total of 12, comprised of 7 plants and 5 suppliers which were visited.

The result Based on the visits, each supplier and plant was given a scorecard rating based on different criteria such as production, financials, investment, technical capabilities, and human resources. www.chainaonline.com

Some of these suppliers are short term, while others have more of a long-term focus. Based on the study, two scenarios for Chinese Ti Sponge supply were projected from 2010 to 2020. Specific results of the project included: • 95% of the Chinese capacity for Titanium sponge was reviewed • Ti Sponge supply was projected over two supply scenarios, one until 2010 and one until 2020 • A five year strategic roadmap with key Chinese partners was created • In a realistic projection scenario, China will produce 23% of Global Ti Sponge capacity by 2010, a growth from 13% in 2002.

LowendalMasai is now engaged in another project for the client to understand the viability of supply further down the Titanium supply chain.

The LowendalMasai advantage “Such complex strategic sourcing projects are highly value added and primarily work in sectors where a high degree of technical knowledge and sophistication is required such as in the aeronautics, railway and pharmaceutical industry,” commented Zheng Feng. As such this project is a good example of a strategic approach to global sourcing with lessons that are increasingly applicable as China moves up the manufacturing value chain away from lower value added manufacturing.

LowendalMasai brings together both consultancy and operational support in order to provide a tailor-made solution to company’s needs. The company has 435 employees in 18 offices around the world ensuring a global approach to strategic sourcing.

NOVEMBER/DECEMBER 2008

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NEWSROUNDUP

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

CSR Hong Kong expands tests after egg scare The discovery of excessive levels of the industrial chemical melamine in Chinese eggs has prompted Hong Kong authorities to expand health tests to include meat products imported from China, a senior official said. The move follows on announcement late Saturday that Hong Kong testers had found 4.7 parts per million of melamine in imported eggs produced by a division of China’s Dalian Hanwei Enterprise Group. The legal limit for melamine in foodstuffs in Hong Kong is 2.5 ppm.

Hong Kong Secretary for Food and Health York Chow said the melamine may have come from feed given to chickens that laid the eggs. “The preliminary opinion experts have given us is that there is a problem with the (chicken) feed,” Chow told reporters.

Three Chinese dairy companies apologize for milk scandal Three Chinese dairy companies have publicly apologized for their involvement in the ongoing toxic milk scandal in that country. Melamine contaminations have led to four deaths and tens of thousands of illnesses and hospitalizations and have caused an epidemic of global recalls of Chinese-made products such as cheese, ice cream, yogurt, biscuits, milk tea, instant coffee, dairy drinks, and candies.

Inner Mongolia Yili Industrial Group, Mengniu Dairy, and Bright Dairy Group are three of the dairy companies initially found to have produced milk contaminated with melamine. “I feel I have let everybody down. I have done so much, yet still done wrong,” said Mengniu’s marketing chief, Zhao Yuanhua, on state television.

The international scandal has shattered the companies’ share prices and drove Starbucks Corporation to pull Mengniu milk from its stores in China.

Melamine is a chemical that has gained notoriety in recent years for its ability to cheat nutrition tests; the chemical was originally designed to make plastics, fertilizer, and fire retardants. Because melamine possesses high nitrogen contents, it is used to falsify protein levels in foods. The toxic chemical was added to watered-down baby formula to create the impression of high protein levels in the diluted products. Melamine can cause kidney problems—including kidney 16

NOVEMBER/DECEMBER 2008

Eggs are seen for sale at a supermarket in Yichang city, central China’s Hubei province

stones and kidney failure—when ingested and is also to blame for the illnesses of some 54,000 children in China.

ZTE banned as Telenor supplier Norwegian carrier Telenor has banned Chinese vendor ZTE from all of its equipment tenders for six months for an unspecified breach of the carrier’s code of conduct policy, the firm has said. “We have

suspended ZTE from participating in tenders and new business opportunities for a period of six months ending March 3 next year,” said Telenor spokesman Dag Melgaard.

Melgaard said the move is based on a breach of Telenor’s code of conduct in relation to the procurement process,” he said, adding that the suspension applies to all of the Norwegian firm’s operating companies worldwide. Telenor has mobile operations in 12 countries, specialising in

Jon Fredrik Baksaas, President and CEO of Telenor ASA (TELN),

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NEWSROUNDUP the Nordics, the Balkans and a handful of Asian markets. Earlier this year, Telenor’s Bangladeshi property, Grameenphone, moved to investigate allegations of child labor at a subcontractor to one of its suppliers.

Customs China customs demands advance cargo manifests From January 1, China’s new 24-hour

before, according to a recent statement by Cosco.

All airfreight carriers will be required to submit full manifests electronically four hours before departure, the company statement said in a China Daily report. For airfreight that has an ETA of greater than four hours from the departure point, the manifest must be submitted prior to the arrival at the first port in China, the state-owned newspaper said. The rule change will affect all carriers including airfreight.

Policy MOF does about face on VAT rebates to spur exports

advance manifest rule requires shippers and carriers to file a consignment’s estimated time of arrival (ETA) on the mainland, with documentation ready to process a day

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The Ministry of Finance (MOF) will raise export VAT rebates for the second time this year, hoping to give a boost to exporters who are struggling amid lower demand in the West. The new rebates will take effect on November 1, covering more than 3,500 different products. The first export tax rebate increase this year took place on August 1. The increase in VAT rebates gives the greatest boost to manufacturers in low margin export industries, such as textiles, whose profits have been eroded by slowing demand, higher labor costs, and the

appreciation of the RMB. Raising export tax rebates in 2008 represents quite an aboutface by regulators, who last year slashed or eliminated VAT rebates on thousands of products, mainly in lower value-added manufacturing sectors.

- ChinaVest

Legal Plymouth Rubber in hot seat with Chinese manufacturing partner A joint venture in Shanghai known as Plymouth Yongle Tape that Plymouth Rubber helped create with a Chinese manufacturer has sued Plymouth Rubber in Boston in federal court. The Chinese joint venture, which took over some of Plymouth Rubber’s PVC tape manufacturing operations, says in its lawsuit that it was owed more than $5 million for goods that it shipped to Cantonbased Plymouth Rubber as of Aug. 14.

Plymouth Rubber’s defaults had become severe by April, according to the suit, and Plymouth Yongle says it unsuccessfully tried to negotiate with Plymouth Rubber to resolve the shortfall.

- Jon Chesto, The Patriot Ledger

NOVEMBER/DECEMBER 2008

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NEWSROUNDUP

Supply Chain Management A roundup of supply chain news

R&D GM builds a $250 million China R&D center General Motors has just begun construction of a $250 million advanced research and development facility in Shanghai. The GM campus covers 120,000 square meters in Shanghai’s Pudong New Area which will house the automaker’s China and Asia Pacific headquarters alongside the GM Center for Advanced Research and Science, said Kevin Wale, president of GM China.

The new facility will spur exploration of alternative fuels, as well as advanced alternative-energy propulsion systems and manufacturing. The first phase of the campus will open at the end of next year and will have more than 2,500 employees.

Soaring fuel prices and stiff market competition have prompted GM, the biggest carmaker in China, to expend more effort developing clean-energy and fuel-efficient vehicles to maintain its lead in the Chinese auto market.

“We have seen a slowdown in auto sales in China, but I am very confident that for the medium and long term, China’s auto market is strong,” said Nick Reilly, president of GM’s Asia Pacific region. “We will keep our lead in China.” In the first half of the year, GM sales in China grew 13 percent to more than 590,000 units, while Volkswagen’s sales rose 23 percent to 531,612 units. China is GM’s second largest market globally and also the company’s major research and manufacturing base in the Asia-Pacific region.

- Vivian Jin, Edmunds

IBM expands R&D in China IBM announced the opening of a new R&D lab in Shanghai, China, to redouble its efforts on Web-based services, including cloud computing. The facility is an extension of the

Automotive R&D in China is increasing as foreign automakers such as GM shift expand their operations

IBM China Research Laboratory in Beijing, one of IBM’s eight research labs worldwide.

“Our extension in Shanghai adds to the significant research and development presence in China and increases China’s position as an innovation hub for IBM,” Dr. Thomas Li, director of IBM’s China Research Laboratory, said in a statement. In addition to cloud computing, the Shanghai campus will focus on information analytics, Webdelivered service computing, and stream computing.

The lab also will focus on integrating service science, management, and engineering (SSME) into the Chinese university curriculum. The company said it recognizes the growing importance of servicing education efforts in China in the global economy.

- Michael Singer, InformationWeek

IBM’s new China Research Laboratory in Beijing

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NOVEMBER/DECEMBER 2008

Trapeze networks opens second R&D center in China Trapeze Networks recently opened a new research and development center in Hangzhou, Zhejiang Provice, China. This new Hangzhou center will focus its energies on embedded wireless technologies and is the second of its kind established in China

by Trapeze Networks.

The success of the first R&D center in Beijing, which Trapeze opened in 2006 to absorb the huge talent pool of engineers in China and for directly catering to the needs of the booming Chinese market is one of the reasons why China has been chosen once again by Trapeze.

The new R&D center will concentrate on the development of embedded networking functionality for both Trapeze Networks’ products and other organizational roles. The team of experts at the Hangzhou center are in fact an extension of Trapeze’s worldwide R&D network which has a global presence with development centers in the U.S. and Romania as well.

The R&D Center will initially employ around 50 engineers and plans to multiply this figure over the years. Trapeze was also in the news last month when it announced the construction of a metropolitan area network in Hangzhou, which will be China’s www.chainaonline.com

NEWSROUNDUP largest WiFi network.

Sourcing Wal-Mart remains confident on sourcing in China Rising labor, production and commodity costs in China will not affect Wal-Mart’s ability to source products from there, said Vicente Trius, chief executive of Wal-Mart Asia.

Speaking at the launch of the retailer’s regional headquarter in Hong Kong, Trius said the quality of Chinese goods will give them a competitive advantage even as other emerging markets, such as southeast Asia, might compete on price.

Trius said the global economic slowdown has not hurt Wal-Mart’s retail business in China, which has grown 16 percent over the past 12 months. He expressed optimism about the prospects for future growth in China. Wal-Mart operates more than 100 stores in China. The retailer is looking into opening its first stores in southeast Asia.

Wal-Mart posted a 17 percent increase in second-quarter profit to $3.45 billion, aided by a 17 percent jump in international sales to $25.3 billion. International sales totaled nearly $91 billion in 2007 and the company

expects to reach $100 billion in international sales this year.

Peugeot to triple China spare parts sourcing PSA Peugeot Citroen said its sourcing of car components from China would more than triple within two years, joining in the slew of overseas car makers to add China as their global sourcing base.

Europe’s second biggest car maker will buy 8 billion yuan (US$1.03 billion) worth of spare parts from China by 2010, compared with 2.5 billion yuan this year, said Armand Chen, vice president of Peugeot Citroen China Business Unit TASC. “China plays a vital role in Peugeot Citroen’s global procurement,” said Chen.

International car makers have been increasing purchases of spare parts from the world’s second largest auto market over

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NEWSROUNDUP the past few years after global spare parts makers moved factories to China.

Exports also jumped as domestic players have updated technology to develop more value-added products in addition to previously low-price devices.

- Shanghai Daily

Manufacturing FAW should abandon false hopes for Red Flag In a sign of the times, China’s FAW Group lowered the price of the Red Flag car this month. The oldest state-owned Chinese automaker still hopes it can breathe life into cars best known for carrying party officials during planned-economy days.

The Red Flag has never been a luxury car with high quality comparable to Western brands. Government officials chose the Red Flag because they had virtually no other choice in a planned economy, a time when almost everything was scarce. After more than two decades of growth and development, the luxury market is crowded with top luxury brands.

However, executives of FAW still believe they can bask in the “glory” the Red Flag brand enjoyed in the past. That’s why it priced the Red Flag, before the price cut, at above 400,000 ($58,565) even though the existing model is built on an old Toyota Crown platform dating to the early 1990s. Chinese customers are becoming increasingly sophisticated. They know what they are paying for. In the first half of this year, less than 1,500 Red Flags were sold.

- Yang Jian, Automotive News China

Can China Save The World?

Chinese growth is cooling as exports and manufacturing weaken. But retail sales have picked up the pace.

China GDP

Chinese retail sales Yearly change

15%

2009e: 9.3%

10

Yearly change

25% 20 15

5

Aug.: 23.2%

10 Q2

’07

Q3

Q4

Q1

Q2

’09e

’08

China moves up the ladder in luxury-goods manufacturing Luxury brands such as Armani, Coach and Paul Smith recently have moved production to China.

“The perception that China produces just for the low-end is not true anymore,” said Pinakin Patel, a client portfolio manager for JPMorgan Chase & Co. When David Adams, senior vice president of Florida-based Tricon Marine, talks with potential customers about the million-dollar yachts he builds, he eases into the fact that they are manufactured in the southern Chinese city of Zhuhai. “I’ve come across people who refuse to buy something made in China because they thought that it wasn’t good enough quality,” Adams said at the shipyard. “But the yachts we build can be as good as any in the United States.”

As Chinese workers have become more technically skilled and Beijing welcomes more foreign companies, high-end

Jan

Jan

’07

’08

Aug

manufacturers have also begun to shift production to China, though often with little fanfare. Last month, European aircraft maker Airbus began assembling passenger planes at a new factory near Beijing. Intel Corp. announced last year that it would build a $2.5 billion factory in northern China to make sophisticated computer chips, the company’s first major production site in Asia.

Adding value to manufacturing In a study by the Georgia Institute of Technology (GIT) measuring the technological standing of 33 nations relative to one another, the GIT put China at the top (82.8%) for 2007 followed by, the United States (76.1).

China’s score was 22.5 just 11 years ago and the US, the long time number one, had peaked in 1999 with a score of 95.4.

This shatters the myth that China, despite its rapid economic advances and giant strides in manufacturing, still lacks high technology.

While the GIT’s study measures progress, rather than absolute technological capabilities, according to GIT indicators, China is also poised to ‘soon’ pip the US in the critical ability to develop basic science and technology and turn those into marketable goods and services.

Airbus A320 final assembly line in Tianjin goes into operation

Sales of the classic Red Flag car, produced by FAW group, the oldest Chinese carmaker, have dropped to 1,500 per year

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The line, a joint venture between Airbus and Tianjin Zhongtian Aviation Industry Investment Co., was built in just 15 months.

The first A320 plane it assembles is expected to come off line by summer 2009.

“With the final assembly line here in Tianjin, we deepen and expand our industrial relationship, which is a key pillar of the internationalization strategy of Airbus,” a spokes person said while addressing the ceremony. The Tianjin assembly line, the third on top of two in Toulouse and Hamburg, www.chainaonline.com

NEWSROUNDUP is to deliver two types of aircraft of the A320 family -- A319 and A320. The A320 family, which includes the A318,A319, A320 and A321, is recognized as the benchmark single-aisle aircraft family.

