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The Future of China’s Supply Chain Leadership 本土供应链管理人才的崛起

FROM THE EDITOR Managing Editor & Publisher Russel Beron

Project Executive Yolanda Gu Event Manager Echo Sun Photographers Grant-Oh! Buchwald Hideto Machikawa Contributing Writers Robert Barrett, Ethan Epstein, Bruno Lhopiteau, John D. Van Fleet, Fangqing Wang

Editorial Advisor Max Henry Contributing Editor Rebecca Kanthor Art Director How Xu Graphic Designer Acco Fang Finance Manager Jenny Kim

Editorial Advisory Board Jeff Broadhurst, Vincent Chang, Chris Deans, Marnix Ettema, John D. Van Fleet, Jean Luc Laboucheix, JP Sexton, Aldo Spaanjaars, Yann Teste, Guy Tran CHaINA Sponsorship For information on sponsorship opportunities with CHaINA Magazine, please contact: Russel Beron 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: 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.

How fast thing change in China. Not long ago, we were talking about the shortage of middle to senior local supply chain professionals and now we’re profiling a batch of young, talented, internationally experienced Chinese supply chain managers. This is not to say the shortage of senior managers with local know-how is resolved, but it seems China’s future supply chains will be in good hands. The messages threading through this issue are on the whole optimistic. The China Federation of Logistics and Purchasing’s (CFLP) Purchasing Managers Index, a measure of manufacturing activity in China rose to 54.0 in August, marking six straight months of gains. We are seeing this reflected in the wind up of new orders and supply chain activity from our community. While the rest of the world struggles to climb out of their debt mire, the Chinese, using investment vehicles such as the China Investment Corporation, are buying up anything the world will let them, including banks, property, retailers and commodities. Our look at the Fortune 500 list shows Chinese companies, albeit many of them state-owned, moving up the list at a fast clip. In a proud moment, Xinhua, China’s official news agency, reported that China recently surpassed Germany as the world’s biggest exporter – with the disclaimer that quality is still an issue. In reality though, exports are a smaller part of China’s GDP compared to the country’s massive fixed assets, the focus of China’s stimulus plan. Stimulus has also brought renewed interest to inland China, as our story on this topic suggests. A combination of government policy to correct an imbalance in distribution of wealth and the search for new markets by conglomerates such as Coca-Cola and Carrefour are driving growth as far west as politically sensitive Xinjiang. As Shanghai’s World Expo approaches, China is reaching its pinnacle. 2008 was the focus of much of the country’s excitement but 2010 is gearing up to be a milestone in the country’s speedy march to supremacy.

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:

Russel Beron Publisher and Managing Editor CHaINA Magazine

Chaina magazine’s sponsors:

CHaINA Magazine (ISSN 1992-9668) is published jointly by Painted Horse Media Limited (Hong Kong) and the China Supply Chain Council Limited (Hong Kong). There is no charge for qualified readers to receive subscriptions. Send subscription requests or address changes to 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.






China’s Future Supply Chain Leadership

Whirlpool’s Take on Global Sourcing




Suzhou, Gem Next Door


The Move Inland China’s Balancing Act


Solving the India Equation




6 Expo Crunch With the 2010 Shanghai World Expo around the corner, we looked at a few numbers related to Shanghai’s big fest.


8 Whirlpool’s Take on Global Sourcing Douglas Egerton, General Manager of Whirlpool’s Asia IPO talks to CHaINA about global sourcing and Whirlpool’s plans for the region. 10 Supply Chain Switch Raju Adhikari, Supply Chain & Logistics Manager for GEA Process Engineering sheds light on how to make the switch to a career in supply chain.


12 A look at some of the key recent stories impacting logistics and supply chain management in the Asian region.


Expert 38 Towards Supply Chain Enterprise Asset Management Assets, in all their forms are not always something companies look at closely. Robert Barrett of PricewaterhouseCoopers discusses the importance of Enterprise Asset Management. Quality 41 Top 5 China Quality Tips Andrew Reich of In-Touch Services provides pointers on ensuring quality. Region 42 Suzhou, Gem Next Door A visit to several sites at Suzhou Industrial Park highlights some of the benefits of the city also known as the Venice of the East. India 44 Solving the India Equation Authors Guido Nassimbeni and Marco Sartor weigh up the pros and cons of sourcing in India.

24 Homegrown –China’s Future Supply Chain Leadership As companies reconsider the costs and long term value of expatriate employees in China’s supply chain, a new breed of homegrown employees are stepping up to the challenge.

China/India 46 Is China’s Aging Population India’s Edge? China is rethinking its one child policy, mainly because of its aging population. We compare some of the differences between China and India’s demographics.

30 China’s Balancing Act – The Move Inland “Go West” has a new spin in China as companies look beyond the search for lower operational costs and focus on new markets in inland China.

Event 48 The Supply Chain Mix 48 Cracking the Retail Code 49 Logistics Real Estate Market vies for Space


Research 34 Service and Quality –New Mantra of China’s Logistics Sector The Council and FM Logistic released the results of a recently completed joint survey on Warehousing and Transportation in China. Special 36 Maintenance, Forgotten Supply Chain Link Bruno Lhopiteau of Siveco China discusses the risks of ignoring maintenance in your supply chain.

50 Cutting Through the Regulatory Fog Navigating the regulatory climate in China is no easy job. PwC sheds lights on recent regulatory changes impacting China linked supply chains.


52 Global supply chains: Understanding risks and rewards 54 58 58





An artist’s rendition, released in August 2009, shows the Mexico pavilion for the Expo 2010 Shanghai.

EXPO CRUNCH With the Shanghai Expo just around the corner, the frenzied construction pace continues. While government authorities bang out their own building, whitewashing and renovation plans, each country has pulled out all their avante garde resources to wow China and the world. The goal, noble but fuzzy - drive innovation, drive business partnership, showcase China, provide a forum for cultural exchange. In the midst of a recession, the ROI of money spent on country pavilions has been hard debated, one only hopes the show will be good.

44 70 184 95 200

billion - The cost in American dollars that the city of Shanghai spent on infrastructure related to the Expo

million - The expected number of visitors, according to the official Expo 2010 website - The number of days, the expo will last


- The number of participating countries and corporate sponsors



- The percent of expected visitors who are Chinese as opposed to foreign





Whirlpool’s Take on Global Sourcing Douglas Egerton, Asia IPO General Manager of Whirlpool has a wealth of experience: 25 years in Whirlpool procurement around the world. He explained to CHaINA some of the challenges of running an Asia IPO.

: What is your professional background and how did you end up in China? Douglas Egerton (DE): For most of my time at Whirlpool I’ve worked in the procurement or materials area. In the mid-1980s I was a member of the first Whirlpool team that began seriously looking at supply sources outside the USA. From there, as Whirlpool made its global expansion, I ended up assisting in some of those opportunities. My first international assignment was with our JV in



Mexico. After my original work there, I was then assigned to Italy, where we established a JV that we ultimately bought out. While in Europe, my responsibilities changed and I went to a position in Germany. China is my fourth expat role. I’ve played some kind of procurement role in almost every product category we have and I have led most of our commodity groups for purchasing. Because I’m familiar with a number of regions, products, and components, it seemed like a fairly good fit. What is the responsibility of the Asia IPO which you manage? DE: We have two offices here in China, one in India, and we just opened an office in Vietnam back in April. Our task is to understand the overall market environment and the competitive landscape of the suppliers to the Asian appliance manufacturer. So we identify potential suppliers that we feel can meet Whirlpool’s stringent requirements for quality and competitiveness and that can provide the level of business service that our regions require. We assess their capabilities and we help them become a Whirlpool supplier. And then working with the commodity, engineering, and manufacturing groups in those regions, we present the opportunities of Asian sup-

PROFILE Company pliers and develop either a regional or a global purchasing strategy. Once we get alignment on that strategy, the IPO assists in the execution of getting those suppliers started. What is your group’s volume of purchasing? DE: In total purchases within Asia the overall Whirlpool spend is close to 2 billion dollars. Of that, my group is really primarily involved in capital and tooling and direct material purchases that get exported. The total value we’re involved in is about 1/3 of that total. We have suppliers with manufacturing plants located in Asia with a long history with Whirlpool that can conduct business with us without a lot of involvement from my group. Then there are the suppliers that have not yet developed that ability to work directly with Whirlpool. They don’t have that history or knowledge of the region being served. That’s where the IPO really steps in and really assists, building the bridge between region and supplier and helping manage all those issues that make it difficult for the supplier to develop a good supply relationship with us. Is the plan for Whirlpool to increase its low cost country sourcing activity in China? DE: The appliance industry has always been a competitive market. This competitive landscape has changed significantly over the last few decades. As a company we have to always be assessing where the best opportunities are to find good quality components and raw materials to keep our product competitive. It used to be that a lot of the components that we use were not even available in China. As the component supply base continues to mature, I’m sure we’ll be able to continue to find more opportunities here. Some companies now talk about “best value,” as opposed to “low cost” sourcing. What metric does Whirlpool use? DE: In Whirlpool we call it Best Cost Country Sourcing (BCCS). We should make our decisions based on the best overall total cost of procuring. We changed the name but the original objective is the same. What it changes is how we look at the objective and set the metric. The BCCS metric is a more holistic approach. It is more complex to measure than it is to blindly designate a few low labor cost countries as Low Cost Countries (LCC’s) and then push business in that direction. We must measure and justify our strategies, using more knowledge of cost structures and cost drivers, logistics,

and economic considerations of the country you’re trying to source in, as well as the long-term performance of the component in our product. You end up having to look at overall total cost and where those costs can best be done. A challenge for China sourcing is that many companies in different regions are replicating some of the benefits of China, while reducing some of the downsides or risks of doing business here. If our regions can find suppliers that are logistically closer, without a time difference, with cultural and language similarities, and as competitive as China in quality and cost, then obviously the IPO has a difficult task. China may be a low cost country and I may be able to increase my percentage of buy but that doesn’t necessarily give Whirlpool the best cost place to source from. What are some of the key challenges for Whirlpool’s IPO? DE: Recently we have been more aggressive in expanding our scope of work from being a China IPO to being an Asia IPO. When this organization started a number of years back it was a fairly China centered organization. Our biggest challenge will always be to stay abreast of the competitive landscape and assess it correctly. We have to understand our competitors’ supply chains and how they are different from ours and why. Which of these differences are valid and add value to Whirlpool and which we are we hanging on to for some historical or non-value added reason? This challenge is even more dynamic in Asia. We’re a procurement organization so we’re supposed to be good at buying, but we also have to be good at selling, because we have to sell the regions and our commodity groups on the Asian opportunity. To be good at both of these simultaneously, as well as develop the supplier, requires us to work hard to find and maintain great people. Asia represents only 3% of Whirlpool’s global revenue. Why has Whirlpool not been more active in Asia, both in terms of sourcing and developing sales for the local market? DE: Whirlpool currently maintains a large presence in Asia. We have three large manufacturing plants in India and three in China, including our new international Joint Venture plant (with Hisense) in Changxing. Obviously we still have a small market share in Asia, but we’re committed to growing it. We’re currently developing a strong sales force and we’ve seen some positive results in the form of market share gains.



PROFILE Manager are still using paper-based supply chain systems. Even if the company is very small there should be a systematic computerbased system, even if they think it is unnecessary because they are used to doing it by hand. Maybe at the beginning it looks hard but in the long term you save money and time and you also find where the problem lies by analyzing data. You can have better relationships with customers and you can utilize your raw materials in a more efficient way. What makes your job interesting? RA: First of all, interaction with people. Internally and externally there are some challenges for example in how we provide good service. This is interesting and in dealing with new problems, you grow day by day. Working with Chinese people is also interesting. They are quite curious, especially when I speak Chinese fluently on the phone and they don’t know I’m a foreigner. When they talk about you, your background and your country, you can pass time easily with them.

Raju Adhikari Supply Chain & Logistics Manager, GEA Process Engineering

The Supply Chain Switch


aju Adhikari is the Supply Chain & Logistics Manager for GEA Process Engineering, a world leader in liquid and solid processing technologies. He came to China in 2005 on a university scholarship from the Nepali government, and stayed on to complete his masters and PhD. CHaINA spoke with him about his experiences. : Many people working in supply chain come from different backgrounds. What drew you to the field? Raju Adhikari (RA): In 2003 I joined a company as an IT manager and after some time the company started China sourcing activities for its European sister companies. Because of my background in the technical field (my bachelor’s degree is in Industrial Automation), the company asked me to take responsibility for the China sourcing operations. Gradually I took over purchasing, warehouse inventory and other logistics functions.



It sounds like you got started in supply chain almost by accident. Was it a difficult adjustment? RA: If you have some knowledge of IT you can start quite quickly in supply chain. Getting started in the practical aspect of the field is relatively easy. Interaction with people, finding suppliers, finding products, getting their ideas - that is quite different though. What is your perspective on supply chain management in China? RA: Well, most of the smaller companies

What are your professional goals? RA: In five years I hope to be managing at the corporate level. In the long term I may go back to Nepal and establish my own company. Any advice you can give for those just starting out? RA: My advice is they should have clear goals. Be familiar with all basic procedures of supply chain. One problem in China I have seen in my working life is that there are some unhealthy practices, like bribery and corruption. If one wants to advance in the supply chain field, you must keep yourself clean from those unhealthy practices. Be sincere to yourself and there will be lots of chances. If you are a foreigner and want to work in supply chain in China you need a basic knowledge of China and Chinese language. You have to learn how the system works, how to speak to people and how to respect their culture. If they sense you feel superior to them, then it is quite difficult to work with them. If they feel they are equal to you then they will work quite well with you and there won’t be many problems.




On Apple’s long awaited deal with China Unicom:

On Asia’s increasing economic importance:

On China’s investment strategy:

On the impact of recession for Asia:

“The economic center of gravity has been shifting for some time, but this recession marks a turning point. It’s Asia that’s lifting the world, rather than the U.S., and that’s never happened before.”

“It will not be too bad this year. Both China and America are addressing bubbles by creating more bubbles and we’re just taking advantage of that.” CIC is investing as much overseas each month this year as it did in all of 2008.

“If the consumer in the United States and Europe doesn’t come back, I’m not sure Asia has a Plan B.”

Neal Soss, Credit Suisse Chief Economist



“It’s a big deal for Apple in this sense: You are leaving an awful lot of units off the table when you ignore a country the size of China. China has taken to mobile phones almost like no other country.”

Charles Wolf, Needham & Co. Analyst

Kenneth S. Rogoff, Professor of Economics at Harvard

Lou Jiwei, Chairman of China Investment Corp. (CIC)


NEWS Supply Chain

LOGISTICS Shanghai to be Asia-Pacific logistics hub According to a recent Shanghai stimulus plan, Shanghai aims to be the logistics hub of Asia-Pacific by 2011. The output of the logistics industry in Shanghai will keep an annual growth of 10 percent and account for more than 13 percent of the city’s gross domestic product by 2011, the plan says. The city will speed up establishment of a logistics resource exchange center and set up public distribution centers to offer doorto-door logistics services, especially for agricultural products, medical equipment and medicines.

Shanghai’s logistics output increased 14.7 percent annually from 2006 to 2008 to reach RMB 179 billion (US$26.3 billion), 13.1 percent of the city’s GDP. - Source: Shanghai Daily

New logistics center launched in Tibet The world’s highest logistics center, located on the Qinghai-Tibet Plateau has started operation. With a total investment of RMB 1.5 billion, it covers an area of 533 hectares in Nagqu County. The center is di-



vided into a bulk cargo zone, an integrated logistics zone and a production zone and is expected to handle 2.2 million tons of goods annually by 2015 and 3.1 million tons annually by 2020. The goods will include raw minerals, local herbs, building materials and commodities. - Source: China Knowledge

SOURCING Fonterra could start more dairy farms in China Fonterra, infamous in China for its role in last year’s melamine milk powder scandal, is looking for more joint venture opportunities in China with the Chinese partners supplying capital and Fonterra bringing farm and management experience. Fonterra had five percent of China’s dairy market last year, and combined sales of foreign dairy products comprised about 12 percent of the total. - Source: National Business Review

ZPMC container cranes line up at the Yangshan Deep Water Port in Shanghai. Yangshan and other newly built logistic facilities are part of Shanghai’s plans to become an Asia Pacific logistics hub.

Indian team to do quality check at Chinese drug manufacturers India’s health ministry plans to send a drug inspection team to China to inspect factories that supply bulk drugs to India. The Drug Controller General of India (DCGI) has raised concerns about the quality of cheap made-in-China drugs used in Indianmanufactured medicines. According to an industry official, China is the largest supplier of raw material for bulk drugs to India and controls over 70% of the bulk drug market. - Source: Economic Times

Fonterra is banking on investing in more joint venture farms to recover from last year’s melamine-tainted milk powder scandal.


FoxConn Case Brings Up Concerns About Worker Treatment

In July, Chinese media broke the story of the suicide of a FoxConn employee targeted in an investigation over a missing prototype. 25-year old Sun Danyong, a young college graduate working in FoxConn’s logistics department, was given the order to send out 16 prototypes of the next-generation Apple I-phone in mid-July. Days later, after one was discovered missing and the employee interrogated, he jumped to his death from a 12-story apartment building. A string of online chat and text messages purportedly from Sun Danyong before his death seem to confirm that he had been mistreated during the investigation.

How do you think companies like FoxConn should handle these situations? Quang Tran, DSM

“I don’t know how the employee was accused but people should be considered innocent before proven guilty. I think the company has to have an internal process to control high IP-related issues.”

Sam Lee, InnoCSR

“I think it is very common in China. Companies need to have internal guidelines on how to handle cases like this and it has to be dealt with in an appropriate way with equal protection. They should start training their workers in a proper way so they understand that there are consequences and they should also have a proper awards and encouragements at the same time. This should be a very clear lesson for companies like FoxConn.”

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NEWS Numbers

The Fortunate 500 While the global recession took it's toll on many of the world's biggest corporations, Chinese companies, relying on their economy of scale, were able to climb the ladder on Fortune's list of the world's top 500 companies. An unprecedented 37 of the world’s top 500 companies by revenue came from China, up from 29 in 2008. Here are a few key figures we thought you might find interesting.

Top Ten Chinese Companies

Biggest Profits Worldwide Company

China Ranking

Overall Ranking

Revenue (Millions of Dollars)

% Change from 2007





China National Petroleum



State Grid


Industrial and Commercial Bank


Sinopec workers at Sichuan Puguang oil field which supplies Eastern China with gas. Ranked #9 on Fortune’s list of top 500 companies, Sinopec is the top ranked Chinese company in the annual list.

Net Profit (in millions of dollars)








Royal Dutch Shell













China Mobile Communications







China Construction Bank







China Life Insurance





General Electric


Bank of China







Agriculture Bank of China









Industrial and Commercial Bank of China





NEWS Numbers Key Figures On The World’s Top Ten Companies In Shipping And Freight Delivery

Biggest Losses Worldwide

Global 500 Ranking



Revenue (millions of dollars)

Profit (millions of dollars)

Deutsch Post






Fannie Mae

U.S. Postal Service



Royal Bank of Scotland





A.P. Møller-Mærsk Group






United Parcel Service












La Poste






China Ocean Shipping






Poste Italiane






Nippon Yusen






Mitsui OSK Lines







Net Loss (in millions of dollars) 58,707 43,166.9

General Motors








Ford Motors




Time Warner




China Ocean Shipping, also known as COSCO is one of the world’s largest freight carriers.



NEWS Industrial Property


Readies for New Offensive Flush with cash after recent cash injections from the China Investment Corporation (CIC), Macquarie Bank and most recently, the Canada Pension Plan (CPP) Investment Board, fund manager and industrial property developer Goodman Group is readying to take on the China logistics property market. The CPP will invest an initial US$132 million in a newly formed joint venture with the mandate of buying and develop assets in mainland China. The JV could invest up to a further US$150 million to develop facilities on land currently owned by Goodman in China. Goodman currently has a landbank of 300,000 square meters in China. This news follows the recent announcement of an investment into Goodman Group of close to 500 million from Macquarie Bank and the CIC. This development marks a new type of joint venture for Goodman Group. “Typically we do funds with 3, 4, or 5 investors,” Philip Pearce, Managing Director of

Goodman Greater China, told CHaINA. “This is the first time we’ve done a JV with just one other fund. The model of using 3rd party capital is the same as in other markets, it’s just the form the capital has been harnessed in is different.” “What it does is give us capital to develop our landbank and look to acquire other landbanks and other warehousing opportunities over the years,” says Pearce. “The joint venture will have a development focus. We’ll develop international standard warehousing space but we’ll be open to buying existing assets if the pricing and quality is right.”

Ben Cornish Takes the Reins of AMB China

AMB Property China announced a recent change in leadership as the company continues to develop their China strategy. Ben M. Cornish, who served as senior vice president and China COO, will



relocate from the company’s Shenzhen regional office to their Shanghai headquarters to take on the position of managing director of AMB Property China. Prior to joining AMB, Cornish was president of GMS China, a developer of retail properties. Previously, he was in charge of China real estate development for Wal-Mart International, served as managing director for the Southeast Asia Division of Koll Development, and developed warehouses for Trammell Crow in the U.S. and China. In his new role, Cornish will oversee AMB’s real estate activities in China, including operations, capital deployment

and business development of a portfolio of 4.1 million square feet (379,900 square meters) of logistics and distribution properties. Cornish will be taking over from Thomas F. Marquis, who has retired but will continue to act as a consultant for AMB. Cornish will be reporting to Michael Evans, the company’s Asia managing director, who says, “We are tremendously grateful for Tom’s contributions to AMB’s success, and I am confident that with Ben now leading our China business, the team continues to be well-positioned to take advantage of emerging opportunities as well as to meet the current and future needs of customers.”

NEWS Industrial Property

Warehouse Operators & Logistics Properties Expand in China

What is your experience of the retail and distribution climate?

Retail warehouse and logistics properties are attracting new interest from overseas companies despite slower demand for other industrial space in this financial downturn. DHL, Shinsegae Group, Nike and Preferred Freezer Services are just some of the companies opening logistics centers, warehouses and distribution centers in China. Demand for factories has been shrinking as some export-oriented businesses have reduced production and cut back on spending in response to weaker markets, according to an industry report from property services provider Colliers International. Yet, retail-oriented logistics and warehouse properties are proving resilient.