The Tianjin line will be able to assemble 44 aircraft a year by 2011, plant sources said. The aircraft will be assembled and delivered in China to the same standards as those assembled and delivered in Europe.

China is the second largest aviation market, and it would be as important as the United States and Europe over the next 20 or 30 years, he said.

- Xinhua

Logistics Agility expands in China

Kuwait-based Agility’s second major acquisition in China this year further extends the logistics provider’s domestic reach in that country’s long-haul transportation for the chemical, automotive and fast moving consumer goods sectors.

Terms of the deal to buy Baisui United Logistics of Shanghai were not disclosed.

The company has 15 offices with more than 300 employees managing eight logistics centers totaling 1.4 million-plus square feet of warehousing space throughout China.

Baisui also brings its own fleet of trucks to the deal, along with a network of 75 trucking companies to meet regional distribution demand.

“Baisui Logistics complements our growing service offering in China, both vertically in specialist sectors and by providing improved connectivity through the company’s extensive domestic transport network,” said James Gagne, Agility’s CEO for the Greater China Area. “We will continue to grow organically and through acquisition in order to provide our customers with an integrated logistics solution throughout China.”

www.chainaonline.com

GCL rules out Shandong Yantai takeover GRAND China Logistics has ruled out taking over Shandong Yantai International Marine Shipping, the troubled Chinese container shipping line, despite taking on five of the company’s vessels.

Executive board chairman and president, Jia Hongxiang told Lloyd’s List that Grand China Shipping, the shipping arm of GCL, has paid off the mortgages of the five ships for SYMS and has taken over the vessels. The company has also taken up the responsibility of any debt in relation to the five ships. “We are not interested in [SYMS’] business, neither are we interested in becoming a big shipowner. What we are trying to do is to build an air-land-sea logistic network which could connect China from north to south,” said Mr. Jia. - Lloyd’s List

Shenzhen’s YICT and Sinotrans link to offer barge-rail service

era of competition to airfreight on the key China-Europe route. Air cargo volumes have seen noticeable erosion to ocean freight in the last 12 months as high fuel prices and surcharges, plus a lack of manufacturing spikes have seen a number of major hi-tech manufacturers switch modes.

The new train service, although initially of limited scale, will not help the erosion from airfreight. It is placed in terms of cost and transport time between air and ocean freight.

The first shipment on the train service was products for Fujitsu Siemens Computers – a commodity that is traditionally a mainstay of airfreight.

Schenker, the logistics arm of German railway heavyweight Deutsche Bahn (DB), will begin offering scheduled rail freight services to China after the Chinese New Year in February. Under the product name of the Trans Eurasia Express, two container trains are initially to travel weekly to link up China with Germany in a little over 15 days.

SHENZEN’s Yantian International Container Terminals (YICT) has signed an agreement with Sinotrans Guangdong to cooperate on barge and intermodal rail forwarding. YICT will offer good terms in berth allocation and customs clearance to a Sinotrans unit operating the new Zhongshan-Shenzhen barge service. Sinotrans Guangdong and its units will handle YICT containers rail services, thus enabling each company to offer customers multimodal sea rail transport

Cargo train poses a new threat to airfreight The first commercial Trans Eurasia Express from China arrived in Hamburg on 6 October after successfully completing the 10,000 km journey in 17 days.

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21

NEWSROUNDUP

Retail

US$50 million in spending to build seven mega steel-structure warehouses, the first covering 207,000 square feet, which will be operational in June next year. The whole program will be in place in 2010 with claims of cutting costs by 15 to 30 per cent for local logistics enterprises.

- Logistics Week

Best Buy will open new electronics store In Beijing According to local media, the American electronics retail chain Best Buy (BBY) will open a new store on the B2 floor of Beijing’s SciTech shopping center in November 2008, marking the beginning of its expansion in China’s capital.

The new Best Buy store will cover an area of about 480 square meters, selling appliances, and the store will adopt a joint-managed model. Not long ago, Best Buy announced through its public relations company that it would open four new stores in China before the end of 2008. Moreover, the four new stores would all be located in Shanghai like its existing stores in Xujiahui and Zhongshan Park and the company planned to extend its business to the Pudong New Area. However, the news was later withdrawn by the company.

Industrial Property AMB heats up China’s industrial property market According to the release of recent results, AMB Property Corporation, a leading global developer of industrial property, continues to grow in China at a strong pace, in line with their global strategy, despite a slowing global economy.

The company has made a string of development starts, warehouse acquisitions

India and continues to sign new leasing contracts with high profile global clients looking to take advantage of the company’s strategically located property. The company has now secured property developments in key sea and air port and inland locations in strategic locations in China.

The company recently closed a deal to develop the AMB Beijing Capital Airport Distribution Center II, a 34,551 square meter facility which follows closely on the phase 1 development of the center. AMB first entered the Beijing market in August this year with the acquisition of three buildings, of approximately 28,400 square meters within the Beijing Airport Logistics Park, which is adjacent to the Beijing Capital International Airport.

ProLogis launches logistics programme in Chengdu Property developer, Prologis has launched an urban business logistics center in Chengdu. The center, located within the Third Ring Road in Chengdu, has an area of 853,000 square feet. It calls for

India to import more electronics from China India importers are looking to China manufacturers more and more to fight rising costs, according to dual surveys released by trade publisher and trade show organizer Global Sources.

The surveys, conducted in July and August, tracked the views of thousands of volume importers and purchasing managers who supply India’s retail distribution channels. The surveys focused on consumer electronics and hardware and building materials, two of India’s fastest growing segments.

“As India’s economy continues to expand, Indian consumers have more disposable income to spend on luxury goods like consumer electronics,” said Bill Janeri, General Manager at Global Sources. “Indian consumers want the next hot electronics gadget or a new large-screen LCD television.

And retail distribution channels in India are better able to supply this demand than ever before, with a wide selection of quality, affordable products.”

“At the same time, India’s construction boom is driving the need for more and more building materials and hardware products.

India is increasing electronic imports from China

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NEWSROUNDUP

Because of the volumes required by some of India’s property developers, many are importing these building materials directly from China,” Janeri added. Last year, China became India’s largest trading partner, overtaking the United States.

India may lose its drug export halo China may top India as the most favored location to outsource drug manufacturing by 2010, says a PricewaterhouseCooper

(PWC) study. As of last year, India generated higher pharma exports compared to China largely due to its dominance in finished products. However, China is projected to significantly ramp up its exports of active pharmaceutical ingredients (API) in which it is already ahead of India. API is the basic chemical used in making medicines.

According to the PWC study, China tops the table as the best outsourcing destination followed by India, South Korea and Taiwan. The study compared the drug outsourcing potential based on a set of

various parameters including cost, market opportunity and risk factors.

Lower costs and greater market opportunity in China and India outweigh the higher risk compared with the more established and mature regulatory regimes of Australia, Japan and Singapore. Strong market growth potential raised South Korea to the third spot while Taiwan’s active promotion of the biotech industry, supported by incentives and tax breaks helped it to take the fourth position, as per the report.

Li & Fung bids for stake in Future Logistics Three multinational firms are in the race to pick up a 15% stake in Future Logistics Solutions Ltd (FLSL), the logistics and supply chain unit of the Future Group, said an executive with knowledge of the deal.

Hong Kong-based Li & Fung Group, the world’s biggest trade sourcing company, European logistics and distribution operator Logista, and CMST, a Chinese logistics enterprises solutions provider, are competing for a slice of FLSL for about $40 million which will be used to finance an China is catching up to India in pharmaceutical production

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KUNMING, CHINA - OCTOBER 27, 2008: An investor closes his eyes when monitoring the stock price at a stock exchange in Kunming, southwest China’s Yunnan province on October 27, 2008. Chinese shares have plunged amid concerns over economic slowdown and following a slump on the Hong Kong market. The benchmark Shanghai Composite Index closed just above 1,700 points on this day.

(Photo by Yan Peng/ChinaFotoPress)

24

NOVEMBER/DECEMBER 2008

www.chainaonline.com

NEWSROUNDUP expansion plan, Industry estimates put logistics constituting 13% of India’s gross domestic product; organized logistics accounts for about 4%.

Vietnam Vietnam economic growth steady

According to government figures, Vietnam’s economy is estimated to have grown 6.52% in the first nine months of this year from a year earlier, maintaining the pace seen in the first half of the year.

Still, annual growth has weakened from more than 8% in the first nine months of 2007 as the economy felt the hit from the global rise in prices for raw materials and food. Reflecting the inflation threat, Vietnam has cut its 2008 growth target to 7% from an original goal of up to 9%. The latest growth data “promised the possibility of attaining the projected growth target” for the year, reported the Planning and Investment Ministry.

Vietnam has adopted various measures to try to counter a widening trade deficit and inflation that has been in double digits for 11 straight months, including raising interest rates and restricting imports of luxury goods.

Vietnam has estimated its trade deficit would nearly double to $15.8 billion in the first nine months of 2008 from a year ago. September consumer prices are estimated to have risen by 27.9% from a

Citimart in Vietnam are developing their own private label goods

year earlier, but easing from the annual pace seen last month. In order to reach the annual growth of 7% for the whole of 2008, the economy has to strive a lot in the fourth quarter,” the government said without giving further details.

Private labels a new retail trend A new trend is emerging on Vietnam’s retail scene – private labels – and it could reduce the price of everyday goods and help regional specialty foods find a much wider market.

Local retailers are teaming up with manufacturers to produce various ranges of private labels, in a new strategy to attract customers and boost sales. Citimart is

among the Vietnamese retailers planning to market private-label goods. Private-label goods are usually produced by well-known manufacturers but are labeled with the retailer’s own brand name.

Nguyen Thi Anh Hoa, Citimart director, said the supermarket will focus on private-label foodstuffs, as well as regional specialties.

Hoa said various specialty items had been developed around Vietnam but none of the goods were branded and sold in shopping malls. “We want to be the first to put our brand on such special products,” Hoa said.

Fish sauce from Khanh Hoa Province’s Nha Trang Town will be among the items to carry the Citimart label, she said. “Private labels were introduced in Vietnam a couple of years ago but they have been used for quite a while in other parts of the world.”

Vietnam’s economy grew at the rate of 6.5% in the first 9 months of 2008

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FEATURESTORY

AN ELIXIR FOR THE SEASON: SUPPLY CHAIN IT & SOFTWARE SOLUTIONS

I

n the face of a punishing global economy, supply chain managers are looking to IT systems for solutions to help streamline their operations. The climate for supply chain related software and IT solutions is far from perfect though. While some multinational companies (MNC), such as General Motors and IC Companys, a large Danish fashion retailer, are turning to high-end solution providers like SAP and Oracle which according to research firm Gartner, dominate the Asian market with a 32.8 percent and 15.4 percent respective share, small and medium-sized enterprises (SME) are more interested in web-based applications.

To understand the role and outlook for IT and software solutions across the supply chain, CHaINA Magazine spoke to vendors and end users of these solutions, including manufacturers, retailers and third party logistics providers.

by Frances Wang

Real-time counts

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

www.chainaonline.com

Because global supply chains can be far more complicated than regional ones, IT plays a critical role in supply chain management (SCM) for companies of all sizes. High demands on real-time inventory are a good example. “Without near real-time information, we could shutdown plants for lack of material and our just-in-time suppliers require hourly schedules and inventory level information which we provide,� Adriana Karaboutis, process information officer for global purchasing and supply chain with Detroit-based GM told CHaINA. In China, she added, GM with more than ten joint ventures will continue to improve the throughput, visibility and cost of the supply chain. Real-time visibility is also important to pharmaceutical companies, said Philippe Malecki, general manager of the Shanghai operation of French pharmaceutical firm, Ethypharm.

The drug delivery system technology provider, whose Qing Pu located factory is supported by over 75 suppliers in China, is makes products for hospitals

NOVEMBER/DECEMBER 2008

27

TOP10

FEATURESTORY throughout Asia.

For third party logistics providers (3PL’s), non-latency means better service. IDS Group, a member of Hong Kong-based sourcing and trading company Li & Fung Group and Shanghaibased Elee Logistics both require real-time visibility of inventory to meet higher requirements from their clients. But in other industries, such as retail, a 24-hour latency is usually acceptable, said Zhou Wen, chief of business systems and IT development with the Shanghai office of UNIQLO, a Tokyo-based fashion retailer which has 15 shops in China.

COMPANY

SAP

www.sap.com Brown-Forman, ConAgra Foods, Under Armour

Oracle

www.oracle.com

Garmin, New Age Electronics, Toshiba Australia

Logility

Growing investment For some bigger companies which complex global supply chains, investing in IT is no small matter. 20 percent of GM’s whole budget goes to IT solutions and the spending continues to be strong, said Karaboutis. In China, which is the key link for GM’s supply chain, “we will continue to invest in supporting capabilities,” she said. John Cheng, Supply Chain Director at Flextronics International, a Singapore-based electronic manufacturer, said solutions priced less than one million yuan and designed for

1 2 3 4 5 6 7 8 9 10

SCM IT Providers

www.logility.com AEI Corporation, Mapie Leaf Foods, Shaklee

RedPrairie Corporation

www.logility.com Georgia-Pacific, Papyrus, Unilever

Manhattan Assoclates

www.manh.com Avon, Wacoal, Ingram Book Broup

Infor Global Solutions

www.infor.com Big Bear, Hallmark, Reser’s Fine Foods

JDA Software Group

www.jda.com

C.F. Sauer Company, Coca-cola Bottling Co., H.J. Heinz

Jesta I.S.

www.jestais.com Kellwood, Perry Ellis, PUMA

I2 Technologies

www.i2.com

Burt’s Boes, Lenovo, VF Corporation

greater efficiency will still be attractive to most companies even at the current tough time.

For 3PL’s, IT spending is dictated by the needs of their clients.

IDS, whose clients include Nike and Abbott Nutrition, is witnessing IT spending, mostly decided by company strategy, as growing by 20 percent year-on-year. According to Herman So, senior director of finance, China with IDS, the company recently upgraded its warehouse management system (WMS) to improve its service level and productivity. “As we extend our presence in mainland China, IDS intends to invest in Transportation Management Systems,” So said.

Elee also employs a customer-oriented investment strategy.”We invest for our clients,” said Hu Tao, Elee’s IT director, exemplifying a door-to-door distribution system they are developing, and a new wireless barcode scanner, both for its fashion retailer clients.

Providing a reality check, Elee’s general manager Jean-Pierre Roquet noted that, in China, technology is not the most important thing to a 3PL. He sees flexible services, which could be a major hurdle for western competitors as much more important than IT as a competitive advantage.