“Our plan for now is to keep opening new stores. We have 106 stores and in the future we are opening 20 stores per year. Our target is 200 stores.� Jeffrey Young, RT-Mart



NEWS India

India A roundup of news relevant to operations in India Ford to shift export transit point from Mumbai to Chennai Ford India has decided to shift its export shipping point for cars from Mumbai port to Chennai by early next year. Ford India Private Ltd. is all set to sign a second Memorandum of Understanding (MoU) with the Tamil Nadu government soon. Previously it had invested US$400 million there. It was reported earlier that Ford India has earmarked India as its strategic manufacturing hub for engines in the Asia-Pacific and Africa (APA) region. - Source:

Logistics parks planned along India’s main freight corridors The Indian railway ministry will start negotiations with state governments to identify locations for multi-modal logistics parks (MMLP’s) along dedicated freight corridors, an official revealed. These logistics parks, spanning an area of around 400-500 hectares, would be developed on a publicprivate partnership basis. Earnings from goods transport are two-thirds of Indian Railways’ revenue. Freight traffic has been particularly hit in the global recession. To improve the proportion of freight on railways, the ministry is preparing plans to encourage private ownership of rolling stock for commodities. - Source: Rediff

Cold storage heats up, as India offers incentives to improve transportation infrastructure.

Damco signs H&M in India and Pakistan Damco was appointed by H&M, the world’s third-largest clothing retailer, as its supply chain management partner in India and Pakistan. This is an extension of H&M’s and Damco’s current collaboration that already covers operations in Bangladesh, Cambodia, Indonesia, Sri Lanka, South Korea, Vietnam, and Thailand. Damco is the new, combined brand of the A.P. Moller Maersk Group’s logistics activities, currently known as Maersk Logistics and Damco. - Source: Business Standard

Food chains to benefit from incentives for cold storage in India Restaurants like Papa John’s and McDonald’s stand to benefit from the incentives given to cold storage and refrigeration companies to develop transportation infrastructure for agricultural produce. More investment will lead to more facilities, better product handling and transportation. India’s finance minister proposed that all capital expenditure —outside of land, goodwill and financial instruments — to build and operate such facilities, can be fully treated as tax deductions. India is the second largest producer of fresh fruits and vegetables in the world, with a cold chain industry worth US$2.6 billion. The proposal is also aimed at reducing perishable waste. - Source: Seema Sindhu / New Delhi

To address infrastructure challenges and improve freight revenues, India is building multimodal logistics parks along the country’s dedicated freight corridors.



NEWS Vietnam

Vietnam A roundup of news relevant to operations in Vietnam DHL launches China–Vietnam trucking service DHL launched a China–Vietnam crossborder trucking service which provides customers with tailored logistics solutions that are cheaper than airfreight and faster than ocean freight. DHL has successfully finished the first China–Vietnam trip within five days from Nanjing in south China to Hanoi, the capital city of Vietnam. The service connects major Chinese cities such as Beijing, Tianjin, Nanjing, Suzhou, Shanghai, Wuhan, Fuzhou, Shenzhen, Guangzhou, Zhongshan and Dongguan with Vietnamese cities including Hanoi, Haiphong, Danang and Ho Chi Minh City. Source: People’s Daily

Vietnam striving to reduce logistics costs Elsewhere, logistics fees are 10 percent of GDP but in Vietnam, they can be 25 percent. Overloaded ports and the weak transport infrastructure, large inventory volume, complicated administrative procedures and high investment fees are cited as contributing factors. Transport costs are high, up to 30 – 40 percent of product costs, and

weaken the products’ competitiveness. “Vietnam Logistics 2009” released by UK’s Transport Intelligence, says government investments in the next five years will improve the logistics sector. Source: Vietnam Business Forum

Vietnamese businesses complain about surcharge on Chinese imports Importers don’t understand a new surcharge for Chinese goods. Local importers started having to pay a China Import Surcharge (CIS) of US$5-60 per cubic meter of LCL goods. LCL importers previously had to pay only three kinds of charges, including Delivery Order charge, Container Freight Station charge, and Terminal Handling charge. Ngo Thanh Minh, head of the MGC Institute of Logistics, said the global economic slowdown had prompted Chinese logistics firms to lower ocean freight rates and in turn they collect CIS to offset the price. - Source: Thanh Nie News

Vietnam logistics boom exposes unqualified workforce While the Vietnam logistics sector is relatively new in the past decade, air and seafreight industry development and the official recognition of logistics as a business under the Commercial Law in 2007 have facilitated a boom. A Vietnam Freight Forwarders Association report says Ho Chi Minh City has about 600 logistics enterprises out of a total of 800 nationwide. Vietnam ranked fifth after Malaysia, China, Thailand and Indonesia in the World Bank’s Logistics Performance Index 2009 for the East Asia region. A weakness of the industry is the small size of Vietnamese firms and a lack of professionalism among its workforce. - Source: VNBusinessNews

Vietnam’s logistics industry is booming but the sector still struggles with bringing its labor force up to speed.



NEWS Movers

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

Thomas Lau, New Director of Airfreight for South China at Schenker International (H.K.) Ltd. Effective August 1, 2009, Mr. Thomas Lau was appointed as Director of Airfreight, South China of Schenker International (H.K.) Ltd. Mr. Lau joined the company in 1979. In the past 30 years, he has held various key positions in developing and growing the airfreight department and has profound knowledge and experience in the airfreight sector. He succeeds Mr. Eddie Chung who left the company. Directly reporting to Mr. Soren Poulsen, Managing Director of South China, Mr. Lau will oversee the airfreight business for South China including Hong Kong, Guangzhou, Shenzhen, Xiamen and Macau, to ensure each location’s functions align with the company strategy.

Damco and Maersk Logistics appoint Katherine Boesen as Chief Commercial Officer for Asia-Pacific Damco and Maersk Logistics have appointed Katherine Boesen as Regional Chief Commercial Officer for its Asia-Pacific operations. In this role, she will take on overall responsibilities of marketing, sales and business development in the Asia-Pacific region. Katherine holds an MBA from Macquarie Graduate School of Management. She joins Damco and Maersk Logistics from Martin Bencher, where she was Managing Director for Singapore and Southeast Asia. Before that, she was the Director for Client Solutions, Asia Pacific for UTi Worldwide and Head of Supply Chain for Alcatel in Australia from 2002. Katherine will be based in Singapore and reports directly to Tony Hotine, Regional Manager for Asia Pacific.



GPLN hires Luzius Haffter as new Commercial Director The Global Project Logistics Network (GPLN) recently announced the appointment of Mr. Luzius Haffter to the GPLN team as their new commercial director with immediate effect. Haffter is a Swiss citizen with over twenty years business experience mainly in the travel and hospitality industry but also in the logistics field. He attended the University of Basel and speaks German, English, French and some Italian and Thai. The Global Projects Logistics Network (GPLN) is the premier non-exclusive professional projects logistics network of independent companies specializing in international project movements by air, sea and land as well as specialized lifts and the special handling of oversized, out-of-gauge and heavy lift cargo.

Matthew Ryan appointed as COO of CEVA Logistics Ceva Logistics, one of the world’s leading supply chain management companies, has today announced the appointment of Matthew Ryan in the newly created role of Chief Operating Officer. This role will focus on ensuring CEVA continues to provide industry leading operational and supply chain service excellence. Until last year, Mr. Ryan was Executive VP of World Wide Operations and Logistics at Flextronics International, where he held numerous operational, supply chain and customer management roles. As COO at CEVA he will assume overall responsibility for the FM network, global procurement and the Global Operations team. Mr. Ryan will be based in the Company’s head office in Hoofddorp, the Netherlands.

Asia’s leading air cargo event is back in 2009

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

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

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

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

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

Co-located with Asian Aerospace 2009 -



China’s Future Supply Chain Leadership Text and story, Rebecca Kanthor and Russel Beron Photography, Hideto Machikawa

ven before the global economic meltdown, expat positions in China -- too expensive to sustain long term -- were being phased out. Executives were expected to train their local counterpart to take over within a few years. The challenge then, maybe to a lesser extent now, given the shrinkage and tightening of the labor force, was finding good local talent. In supply chain management, maybe more so than other fields, the combined effect of talent shortage and recession forced companies’ hands, putting pressure on them to develop talent, then cut costs and create efficiencies. Ready or not, a new field of managerial talent has stepped forward, taking on regional and even global responsibility. Pictured from left to right Back Row: Zhang Xudong, Ji Simai, Chuang Taching, Zhou Lili. Front Row: Jiao Yang, Jiang Dongyu





n this profile, we took a look at who some of these Chinese supply chain professionals are, looking at both their personal and professional philosophies. Mostly Mainland born and bred, the seven people we profiled included one person from Taiwan and one Chinese-born U.S. citizen. All are now based in either Shanghai or Beijing and have an average of nine years experience in the field. Supply chain is a broad term with no clear career track, and all have followed disparate paths to reach their current position. The common denominator is extensive international experience combined with local street-smarts. Most of them didn’t start out in the supply chain field, and have made the switch from careers in sales, IT, or engineering. Almost all have a masters or MBA from international programs in Asia or the US. All of them are passionate about their work, traveling extensively and working long hours to cover the demands of their positions. This is not just a job for them; it’s about pride in helping an organization run smoothly and working to bring the China supply chain up to global standards. It’s about gaining a sense of fulfillment from building relationships and having fun while handling the challenges. The future of China’s link in global supply chains appears to be in safe hands.

I think the Asia market gives young people the opportunity to grow and get exposure.

Luo Lei Logistics Manager, Asia Pacific Eaton China Luo Lei’s varied experiences working in multinationals, joint ventures and different industries have given him insight into Asia’s supply chain. After his masters at Singapore-MIT Alliance, he returned to China to work for GM and in 2006 moved to Eaton. “It’s challenging and interesting for me. There’s no more Chinese supply chain management. The world is flat and we are a key part of the global supply chain economy.” “Asia’s economy helps the world’s economy,” he believes. “When we have more economic growth here, we stimulate economic growth overseas. We’ve seen more import-export due to China’s stimulus plan.” Luo observes that compared to other regions, Asia in general has many more young faces in the supply chain field. “I think the Asia market gives young people the opportunity to grow and get exposure,” he says. “It is a new thing in China, so many people are interested in joining supply chain to develop their career.” Another benefit of Asia is the diversity between countries and economies, he says. “We are exposed to more cultural differences in Asia. This helps us think more about innovation and bring our supply chain to the next level.” Luo plans to make supply chain his lifelong career. “The field has big potential for innovative solutions and technology. It will be an interesting place for long-term career development.”



Zhang Xudong (Jerry)

Chuang Taching (Simon)

Jerry Zhang chose a career in supply chain as an MBA student at University of Michigan. “I wanted a career that matched my strengths and improved upon my weaknesses. The first step is to know yourself.” With seven years of experience, he thinks he made the right choice. “It provides the right mix for people with career objectives not only in business management but also who enjoy analysis, management, and organization.” Before joining Checkpoint Systems, Jerry worked for several Fortune 100 companies in the US and Asia-Pacific regions. “Working in foreign countries for a long time helps you know the mindset and culture. In a flat world, you need to be comfortable working with others, so you can continue your initiatives.” Jerry believes that supply chain management attracts a certain type. “To make the company more productive, efficient, and effective, the company’s resources should be utilized in the best possible way. People like me like things in order. If some process is not optimized, we see something we can do better. That’s something supply chain people have in common.” As for his future goals, “I hope to continue to remain in SCM, but with more exposure to sourcing and procurement. I think there will be even more development in the field in the future.”