David Wang, general manager of Shanghai Hai Yue Logistics, supports Roquet’s view. “In Shanghai, the majority of the socalled logistics companies are like us - small, privately owned but able to provide flexible services. That’s why we can survive after over 10 years of industrial development,” he said. Wang recently 28

NOVEMBER/DECEMBER 2008

3M/High Jump

www.highjump.com

Flowers Foods, Lion Apparel, Zoom Eyeworks

Top 5 Vendors by Market Share in Asia Pacific for all Software Segments (Gartner)

FEATURESTORY

opened a new office in Jiang Yin, a second tier city two hours’ ride from Shanghai in the North. He is satisfied with his current database system which has three main functions: providing statistics, accounting and document processing. “With the expanding of our business, we are thinking about investing more in technology, especially in networking with our clients in Germany to provide traceability,” he said.

Flexibility, agility and efficiency What types of systems are companies looking for? Businesses in different industries have some key requirements on systems such as agility, flexibility and efficiency. “Especially this year, prices of commodities are changing all the time. As a food manufacturer we do need some way to improve the speed of data updating and analysis to enable our planning to catch up with changes,” said Raymond Huang, sourcing director of international procurement at British bagged tea maker AB Twinnings.

Flexibility includes truly understanding a client’s business model. For example, most Chinese vendors are used to giving solutions to manufacturers with assembling processes, such as mobile phone makers and automakers, whose materials are usually solid parts. But when it comes to chemical producers, for www.chainaonline.com

whom raw materials are usually liquid and powder, it’s difficult to find a proper system to support the business.

Henrik Larsen, CEO with Flügger Group, a Danish chemical manufacturer for housing, is stuck by such a problem. He said the ERP in its Song Jiang-located factory has problems with the raw material related modules. “It’s about how to monitor and control the waste of raw materials in the process, which is a very important part of our cost control.” As a medium-sized company, it’s not practical for us to turn to SAP, “we try everything we need from local vendors,” he added. Retailers always appreciate efficiency.

Over at IC Companys, Bjarne Hultquist, managing director of Hong Kong and Shanghai, noted that “We are looking into barcode scanning for more efficient packing processing. We tend to invest more in WMS and efficiency is the key criteria for us to choose new solutions,” he said. Inventory management is also an issue at other retailers such as UNIQLO. Zhou at UIQLO said a further improvement in inventory management is under planning because currently their shop managers can’t place any orders.

Issues on the rise Data sharing among operations through an internal platform occurs across the board for big companies in China, but when it comes to collaborating with suppliers, telephone, email and fax are still preferred. The problem is it causes a great waste of time, said Thomas Fendt, a purchasing engineer of corporate NOVEMBER/DECEMBER 2008

29

FEATURESTORY purchasing and logistics with Bosch (China) Investment. “If you output data from systems, convert them into document file and then email them, this takes a few minutes each. Assume all this is done manually it takes two minutes each, but how much time will it take if they have one thousand suppliers?” he questioned.

Both Bosch and GM are using electronic data interchange, or EDI, a web-based technology, to share information with suppliers around the world. But Fendt admits the openness of information sharing largely depends on how trustful the business relationship is. “Generally speaking most business relationship in China are not very trustful, unlike in Europe and Japan, where suppliers and clients work close together.”

Even Walmart, which developed a real-time data sharing software with FMCG giant Procter&Gamble back in the 80’s, is conservative on data sharing after its move to China. Although it offers latency data for the suppliers who are willing to pay more than one million yuan a year, according to Li Xiaokang, vice general manager of Shanghai-based Sinoway Herbage Cosmetics, a skincare producer.

On the other hand, Fendt notes, Chinese manufacturers, most of which only focus on earning quick money during the boom times, are not under pressure to improve their operations. This probably explains why ERP is underused in China, even though it has been adopted to some extent by Chinese companies.

Shanghai Jiale Corp., a Jin Shan-located textile manufacturer whose clients include French sportswear Decathlon and Japanese trading company Itochu, has been employing ERP for years and now it’s still only used for “giving quotations and making plans,” said Ken Gao, the general manager. “In our industry it’s very common that a plan is modified several times a day, so a realtime data upgrade is really important,” he added.

Gao is working with the vendor to improve the system, and he said it could help the factory save some costs to offset the dropping profits on export due to the economic crisis. Sinoway’s Li, who himself is a data analysis professional said the ERP system provided by Shenzhen-based Kingdee International, is used for inventory and accounting, but for the most important part of their business – forecasting, “we are using Excel, and so far it works fine.”

He explains it’s because the forecast calculation formula in ERP usually is based on the historical data, “which doesn’t work very well for a fast growing company like us.” Another limitation he said is that there are other factors affecting sales, such as promotion. The sales of Sinoway’s over 100 products was 100 million yuan last year, compared with 45 million yuan in 2006, and is expected to reach 250 million yuan by the end of this year.

But Chinese companies are traditionally skimpy on IT spending because they are not sure of the returns, said Shen Yuelin, associate professor of operations management at Shanghai University of Finance and Economics.

In fact, “SCM serves two purposes – maximizing customer service and minimizing costs in logistics and manufacturing, and IT solutions help companies archive both of them,” he said.

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Emerging technologies and opportunities Manufacturers, who usually lack skilled, educated technicians, prefer something cost-effective and easy to use, said Stephen Cross, managing director with Birmingham-based software vendor ATMS, which is developing a software for its European clients whose suppliers are mostly in China. “The software is for monitoring the manufacturing process in those factories, and since it will be installed in those factories, easy- to- use is a key feature,” he said.

Another feature ATMS provides is a barcode printing management, which supports Radiofrequency identification (RFID), a wireless technology for tracking assets. As a new and pricy technology, RFID hasn’t been widely adopted in SCM; however, it has attracted interest from big companies like GM, UNIQLO and IDS because of the importance of traceability and security. RFID will tremendously improve our inventory procedure in both speed and accuracy,” said UNIQLO’s Zhou.

For sourcing companies who need to communicate information between designers, buyers and suppliers,

connectivity is also essential. Sourcing companies would like to see an all-in-one integrated system which networks with their suppliers, said Tim Chiu, managing director of New York-based Core Solutions, an SCM solution provider whose major clients are sourcing companies and buyers. “They are looking for a complete system from product development to a shipping and payment system, as well as further extending their system to the suppliers to get information updates,” he said.

Meantime, Bosch’s Fendt said web-based services,

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FEATURESTORY known as Software As A Service (SaaS), will support globalized processes in China. SaaS is popular in Europe, partly because “they are less expensive.”

Chinese SMEs are also showing great interest in SaaS, said Mike Zhu, general manager at Shanghai Qeweb, a local SCM vendor: “The time for easy money is gone, they are trying to squeeze every little profit, especially in terms of inventory management.”

Qeweb now serves both big enterprises including dairy producer Shanghai Bright Dairy and Siemens by providing installed software, as well as SMEs through promoting SaaS. He also mentioned a new platform, IMBP, designed for growing smartphone users. “I think now the competition is about ease of access,” Zhu said.

Another solution is Microsoft Dynamics AX, which is “excellent for SMEs,” suggested Baba Masood, manager of business development at Semantic Space Technologies. There is no doubt that China has a lot of capable persons to provide good quality services, but as ATMS’s Cross notes, the challenge that local vendors are facing has little to do with technology, but “an understanding of the needs of the market.”

With the rising of labor costs, some low-end manufacturers are moving their businesses out of China to countries like Vietnam and Cambodia in order to survive.

“China is shifting to becoming a value-added manufacturer which will definitely leave vendors and logistics companies with new opportunities,” said Cross. A good example is the start of operation in late September of the first Airbus final assembly line outside of Europe in Tianjin, a large industrial city in northern China. From sourcing to manufacturing to services, China is climbing the rung of value and like it or not, Chinese and foreign companies, big or small will be required to embrace new solutions.

S&OP systems Process

38% 45%

Discrete

VMI systems Process 36%

Discrete

International trade Process compliance and Discrete documentation

45% 32%

Finite capacity Process planning/scheduling Discrete

45%

25%

Supply chain visibility Process and performance Discrete

42% 27%

Supply chain network Process design Discrete

31% 32%

Inventory optimization Process Collaborative Process forecasting Discrete Discrete

44%

27%

Discrete

Transportation Process management

44%

33% 30% 44%

20%

Service parts management and Process planning Discrete Demand planning Process Discrete

Warehouse Process management Discrete Manufacturing and Process distribution planning Discrete Order management Process Discrete 14%

31% 34%

21%

34%

27% 23% 30% 25% 23%

I believe we will increasingly see companies invest in solutions that empower people to make faster and better decisions. In a static world, planning and execution are the priorities. In a dynamic world, empowering people to respond to change becomes the new priority.

- A blog posting on Kinaxis - http://blog.kinaxis.com

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EXECUTIVEINSIGHT

Managing a global logistics career

I

n this final article in the Executive Insight Series for 2008, global recruitment firm Michael Page International asks Morten Damgaard Andersen, Head of North Asia at global freight forwarding company Damco, for his views on career development.

Morten Damgaard Andersen started his career at A.P. Moller-Maersk Group in Denmark as a management trainee and accepted an expatriate transfer to Beijing in 1994 with Maersk Line. Following positions in Guangzhou and Singapore, he moved to Shenzhen in 2001 to take up a new role with Maersk Logistics and quickly progressed up the corporate ladder, taking on responsibility for integrated logistics management in the Southern China region.

In 2006, he was seconded to Damco which A.P. Moller-Maersk acquired in connection with the P&O/Nedlloyd acquisition. Damco was later merged with Maersk Logistics’ DSL. In his current role as Head of North Asia, he is responsible for all Damco activities in the region. Located in Shanghai he manages 20 offices across Hong Kong, Taiwan, mainland China, Japan and Korea and is involved in all aspects of the business from operations to sales.

Morten is an excellent example of a professional who has progressed his way up the corporate ladder within the same company and has extensive regional experience across a broad range of supply chain functions. In this article, he shares his experiences and advice on career advancement.

What has been the most rewarding aspect of working in the procurement and supply chain profession?

The opportunity to interact with people from different cultures and backgrounds has been very rewarding as it’s enabled me to learn different ways of doing things and has broadened my perspective, both professionally and personally. Being part of the growing transportation and logistics industry in China and having exposure to many new and interesting projects has also been a rewarding part of my career.

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

I think my personal drive and ability to focus on the end result has helped me progress in my career. We work in a very dynamic and fast-paced industry and it’s easy to lose sight of what you want to achieve. You need to look at the longer term picture and keep your targets and goals top of mind.

As a manager, you must also trust your staff to deliver. I learnt early on in my career that I needed to delegate to my team or else I wouldn’t achieve anything. I realised that I needed to do things differently to when I 32

NOVEMBER/DECEMBER 2008

had a role without staff reporting to me. For example, you might really like doing pricing and be good at it and then one day you are promoted to head of pricing. If you continue to do everything you did before in your previous role, you will not only hold back your team from growing and developing but you will also not be performing as a leader.

What advice do you have on how to progress to the top?

To progress to the senior level, you need to get to know the basics first. Many people these days start their career with expectations of becoming a manager in their first 6 – 12 months but I firmly believe you need to learn and understand what the business is about if you want to lead, and that takes time. You need to learn the simple things like how to handle a shipment and what the documentation process is.

I also encourage young professionals to learn as much as they can from the job they’re in and not move too often. Being in a position longer will enable you to expand your influence, involvement and impact. I see many resumes with multiple job changes over a short period of time. It’s important for people not to focus purely on salary or

position title but also consider what you can learn from the job and the long-term career prospects.

What are some of the changes you have seen in the industry over the course of your career?

When you look at world trade growth and the volume of goods being traded globally, the supply chain has certainly increased in complexity. There has also been a lot of consolidation in the industry with some major players in Asia growing their operations over the past few years. The speed and efficiency of technology has also improved how things are done and enabled companies to instantly communicate with suppliers on the other side of the world and enhance the visibility of goods through sophisticated tracking systems.

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

www.chainaonline.com

MOVERS&SHAKERS

Jim Wang Ethertronics appoints Joe Wu as Vice President of Global Manufacturing Operations

Grand Power Strengthens China Team Grand Power Logistics announced the appointment of Junming Wang as General Manager, China, of Grand Power Express International (China) Limited, a fully owned subsidiary of Grand Power Logistics Group Inc. effective immediately.

Mr. Wang is an 18-year veteran in the China logistics industry and brings specific expertise in express logistics to Grand Power. Mr. Wang began his career with Sinotrans Zhe Jiang Co. Limited (“Sinotrans”) after earning an MBA from Jia Jiang University (China). “Mr. Wang has extensive knowledge and well established relationships in the Chinese logistics industry which will prove invaluable as Grand Power continues to grow its business in China,” stated Ricky Chiu, president and CEO of Grand Power.

E t h e r t r o n i c s Inc., a leading provider of standard and customized embedded antenna solutions for wideband and multi-band wireless devices, announced that Dr. Joe Wu has been appointed as vice president of global manufacturing operations. In his new role, Wu will be responsible for worldwide supply chain management, including the development and expansion of Ethertronics’ Chinese Manufacturing Center, which opened in 2007. Wu is also charged with leading the company’s strategic sourcing for its broad range of products, including its Savvi(TM) ceramic antennas and Tavvel(TM) actively tuned antennas and modules. “As we continue on the path of growing our global presence and capabilities, we are pleased to add Dr. Wu to the Ethertronics team as vice president of global manufacturing operations,” said Laurent Desclos, president and CEO of Ethertronics.

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www.chainaonline.com

NOVEMBER/DECEMBER 2008

33

SPECIALFEATURE

Supplier Satisfaction:

Making suppliers

work for your success Marnix Ettema, Director Alvarez & Marsal Mr. Ettema works in performance improvement consulting, creating value by hands-on improving operational practices and performance. Mr. Ettema has a Master’s Degree in Mechanical Engineering and an MBA from IMD, Lausanne.

B

eing a supplier is not always an easy thing, especially when you work for a large Original Equipment Manufacturer (OEM). Frequently heard complaints about the major OEM’s include: excessive and unrealistic price pressure, excessive and late Engineering Change Orders, wildly fluctuating demand forecasts, poor communication from overseas based OEMs, excessive numbers of Request-For-Quotations and even demands for year-end-rebates that would take profit from suppliers. This article provides a few ideas on how to better work with suppliers to ensure success for both parties.

Suppliers are a key determiner of success Clearly, suppliers who face some of the above issues are very unsatisfied with the buyer-supplier relationship. But from an OEM point of view, does it really matter whether suppliers are satisfied about the buyer-supplier relationship or not? Some evidence suggests that having satisfied suppliers is key to any company’s success.