“There is still a shortage of mature top level local supply chain professionals in the China market,” says Simon Chuang of Tyco Electronics. “But this is an excellent opportunity for local professionals to grow in this environment and resources are available to boost their development.” The only non-home-grown person in our profile, Chuang came to the mainland from Taiwan four years ago to help expand Tyco’s IPO. Chuang’s background in engineering and sales has come in handy. “When I negotiate with sales, I know the tricks,” he says. “Sometimes I give training to suppliers. I tell them, this is not the right way to convince your customer.” Chuang finds working in the electronics field in China a challenging arena. “Consumer electronics have a very short life cycle. The key is the speed and agility of your supply chain to win the competition.” His work keeps him on his toes handling a wide product line with many different commodities. “The complexity of meeting the needs and expectations of our supply base makes this job challenging and lots of fun. This is the right arena for personal development and growth.” Chuang plans to stay within the supply chain field, focusing on further understanding country and regional requirements, and moving on to other regions or functions to meet his long term career goal.

Supply Chain Management Director, APAC Checkpoint Systems, Inc.

Senior Regional Manager, Asia Procurement Tyco Electronics

If some process is not optimized, we see something we can do better. That’s something supply chain people have in common.



FEATURE Story Ji Simai (Michael)

Zhou Lili

Michael’s MBA education in Atlanta at Goizueta Business School exposed him to supply chain. “I got a taste of everything, and I found sourcing was the one for me.” After graduation, Johnson & Johnson offered him a job in Singapore, where he crossed paths with Jerry Zhang. With exposure in sales, Michael found supply chain was not without challenges. “When I dived into sourcing, there was a different knowledge set. I had to seek mentors and get more hands-on experience.” His current position with Danone brought him back to China. “I’d been working with multinational companies and diverse cultures. After I’d been to the States, Singapore and back to China, I felt I could stretch myself to the maximum.” Michael finds fulfillment in his work. “I’m not over-pushy; that’s not my style at all. I like to create a win-win situation for both parties. That’s an accomplishment,” he says. “I like to make people happy and achieve my goals as well.” That philosophy impacts his cooperation with suppliers. “You need to treat suppliers as your partner, not someone you can dump quickly. Some people want to change suppliers often, but it’s important to build solid relationships.” Michael believes he’s on the right track. “I want to stick to my current sourcing path and keep moving up.”

Lili Zhou’s advice for people interested in the supply chain field is, “Go do it. That’s the best way to learn.” She takes her own advice. After studying international trade, she worked in import-export and then moved to third party logistics. “Ten years ago, supply chain was new in China. I didn’t know exactly how it worked, but I wanted to give it a try.” Born and raised in China and with eight years work experience in the US (she’s now a US citizen), Zhou considers herself to be a bridge between worlds. She strongly believes the local advantage is crucial. “Ideally we need a supply chain manager to have both international and domestic experience. Language is a priority in building a relationship. We deal with everyone from truckers to suppliers to store staff, so strong domestic experience gives someone an extra edge.” One of the challenges for Zhou is how logistics differs between the US and China. “It’s very local. I have to deal with many different companies. They may subcontract and it’s difficult to get standard service quality,” she says. “It’s grown a lot but there’s still a ways to go.” Zhou enjoys the challenge though. “At Herbalife we have an aggressive team and we work efficiently. It keeps our heart beating and we never get bored. That’s the fun part.”

Regional Senior Sourcing & Supplier Development Manager Danone Asia Pacific

Senior Director of Operations Herbalife China

You need to treat suppliers as your partner, not someone you can dump quickly.

Jiang Dongyu (Charles) Supply Chain Manager Consumer PBU, APAC Goodyear Tire

When we develop a local Chinese supplier from a junior supplier to a global player, I feel we’ve done something good for both the country and the company.

“Chinese supply chain managers still need to convince top management of supply chain’s strategy role,” says Charles Jiang of Goodyear Tire. “As the economy changes and competition becomes global, it’s no longer company versus company, but supply chain versus supply chain.” “It’s the competitive advantage to fight with others. It’s not just cost savings.” After starting out in supply chain, Jiang moved onto IT after his masters. “It is important because every function needs information visibility. Later I came back to supply chain, because supply chains link everything from suppliers to customers.” Jiang cites professional mentors as having helped guide him to where he is today. “My current boss has had a big influence on me. He showed me the importance of supply chain and got me interested in it.” He enjoys the communication aspect of his job. “You need to talk with lots of people from sales to manufacturing, from global sourcing to purchasing and link them all together.” Jiang thinks that’s common sense. “It’s not rocket science,” he jokes. “If you can open your mouth and think analytically, that’s all you need.” But he clarifies, to be good at it; you must like your job. “You have to like communication and have a passion for excellence. You can’t stop pushing yourself.”

Jiao Yang (John)

Supply Chain Manager Greater China IBA Technology Group

John Jiao of IBA Corporation in Beijing began working in supply chain not by choice but by chance. Now with ten years experience in supply chain, he says, “I’m lucky I just stepped in the right rhythm.” Jiao has seen China’s supply chain develop. “There are already many senior local people. There are still some improvements to be made to be more globalized, but we are much closer to professional level.” The challenges are what keep John interested in his work. “Building relationships with suppliers is tricky. It’s like a marriage. It covers everything, from pricing mechanisms to quality. Setting up a long-term contact is pretty challenging, but also very interesting.” For Jiao, fulfillment comes from creating a good relationship with a supplier and benefiting the company. “I feel good when I make a good savings for the company. When we develop a local Chinese supplier from a junior supplier to a global player, I feel we’ve done something good for the country and for the company.” The rewards are worth the challenge. “When I do it right, I feel really valuable for the company.” Supply chain’s role linking supplier and customer means that there are huge challenges and opportunities, says Jiao. “The importance of our role means that in supply chain, you will never risk losing your job,” he jokes.




China’s Balancing Act The Move Inland

Driven by a search for new markets and supported by government efforts to balance China’s regional wealth gap, foreign investors continue their push inland.


oca-Cola has made the latest move in the soft drink industry, quite literally, opening up two new plants in China. In June the soft drink giant opened two new bottling plants in Nanchang city, Jiangxi province and Urumqi, the capital of far western Xinjiang, bringing its total China bottling plants up to 38. The two factories will manufacture all of Coca-Cola’s product lines to meet the local demand. China is Coca-Cola’s third largest market in the world, just behind the US and Mexico. However, China lags far behind in annual per capita consumption of Coca-Cola products, with just 28 bottles to the US’s 400. “You can see how huge the potential market is. Our goal is to deliver our drinks to every corner in the country,” Wang Lei, senior manager of communication of Coca-Cola China, told CHaINA. “That’s the reason for setting up our new factories.” He added that another new factory is in the works in Hohhot, the capital of Inner-Mongolia, due in 2010. By then, “we will almost cover the whole country,” Wang said. Northwest - Xinjiang, an emerging business hub Coca-Cola is not the first multinational company to head west. Xinjiang, China’s largest autonomous region and a former key stop on the ancient Silk Road, has once again become a choice of investment in recent years despite simmering ethnic instability. The giant French retailer Carrefour Group pioneered the trend, becoming the first multinational company in the region when it opened one of its supermarkets in Urumqi




By Wang Fangqing

in 2004. Even as the region recovers from a recent ethnic clash on July 5, government newspaper People’s Daily reported that Jean Luc Lhuillier, vice-president of Carrefour China, said the group plans to invest more in Xinjiang. The growing local spending power has also attracted high end retailers. Hong Kong-based luxury department store Maison Mode made its debut in the region last year, opening a location in Urumqi packed with glamorous brands such as Cartier, Giorgio Armani and Gucci. Li Sheng, professor of logistics management

at Chengdu-based Southwestern University of Finance and Economics (SWUFE), said the rise of Xinjiang is not a surprise given its special background. “I think people living there are more open-minded than people in other inland areas because of their different ethics, different cultures and the closeness to the West geographically,” he said, adding they are easily influenced by western spending habits, which retailers can use to their advantage. He said Coca-Cola’s recent opening of a new plant was nothing unexpected. “How costly and time-consuming must it be to deliver drinks to local stores from factories hundreds of miles away?” he said. Coca-Cola’s Wang Lei confirmed that distribution remains a challenge. Even with the presence of the new factory and the help of

3PLs, the distribution area remains as vast as 1.6 million square kilometers, almost one sixth of China’s territory. “It’s possible that the factory will set up several regional delivery stations in the future,” Wang said.

KFC and Carrefour at the International Great Bazaar at Erdaoqiao, Urumqi, Xinjiang.

Midwest - Sichuan’s plight China’s Midwest is another region of growing importance, but not without its own challenges. In March, the first bonded logistics center (B type) in western China started operation in Chengdu. This development means that local exporters no longer need to ship their products to Hong Kong, the only way to get a tax rebate. The



FEATURE Story new option works, at least for Intel, which recently also relocated its assembly operations from Shanghai to Chengdu. The Sichuan government has plans to turn the province into a Midwest transit hub, despite its notorious reputation for inconvenient transportation. The latest plan issued in May announced preparations for seven new railway lines and eleven new expressways in Sichuan by 2012. Sichuan now has only seven railway lines and seven expressways connecting it with the rest of China, making it hard to do business with prosperous coastal cities, as well as southwestern cities like Kunming, which in recent years has been keen to build connections with Southeast Asian countries such as Thailand and Myanmar. Li Sheng of SWUFE said that although the plan sounds great, it is not really feasible, partly because of the extremely unstable geological conditions that has made the area prone to natural disasters in the past year. A week long heavy rain in mid-July caused flood and mudslide conditions in several towns in Sichuan, including Wenchuan, the epicenter of last year’s massively destructive earthquake. “We had a quake last year and mudflows last month. How can we expect to build roads and railways right away?” he questioned.

biggest port in the region, so it makes sense for us to move there,” said Zhen Qibin, Ant’s logistics manager. Zhen believes the FTZ will attract more heavy industry clients like steel and chemical materials producers in the future. Copenhagen-based Maersk Logistics is very likely to follow Ant’s example. In July, Rolf Habben Jansen, CEO of logistics of Maersk, toured Chongqing and held talks with mayor Wang Hongju about possible investments. Facing their up-coming competition, Ant’s Zhen said advanced management doesn’t necessarily mean successful business. “It’s good that they will bring western management here, which could help us improve our service, but they have to get themselves localized at first,” he said, pointing to gaps in business practices between first-tier cities and inland cities as possible stumbling blocks. “These gaps won’t disappear overnight,” he said. This isn’t the only challenge to companies making the push into new territory. Before companies jump on the bandwagon, they should think long and hard about moving inland to find cheaper labor. The lack of a favorable business environment may prove to be a challenge difficult to overcome. “There is nothing worse than setting up a plant far away from suppliers,” noted Wu Di, a professor of supply chain management at Shanghai Jiao Tong University. The shortage of local senior talent is another issue. “Chances are that companies would have to relocate all these technicians and senior managers from other places, and it costs money,” Wu Di reasoned. While Coca-Cola has senior managers in the Urumqi factory deployed through its business partner - the state-run China National Cereals, Oils and Foodstuffs Corporation (COFCO), though in the future, we want to hire from the local area,” Wang Lei said. If these inland challenges can be affectively addressed, China will close much of the distance holding back its great promise.

the rise of Xinjiang is not a surprise given its special background

Chongqing - the waterway advantage In contrast with Sichuan’s struggles, longtime rival Chongqing has seen its water transportation along the Yangtze River develop into a growing advantage since last December’s approval of the first free trade zone in inland China. Already some companies are planning a move to the Lianglucuntan FTZ whose first stage construction began in June and will be completed in six months. Ant Logistics, the leading privately owned 3PL in the region, plans to move its headquarters from Chengdu to Chongqing by the end of this year, basing its offices in the FTZ. “More than 60 percent of regional products go through Chongqing as it has the

Coca-Cola is expanding aggressively into Western China, opening new bottling plants, such as this one with partner COFCO in Urumqi, Xinjiang Province’s capital.



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FOCUS Research

Service and Quality

The New Mantra of China’s Logistics Sector


hina’s economy isn’t just growing, it’s changing in composition. The increasing wealth of the people, the decline in export-led manufacturing and the government’s stimulus measures are all driving dramatic shifts. In such an environment, we see that the logistics sector is transforming as well. To gain a better image of the current environment, the Global Supply Chain Council, in partnership with FM Logistic, launched the 2009 Warehousing and Transportation Survey in late spring, to assess the current situation in the sector. During the weeks that followed, we received more than 100 responses. We will publish the survey results in September; in this edition of CHaINA we offer a summary preview. The view from the ground More than 50% of our responses came from supply chain or logistics directors or managers, with an additional 15% coming from managing directors, general managers or chief representatives. Our respondents come from a wide range of industrial sectors. While 38% of our respondents manage less than 5,000 square meters of warehouse space, 30% manage more than 20,000 square meters. While we asked a number of questions aimed at understanding what companies are doing (which mode of transport, distances covered, etc.), we also asked many questions aimed at understanding respondents’ thinking and outlook, which we’ll focus on in this summary. Regarding their distribution strategies for the coming two years, the possible choices were broadly growth-focused (nationwide network, expansion) or performance-focused (the remaining choices). Respondents could tick more than one choice. Among the ‘performance’ strategies, nearly two-thirds of all re-



spondents indicated that they seek better performance in their existing network, but we note that only about 21% of our total respondents selected ‘reducing the number of contractors’ or ‘bypassing wholesalers and distributors’ as strategic goals. Only 14% of our respondents ticked ‘other’ as an answer, and we found no noteworthy patterns. So while our respondents are broadly aimed at improving performance, 3PLs, wholesalers and distributors can breathe easy—their jobs aren’t being targeted. China distribution strategy for the coming two years

We then asked how satisfied the respondents were with their current 3PL. A full 75% say that they are ‘satisfied’ (67%) or ‘strongly satisfied’ (8%). We found two interesting correlations here: Those answering ‘dissatisfied’ are strongly correlated with those who manage less than 5,000 square meters of warehouse space. Only 10% of the respondents who identified themselves as supply chain or logistics directors/managers reported dissatisfaction. We read these results as indicative that professional focus and responsibility drives ability to select and manage 3PLs successfully. Dedicated directors and managers in the supply chain/logistics field, or those responsible for large warehouse footprints, seem less likely to face issues.

FOCUS Research

Service quality valued over price We also observed a result that is consistent with other research done on services purchasers in China: service quality is a more important decision driver than price is. A 2007 survey by the Council found the same thing. Two different sets of responses prove the point in our current survey: 65% of those who reported dissatisfaction with their 3PL responded that ‘service quality and professionalism’ is the cause of their dissatisfaction, with ‘price’ and ‘inability to adapt’ far behind at 43%. In another question, we asked respondents to rank the importance of several criteria that might influence their decision on which logistics service provider to use (see table below). Service quality was by far the most important attribute. More than half of all our respondents ranked service quality as being of the highest priority, while only one-third ranked ‘price’ (roughly tied with ‘safety/security’) as being the highest priority.

Criteria used to choose a logistics service provider % of respondents

To understand this dramatic finding more fully, we analyzed the

An FM Logistic responses of the supply chain/logistics ditruck on the rectors and managers, as well as those for road in Eastern whom we could detect a Chinese surname China. FM Logistic partnered with (a crude attempt to get at the idea, held by the Council some, that local decision makers are more in conducting price-sensitive than foreigners). We found the 2009 Warehousing and only one variation from the overall results: Transportation Chinese-surnamed supply chain or logistics Survey. directors/managers were slightly more likely to rank ‘service quality’ as being of the highest priority. One obvious conclusion is that people rank service quality as the highest priority but are not in fact willing to pay for it—that price is more important than respondents indicate, or a criterion in a different category from the others, as a starting-point requirement. While that effect surely exists, the difference between the ranking of price and the ranking of service quality is dramatic enough (and again, consistent with other research on other components of the service sector in China) that we conclude something else must be true: while China’s service sector economy is nascent, it is evolving quickly, and coming into closer line with those in the more developed parts of the world as the economy grows overall. That evolution everywhere includes an increasing demand for quality, not merely price. Our survey results show that decision makers’ evolution to quality-based, not just price-based, decision-making provides an opportunity for service providers who are willing to evolve themselves. Those providers who remain focused on price are lagging in market evolution—and the market will pull away from them.

John D. Van Fleet is a director of marketing solutions for the Global Supply Chain Council. He may be reached at



FOCUS Maintenance



Forgotten Supply Chain Link

orror stories of badly designed and poorly maintained facilities are everywhere. A recently conducted “maintenance in China” survey estimates the indirect cost of maintenance, in the form of losses and consequential costs throughout the supply chain, at around 10 times its direct cost.

It is not uncommon for industrial facilities in this country to experience early aging, in the form of an increasing number of breakdowns after only two or three years of operation, the direct consequence of maintenance not being managed. Indeed, most Chinese organizations still operate in a purely reactive manner with a very shortterm view focused on immediate cost cutting. In China, abnormally low maintenance expenditures in early years inevitably lead to high unplanned costs later on. These take the form of early replacement of key equipment, production stops and operation losses. For instance, it is very common to find design problems, which should have been identified in the early stage of operations, several years down the line. This picture is further complicated by some of the other aspects of “maintenance with Chinese characteristics”: a shortage of experienced managers as opposed to skilled technicians, fraudulent procurement (a field often overlooked by corporate controllers) and a lack of experienced suppliers, who often suffer from the same shortcomings as operators.

its and skills of local teams) for all facilities and systems (HVAC, compressed air, cranes, etc.). This approach ensures that routine inspections and other preventive actions are in place from the startup stage. Existing facilities – assessment and preparation When acquiring another company or facility, it is necessary to conduct an assessment of all buildings, systems and utilities, in order to determine the additional investments required to bring the equipment up to standard, and define preventive maintenance programs. The maintenance team should be trained on modern maintenance practice, especially in terms of preventive maintenance, long-term planning and optimization.

In China, abnormally low maintenance expenditures in early years inevitably lead to high unplanned costs later on.

New facilities – preparing maintenance from the early construction stage In China more than anywhere else, it is critical to take maintenance into account as early as possible, ideally from the design stage of new facility. This includes preparing maintenance plans (necessarily adapted to the reality of maintenance in China, including the experience, hab-



How to train local teams – the CMMS as a catalyst Classroom training simply doesn’t work in China. Western wisdom on the subject, which recommends auditing, training, organizing and then computerizing the maintenance department to drive efficiency improvement, is at best irrelevant, often counter-productive. Experience has shown, on the contrary, that a Computerized Maintenance Management System (CMMS) is the ideal tool to immediately structure the maintenance team, to build-up historical records to support decisions based on technical/financial analysis, to train the team on-the-job on the concept and practice of preventive maintenance and ultimately build reusable know-how. The resulting organization will be less reliant on specific people such as an expat manager soon to leave China or an excellent

Cut through the hype, back to basics With all the talk about “green buildings,” energy saving equipments, sophisticated monitoring systems and other vendor fantasies, the basics of maintenance are often overlooked. It is not uncommon to see newly-built facilities incorporating all the latest gimmicks, providing only marginal benefits, while suffering huge inefficiencies. Worse still, those companies that have stuffed their buildings with sensors – which have a high failure rate, without in-house skills for repair and tied themselves to a specific supplier for many years to come. A vendor’s dream come true, but a true maintenance nightmare.

FOCUS Maintenance local technician headhunted by competitors. Typical ROI is well within one year, sometimes weeks when design problems are quickly uncovered. Finally the introduction of a hightechnology tool has proven to be a powerful motivator for maintenance teams, too often undervalued. From the trenches Drug producers rely on clean rooms, where air is carefully controlled to reduce the spread of germs. A few years ago, an audit conducted at a multinational producer located in Shanghai revealed a fraudulent scheme whereby the maintenance team recycled used air filters, washing them with water and having them repackaged by the original manufacturer. The scheme involved maintenance, security and purchasing personnel. Luckily, no harm was caused. In fact, as often happens in such cases, everyone benefited: production was not affected, and the manChinese factory workers check and maintain water treatment equipment in Daqing Hongwei ufacturer increased its margin. Thermal Power Plant in Daqing city, northeast China’s Heilongjiang province. Who are we to complain? Who the park, which rely on the incinerator to burn hazardous by-prodwould have been liable in case of a problem? ucts according to European standards. General Manager Philippe AlRetail business can be seriously disrupted by maintenance louche commented: “From day one, we recognized maintenance as problems, as happened when a major hypermarket in China had a key success factor for our project. A Computerized Maintenance to close for the day, because of an electrical failure with the main Management System (CMMS) was implemented before startup. The transformer. The backup diesel generator did not start since it had system allowed us to manage safety right from the commissioning never been tested! Losses: one full day of business, all the food in stage, by enforcing a strict work order process. The CMMS is used the refrigerated areas, not to mention the company’s image. This to educate and organize our team and to support management added up to several times the store’s annual maintenance budget. decisions. Reliability is the key to our business, The failure was traced back to a small electrical serving chemical plants in the area, whose own component that had been replaced with a cheapoperation would be affected by a prolonged downer locally-made part – a saving of a few hundred time of our facility. Four years down the line, we RMB. Simple maintenance routines would have have succeeded in creating a true culture of mainprevented huge losses. A few years later, has this tenance in our Chinese operation: maintenance retailer learnt its lesson? Have they managed to is under full control, regardless of the inevitable instill the notion of preventive maintenance to their personnel changes.” technical team? Some companies have, from the start, taken control of their maintenance and recognized its Bruno Lhopiteau, a 10-year vetimpact on operations. SCIP Swire SITA Waste eran of the Chinese maintenance Services, which operates a modern waste incinerator in Shanghai’s market, is the General Manager of Siveco China, a Chemical Industry Park, is one of them. The company is a critical maintenance consultancy. He can be reached at bruno. element in the supply chain of giant chemical producers located in

Simple maintenance routines, would have prevented huge losses.



FOCUS Expert

Towards Supply Chain “Enterprise Asset Management” Most of us look at our assets without really seeing their value or potential. Robert Barrett, a director in PricewaterhouseCoopers Performance Improvement practice lays out the latest thinking in Enterprise Asset Management


hat’s an asset? The term refers to anything required for the production of a service or product in which value was expended to acquire it. Assets are continually useful and aren’t consumed. Assets, supply chain assets in particular, make up a large part of a company’s value. Managing these assets are an important part of managing and optimizing a company’s enterprise value. Now for the nitty-gritty. Following are a few of the most common ways to categorize assets.

Operating (tangible) assets are plant, production and distribution related Non-operating (intangible) assets are not as easily definable due to their diverse nature and the myriad of financial rules and representations related to accounting for them. Examples include leases, patents and right of ways. Some industries also have mass assets that are operating assets too small to track individually, but are significant in a group. These could include poles for a utility transmission company or meters for a gas transmission company or pipelines.