Look at some of the global trends in sourcing: More and more product content is (out)sourced More value added services are asked from suppliers Supplier performance has to improve year-on-year Supplier-bases are becoming more and more international Companies want to reduce the number of suppliers, while keeping ‘the best’ These trends suggest that companies rely more and more on their supply chain to create value for their business COMPETITIION IS NO and customers. The LONGER BETWEEN talent, processes COMPANIES, BUT BETWEEN and innovations that companies find in their SUPPLY CHAINS. supply chain are more and more important to their success. Competition is no longer between companies, but between supply chains.

Most companies spend a lot of time and money to attract and retain the best talent in their own organization. In the automotive industry for example, 34

NOVEMBER/DECEMBER 2008

70-80% of the product content is sourced; is it then not at least equally important to ensure that suppliers dedicate their best talent, resources, processes and innovations to your company?

The best suppliers can choose their customers and where to channel their best talent, processes and innovations: to you, or to your competitor. Naturally, they will bring their best competitive capabilities to the customers whose relationship they value most. Therefore, when a company sources a large percentage of product content, it is vitally important to be a good customer and reach a high level of supplier satisfaction.

Measuring supplier satisfaction If we accept that having satisfied suppliers is important to a company’s success, then the question becomes: How can we manage it, and in order to manage it, is there a way to measure supplier satisfaction?

A consultancy firm in the US, Planning Perspectives International, developed a survey and a yard-stick to measure Supplier Satisfaction. Through a survey among a company’s suppliers, the quality of working relations is measured along five dimensions: Overall relationship, OEM Communication, OEM help, OEM hindrance and Supplier profit opportunity. Figure 1 shows the sub-criteria for each dimension. The scores resulting from the supplier surveys are calculated into an overall score on a scale of 0 to 500 – the Working Relationship Index - where a higher score means a higher supplier satisfaction. www.chainaonline.com

SPECIALFEATURE Relationship 1. Supplier trust of OEM 2. Supplier-OEM working relationship

OEM Communication 1.OEM open and honest communication with suppliers 2.OEM communicates timely information 3.OEM communicates adequate amounts of information

OEM Help 1.Help OEM gives to suppliers to reduce costs 2.Help OEM gives to suppliers to improve quality

OEM Hindrance 1.OEM 1 ate/excessive engineering changes(reverse measure) 2.Conflicting objectives across OEM functional areas(reverse measure) 3.Supplier given flexibility to meet piece price/tooling cost objectives 4.Supplier involvement in OEM product development process

Supplier Profit Opportunity 1.OEM shares savings from suppliers' piece price cost reduction proposales 2.OEM shares savings from suppliers' value chain cost reduction proposales 3.OEM rewards high performing suppliers with new/continued business 4.OEM covers sunk costs on cancelled or delayed programs 5.OEM concern for supplier profit margins when asking price reductions 6.Suppliers' opportunity to make acceptable return over long term

Figure 1. Dimensions and sub-criteria of the Working Relationship Index .(Source: PPI) A powerful example of the value of high supplier satisfaction Since 2002, a yearly supplier satisfaction survey has been conducted among hundreds of NorthAmerican automotive suppliers to evaluate the interaction with the Big 6 OEMs and calculate their WRI scores. Figure 2 shows the results.

OEM -- Supplier Working Relations Very good

Very poor

Ford 162 GM 174 Chrysler 199 Nissan 294 Honda 384 Toyota 412 0

100

200

300

400

500

Figure 2. Results of the 2007 WRI survey for the Big 6 North-American OEMs. (Source: PPI). www.chainaonline.com

The 2007 results are indicative for the results over the last 6 years. The survey has consistently shown a higher score for the Japanese OEMs compared to the US Big Three. North-American suppliers are structurally more satisfied doing business with the Japanese OEMs (J3) than the Detroit-based US OEMs (D3).

These results reflect a fundamental difference in supplier management by the J3 compared to the D3. In Toyota’s view, suppliers are an extension of its own factories. Hence, Toyota works as hard to take waste out of its suppliers’ products and processes as it does within its own factories. Toyota sends its best engineers to work with and train suppliers to find product- and process-savings.

On the other hand, D3 purchasing practices are much more adversary: sourcing is perceived as a zero-sum game where the objective is to squeeze the suppliers to the limit in tough negotiations. In other words, the D3 tends to focus on price, where the J3 focuses on cost, the elimination of cost and the building of suppliers’ capabilities to continuously reduce cost. This does not mean that Toyota applies less price pressure than GM. The survey finds that Toyota applies at least the same price pressure. However, with a carefully specified target cost for each part, Toyota offers the full help and support to suppliers to reach that cost, and encourages suppliers to contribute their own talents and ideas to reduce cost.

Great supplier relationships do not depend on how much price pressure is being applied, but in the way it is applied.

Obviously, suppliers value Toyota’s approach much more than the D3 approach, and naturally channel their best people, innovations and ideas to the J3. Clearly Toyota has benefited from suppliers’ best capabilities: their cars are lighter, are more fuel-efficient and have more advanced electronics and power-trains than the D3’s cars. With 70-80% of the content and cost of a car being purchased parts, we can understand one significant reason why GM today is fighting bankruptcy, while Toyota is one of the ten most profitable companies in the world.

The automotive sector makes for a great example with OEM names that are familiar to all of us. But make no mistake: the conclusions are universal and applicable to any industry where purchased products and services make up an important part of COGS. Companies in different industries like chemicals, powertools and consumer goods have adopted Toyota’s approach to supplier management and have gained similar results: immediate cost reductions and performance improvements and satisfied suppliers which provide them their best talents and innovations to strengthen their long-term competitiveness.

Supplier satisfaction in China China is a major and growing supply-base for many industries.

Toyota’s lessons are as relevant in China as anywhere else. Companies that source in China have to ask themselves the question: how do we establish good supplier relationships and benefit from the best resources of the best suppliers? This is all the more important due to the recent cost-pressures in China: the inevitable concentration of companies will leave the best suppliers standing, and they will be in a position to choose their customers.

On the practical sides of buyer-supplier relationships, Western companies sourcing in China usually have a lot of potential to improve. Late and inadequate communication, conflicting objectives between departments, excessive RFQs and ECOs all lead to poor relationships. Due to inherent communication barriers, more emphasis on these obstacles is needed in China than in other places.

Solving these issues is a matter of internal organization.

Too many companies sourcing in China take a transactional approach to sourcing by focusing on obtaining the lowest possible cost. There is great opportunity though in taking a more strategic, collaborative approach with Chinese suppliers. Chinese manufacturing operations have relatively high levels of waste in their processes. Fully embracing Toyota’s partnership approach to sourcing by helping suppliers to reduce working capital, improve quality performance and reduce lead-times can lead to spectacular results. As China moves up the value chain, companies who are able to deploy design and lean-production specialists to reduce waste in their supplier’s operations will not only get direct financial benefits, but also will make the best use of the suppliers come their way.

NOVEMBER/DECEMBER 2008

35

COMPANYPROFILE

High-end Italian suits explore production and distribution in China

L

elio Gavazza is General Manager of Wenzhou based Sharmoon EZ Garments Co. Ltd., a joint venture textiles manufacturer which manufactures high end men’s suits for the China market. CHaINA Magazine spoke with Mr. Gavazza about their operations and strategy in China especially in a time where textiles manufacturers are struggling.

Can you tell us about your company?

Lelio Gavazza (LG): Sharmoon EZ Garments Co. Ltd is a 50-50 JV between Zegna Group and a Chinese company which was formed 5 years ago and since then has been operating in the market with great success. We have nothing to do with Zegna Group, because we don’t produce garments with a Zegna label. At Sharmoon, we do everything with a Sharmoon label or with a private label of our garment.

Why don’t you make the Zegna suits in China?

LG: Up to now, Zegna is imported from Italy. Basically Sharmoon benefits from being in touch directly with headquarters in Switzerland and in Italy. We have all the benefits of design and technician support from Zegna Group, but as far as the market is concerned, we are working in different sectors. We also do some export for international customers, but we strongly believe that in the next few years, we will be growing very fast in the Chinese market.

How much does a Sharmoon suit cost?

LG: We have different price ranges but our opening price is 3,000 RMB, using Chinese fabrics and can go as high as 15,000RMB when you have a Zegna fabric made in Italy with the suit made here in Sharmoon.

So it is obviously still a high-end product but priced lower than the Zegna brand?

LG: Yes, the aim of Sharmoon is precision, and we intend to reach the highest level customers in China, given our capability coming from the Zegna Group, to make very high level and quality clothes. www.chainaonline.com

This must be a good time for your company given the increasing wealth being produced in China and the reported demand for luxury products?

LG: It is, this year will be a very interesting year, because we also made a lot of changes in the company and modified our company structure somewhat to meet the market. I can foresee for the next few years that we will have even more Chinese customers.

We do have a lot of competitors who are of course pushing hard in their quality. All the companies in our sector recognize that if you want to succeed in this market, you have to have a good quality product and be in touch with the market.

NOVEMBER/DECEMBER 2008

37

COMPANYPROFILE What are some of the strategies you use to stay competitive?

LG: As a company in the top tier in terms of customer segmentation, we need to pay a lot of attention to the quality and design of our products. For this reason, several months ago, we started pushing a new product in our stores, an “FDM” suit. Basically customers can go inside and have an Italian tailor custom design the suits in our shop. Customers can rely on our expertise and the flavor that we bring from Italy to them. Chinese customers are very interested to have European style design.

I CAN FORESEE THAT IN THE NEXT FEW YEARS THOSE CHINESE COMPANIES THAT HAVEN’T PAID ENOUGH ATTENTION TO QUALITY WILL DISAPPEAR BECAUSE OF THE COMPETITION We hear a lot about low-end textiles manufacturers shifting outside of China, is this affecting your high end-niche?

LG: To some extent the quality of production in India is improving and I would say in the next few years, companies there will play a big role in the textile market, particular in the medium-end customer segment.

Lelio Gavazza, General Manager, Sharmoon Zegna

38

NOVEMBER/DECEMBER 2008

Are India or Vietnam an option for you to set up operations?

LG: I would say no. Because Sharmoon doesn’t have a huge amount of volume as many companies may have in China. We make 260,000 pieces per year and we are not looking for customers who can buy thousands and thousands of pieces every year. Our focus is on pushing the quality and making sure that the Sharmoon brand is connected with international customer that give us fewer than a thousand pieces per year. With those assumptions, there is no need for us to set up operation outside of China.

But for sure it’s going to be really interesting to understand how our company is going to move up in the market.

Is the quality of textiles production better in China than elsewhere?

LG: For a company like Sharmoon, we are working at the top of the spectrum, the quality is better in China, but for companies working in the mid-range sector, I would say the quality in India or Vietnam is at the same level. I can foresee that in the next few years those Chinese companies that haven’t paid enough attention to quality will disappear because of the competition.

When material costs increase, do you pass it on to the consumer or do you absorb the increase?

LG: We were not able to pass on all the cost increases, such as those on salaries and material supply to our customers. As a result we made some modifications to the business processes and the organization of the company. We are an international company with international management so we try to recover the cost increases through greater efficiency. This is a key factor to surviving in the future. I don’t know whether Chinese companies are able to do this kind of change. Probably they will try to rebate this cost increase to the customer if the customers are willing to accept that. Customers are always looking around for alternative suppliers.

As Chinese companies pay more attention to design and development, do you think they more textiles design will shift from Europe to China?

LG: It’s going to happen for sure, maybe not in the next few years but in the long term, maybe the next 10 years. As younger generations of Chinese people have experiences around the world they complete their studies in Italy and other places, they are developing a more sophisticated taste for design. I’ve seen beautiful things made by Chinese companies.

It’s going to be difficult but it will be something that will happen for sure in the future.

Participants at the China Supply Chain Council Fashion and Apparel workgroup lunch

www.chainaonline.com

Sea freight rates crisis?

Recent reports say that the cost to ship a container from Asia to Europe plunged recently from

just a few months ago to

just today.

While ocean carriers were making great profits over the last few years, the incredible reversal in rates has totally changed market dynamics, to the benefit of shippers but to the financial peril of ocean carriers.

Eivind Kolding, chief executive of Maersk, the world’s largest ocean carrier, was reported in the Wall Street Journal as saying recently that spot market rates for container moves are simply “unsustainable.”

The dramatic drop in rates is the result of several factors. Volumes of ocean shipping have slowed, but not that dramatically. After years of double-digit annual gains, London’s Drewry Shipping Consultants Ltd., a respected research and consulting firm, expects container volumes from Asia to the US to shrink by about 5% in 2009.

Eivind Kolding, “spot market rates for container moves are simply unsustainable.”

PRODUCTRECALLS

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

Hasbro Inc. recalls Nerf Blasters due to hazard The U.S. Consumer Product Safety Commission, in cooperation with Hasbro Inc., of Pawtucket, R.I. announced a voluntary recall of about 330,000 units of Nerf™ N-Strike Recon Blasters.

The blaster plunger can pull the user’s skin during firing of the toy blaster resulting in injury to the face, neck, and/or chest.

Manufactured in China, the product was sold at Wal-Mart, Target, Toys R Us, discount stores and toy stores in the U.S. from November 2007 through August 2008 for about $20.

Outdoor playset gliders recalled by Backyard Play Systems About 500 units of Heartland/ Yardline/ Backyard Play Systems Outdoor Playset Gliders have been voluntarily recalled by Backyard Play Systems LLC, of Monroe, Michigan. Some of the gliders were shipped with assembly instructions that did not inform consumers to tighten all lock nuts during assembly, including those attached by the manufacturer, posing a fall hazard to children. Manufactured in China, the glider is sold by Backyard Buildings and More and Lowe stores and through other channels from February 2008 through July 2008 for about $100.

Rack Room shoes recalls girls sandals Rack Room Shoes Inc. of Charlotte. N.C. announced a voluntary recall of about 11,000 units of Girls Sandals due to the hazard of the ornamental flowers on the sandals detaching, posing a choking hazard to young children. The recalled girls sandals are leather with attached leather flowers and were sold under the Kids Feet name. Manufactured in China, the importer has received one report of a flower separating. No injuries have been reported.

Wal-Mart recalls general electric toasters due to fire and shock hazards Wal-Mart Stores Inc., of Bentonville, Ark. announced the voluntary recall of about 210,000 General Electric Toasters due to the hazard that an electrical short circuit can occur between the element and the bread cage, posing a fire and electrical shock hazard to consumers. Wal-Mart has received 140 reports of fires or sparks coming from the toasters or the toasters tripping the circuit breaker in consumers’ homes. Manufactured in China, these General Electric Toasters were sold at Wal-Mart stores all around the United States from September 2007 through July 2008 for between $17 and $28. www.chainaonline.com

Razor USA recalls PowerWing three-wheeled scooters Razor USA LLC, of Cerritos, Calif. announced a voluntary recall of about 103,000 units of Razor® PowerWing™ three-wheeled scooters due to the undersides of the foot platforms posing a laceration hazard to children. Razor has received 10 reports of Achilles tendon or ankle lacerations, including four consumers who required tendon surgery and three who needed stitches. Manufactured in China, the product was sold by authorized retailers in the U.S. and online from October 2007 through September 2008 for about $100.