The asset lifecycle Like humans, assets have a lifecycle, except that rather than from conception and birth to death and burial, an assets lifecycle starts at conception and design and goes all the way through to disposal. The Operational Asset Lifecycle shows the stages assets moves through. By understanding each stage, companies are better able to improve activities at each stage.

Stage 4: Shipping Often assets are owned as soon as they are shipped but sometimes there must be formal chain of command documentation throughout the asset’s manufacture, shipping, and delivery. This is especially true in global procurement scenarios where equipment moves across state borders and are subject to taxes and duties. Added to this are insurance and permits required for large or hazardous assets.

Stage 1: Designing/Specifying Even though the physical asset might not exist yet, costs including design, engineering and site Stage 5: Storage/Inventory Most minor assets are received into preparation are being incurred a storage facility and can incur and need to be properly tracked. storage costs before instalDesigning/ Specifying ment. Larger items are most Manufacturing Retirement Stage 2: Manufacturing An asoften shipped directly to the set’s lifecycle begins long before instalment location. a company takes possession of Abandonment Procurement the asset. Some assets are manuStage 6: Instalment When asfactured or customized for a spesets are installed at a facility the cific supply chain purpose, such cost of labour, services, conEAM Value Shipping Salvaging as specialized manufacturing sumables, vehicles, and tools Practices equipment for manufacturers or required for instalment are all handling equipment for shipping part of its acquisition value. companies. Oftentimes, paying a Storage/ Refurbishment Inventory down payment to the supplier will Stage 7: Operation & Mainsignify the ownership of an asset. tenance This can be the longest, most critical and most Instalment Removal Stage 3: Procurement This is expensive part of an asset’s Operation & Maintenance similar to the Design stage in that lifecycle. The costs incurred costs are incurred which will need are generally expensed and do to be distributed to the asset. These costs can include documenta- not add to the asset’s book value. However, some maintenance tion, negotiations, plant process testing and verification. changes to an asset add value or extend life and these cost must be



FOCUS Expert

China is at the early stages in terms of effective management of assets such as inventory, equipment or even intangible assets such as property leases.

The Benefits of managing asset lifecycle There are many different data collection options used to feed a company’s Enterprise Resource Planning (ERP) system or general ledger. The challenge for companies is managing this disparate data in a way that allows them to optimize decisions about critical assets.

added to the asset value. Focusing efforts on maintenance activity that will keep assets reliable and productive throughout their life is critical. Stage 8: Removal Once an asset is no longer needed or can’t fulfill its purpose due to wear and tear, damage, failure, upgrades, it is removed. If the asset is to be removed, the costs associated with this activity may be recorded in order to know the retirement cost. Stage 9: Refurbishment Sometimes it can be more cost-effective to refurbish the asset than to replace it. Factors influencing this decision include replacement costs, refurbishing skills and cost, replacement availability, and level of urgency.

In China, many companies are only at the very early stages of utilizing their ERP systems to their full potential. The development of ERP provides excellent opportunities to improve machine reliability and reduce supply chain disruptions. It can reduce maintenance costs and improve return on assets and shareholder value. By automating and building asset creation and task tracking into ERP tools, companies will take a major step toward comprehensive

“The ability to use integrated systems and data to support enterprise asset management (EAM) vastly improves the ability to improve asset performance. We believe that our increased focus on assets will improve our already strong safety record and improve the plants’ operability, availability and reliability. EAM helps us to efficiently organize the qualified people, materials and tools to keep the equipment running safely and effectively.” Ma Gang (马刚) ERP Department Manager – Daya Bay Nuclear Management Company

Stage 10: Salvaging When an asset is physically removed from service, there is often a residual value that must be determined. There may be mandatory disposal requirements which can affect the salvage value.

Stage 11: Abandonment If asset removal is too expensive, the asset is abandoned. This is common for gas mains or oil pipelines which are cut, flushed, and capped. In these situations, any labor and materials related to the abandoning of the asset needs to added to the assets value.

Enterprise Asset Management (EAM). As ERP applications become more integrated, so will the asset data of China’s world class manufacturers, transport companies and energy producers. Merger and acquisition efforts will benefit. And on the whole, maintenance and operational capability decisions are more effective. Ultimately the non-value added task of manual asset administration will be reduced, resulting in more accuracy.

Stage 12: Retirement Regardless whether an asset was abandoned or removed, the resulting value must be recorded so its residual value can be properly accounted for on the books.

Robert Barrett is a Director in PricewaterhouseCoopers Performance Improvement (PI) practice. Based in Shanghai, China, he has been working in South East Asia since 1995.



FOCUS Quality


China quality tips


onsumer goods manufacturer Wilton Industries and other major international retailers met with a dangerous quality issue in one of their made-in-China products this summer. Users of one of their bestselling tea kettles found the kettle lid was prone to coming loose, leading to second degree burns on some consumers’ hands and fingers. This quality defect forced Wilton to recall 142,000 units, and they sustained financial loss and a hit to their market reputation. The lesson for suppliers, manufacturers, and retailers? It just takes one small lapse in quality control to wreak havoc for your product supply chain, especially when working with factories in China. Below, China quality control guru, Andrew Reich of InTouch Services, lays out his top five tips for quality assurance when working with factories and suppliers overseas. Know Who You’re Working With - If you are not working with the factory directly and the supplier cannot provide you satisfactory answers about the product, that’s a flashing warning sign. The supplier is inhibiting the sourcing process for you and you should reconsider the relationship. If you’re having a tough time putting your finger on who you’re working with, you should contact a company specializing in China supplier verification. Communication is Key - Keep Emails short and to the point. Remember that English is not the first language of your supplier. Keep in mind that it’s common for a supplier to simply skip over or ignore language that they have difficulty understanding, so keep it clear and concise. Don’t be afraid of the phone. There’s nothing like connecting with a supplier on the phone. Use Skype or other internet service to say “hi” every once in awhile. You’ll feel a lot better afterwards. Keep in touch constantly to confirm your production schedule and ship date. If the factory feels as though you are too easygoing, when it comes to your ship date they are more likely to bump your production as new orders come in. Paying Chinese Suppliers – Wire Transfer (W/T) or Letter of Credit (L/C)? – Always inquire before your order about how the factory will accept payment. Using L/C when working with new suppliers will help protect your company from scammers.

Andrew Save Money and Headaches with a 3rd Reich party Quality Check (“QC”) – For a very reainspecting sonable price you can send in a professional MP3s bound for export in the country you are working with to be your the USA. eyes and ears. One of the most common “tricks” for overseas factories is to switch out the materials you have approved with other cheaper ones. Don’t be a victim of this. A QC can check and test the raw materials to make sure they meet your standards.

Avoid Disappointment -- It’s absolutely key for both parties to have a bilingual Product QC Checklist drafted by either you or the supplier, listing out all of the quality and shipment details that you expect the product to meet. Take some time to write these details down and have your supplier sign a copy as confirmation that they can meet your standards. Samples are worth a thousand photos. Insist on getting a production sample in your hands before the shipment. Andrew Reich is the founder and general manager of InTouch Services, Ltd, a provider of product inspection and quality control support in China. He is also author of a blog titled: QualityWars (



FOCUS Region


The Gem Next Door Special Economic Zones, Free Trade Zones and other Industrial areas set up by the Chinese government to foster trade have served China well. Suzhou Industrial Park (SIP) is a relatively recent addition to the myriad of industrial zones established since China began its own industrial revolution began in earnest not that long ago. Established with joint Singapore and local investment and classified as an Integrated Bonded Zone (IBZ), the SIP brings similar advantages to the establishment of foreign businesses, such as tax breaks and improved export processing. To get a firsthand look at the SIP, the Global Supply Chain Council brought a bus load of people to visit factories and sites in the zone, including adidas and the Prologis (GLP) Park, Shure and BlueScope Steel. SIP’s goal, a spokesman told us, is to be a city, not an industrial park. As such, the sprawling area has universities to feed local industry with talent, foreign and local shops, subsidized apartment buildings, its own customs house, five star hotels and international hospitals and schools to serve the 20,000 expats who live in the zone. A few good companies While the much anticipated visit to BlueScope was cancelled at the last minute due to a site emergency, the group was able to receive a presentation from BlueScope’s logistics director about the company’s operations, which include metal coating and painting. Interesting from a logistics perspective, the BlueScope factory provides the majority of transportation of raw materials through intermodal means, relying on water canals to achieve savings in transportation. Shure on the other hand relies more on air-freight for some of the high end, lower volume merchandize they export. Shure is not a name that most people recognize except when we are shown the high-end microphones and earphones the company produces for rock-stars and other celebrities. The family owned company employs China as both a supply and manufacturing base. The company also has manufacturing operations in the U.S. and Mexico. Some of the biggest supply chain challenges the company faces, reported Shure’s supply chain director, are flexibility and being able to meet customer requirements on lead time and on-time delivery. These same concerns about lead time, planning and forecasting are an issue for adidas. The Council group was lucky to be able to visit adidas’ sprawling distribution center in the Prologis (GLP) Park. The national D.C. processes up to 8 million pieces per month, using three 3PL’s to transport goods to over 125 cities, serving over



FOCUS Region

David Cai, Supply Chain Manager for Shure Electronics in Suzhou, presents his company’s logistics strategy to a group of Supply Chain Council visitors on July 16, 2009.

5,000 adidas’ branded shops in China. The company faces a problem most companies would love to have: double digit growth every year for several years. As such adidas is playing catch-up on some of its processes and is learning fast how to optimize its supply chain to deliver greater efficiency to the numerous stores it serves. A reason for Suzhou Suzhou has a number of attractive features for business set-up and living, including its own virtual airport code (SZV) so that goods can go directly to or from Pudong airport, passing customs clearance in Suzhou rather than at Pudong. Hongqiao is only 80 kiliometers away while Pudong is 130 kilometers. On a cost comparison to Shanghai, living costs are significantly lower as are labor and operational costs. With a high speed train to Suzhou taking only about 30 minutes, there are some compelling arguments to set up in the quiet, ancient water city.