Pottery Barn recalls wooden hammock stands Pottery Barn, of San Francisco, California announced a voluntary recall of about 30,000 units of Wooden Hammock stands due to fall and laceration hazards. Pottery Barn has received 12 reports of injuries requiring medical attention, including lacerations, neck and back pain, bruising, and one incident involving fractured ribs. Manufactured in China, the product was sold through Pottery Barn’s catalog and the firm’s web site from March 2003 through July 2008 for about $300.

NOVEMBER/DECEMBER 2008

41

DON’T MISS OUT!

List your company in the most comprehensive

supply chain services directory in China

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

• Material Handling Equipment

A comprehensive bi-lingual listing of vendors, service and equipment providers, consultants and IT solutions providers for the supply chain and logistics industry n Companies are listed according to their specific service offering LowendalMasa

n In-depth company profiles including contact details and full description of services and solutions

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n Lega status in China 企业性质 Business Consu ting Compa 商业咨询公司 y n China head office 中国代表 处总部 1505-1506 H i Tong T we , 689 Gua gdong Shanghai, 20000 Roa , 1 上海市黄浦区广东 路689号海通证券 1505/1506室, 大厦 200001

n Free and complete online access at www.supplychain.cn

) +86 21 6 41 1255 7 +86 21 6 41 1253 8 www.l wenda lmasaichin

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C eme t Homo le ) +86 21 6 41 1255 7 +86 21 6341 1253 + chomo l @ wenda masa chin .cn Hou Xun ) +86 21 6 41 1252 7 +86 21 6341 1253 + xhou@l wenda masai china.cn

Who should list in the 2009 VENDORS DIRECTORY?

u Highlights

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

How much does a company listing cost?

A 12-month company listing costs only RMB4,000 (or RMB2,500 for China Supply Chain Council members). Because the Directory is re-printed every 6 months, we give companies the opportunity to update their profile online, meaning your company information will always be up-to-date.

朗达玛赛

n Corpo ate HQ 公司总部 Pari , France 法国 n Estab ished in China 在中国成 20 4 立于

• More than 15 years f expe ience • Consoli ted p o form turnover: 56,5 mil ion € fo the yea , ending march 3 th 2007 • 435 emp oyees around the wo ld • ,500 a tive clie ts, 55% of them i ted on the CAC 40, 43 f the Fo tune 500 • 18 ffices in the wor d • 1996: Found ing f Ma aï

by Thier y Fournier and François-X vier Ter y • 1996-20 4: 120 expe ts in 6 ffices in Europe, in Japan and t e United States a d 7 sou ing ffices in deve oping cou t ies • 20 4: openin g f the fir t ffice in China in Shang hai • 2006: acquis ition y L wenda group f Mas l ï. Masaï becom L wenda Masaï es

22

u Company

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Lowe dalM a aï China is a consultan Optimiz ion y compa y and Oper specia ized tional Perfor Purchasing in Co t mance. ts , Global So ter itories are rcing, Value Supply Chain Str tegic Ana ysis, ndu Optimiz tio trial Process .

G obal S urcing and p je ts includ (purchasing e a tr tegic m turity, s Analysis of vings p tentia inn v tio , LCC pote tial , LCC oppo capacity and tunities uch compensat so utions like ion), and as hosting and LCC organ office set up isational Lowe nda Masa abroad. ï China helps c ie qua ific tion, t , in the the contr a se e tion, tualis ation best Chine , and the the se supp lier devel opme . t of the

u Services

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ns n ine with contin uous effo ts to funct ion has achie ve a majo r role to pl y in imple savin g , the Purch asing co t optim iz tion pr me ting a je t. c mpa y-wid both consu wend a Masa tan y and e ï China bring opera tiona made so ution toget her l suppo rt in to the comp order to provid any’s need e a tai orGLOBAL SOUR .

CING • G obal Sourc ing tr tegy / Diagnosis • Supplier Sele tion / Qua ificatio Developme n/ t • Sourcing Oper tions amp-Up • Internationa l Purchasing Office Set-U p / Organisation Coaching / CO T O TIM ZATION • Supply Chain Design / Optim iz tion • Retail Life Co t Optim iz tion • Design To Co t • Ana ytical Co ting OFFSHORE PURCHASI NG OFF CE • Added-Valu e Ho ting

CONS U TING F RMS

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

How is the 2009 VENDORS DIRECTORY distributed and promoted?

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

To find out more about how the VENDORS DIRECTORY can contribute to your marketing needs in China, please contact: Wendy Yu

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

8 www.supplychain.cn

EVENTUPDATE

China’s express logistics market

By Russel Beron

“You have to get their heart,” said Michael Drake, managing director, Greater China, of global logistics giant, TNT when speaking of how the company integrated 14,000 Hoau Logistics employees into TNT’s China operations.

TNT acquired Hua Yu, the biggest truck operator on the mainland about 2 years ago for about US$135 million.

Many of these JV’s have not worked, but TNT’s appears to be paying off.

The company has big plans for China, with the goal of being the country’s number one logistics provider by 2030, Drake said at a China Supply Council 3PL workgroup in Shanghai attended by around 25 logistics professionals.

Drake talked about TNT’s current operations in China including some of the differences between the company’s strategy in China and elsewhere.

Like other foreign logistics service providers in China, TNT competes with local players by offering higher value services. “We can make money by going up the reliability scale to customers who are looking for value-

www.chainaonline.com

add,” said Drake. One of the ways the company does this is by investing – the company just invested 4 million Euros on trucks in China – and also by maintaining an 8 year cycle versus the 12 year cycle that most operators run on.

China challenges and opportunities Innovation is another way the company stays competitive. “TNT was the first company in China to implement the Electric Truck,” said Drake. Designed with Chinese truck-maker, Dong Feng, the truck is produced at about one fifth of the cost it would be in Europe. The electric truck will also be used in other markets that TNT operates in.

China has a unique set of challenges such as regulatory hurdles, an oft-heard complaint for foreign businesses operating in China. Although Drake feels that the regulatory environment is improving making it easier for foreign giants like TNT, FedEx and UPS to make headway into China’s domestic express and direct mail market. It will be interesting to watch how TNT’s goal of becoming the leader in China’s domestic express materializes in coming years; while the company may be well positioned, it will not be easy.

The China Supply Chain Council’s regular 3PL workgroup aims to provide a platform for senior logistics and freight professionals to get to network and share operational experiences on how to work with each other to increase efficiencies in China’s logistics sector.

NOVEMBER/DECEMBER 2008

43

TIERTWO

Hangzhou: A powerhouse in its own right

T

he Yangtze River Delta region has long been one of the powerhouses driving China’s economic growth. Only a few hours from Shanghai, Hangzhou is a key tier 2 city in the region, attracting significant investment and serving as both a strong manufacturing base and leisure destination with the attraction of the West Lake and other natural features. In the first Roadshow to Hangzhou, the China Supply Chain Council took a group of visitors on tours of three prominent, diversely different manufacturers in the city: industrial gas supplier, Air Liquide, cosmetics manufacturer, Mary Kay and contract electronics manufacturer, UT Starcom.

By CHaINA staff Accommodating big names like leading Chinese beverage company, Wahaha and Toshiba, which has its only overseas production plant for laptop computers here, Hangzhou is well situated as an East coast transport hub connected to waterways, highways and rail. As such, Hangzhou is a good base for both domestic and international trans-shipment with slightly lower labor costs.

Gases Air Liquide, an industrial and medical gas manufacturer with more than 40,000 employees in 75 countries started their operations in 1995 by establishing a Sino-Franco Joint Venture with Hangzhou Hang Yang Assets Management Co., Ltd. The company produces a range of gases such as oxygen, nitrogen and argon for commerical use and is also engaged in the engineering, manufacturing and construction of large industrial gas plants.

The waterways are used to transport their heavy equipment by barge to customers around the world. “The good thing is shipping is not an issue here and using the canal is cheap,” said Marc Ducrocq, Chairman & General Manager of Air Liquide’s Hangzhou operation.

According to Ducroque, Air Liquide is looking at Hangzhou and China as a long term investment, with the goal of China becoming

Leading executive search consultants for the maritime and logistics industry

Expanding into China The board of Plimsoll Management Consultancy is extremely pleased to announce the opening of its Shanghai office per 1st of November 2008.

The office will be led by Mr. Olivier Binkhorst, who has more than 10 years experience in both executive search and the maritime & logistics industry. He has managed board and management appointments in shipping, logistics, SCM and industrial in Rotterdam, Hong Kong and Shanghai.

Plimsoll, founded 1984, provides executive search, interim management and corporate finance to the maritime and logistics industry. The firm is market leader in the Benelux and ranks among the leading firms in Europe in its field.

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Plimsoll (Asia) Holding Ltd 1388 Sh n Xi North Road, Shanghai, P.R. China 200060 Tel + 86 21 61498286 Mobile + 86 159 213 186 00 Fax + 86 21 61498001 www.plimsoll.nl Plimsoll Management Consultancy Karel Doormanweg 7B 3115 JD Rotterdam – Schiedam The Netherlands Tel + 31 10 4272640 Fax + 31 10 4272630 info@plimsoll.nl www.plimsoll.nl Partner of Experts for Experts

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TIERTWO their centre of global operations. “Our company strategy is to be Chinese in China,” said Ducroque. Demand for their products is growing exponentially as the Chinese economy grows and matures requiring more of Air Liquide’s products. 2007 revenue in China was around 5 billion RMB (equivalent to around 500 million Euros) representing a 2 year growth of more than 6 times.

The company differentiates itself from its competitors by offering more value added services to customers and treating their suppliers more as partners.

Electronics Electronics and telecommunications provider, UT Starcom is somewhat higher up the value chain than cosmetics. Their offices, a mega-complex, complete with its own Starbucks and situated on the Binjiang River, are a showcase of their products and services which include the contract manufacturing of electronics and increasingly the provision of sophisticated Broadband TV broadcasting, surveillance and other IT solutions.

Tom Jia, the company’s senior BPI Manager in charge of supply chain operations, briefed the group on the complexity of UTStarcom’s global supply chain including how they manage their suppliers.

Our company strategy is to be Chinese in China

Cosmetics Also capitalizing on Chinese consumption growth is cosmetics giant, Mary Kay. As one of only ten companies in China permitted by the government to do direct sales, cosmetics giant, Mary Kay is fairly unique in China.

With sales in more than 35 markets worldwide, Mary Kay set up its only manufacturing plant outside of America in 1995 with the same goal of “enriching women’s lives” as they have in other markets. They do this with the help of over 300,000 Independent “Consultants” who sell their cosmetics. In their unique business model most of their sales take place over the internet to their sales consultants who then resell the product.

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While it is a somewhat smaller city by Chinese standards (6.5 million people) Hangzhou has some advantages over Shanghai for businesses establishing themselves in the Yangtze River Delta region, which include slightly lower labour costs for manufacturers and somewhat more of a laid back life for both salaried and factory workers.

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KNOWHOW

THE FLAT WORLD PLATFORM

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homas L. Friedman in his book “The World is Flat” speaks about the emergence of what he calls the “Flat World Platform.” According to Friedman, the Flat World Platform is the result of the recent convergence of several technologies which are transforming our world.

People are using it to create some startling results and it is opening up great opportunities for entrepreneurs and Supply Chain Managers.

Progressive thinking Chinese companies like Li & Fung and PCH International are leveraging this platform to not only optimize their supply chains, but to completely transform the way business is conducted. In this column, we take a look at The Flat World Platform.

Columbus got it wrong In 1492, financed by King Ferdinand and Queen Isabella of Spain, a radical thinking Italian entrepreneur named Christopher Columbus set out to establish a new Supply Chain between Europe and the Far East. Eschewing the traditional land-based caravan model, Columbus instead provisioned and staffed three relatively small ocean-going vessels. The daring erstwhile Supply Chain Manager and his crew set off on their adventure, heading West instead of East. Although they missed their intended target by a few thousand kilometers, Columbus and his crew demonstrated something the Vikings had known all along but, being mead-swilling Celts, failed to publicize – the world is indeed round.

Fast forward 500 or so years and we encounter journalist Thomas L. Friedman who insists, after travelling the length and breadth of this planet pursuing assignments, that the world is flat.

Friedman says that human history has undergone three distinct “Globalization Eras.” The first, Globalization 1.0, began with Columbus in the late 1400’s.

Globalization 1.0 is characterized by the projection of power, (muscle, horse, wind, steam) and by countries pursuing trade.

The question being asked in this era was, “How can my country go global?”

The second era, Globalization 2.0, began around 1800. This era is marked by cheaper, more reliable transportation and communication. This era is characterized by multi-national companies pursuing commerce and marks the beginning of a true global economy. The question being asked in this era is “How can my company go global?”

The flat world platform Friedman stipulates that the convergence of several technologies in the year 2000 heralded the birth of the 46

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Flat World Platform. These include: Powerful, cheap personal computing A fast, reliable global communications and information infrastructure (fiber-optic cable, communications satellites, earth stations and server farms) Dependable work-flow software (internet browsers, office productivity suites and a host of business applications) Standardization (in file formats, communication protocols, and business process) The creation of the Flat World Platform unleashes powerful potential that levels the playing field for entrepreneurs or, as Friedman puts it, “flattens the world.” This event marks the beginning of Globalization 3.0, an era characterized by individuals collaborating with others virtually instantly, anywhere on the planet. The question being asked in this era is “How can I collaborate and compete globally?”

In this paradigm, there is no distinct cut-off between one era and the next.

There are plenty of examples of cultures and mindsets from each of the 3 eras

THE ANTIQUATED CONCEPT OF ”COUNTRY-OF-ORIGIN” HAS NO MEANING

coexisting today. A good portion of the complexity of Supply Chain Management has to do with reconciling Globalization 3.0 innovations with a Globalization 1.0 or 2.0 culture or mindset. For example, the ideas of ‘countries’ and ‘borders’—a Globalization 1.0 paradigm—are quite strong in the world. Nationalism is not a bad thing by any means. But this mindset

Chris R Deans is a seasoned supply chain executive, with over 25 years of experience in the Energy, Forest Products, Government and Consulting Industries. He can be reached at: crdeans@hotmail.com

Supply Chain 101

Back to The Basics! influences the way international trade statistics are calculated and monitored.

In a world where finished products are comprised of raw materials and components sourced from all over the globe, the antiquated concept of “country-of-origin” has no meaning, and in fact leads to choices and behaviors that impede economic growth. There are plenty of entities, governments, multinational companies as well as individuals that are constrained by cultural inertia, bad habits and sub-optimal behaviors developed in a prior era. They are struggling to understand the profound implications of Globalization 3.0 and the Flat World Platform and how to leverage it for their own benefit.

SCM leaders in a flat world On the other hand, progressive thinking firms like Li & Fung and PCH International have seen huge opportunity in the Flat World Platform. Pursuing a “network orchestrator” business model in Flat World Supply Chain Management, these Globalization 3.0 companies own no factories yet sell billions of dollars worth of goods worldwide. Taking direct responsibility for coordinating activities occurring in their Supply Chains, they are much more than merely trading companies. Their advantages include: Being flexible and nimble Running True “Lean” supply chain “Democratizing” the supply chain— qualified SMEs get to play Fostering best practices and organizational learning Spreading risk Optimizing capacity Regardless of how companies perceive themselves in Friedman’s paradigm, his “flat world” theory gives SCM practitioners some food for thought and suggests they take a careful look at their operations.

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COMPANYPROFILE

Dow Chemical takes the long view on China As many multinational companies struggle amidst a beat down global economy and finding the right plan for China, The Dow Chemical Company’s China strategy appears to be paying off. So far Dow has invested over US$500 million in Greater China -- and earmarked another US$400 million -- for investing in manufacturing and R&D facilities and buying up Chinese companies such as Zhejiang Omex Environmental Engineering Company, a leading water treatment and design company Dow bought in 2006. The newly completed Dow Center in Zhejiang High-Tech Park in Shanghai will serve as the company’s business and innovation hub for Dow in the Asia Pacific region and signifies the importance of China to Dow. In this company profile, CHaINA Magazine spoke with William Loy, Supply Director, Major Projects and Ken Bryan, Asia Pacific Supply Chain and Customer Services Director at The Dow Chemical Company about their supply chain and operations in China.

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Dow’s Global Supply Chain: Fast Facts 3,500 employees world-wide 45,000 customer ship-to locations Shipping sites in 200 countries 2.5 million shipments each year 20% of shipments involve international border crossings with Customs clearance Two-thirds of volume by land; one-third by marine 80% not hazardous; 1% highly hazardous 99.97% incident-free This story is a rendition of a segment from Operations Asia, a new initiative into TV programming taken by the China Supply Chain Council, and our production partner, Yubi Digital. The soon to be released pilot show features the latest operations news, stories and company profiles from the Asian region.

lobally, Dow Chemical is a US$54 billion dollar business, with revenue in Greater China of US$3.3 billion. The company produces a wide range of chemical related products including coatings, adhesives, resins and provides solutions for everything from personal care and agricultural products to water treatment. “We try and make products that are better for consumers. For example water bottles, Dow doesn’t make the bottle, but provides the ingredients to make the bottle better, flexible and easier to use,” says William Loy, Supply Director, Major Projects at Dow Chemical.

Dow has had a long presence in China, first arriving in the 1930’s and then officially entering the mainland in the early 1980’s. In line with China’s ongoing push up the value chain, away from low-end consumer products to more sophisticated and higher end products, the competitive landscape has changed.

“The Chinese government is encouraging value added manufacturing rather than low-value assembly or piecework manufacturing. Chemicals, fits very well this,” Ken Bryan, Asia Pacific Supply Chain and Customer Services 48

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By Russel Beron

Director for the Dow Chemical Company comments.

“The Chemical industry takes basic raw materials, converts them into value added products which solve problems for a number of industries like automotive, construction, paint and coatings and electronics.”

Elaborating on China’s competitiveness, Loy makes the comment that “In the 1980’s mainly we were competing with multinationals from Europe and the United States.

As we evolved we started competing with the Japanese and then the Koreans and now increasingly we are facing competition from local Chinese companies and from the Middle East.”

The future is China The chemical giant which prides itself on its commitment to “human progress” through the harnessing of science and technology has big plans for China. “We’ve grown up with the Chinese economy,” says Ken Bryan, Asia Pacific Supply Chain and Customer Services Director for the Dow Chemical Company.

“China is currently our third largest global market and we expect within 10 years it will be our second largest, surpassing Germany and within 20 years it will be our largest market, surpassing the United States.”

Chinese companies are often criticized for lacking innovation and having little respect for copyright laws, www.chainaonline.com

COMPANYPROFILE however this may be changing as Dow and other companies make heavier R&D investments in China and their competitors continue to grow and innovate themselves. “Globally Dow

supplier management is something the company has to work hard at. Big companies like Dow are required to work a range of third party logistics service providers (3PL’s) in a market

spends more than US$1 billion a year on research development,” says Bryan.

When Dow opens the new centre in Zhangjiagang, over 600 engineers will be doing research for the global market.

In Ken Bryan’s tenure at Dow China over the past 3 years, the company has hired over 1000 people. “We have hired about one person per day, including evenings and weekends, for the past 3 years,” Bryan says.

Are Chinese companies able to compete? “If you look from a commodity product perspective, the Chinese companies are able to make the same product as most of the multinationals,” says Loy. “However if you look at the more market phasing end, which is more value added and technology and R&D driven, that is where the multinationals have a competitive advantage? “

that is highly fragmented. “We are looking at consolidating our suppliers and developing a few strategic suppliers who can help reduce inefficiency and streamline the operations,” Loy says.

“The multinationals and local providers each have different strengths and weaknesses which we leverage.”

In a country where logistics costs represent 20% of GDP, compared to mature markets where logistics costs are less than 10% of GDP, the last leg or “last mile,” whereby the product is delivered, is the most important determiner in bringing down the overall logistics cost, Loy says. “If you are running a 500 versus a 50 kilometer last mile, then your logistics costs will be more expensive.” This makes a clear case for companies to establish their operations near their suppliers, which some companies such as Intel

Business challenges Like many other companies in China, finding competent supply chain professionals is a challenge. Finding junior managers is easier, says Loy, top levels of management are hardest. Like other multinationals, to compensate for the shortage of experienced executives, Dow brings experienced people such as Loy and Bryan from other markets. “We use a hybrid of expats and we have a very clear path for each expat, so that each one of us will have to find and train a successor. At the same time we are developing people in China by sending them to the U.S. and Europe.”

For Dow, as with many companies who are required to manage suppliers for both the export and import market, www.chainaonline.com

are doing in Western China – albeit with government incentives.

Navigating regulations Ken Bryan notes that Dow is taking a lead role in driving the level of procedures and standards in China. “Dow has worked with BASF to try to bring a European standard of road transportation to China. We trained local companies to self audit and tried to bring up the standard of performance.

Another example is where we are working on barge transportation in China. We are working with the barge industry and government regulatory bodies to raise standards, to allow us to use more barges to move product on inland waterways.”

Many companies complain about the complex regulatory environment in China, where rules are changed on a dime. If companies can’t negotiate through this framework, it can interfere with their business.

“We find that by close monitoring of regulations, we can minimize surprises.

We have a supply chain regulatory guy in Beijing whose full-time job it is to work with the government and understand regulations. It is a dynamic environment, but I think it’s very manageable.”

Dow is a good example of a company with a clear long term plan and execution strategy for China, which as some companies have found out, is necessary for success in such a dynamic market.

“To be number 1, you need to have the capability the competency and the assets in place to be in that position.

The market is there,” says Loy. “We realize that if you don’t aspire to be number in one in China, you can’t aspire to be number one in the world.

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BOOKREVIEW

KFC in China Secret Recipe for Success Author: Warren K. Liu Publisher: Spiegel & Grau

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aiwan born, USA educated (Harvard MBA), Warren Liu returned to Asia in 1993 and worked for several multinationals operating in the region. From 1997 to early 2001, Liu served as vice president of business development for Tricon (now Yum!, owner of the KFC brand as well as Taco Bell and Pizza Hut). Liu’s book looks at the various aspects of KFC’s development in China that have propelled it to a market presence double its global arch-rival, McDonalds.

With chapters on marketing, government relations and the ‘Taiwan Gang’ leadership team, among others, Liu organizes his book along the lines of a business administration curriculum, a fine choice for his target audience, many of whom we may assume are so educated. In fact, the book often reads like an extended Harvard business school case, which for his target audience is a major benefit—a format they’re accustomed to.

Chapter Six focuses on supply chain.

Liu begins by describing the KFC China of 1997: “The organizational structure resembled a federation wherein each market was not only a self-contained profit and loss center, but was also in total and full control of its own destiny.” Rational at the earliest stages, but by 1997 creating “problems with quality, cost and operational efficiency.” He speaks specifically about the fragmented chicken supply chain, in which every market had its own, usually small, suppliers. Liu rightly points out that changing the structure was essential for future growth and quality management, but also a tough task—in large part because the various markets’ leaders had their own guanxi working in their favor.

So the company began to introduce its global ‘supplier tracking assessment and recognition’ (STAR) system, which greatly aided the transformation toward a more efficient, nationally managed supply chain, a transformation which had the added virtue of reducing the number of suppliers, and therefore allowing the company’s QA teams to enhance quality throughout the chain, because they could focus their efforts.

Some will likely challenge Liu for avoiding discussion about what must have been some seriously bareknuckle battles over the transformation.

But they should

understand that revealing such ‘dirt’ would not only be a likely violation of Liu’s confidentiality agreement, but also likely end his relationships with the company’s current and former leaders.

His section on corruption in the supply chain chapter points up this tension—he mentions only one incident, and that briefly, focusing the rest of the section on a general discussion of the topic (history, prevalence risk), as well as his personal, laudable approaches to avoiding problems. But Liu does invest some ink in describing the steps of the supply chain transformation, including sections on localization and competitive bidding.

Later in the chapter, Liu draws an interesting 2001 comparison with a highly-automated, 3PL-run McDonald’s warehouse in Shanghai, with a shiny 18-wheeler parked outside. Liu implies that the 18-wheeler was not a suitable vehicle for Chinese roads at the time, that such a high level of automation was also a mistake in a country where semi-skilled labor was so inexpensive, and that use of 3PLs wasn’t the right choice for a national restaurant brand at the time.

In contrast, KFC was highly vertically integrated—maintaining distribution/ logistics as company owned and operated entities, a stance at odds with KFC’s global practice but one that Liu believes brought the company major advantages in China, among others quality control. Sanlu’s ex managers and shareholders have become only the most recent in the food sector to experience the danger of insufficient QC in the supply chain.

Liu suggests that blame for McDonald’s apparent China supply chain mistakes lay with an insufficiently localized management team—part of his overall assertion that what he calls the ‘Taiwan Gang’ of KFC’s pioneer leadership team is largely responsible for the company’s success in China. This team, being Chinese and native speakers of Mandarin, were making and implementing China-appropriate decisions earlier, and more powerfully, than most of their competitors, while being sufficiently globalized to capture that aspect of competitive advantage; Liu asserts that such localization has propelled KFC into the number one spot among restaurant brands in the country (his Chinese edition of the book, published in 2006, is subtitled ‘Number One in China’).

For anyone who seeks an overview of a galloping success story in China, Liu’s book serves as a fine set of saddle and stirrups. Buy it, read it and learn how one foreign company in China gets it right—continually— and how.

John D. Van Fleet is director and editor of the NNA China Report. He has led a number of service sector businesses in China, and has lived in East Asia since 1991. He holds an undergraduate degree in English, as well as an MBA.

FACE-OFF PC Makers are in a fierce battle for market share. Chinese PC maker, Lenovo has made a smooth transition after buying IBM’s PC unit several years ago.

We took a comparative look at the two companies.

Lenovo VS Dell Headquarters: Executive Headquarters: Morrisville, NC Research Center: Beijing, Tokyo and Raleigh

Global Headquarters: Round Rock, Texas, Asia-Pacific & Japan HQ: Singapore

Number of Employees: 9,000 employees in China

5,500 employees in China

Revenue: $ 16.4 Billion Global Revenue (An increase of 17% in 2007) $ 484 Million Net Profit

$ 61.6 Billion Global Revenue $ 3.35 Billion Net Profit

Market Share: Market share in China: 36%

Market share in China: 18%

Manufacturing: Lenovo’s primary PC manufacturing and assembly facilities are located in Shenzhen, Huiyang, Beijing, and Shanghai, China. Additional manufacturing and distribution facilities are located in the United States, Mexico, Brazil, Scotland, Hungary, India, Malaysia, Japan, and Australia.

95% of Dell’s first stage manufacturing of notebooks is completed in China. Dell doesn’t do any of its notebook design and relies completely on Taiwan ODM’s(OriginalDesign Manufacturers).

Distribution: Lenovo’s extensive PC distribution network includes approximately 6,000 retail outlets in China.

Dell has 1,800 direct sales stores in China and hopes to increase the number to 3,000 by the end of 2008.

Gossip: William Amelio was senior vice-president at Dell and had been head of Asia-Pacific of the Texas computer maker for four years.

When Dell made him share the Asia portfolio with another exec, Steve Felice, Amelio grabbed the opportunity to become CEO of Lenovo. “If there is someone who just wants desperately to have a CEO title, they’re not going to get it at Dell,” said Kevin Rollins, Dell’s CEO, shortly after Lenovo designed a line of low cost PC’s for the U.S. market.

Other contenders: HP is a strong up-and-comer which is increasingly popular among Chinese consumers.

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INSIDEVIEW

Industry and the Ivory Tower need to talk!

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uelin Shen is an Assistant Professor of Operations Management at Shanghai University of Finance and Economics. Prior to taking an academic post, he worked at Intel and Optiant on supply chain software design.

CHaINA’s Editor spoke with him about the shortage of supply chain practitioners in China and how some of these issues can be addressed.

With a Ph.D. from the United States, why did you choose to teach in China?

Yuelin Shen: When I finished my Ph.D. in supply chain management at Boston University a few years back, I was eager to assume a faculty position in Shanghai. The manufacturing sector in the Yangtze River Delta appeared to be a natural lab for my teaching and research. I was able to move back to Shanghai last year.

What were your impressions about the supply chain profession upon returning?

YS: You often hear about the need for talent in the logistics and supply chain management profession in China, with companies finding it hard to recruit and retain qualified employees. I was therefore very surprised that my students, who majored in operations and logistics management, could not land jobs in this sector but had to join commercial banks. The reality told me that China is different from America; there is a dilemma among the employers, the students and the educators.

We always hear about the difference between Chinese and Western education.

What differences did you notice?

YS: The higher education system in China has long been criticized for the lack of innovation. Yet it is growing quickly in terms of the infrastructure and the student population.

It seems strange that the industry cannot identify the right employees while millions of new graduates hunt desperately for jobs each year? I believe the root is the lack of ties between the universities and industry in China. This is a particularly urgent issue for the supply chain profession in China.

How do industry and academia work

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together in the United States?

YS: Supply chain management is one management discipline where academia has been deeply involved in pushing the industry forward. I witnessed numerous professors from different universities in the United States helping to solve supply chain problems at companies such as P&G, Kodak, IBM, HP and John Deer.