Suzhou Facts Population:

6,297,530 (2008)


East end of Jiangsu Province, China, bordering Zhejiang Province. West of Shanghai. Between Lake Tai and the Yangtze River


Greater Suzhou Metropolis, 8488 sq km, Suzhou City proper 105 sq km


RMB 510 bln, +13.3% (2008)

Total Fixed Asset Investment:

RMB 261.1 bln, +10.3% (2008)

Total Import-Export Value:

US$228.5 bln, export: US$131.7 bln, import: US$96.8 bln (2008)

Private Enterprises:

122,000 within Suzhou, 122 are Fortune 500 companies (2007)

Foreign Capital:

US$8.13 bln

Urban Resident Per Capita Disposable Income:

RMB 23,867

Farmer Per Capita Net Income:

RMB 11,680


Port of Suzhou is a river transport hub including Zhangjiagang, Changshu and Taicang ports volume: 207 mln tons (2008)


A top-10 manufacturing, technology, investment, and export base

Top Five Industries:

Electronics and Telecommunications, 31.2% Smelting and Pressing Ferrous Metals, 9.8%, Textiles 8.7%, Electric Equipment and Machinery 7.0%

Source: Suzhou Statistical Yearbook 2008, Suzhou News, Xinhua




Solving the India Equation

Guido Nassimbeni and Marco Sartor, the authors of Sourcing in India: Strategies and Experiences in the Land of Service Offshoring


rofessors Guido Nassimbeni and Marco Sartor literally wrote the book on sourcing in China - their 2006 study, Sourcing in China, provided a comprehensive study of all aspects of the field. Now they’re giving India the same treatment: their new study, Sourcing in India, came out late last year. CHaINA Magazine spoke with the two Italian business professors via phone.

ever, in recent years, India has spent a lot on developing its infrastructure. The Indian philosophy – which is very different from the Chinese philosophy – is that it is taking a step and step approach to improving its infrastructure. I don’t only mean the physical infrastructure here – I also mean immaterial infrastructure. For example, stock markets – India’s are probably better developed, now. If you take these sorts of immaterial infrastructure into account, you will see that the gap between China and India is not so stark. In fact, India is actually ahead in terms of some kinds of infrastructure! Take a look at telecommunications as another example: after 2005, after a huge investment, there were more mobile contracts in India than landline contracts. This is an example

: Why focus on India? Guido Nassimbeni and Marco Sartor (GN & MS): The world has changed significantly in past few years. Two of the most important factors in that change have been China and India. So we’ve been writing about supply chain management topics in China and India for several years. After China, we needed to look at India: India is the second most populated country in the world – and it has many strengths, also some weaknesses, of course. In our opinion, this is not a country that businessmen around the world can afford to ignore. What kind of sourcing are you seeing in India? GN & MS: It is often said – though it is not always true – that China has become the factory of the world, while India has become the office of the world. While this isn’t always true, it is definitely the case that India has become the place for service off shoring. It is interesting to look at why India, which is still one of the world’s poorest countries, has become the center of such valuable activities. Although textiles Does the rather underdeveloped infrastructure in India pose problems? GN & MS: Absolutely yes. Most infrastructure remains weak compared to China and other Asian countries. How-



are still widely sourced in India, companies continue to search for lower cost markets, a strategy that Nassimbeni and Sartor question.


of how government investment is building up all forms of infrastructure in there. So why is India so strong in the IT sector? GN & MS: Through many years, the various Indian governments that have come and gone have invested heavily in this sector. Starting in the late 1950s and 1960s, beginning in Calcutta, you began to see a large focus on developing technological sectors. So this has been going on for about forty years. It is our sense that this will continue. The ruling Congress Party, which just won the last election, has guaranteed to the international community that India will continue to promote this sector. Let’s get to the bottom line for our readers: should companies set up in India? Is it competitive? GN & MS: Yes and no. For unskilled labor, I would say that India is probably less competitive than other offshore basins. Furthermore, for skilled labor, at least before the financial crisis, the costs were

relatively high. It is easy to understand why: there was a big demand for skilled labor and not adequate supply. However, especially in the IT sector, India can also provide some great benefits to compensate for the labor costs which are higher than other emerging countries. Indeed, India can demonstrate that its services are among the highest in the world. This is because India has an excellent education system which has produced a significant number of highly skilled people. A message I would give to companies in China operating in low skilled labor sectors is this: do not move continuously from one country to the next – from China, to India, to Bangladesh to Africa and so on. For one, you will never stop moving. Secondly, you also have to think of the perspective of the local markets: think of the selling perspective. You have to put production where you think there will be a good market for your production. Therefore, for low-skilled labor, you can definitely find countries more competitive than India. There are not that many sales opportunities there – it’s still a very poor country.

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Is China’s Aging Population India’s Edge? China’s recent move to soften its stance on the once rigid one-child policy is an indicator of rising concern about the country���s aging population. “China’s demographics are going to pose huge problems, Professor Susan Shirk of the University of California-San Diego recently told CHaINA Magazine. By midcentury, Shirk observes, China will have nearly twice as many people over the age of 50 as under the age of 20. As life expectancies increase, and the labor pool begins to shrink thanks to decades of the one child policy, China is going to face unprecedented demographic strains. With no social security system in place,

China 700

and no way for China’s soon-to-be shrinking working population to support its massive elderly population, it remains to be seen how China will cope. India, on the other hand, boasts one of the world’s youngest populations. A stunning 54% of the population there is under the age of 25. Meanwhile, the Indian labor force is set to expand massively throughout the 21st century. With its huge pool of young workers, will the office of the world soon turn into the factory of the world as well? Chinese and Indian population demographic comparison:


Age 0-19

Age 20-49

Age 50+

600 500 400 300 200 100 0







Source: US Census Bureau International Database




List your company in the most comprehensive directory of supply chain & logistics related services in China.




Q1/Q2, 2010 edition to be published in March, 2010 Early bird deadline (receive a 10% discount): January 15, 2010

• Logistics Services

• IT & Software Solutions

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• Real Estate Services A comprehensive bilingual listing of vendors, service and equipment providers, consultants and IT solutions providers for the supply chain and logistics industry STICS




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 Key Conta

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

How much does a company listing cost? A 12 month listing in the Vendors’ Directory costs US$ 750 (RMB 5,000) or US$ 450 (RMB 3,000) for Global Supply Chain Council members. This includes two issues, one in Q1/ Q2 and one in Q3/Q4.


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 Highlights • Founded in 1987 in the UK 198 年成立 英国 • Acquired by EZW in 2008 2008年被EZW 收购 • Oper tion l in the U , France, Belgium, Spai , Germa y, t y, Chin , ndia, Mexic o and the AE 业务遍及英国,法 国,比利时,西班 德国,意大利,中 牙, 国,印度,墨西哥 联酋 和阿

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Our c t-e fective su tainab e wareh and di tributio ouses n me t the needs ce tres are designed to retailer , manu of tod y’s an tomor w’s a tu es, and er tor , provid thi d-pa ty • Gazel y’s visio oping large ites es in tr egic : To be a g and wa ehous pr vider o al locations that ogistics space and efficien t goods torage wi l e iver fast de ivered in a su tainab le and di tributio 盖世理致力于成为 way’ . We under 全球化可持续发展 tand the impo 间的供应商 物流空 tance to our c tome istening fe to suit thei s so we can tailor our • Gazel y’s su fneeds exa tainab e design based on f t y Our o fer cept aunch conexible lease is ed in Octob , bui d-to-s ve opme t er 20 4 盖世理公司于20 uit , and specu de4年10月提出 tive u it . 设计理念 可持续性 我们建 造的有 经济效 为 满足各 行业客 益的可 持续仓 库和配 送中心 • Su tainabi ity measures 是 户的需 求,如 e bedded 第三方 物流提 零售商 ,制造 in al the wa 供商等 。在战 商及 ehouse buildin 略性的 地区提 的仓储 空间, 可持续环保措施应 gs 供大面 积 保证快 捷、高 用于全球所有仓储 效地进 行货物 送。 项目 储存和 配 • Co t-effective and high-q ua ity buildings 我们深 谙倾听 客户需 求的重 有经济效益的高质 要性, 因而能 为他们 度身定 够准确 地 量仓库 制独特 的方案 。我们 提供的 租期灵活,多元化 • On-budge 配送空 间 开发模式 , on-schedule 按需承建和标准化 造,从而满足不同 delive y 严格遵守预算的如 建 客户的需 。 期交付




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

How is the VENDORS’ DIRECTORY distributed and promoted? Targeted at qualified decision-makers, the directory is distributed free-of-charge to subscribers of CHaINA Magazine and companies based in Asia who request a copy (companies are only asked to cover the mailing cost). Copies are distributed by direct mail and are given out at more than 100 supply chain and logistics-focused events each year.

To find out more about how the VENDORS’ DIRECTORY can contribute to your marketing needs in China, please contact: ) +86 (21) 6280 1731




The Supply Chain

Mix Professionals working in supply chain, logistics and purchasing gathered at Shanghai’s Mesa & Manifesto on Julu Road for a late summer networking mixer organized by the Council. Held every few months, these mixers give supply chain professionals a chance to meet their peers over drinks and hors d'oeuvres.

Cracking the Retail Code


etail fashion is a hot topic in China as hungry foreign and domestic retailers crunch the numbers on what it would be like to sell to just a fraction of the massive Chinese populace. While the potential is enough to make mouths water, the challenge can result in no small amount of head banging. Aldo P.H.M. Spaanjaars, Vice President of Operations, adidas Group Greater China, talked with a new Council Apparel and Fashion Supply Chain Group on some of the challenges that adidas faces in forecasting and planning for distribution to their roughly 5,000 stores in China. While adidas has grown in China as fast as any company would hope, growth has brought challenges, such as complex distribution networks and under developed systems and



processes at various stages of the supply chain. Unlike some retailers, adidas chose to centralize their distribution into one massive distribution center in Suzhou which serves the entire country. This gives adidas a greater degree of control, but also creates a greater need for forecasting and planning to keep a lean supply chain. With most of adidas’ stores being franchises, visibility of data is a challenge that other companies present at the workgroup also face. The group discussed solutions to the data challenge, which might include employing customized data gathering technology and implementing better forecasting tools. The group will meet at regular intervals to discuss similar challenges.


Logistics Real Estate Market Vies for Space While the rest of the world is suffering, China seems to have marched on through the recession. Contrary to popular belief, most of China’s economy is not tied to exports; in 2008, 57% of China’s GDP came from fixed asset investment, Michael Klibaner, Jones Lange Lasalle’s research head, told a Council Real Estate lunch workgroup. Along with JLL’s industrial head, Stewart Ross, the duo shed light on some of the supply and demand drivers in the retail and distribution market in China. Over the lunch, they raised questions about everything from lending to private consumption and retail growth. Growth is not just coming from government stimulus. The JLL consensus is that retail growth is continuing unabated beyond Tier 1 cities, into Tier 2, 3 and 4 cities in China as retailers such Zara, H&M and UNIQLO build new stores and find new markets. The challenge for these retailers, says JLL, will be finding quality logistics property, given the slowdown in building that happened over the past year. One of the trends they noted will be consolidation into larger facilities as the supply of quality domestic non-bonded logistics space remains tight. On the plus side, prices have and will come down as industrial zones and landlords become more willing to negotiate, especially in the bonded space arena, where discounts are expected to reach 20-25%.




Cutting Through

the Regulatory Fog Changing fast, implemented suddenly and often fuzzy, trade regulations are almost always a minefield in China. While some larger companies have dedicated staff whose sole function is to deal with government policies and relations, most companies are in the position of playing catch-up. With the goal of clarifying some of the latest regulations affecting supply chains linked to China, PricewaterhouseCoopers and the Global Supply Chain Council held a seminar in July to discuss some of the latest issues including the new VAT regulations. VAT R e g u l a t i o n s a r e a good case in point of the fast changing Chinese regulatory climate. VAT rebates have

been used by the government to encourage exports based on government policy, to regulate production of high energy producing products and to stimulate the economy when exports are suffering. “The issue is really how to continue economic development and balance that with tax collection,” said Michael Jiang, director of PwC’s Worldtrade Management Service and the event chairman. The event panel included Donna Dong, head of Customs and Trade Compliance at BayerMaterialScience China, Kae-por Chang, managing director of EasyCargo and Flora Sun, a senior manager in PwC’s Worldtrade Management Service. The panel discussed regulations

Update on VAT Refund Rate


Issue Date

Update on VAT Refund Rate Regulations


1 Jun. 2009

[Notice Jointly Issued by the MOF and the SAT Regarding Uplifting Export VAT Refund Rate for Certain Commodities] Caishui [2009] No.88

Agriculture products, plastics, home applications, and steel products, etc.