In the past two decades, supply chain has meant the renaissance of Operations Research, an academic field nurtured in the military during World War II. In the United States, interaction between universities and companies has created a vibrant supply

chain profession. Industry leaders are often in the classroom lecturing to businessschool students, while professors and students frequently participate in industry projects through consulting and internship.

This exposes students to the profession while they are at school.

How does China differ to the United States

in terms of supply chain education?

YS: The dissemination of supply chain management in China is far behind America.

This is partly because of the nature of the industry in China. Although China has become the world’s factory or sourcing base, we only own a low-end segment of the global supply chain for many global companies. I have worked both at a leading American high-tech firm and at its Chinese counterpart. The former probably has the most complicated supply chain in the world, while the latter, though a giant in China, has a very simple supply chain network.

When I talk to my students about supply chains they think of functions like transportation, warehousing, trucking. Many of them are not excited by the wages and working conditions in warehousing or trucking companies. There are many challenging supply chain functions that students are not aware of as career options.

Is the Chinese government pushing collaboration between academia and industry?

YS: The Chinese government has viewed the logistics sector as an area of strategic importance for the nation. In response, many business and engineering schools have set up new departments to enhance this discipline. To solve the mismatch between the supply and demand for talent in China’s supply chain, the universities need to tailor their programs to meet the industry’s basic needs. At the same time, the industry should approach academia to share their needs.

We expect this kind of collaboration.

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INSIDEVIEW

Opportunities and challenges in sourcing and selling

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any companies—regional and global—still approach Chinese markets and supply sources with strategies that are not fully formed. They fail to recognize that distinct strategies—for entry, sales channel, supply and workforce—are a virtual prerequisite to successful sales and sourcing.

Michael Yee leads the Accenture Supply Chain Management practice in China and is based in Shanghai.

Entry strategy In previous eras, the main hurdles associated with China and other Asia Pacific locales were finding ready markets and then cutting through the red tape that protected them.

Nowadays, receptive markets are common, which means that the emphasis is more about competing for customers, resources and qualified business partners, such as local distributors. Moreover, China’s population growth is disbursed across a wide variety of urban, suburban and rural locations. This changes the battle plan by introducing more transportation, distribution and local marketing dimensions.

The bottom line is that a formal, country- or regionspecific, market-entry strategy is vital. And the most fundamental determinant of this strategy is deciding whether to grow one’s business organically or by acquiring one or several local companies. A leading player in business-tobusiness (B2B) foodstuffs exemplifies the value of making the right partnership choice. The organization has operated successfully in China since 1990, partly due to its acquisition of a local player that uses the company’s ingredients in its own offerings. That local partner also is helping the company build up its business-to-consumer (B2C) capabilities—an essential arrangement since one of the entity’s new B2C offerings is a food product that is not widely known or accepted in China.

Channel strategy Changing demographics should be the catalyst for new channel strategies. Across the Pacific Rim, most people still reside in rural areas. However rapid urbanization is quickly shifting the distribution landscape. At the same time, a burgeoning middle class—with greater disposable incomes and increased propensity to spend— brings different priorities to the marketplace.

On the one hand, the above challenges highlight the increasingly essential role of business partners (e.g., distributors or companies in other industries) that possess local knowledge of various regions, insights into customary business practices, and knowledge of (and ability to provide) competitive pricing. Some companies are actually taking back sales and marketing functions from their distributors, and relying on them only for fulfillment. Several of the world’s mobile phone manufacturers have followed this path. Early on, they worked closely with local partners to develop market insights and key capabilities. But as their proficiency grew and markets become more competitive, they moved to more of a

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direct model. A leading US-headquartered electronics manufacturer is also following this path.

Supply strategy Entering or sourcing from any new market— emerging, developing, developed—calls for a globally optimized, end-to-end supply chain that is simple on the inside, differentiated on the outside, and delivers the right item(s) at the right time and right cost to the right place.

To manage the vast distances and broad complexities of Chinese supply markets, most companies would do well to consider large third-party logistics providers. Entities like DHL, FedEx and UPS are structured to help businesses of all sizes source quickly and reliably. The added costs associated with not doing it yourself are generally neutralized by reduced assets and overhead, and greater convenience, reliability, predictability and scalability.

International procurement organizations (IPOs) are a potentially valuable part of companies’ Chinasourcing strategy. IPOs are basically shared services entities staffed with specialized sourcing teams that perform dedicated order- and logistics-management functions. Leveraging its China IPO, one of the world’s top retailers has developed a Hong Kong-centered hub-and-spoke sourcing system.

Workforce strategy 3PL or no 3PL, a distinct strategy for managing talent in emerging markets is essential. This generally implies tight coordination with a company’s homecountry talent-management systems, even though most of the success associated with attracting, developing and retaining Asia Pacific talent is unique to local cultures. Many HR managers working in emerging markets have had a rough time when techniques used in their home country are relied upon too heavily. A good example is a global retailer that relied too heavily on e-learning systems to bring its China-based staff up to speed. The company realized that face-to-face environments, which focused on specific case studies, were needed to fully overcome culture and language barriers.

Among multinational companies, it is increasingly common to invest in the development of middle managers. Hot commodities—people heavily sought by other companies—often result, which is why distinctive strategies need to be in place to retain top people.

The Best Strategy Regional and international companies looking to penetrate or source from China could learn much from established multinational companies. Still, the best strategy is multiple strategies: creating specific, distinctive approaches to market entry, channel, supply and workforce, and revisiting them frequently. www.chainaonline.com

www.chainaonline.com Shanghai: +86 (21) 51021617

Hong Kong: +852 8199982

Ho Chi Minh City: +84 (8) 35493711

INSIDEVIEW

Managing the Customs Function

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t is now common for foreign invested enterprises (“FIE”) engaged in manufacturing to have anything from 5 to 25 site locations across China. FIEs engaged in trading and distribution are now dispensing with intermediary import/ export companies and importing/exporting direct to their customers.

As a consequence, FIEs, particularly those engaged in manufacturing across multiple locations are establishing and managing a Customs Centre of Excellence (“Customs COE”) in China in order to effectively manage the customs function. This article assesses the challenges that exist in setting up such a center and the best-in-class practices that are being adopted.

Why does the customs function need to be managed?

The regulatory environment in China is complex and continually evolving. The decentralised structure of the Customs authority leaves scope for local interpretation, which results in a gap between the national regulations and the local practices. For example, standard operating practice in Processing Trade is different in Southern China compared to the rest of the country.

Since China Customs needs to meet revenue targets set by the central government, different measures are used to ensure customs duty and import VAT collection, including post-importation audits. Customs duty, consumption tax, and import VAT normally forms a significant cost in the supply-chain.

Core customs competencies, such as product tariff 56

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classification, impacts business at both strategic and operational levels. This is because the government implements certain economic and environmental policies by use of HS Codes, for example, the Prohibition and Restricted Lists for Processing Trade, and export VAT refund rates. Incorrect classification can have a significant negative impact on whether or not a business can engage in bonded manufacturing and what amount of export VAT refund it can claim.

Why has the Customs function not been managed well so far?

Given the significant risks and potential lost opportunities, you would think that companies might have developed the resources to manage the customs function. In reality, for many companies in

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INSIDEVIEW China, this is not the case.

Many multi-site companies have grown rapidly, through acquisition or joint ventures, yet have failed to capitalize on pooling their increased customs resources or sharing of customs knowledge and systems/processes. Multinationals that have entered into joint ventures or have acquired local Chinese businesses often inherit flawed customs practices or under-resourced customs functions and encounter significant resistance to change.

Current best-in-class companies in terms of customs management have come a long way. In some cases, they have been subject to customs investigations leading to temporary detention of management and employees resulting in significant harm to their reputation and bottom line. This has helped raise customs management high on the agenda of executive management who are allocating new resources to establish and manage the Customs COE. How do you structure your Customs COE? This will depend greatly on the nature of your business and “customs” footprint and the objectives of the Customs COE based in the current business and regulatory environment. In our experience a best-in-class Customs COE will follow some of the guidelines below.

Guiding Objectives: An effective Customs COE should achieve adequate balance between these three objectives.

Creating value through structuring and implementing effective customs planning strategies that are aligned to the direction of the business; Proactively ensuring high levels of customs compliance through self-assessment, and looking at advance rulings of new regulations; Managing risk with a robust defense to resolve customs audits and investigations.

General Suggestions: Based on our experience the Customs COE should be structured under the Legal or Tax area and be independent from day-to-day operations.

The Customs COE in a multi-site manufacturing enterprise may have a head count of anything from 5 to 20 people, depending on the business and regulatory environment.

People responsible for day-to-day compliance at a site level would typically still have “straight line” reporting into management of the local entity since the Customs COE is independent from operations.

Personnel recruited to the Customs COE may come from industry, service providers such as 3PLs, customs brokers or consultancies, as well as government.

Team Structure: A best-in-class COE would typically be structured around the following teams, each with their own focus: Assessment Team: Conducting “simulated customs audits” Identifying risks and gaps in policies and procedures Recommending corrective action Ensuring that corrective action is implemented Planning Team: Upgrading the Category local sites from say Category “B” to Category “A” Upgrading the Customs Handbook from ‘manual’ to say ‘e-account handbook’ Optimizing the use of bonded zones in the supply-chain Optimizing the use of preferential Free Trade Agreements Optimizing new structures and business models

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The Execution Team: Assessing new regulations Providing awareness building and compliance training Delivering internal customs and trade updates Developing and implementing standard procedures and processes Customs Broker and 3PL management (optional) The Customs COE can also be expanded to include Trade Compliance (export licensing, denied parties etc.) and supplychain security (C-TPAT, AEO etc.).

Area What needs to be managed?

A high-level summary of some of the most important areas is set out as follows:

Customs handbook Duty exemptions Prohibition List Restricted List Bonded transfers Bonded zones Bonded warehousing VAT refunds Customs valuation Tariff classification Country of origin Foreign exchange Miscellaneous Trade

Activity Type Bonded Manufacturing

Trade Compliance

Importing & Distributing

Import/export licenses

Sourcing & Exporting

Training

Regional Distribution

Customs Brokers

Supply-chain security Knowledge Record keeping Audit/investigations

What are some management tools?

For the Customs COE to be effective and to attain its objectives, the different teams will need different tools for the job. In the case of the assessment team for example, this would consist of: prequestionnaires, document request lists, sampling methodologies, standard assessment reporting formats, a compliance rating system and gap analysis reporting on follow-up actions.

Use of technology An investment in technology is essential in order to enable the Customs COE to be streamlined and function across a large territory with some degree of automation. At a simple level, standard operating policies, procedures and work instructions, forms, templates, records, papers and journals can all be uploaded to a dedicated intranet set. Training of executive management and operational staff can also be delivered on-line through use of a “virtual classroom.”

Summary The above article is intended to be ‘food for thought’ and has been written based on our collective experience over a number of years. Above all, communication and collaboration between the Customs COE and the local site management and stakeholders is fundamental to success.

NOVEMBER/DECEMBER 2008

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LOGISTICS SERVICE PROVIDERS

LOGISTICS SERVICE PROVIDERS Arvato Services China 162, Luoxiu RD, Shanghai, 200231 P R.C 中国上海市罗秀路162号，邮编200231 +86(0)21-54630606, ext 580 www.arvatoservices.com.cn

Agility 19/F Broadway Centre, 93 Kwai Fuk Road, Kwai Chung, NT, Hong Kong, China 香港新界葵涌葵福路93号 百汇中心19楼 +852 2211 8668 www.agilitylogistics.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

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

CEVA LOGISTICS 上海长宁区延安西路1118 号龙之梦大厦2608室 +86 21 5258 6611 www.cevalogisitics.com

To take out an ad in CHa NA, contact KAMAN CHENG tel: +86 (21) 5102 1617/18 • email: kaman@chainamagazine.com

滇 Go Kunming Whe her you're going to Kunming on business or for leisure you'll need to know how to get around, where to stay and the top places for food, drinks and fun.

GoKunming is the only English-language website serving he needs of visitors to and residents of Kunming, China's 'Spring City'. Filled with useful listings, an insightful blog that is updated daily plus forums and classifieds, GoKunming makes it easy to get the most out of one of China's top second-tier cities.

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NOVEMBER/DECEMBER 2008

LOGISTICS SERVICE PROVIDERS

LOGISTICS SERVICE PROVIDERS

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

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

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

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

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

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

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

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

ELEE Elee Shanghai Offce 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

LOG FASHION 375 Kefu Rd, Nanxiang Town, Jiading District, Shanghai, 201802, China +86 13917614568 www logisfashion.com

FM LOGISTIC 2099 Xinqun Road,Pinghu EDZ, Zhejiang Province. 浙江省平湖经济开发区新群路2099号 +86 573 8527 3072 www.fmlogistic com

Maersk Logistics 中国上海黄浦区南京西路338号天安中心24 楼 200003 24/F, Tian An Centre No. 338 Nanjing Road Shanghai， 200003 +86 （21）23062666 www maersk-logistics.com

HAVI FOOD SERVICES 6 Xingsheng Jie, Beijing Economic & Technological Development Area, Beijing, 100176 100176北京经济技术开发区兴盛街6号 +86 010 6788 3335

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

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

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

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

RUNBOW LOGISTICS Office #207, Building 39 No. 2688 Yindu Road 201108 Shanghai, China +86 (21) 5443 1002 www runbow-logiitics com SCHENKER Room 3802-3806, Raffles City (Office Tower) No 268 Xi Zang Zhong Road, Shanghai 200001, P R.China 上海市黄浦区西藏中路268号来福士广场 3802-3806室邮编：200001 +86 21 6170 8888 www schenker.com.cn SCHNEIDER LOGISTICS UC Tower,Suite 1605,No 500 Fu Shan Road,Shanghai,China 上海浦东福山路500号城建国际中心1605室 +86 21 5058 7970 www schneider.com

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Sourcing Director – APAC Our client is one of the world’s leading manufacturers and suppliers of fitness equipment and one of the most recognised brands in the industry.

Senior APAC leadership role U Shanghai based Reporting to the Global Sourcing Director in the USA, this newly created role will be leading the entire sourcing and supplier quality functions for Greater China. Your objective is to reassess and enhance the OEM supplier base and drive a TCO approach to sourcing. By conducting thorough market analysis, supplier selection, qualification and management of product lifecycles, you will improve and attain best pricing and supplier quality. You will work alongside NPD, engineering, logistics and quality teams globally, to deliver products on time, which meet the design, quality and standards of the organisation.

The successful candidate will be degree qualified in a supply chain related discipline with at least 10 years experience in sourcing and five years in a senior management role within a manufacturing industry (mechanical related). You will have proven experience in driving sourcing best practice, achieving aggressive cost savings and leading end to end NPI projects. You will also work closely with overseas sourcing and business stakeholders; hence the ability to effectively communicate and influence is essential. Fluency in English and Mandarin is a prerequisite.

To apply for this position, please go to www.michaelpage.com.cn/apply quoting reference number H319030 or call Josh Hollway on (+8621) 3222 4758 for further details. Data collected will be used for recruitment purposes only.

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

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

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

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

CONSULTING FIRMS

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

公楼1709室, 200021 +86 21 6391 8356 +86 139 16217254 www.araia.com BAKER & McKENZIE 14/F, Hutchison House 10 Harcourt Road Hong Kong 香港夏悫道10号和记大厦14楼 +852 2846 1888 www.bakernet.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

BARKAWI A 705, Dong fang Road, Eton Place, Pu dong New District, Shanghai, P.R. China 200120 上海东方路裕景国际商务广场A705室 +86 21 6859 9686 www.barkawi.com

DEMAND MANAGEMENT SYSTEMS PO Box 6180, Norwest Business Park, Baulkham Hills BC NSW 2153 Sydney, 2153 Australia +612 9659 4555

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

DESCARTES SYSTEMS 4106 China Development Bank Tower, No.500 Pudong Road (S), Shanghai, 200120, P.R. China 中国上海浦东南路500号国家开发银行大厦 4106室 200120 +86 21 6109 5785 www descartes.com DRAGON SOURC NG Suite 1502, Jin Tian Di International Mansions 998, Renmin Road Shanghai, 200021, P.R.China 上海市人民路998号今天地国际大厦 1502室, 20002 +86 21 61413955 www dragonsourcing com

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CONSULTING FIRMS 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 ESTABLISH Room 609, Tian An Centre No. 338 West Nanjing Road Shanghai 200003 上海南京西路338号天安中心609室 邮编 ：200003 +86 21 6359 1980/0486 www.establish cn HUDSON Unit 2302, 23/F Hongyi Plaza 288 Jiujiang Road Shanghai, China 200001 上海市九江路288号 宏伊国际广场23楼2302室 +86 21 2321 7888 www.hudson com BM GLOBAL BUS NESS SERVICE BM 中国有限公司 北京市朝阳区工体北路甲 2号 盈科中心 BM 大厦，25层 邮编：100027 +86 10 6361 8888 www.ibm com/cn/zh/ NTEGRATED DECISION SYSTEMS CONSULTANCY No 511-1-302, Jingsong Wu Qu, Chaoyang District, Beijing, China 100021 中国北京100021 朝阳区劲松五区511-1-302 +86 134 6675 0455 www.idsc com sg

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

中国上海市湖滨路202号普华 永道中心11楼 +86-21-2323-8888 www.pwccn.com 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 shanghai-eandt@lr.org LOGISTICS RECRUITMENT 2B, Apollo Building No. 1440, Yan An Road © Shanghai 200040 上海市静安区延安中路1440号

CONSULTING FIRMS 阿波罗大厦2B 邮编： 200040 +86 21 6248 8606 www.logisticsrecruitment.com.cn LOWENDALMASAI 1505-1506 Hai Tong Tower, 689 Guangdong Road, Shanghai, 200001 上海市黄浦区广东路689号海通证券大厦 1505/1506室, 200001 +86 21 6341 1255 www.lowendalmasaichina cn MANPOWER 36F, Xinmei Union Square, 999 Pudong Road (S), Shanghai, 200120, China 上海市浦东南路999号 新梅联合广场36楼邮编200120 +86 21 5878 2618 www.manpower.com.cn MB SIM TECHNOLOGY Bldg. 8, 865 Changning Road, Shanghai 200050, P.R. China 上海市长宁路865号8号楼5楼, 200050a +86 21 6240 5529 www.mbtech-group com MICHAEL PAGE INTERNATIONAL 601-603 Shanghai Kerry Centre 1515 Nanjing Road (West) Shanghai 200040, China 上海嘉里中心601- 603 南京西路1515号， 上海， 200040 +86 21 3222 4758 www.michaelpage com cn Resources Global Enterprise Consulting (Beijing) Co., Ltd Shanghai Branch Company 荟才环球企业咨询(北京)有限公司上海 分公司 Room 2705-06, Lippo Plaza, 222 Huaihai Middle Rd, Lu wan District, Shanghai, 200020 上海市卢湾区淮海中路222号力宝广场 2705-06室 Tel: +86 21 6386 8700 Fax: +86 21 6386 8712 www.resourcesglobal.com 7 ROCK INVESTMENT ADVISORY 7/F Crystal Century Tower, 567 Weihai Lu, Shanghai 200041 上海市威海路567号晶彩世纪大厦7楼 200041 +86 21 6288 8766 www.sevenrock.com SUPPLY CHA N CONSULT NG Suite 404, 20 Donghu Road, Xuhui District, Shanghai, CHINA 200031 上海市徐汇区东湖路20号404室 +86 21 5404 0818 www.supplychain-consulting.com TUV RHE NLAND 5-6/F AZIA Centre, 1233 Luijiazui Huan Lu, Shanghai,200120 上海市陆家嘴环路1233号汇亚大厦5/6楼, 200120 +86 21 6108 1188 www.chn.tuv com

REAL ESTATE SERVICES

REAL ESTATE SERVICES

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

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

BARLOWORD OPT MUS 35/F UOB Plaza 1, 80 Raffles Place, Singapore, 48624 , 48624 Singapore +65 6248 4722 www.barloworldoptimus.com

BAOWAN INTERNATIONAL LOGISTIC +86 21 3379 4008 www.blogis.com.cn BRAVOSOLUTION BravoSolution China CO., Limited 19F-08, 129 Yan An Road West, Chinese Overseas Building Shanghai 200040, PR China 上海市静安区延安西路129号华侨大厦19楼 08室,200040 +86 21 6145 8500 www.bravosolution.com 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

+86 21 5298 6622 www.gazeley.com GSE 27C Industry Building, 18 Cao Xi Bei Lu, Shanghai, 200030 上海市徐家汇漕溪北路18号实业大厦27C, 200030 +86 21 6427 9180 www gsegroup.com JONES LANG LASALLE 25F, Plaza 66 Tower 2, 1366 Nanjing Road West, Shanghai 200040 上海市南京西路1366号恒隆广场2期25楼 200040 +86 21 6393 3333 www joneslanglasalle.com.cn KNIGHT FRANK 莱坊 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 高厦1208室，200031 +86 21 6445 9968 www knightfrank com

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

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

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CLASSIFIEDLISTINGS

MagicBusCreative Grant-oh! Buchwald

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

LXE Room 03B,5/F Office Tower Huaihai Road(C) 200031 Shanghai, China 上海市淮海中路1045号淮海国际广场办公楼 0503室 +86 (21) 6124 9688 - 866/862 www.lxe.com

phone: +86 136 4165 6924 email: magicbuscreative@mac.com www.flickr.com/photos/gmartini REAL ESTATE SERVICES NEW CITY NVESTMENT MANAGEMENT Room 2602 Bank of Shanghai Tower, 168 Yin Chen Middle Road, Shanghai, China, 200120 上海银城中路168号上海银行大厦2602室, 200120 +86 21 3896 6388 www.newcitycorp com PROLOGIS Room 2708 Azia Center, 1233 Lujiazui Ring Road, Shanghai, 200120 上海市陆家嘴环路1233号汇亚大厦2708 室, 200120 +86 21 6105 3999 www.prologis.com IT SOLUTIONS AND SOFTWARE NFOR 15 F Raffles City Office Tower 268 Xizang Zhong Road Shanghai 200001 恩富东方软件（北京）软件公司 上海市西藏中路268号来福士广场15楼 +86-21-5359 9666 www.infor.com EMPTORIS Emptoris, Inc. PO Box 173 Clementi Central Post Office Singapore 911206 +65 6778 6395 www.emptoris.com JDA SOFTWARE 2905 United Plaza, 1468 Nanjing Xi Road, Shanghai 200040 上海市南京西路1468号 中欣大厦2905室 200040 +86 21 6289 7979 www.jda.com MANHATTAN Unit 2110, 21/F, Shui On Plaza, 333 MANHATTAN ASSOCIATES SOFTWARE Huaihai Zhong Lu, Shanghai, 200021 Shanghai, 200021 China 上海淮海中路333号瑞安广场21楼2110室 www.manh.com REDPRA R E Cloud-9 Mansion 7F 711 No.1118, West Yan‘an Road

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

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

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

COMPANYINDEX IT SOLUTIONS AND SOFTWARE

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

P.R.C. (518040) 香港亚太贸易卡有限公司深圳代表处 深圳市福田区深南大道6021号喜年中心A座 1101-02室（518040） +86 755 8830 9030 www.tradecard.com MATERIAL HANDLING EQUIPMENT BPS GLOBAL GROUP Unit 3104,Tower 1 Kerry Everbright City 218 West Tian Mu Road 200070 Shanghai, China 上海市闸北区天目西路218号嘉里不夜城第 一座3104室 邮编200070 +86 (21) 6317 8830 www.bps-group.net

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

A A.P. Moller-Maersk Group ����� ‌32 AB Twinnings ������������������������� 29 Abbott Nutrition ��������������������� 28 Accenture ����������������������������� 54 Agility �������������������������� 21,58,64 Airbus ������������������������������ 20,31 Alvarez & Marsal ������������������� 34 AMB Property Corporation 22,60 ATMS �������������������������������� 30,31 B Backyard Play Systems LLC � 41 Baisui United Logistics ���������� 21 Best Buy �������������������������������� 22 Bosch ������������������������������������ 30 Bright Dairy Group ����������������� 16 C China Daily ���������������������������� 17 China Petroleum & Chemical Corporation ������������������������������ 4 Citigroup ������������������������������� 10 Citimar ����������������������������������� 25 CMST ������������������������������������ 23 Core Solutions ����������������������� 30 Cosco ������������������������������������ 17 Cottonfield ����������������������������� 27 D Dalian Hanwei Enterprise Group ���������������������������������������������� 16 Damco ����������������������������������� 32 Decathlon ������������������������������ 30 Deloitte Consulting ������������ 7, 59 DHL ��������������������������������� 54, 58 Drewry Shipping Consultants Ltd., ��������������������������������������� 40 E EDI ���������������������������������������� 30 Elee Logistics ������������������������ 28 ERP ��������������������������������� 29, 30 Ethypharm ����������������������������� 27

F FAW Group ���������������������������� 20 FedEx ������������������������������� 43,54 Flextronics International �������� 28 Flügger Group ����������������������� 29 Ford ������������������������������������ 4,35 Fujitsu Siemens Computers �� 21 Future Logistics Solutions Ltd (FLSL) ����������������������������������� 23 G Gartner ���������������������������������� 27 General Motors �������������� 4,18,27 Georgia Institute of Technology (GIT) ����������������������������������� 5,20 GlaxoSmithKline ���������������������� 4 Global Sources ���������������������� 22 Grameenphone ��������������������� 17 GRAND China Logistics �������� 21 H Hasbro Inc. ���������������������������� 41 HP ������������������������������������ 51, 53 Hudson ���������������������������������� 60 I IBM ������������������������� 18,51,53,60 IC Companys �������������������� 27,29 IDS Group ����������������������������� 28 Inner Mongolia Yili Industrial Group ������������������������������������ 16 Intel Corp ������������������������������� 20 Itochu ������������������������������������� 30 J John Deer ������������������������������ 53 Johnson & Johnson ����������������� 4 JPMorgan Chase & Co ���������� 20 K KFC ��������������������������������������� 50 Kingdee International ������������ 30 Kodak ������������������������������������ 53 L Li & Fung �������������������������� 23,28

China Supply Chain Council announces the launch of SourceMakeDeliver®, a unique hands-on business simulation created specifically for the Chinese market that will engage your TeAam to effectively implement your Supply Chain strategic vision.

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

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

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

COMPANYINDEX

EVENTSCALENDAR

Lloyd ���������������������������������21,60 Logista �����������������������������������23 LowendalMasai ���������������������15 M Maersk ������������������������������32,40 McDonalds ����������������������������50 Mengniu Dairy �����������������������16 Michael Page International �����������������������������������������59.60 Microsoft �����������������������������4,31 N Nike ���������������������������������������28 Nokia ���������������������������������������4 O Oracle ���������������������������������27,28 Owner Katzscan Inc. ��������������10 P P&G ������������������������������������30,53 P&O/Nedlloyd �������������������������32 PCH International �������������������46 Petrochina ��������������������������������� 4 Pfizer ������������������������������������������ 4 Pizza Hut ���������������������������������50 Plymouth Yongle Tape ������������17 Pottery Barn ����������������������������41 PricewaterhouseCoopers ���������������������������������������� 3,23,60 Prologis ������������������������������������22 PSA Peugeot Citroen �������������19 PSI Engineering ����������������������10 R Rack Room Shoes Inc. ����������41 Razor USA LLC ����������������������41 Roche Holding AG �������������������� 4 S Samsung Electronics ��������������� 4 SAP ������������������������������� 27,28,29 Schenker ������������������� 7,19,21,58 Semantic Space Technologies �������������������������������������������������31 Shandong Yantai International Marine Shipping ����������������������21 Shanghai Hai Yue Logistics ���28 Shanghai Jiale Corp ���������������30 Siemens ������������������������������21,31 Sinotrans ���������������������� 21,33,59 Sinoway Herbage Cosmetics �������������������������������������������������30 Spiegel & Grau ������������������12,50 Starbucks Corporation �����������16 T Taco Bell ����������������������������������50 Telenor ��������������������������������16,17 Tianjin Zhongtian Aviation Industry Investment Co., ��������20 Toyota ���������������������������������20,35 Trapeze Networks ������������������18 Tricon Marine ��������������������������20 U UNIQLO ������������������������ 28,29,30 UPS ������������������������������� 43,54,59 W Wall Street Journal ������ 12,13,40 Wal-Mart ����������������������������19, 41 Wassax Inc. �����������������������������10 Y Yantian International Container Terminals (YICT) ���������������������21 Yum Brands �����������������������������50 Z ZTE. ��������������������������������������4,16 62

NOVEMBER/DECEMBER 2008

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YOU NEED TO SOURCE FROM EMERGING MARKETS.

YOU NEED HANS MIEDEMA. When does Agility’s Hans Miedema consider a job done? When he successfully executes critical gas turbine shipments for his global energy customer? When he applies Lean Six Sigma Methodology to eliminate defects for his clients in Eastern Europe and India? For Hans, and more than 32,000 other Agility employees in over 100 countries around the world, success isn’t measured in parts assembled or products shipped. Success occurs when our partners achieve their goals. It’s an intimate approach to logistics that demands individual attention and personal ownership. It’s how Hans Miedema brings Agility to supply chain challenges.

Hans Miedema Regional Support Leader Agility Global Account Team

agilitylogistics.com