1 Apr. 2009

[Notice Regarding the Increase of Export VAT Refund Rates for Certain Textile and Electronic Products Jointly Issued by MOF and SAT] Caishui [2009] No. 43

Electronic products, textile, chemicals, wooden products, glass products, and building materials, etc.

1 Feb. 2009

[Notice Regarding the Increase of Export VAT Refund Rate for Certain Textile Products and Garments Jointly Issued by MOF and SAT] Caishui [2009] No. 14

Textile products and garments

1 Jan. 2009

[Notice Regarding Raising the Export VAT Refund Rate for Certain Mechanical and Electrical Products Jointly Issued by MOF and SAT] Caishui [2008] No. 177

Mechanical and electrical Products

1 Dec. 2008

[Notice Regarding the Uplifting of Export VAT Refund Rates for Certain Products of Labour-intensive Industries Issued by MOF and SAT] Caishui [2008] No. 144

Labour-intensive Industries, such as: rubber, chemicals, and mechanical and electrical Products, etc.

1 Nov. 2008

[Notice to Raise the Export VAT Refund Rates for Certain Commodities Jointly Issued by MOF and SAT] Caishui [2008] No. 138

Textile products, garments, ceramics, plastic products, furniture, etc.

1 Aug. 2008

[Notice Regarding the Adjustment of Export VAT Refund Rates for Certain Commodities Including Textiles and Garments Jointly Issued by MOF and SAT] Caishui [2008] No. 111

Textile products, garments, agriculture products, pesticide, paint, and batteries, etc.


FOCUS Event Participants at the PwC/Council event on the latest supply chain regulations, held in Shanghai on July 9, 2009.

governing the importation of used versus new equipment, the types of tools used to manage regulations, implications of regulations on business areas such as R&D as well as how to balance your company’s Processing Trade Book. It was clear from the seminar that the level of company expertise in managing regulations and trade compliance varies widely and that effective management of such policies can have a direct impact on a company’s bottom line. The consensus was that as China matures economically, and takes a more progressive global role, regulations will become more transparent and easier to manage. Until then many companies will be scrambling to keep pace.




Global Supply Chains Understanding Risks and Rewards


n October 2008, aerospace giant Boeing Co. suffered an embarrassing setback in its ongoing battle with rival Airbus when it announced a six-month delay in the delivery of its nextgeneration wide-body jet, the 787 Dreamliner. After months of touting the benefits of its new, collaborative supply-chain management system, in which major portions of the new plane were to be built by suppliers around the globe and shipped to Boeing for final assembly, the company cited shortages of key materials and slow deliveries by suppliers as primary reasons for delaying initial deliveries of the Dreamliner until late 2008. The news was quickly followed by the replacement of Michael Bair, the Boeing vice-president who led the Dreamliner initiative, and corporate executives are now scrambling to get things back on track. “We have been very engaged over the last several months with each one of our major structural suppliers and further down in the supply chain,” said a company spokesperson during a conference call with analysts and investors in October to explain the delay. “I think we clearly have learned some things about how we could do this job better in the future.” The supply-chain problems were particularly embarrassing for Boeing because it had picked up business from Airbus, after the European company suffered its own manufacturing glitches that forced a two-year delay in delivery of its giant A380 jetliner, the first of which was delivered to Singapore Airlines in October 2007. Boeing isn’t the only company experiencing headaches with its supply chain. As new sourcing options become available across the globe, compa-



nies can greatly benefit from low-cost supplies and the ability to make their supply chains more flexible by sourcing from a number of different vendors around the world. But with these new opportunities come greater logistical hurdles: managing trade laws, accounting for events that could derail important shipments, and ensuring that current systems are able to accommodate exchange-rate fluctuations, language differences and other issues. It’s a larger undertaking than many companies realise, and is costing businesses billions of dollars annually, according to Aberdeen Group. To find success with global supply chains, executives need to integrate operations both vertically and horizontally, creating a centralised operation that gives supply chain executives insight into all areas of the chain, from product design to manufacturing and distribution. This requires improving the accuracy of product data, sharing real-time logistical information with key stakeholders, and creating greater flexibility and more accurate demand forecasting. It’s a tall order, but one companies must undertake if they aim to expand their business in the future. The Economic Intelligence Unit’s briefing paper for Oracle - Global supply chains: Understanding risks and rewards provides important information for supply chain professionals. The research is based on desk research and in-depth interviews with executives from around the world about the challenges and opportunities they face with regard to global supply chain management. You can access a full copy of the briefing paper by going to:







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Aberdeen Group������������������������ 52 adidas���������������������������� 42, 43, 48 Agility������������������������������������� 2, 33 Agricultural Bank of China��������� 16 Air Freight Asia�������������������������� 23 Airbus���������������������������������������� 52 Alcatel���������������������������������������� 22 AMB Property Corp������������� 18, 33 Ant Logistics������������������������������ 32 A.P. Moller-Maersk�������������������� 17 Apple�����������������������������������������15 ATMS�����������������������������������������55 Bank of China���������������������������� 16 Bayer Material Science China��� 51 Blue Scope Steel����������������������� 42 Boeing��������������������������������������� 52 BP����������������������������������������������16 Canada Pension Plan���������������� 18 Carrefour Group������������������������ 30 Cartier���������������������������������������� 30 CB Richard Ellis������������������������ 12 Ceva Logistics��������������������������� 22 Checkpoint Systems Inc.����������� 27 Chevron������������������������������������� 16 China Construction Bank����������� 16 China Investment Corp�������������� 12 China Life Insurance����������������� 16 China Mobile Communications�� 16 China National Petroleum��������� 16 China Ocean Shipping�������������� 17 Citigroup������������������������������������ 17 Client Solutions������������������������� 22 Coca-Cola���������������������� 30, 31,32 COFCO�������������������������������������� 32 Colliers International������������������ 19 Conoco Philips�������������������������� 17 Credit Suisse����������������������������� 12 Damco��������������������������������������� 20 Damco and Maersk Logistics���� 22 Danone�������������������������������������� 28 Daya Bay Nuclear Management Company ���������������������������������� 39 DB Schenker ���������������������������� 15 DDS ������������������������������������������ 49 Deutsch Post ���������������������������� 17 DHL ������������������������������������ 19, 21 DSM ������������������������������������������ 15 Easy Cargo ������������������������������� 51 Eaton China ������������������������������ 26 ExxonMobile ����������������������������� 16 Fannie Mae ������������������������������ 17 FedEx ��������������������������������������� 17 Flextronics International������������ 22 FM Logistics������������������������ 34, 35 Fonterra ������������������������������������ 14 Ford������������������������������������� 17, 20 FoxConn������������������������������������ 15 Gazprom������������������������������������ 16 GEA Process Engineering��������� 10 General Electric������������������������� 16 General Motors�������������������� 17, 26 Giorgio Armani �������������������������� 30 GPLN����������������������������������������� 22 GMS China�������������������������������� 18 Goodman����������������������������������� 13 Goodyear����������������������������������� 29 Gucci ���������������������������������������� 30


EVENTS Calendar

H&M������������������������������������� 20, 49 HBOS���������������������������������������� 17 Herbalife ����������������������������������� 28 Hisense �������������������������������������� 9 Hongwei ����������������������������������� 37 IBA Corp ����������������������������������� 29 ICBC ����������������������������������������� 16 InnoCSR ����������������������������������� 15 Intel �������������������������������������������32 InTouch Services ���������������������� 41 Johnson & Johnson ������������������ 28 KFC ������������������������������������������30 Koll Development ��������������������� 18 La Poste ����������������������������������� 17 Macquarie Bank ����������������������� 18 Maersk Logis ics ����������������� 20, 32 Magic Bus Creative ������������������ 57 Maison-Mode ���������������������������� 30 Manhattan Associates��������������� 33 Martin Bencher ������������������������� 22 McDonalds ������������������������������� 20 Microsoft ����������������������������������� 16 Mitsui OSK Lines ���������������������� 17 Moller-Maersk Group ���������������� 20 Needham & Co. ������������������������ 12 Nestle ��������������������������������������� 16 Nike ������������������������������������������ 19 Nippon Yusen ��������������������������� 17 Papa John’s ������������������������������ 20 Pemex �������������������������������������� 17 Petrobras ���������������������������������� 16 Poste Italiane ���������������������������� 17 Preferred Freezer Services������� 19 PwC�������������������������� 38,39, 50, 51 Prologis ������������������������������ 42, 43 Royal Bank of Scotland ������������ 17 Royal Dutch Shell ��������������������� 16 RT-Mart ������������������������������������� 19 SCIP Swire ������������������������������� 37 Schenker International ������������� 22 Shinsegae Group ��������������������� 19 Shure ���������������������������������� 42, 43 Sinochem ��������������������������������� 16 Sinopec ������������������������������������ 16 Siveco China ���������������������������� 37 State Grid ��������������������������������� 16 Time Warner ����������������������������� 17 Trammell Crow ������������������������� 18 Transport Logistic China ����������� 59 Tyco Electronics ����������������������� 27 UBS ������������������������������������������ 17 UNIQLO �������������������������������������� 49 United Parcel Service ��������������� 17 U.S. Postal Service ������������������ 17 UTi Worldwide �������������������������� 22 Wal-Mart ����������������������������������� 18 Whirlpool ������������������������������������ 8 Wilton Industries ����������������������� 41 World Food Program ���������������� 60 Yubi Digital ������������������������������� 51 Yupei Group ����������������������������� 19 Zara ������������������������������������������ 49


2009 SEP




Air Freight Asia 2009

Exhibition & Conference

Hong Kong Venue:

AsiaWorld-Expo, Hong Kong International Airport Organizer:

2009 SEP





2009 SEP

15 TUE

2009 SEP


What's up with RFID in China? Workgroup

Shanghai Venue:




Suzhou Road Show Road Show

Suzhou Venue:





2009 SEP

16 WED

2009 SEP


The World Route Development Forum Forum

Beijing Venue:

to be confirmed Organizer:

Capital Airports Holding Company Automotive Global Sourcing Workgroup Workgroup

Shanghai Venue:

to be confirmed Organizer:


2009 Asia Bulk Liquid Chemicals Shipping and Storage Conference Conference



Shanghai Venue:

Crowne Plaza Century Park Organizer:

CBI China

2009 SEP

20 SUN

2nd ISM China Annual Conference Conference

Shanghai Venue:

Plaza Royale, Shanghai Organizer:

ISM China

2009 SEP

22 TUE

Maintenance failures - Impact on your Supply Chain and Logistics Operations Workgroup

Shanghai Venue:

to be confirmed Organizer:


2009 SEP


Exhibition & Seminar

Shanghai Venue:



2009 SEP

24 THU

2009 NOV


International Sourcing Fair



Shanghaimart Organizer:

Ministry of Commerce and Shanghai Municipal People’s Government Pallet Standardisation in China Workgroup

Shanghai Venue:

to be confirmed Organizer:

Council CHaINA


Shanghai Venue:

Renaissance Zhongshan Park Organizer:


2009 SEP

23 WED

In Search of Best Value: India Conference

Shanghai Venue:

Renaissance Zhongshan Park Hotel Organizer:


2009 OCT


16 THU-SAT 2009 NOV



Wuhan Road Show Road Show

Wuhan Venue:




Tianjin Roadshow Road Show

Tianjin Venue:




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

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

2009 Sep-Oct Issue