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Trends and Challenges for Supply Chain Management and ...
Trends and Challenges for Supply Chain Management and ...
Trends and Challenges for Supply Chain Management and ...
Trends and Challenges for Supply Chain Management and ...
Trends and Challenges for Supply Chain Management and ...
Trends and Challenges for Supply Chain Management and ...
Trends and Challenges for Supply Chain Management and ...
Trends and Challenges for Supply Chain Management and ...
Trends and Challenges for Supply Chain Management and ...
Trends and Challenges for Supply Chain Management and ...
Trends and Challenges for Supply Chain Management and ...
Trends and Challenges for Supply Chain Management and ...
Trends and Challenges for Supply Chain Management and ...
Trends and Challenges for Supply Chain Management and ...
Trends and Challenges for Supply Chain Management and ...
Trends and Challenges for Supply Chain Management and ...
Trends and Challenges for Supply Chain Management and ...
Trends and Challenges for Supply Chain Management and ...
Trends and Challenges for Supply Chain Management and ...
Trends and Challenges for Supply Chain Management and ...
Trends and Challenges for Supply Chain Management and ...
Trends and Challenges for Supply Chain Management and ...
Trends and Challenges for Supply Chain Management and ...
Trends and Challenges for Supply Chain Management and ...
Trends and Challenges for Supply Chain Management and ...
Trends and Challenges for Supply Chain Management and ...
Trends and Challenges for Supply Chain Management and ...
Trends and Challenges for Supply Chain Management and ...
Trends and Challenges for Supply Chain Management and ...
Trends and Challenges for Supply Chain Management and ...
Trends and Challenges for Supply Chain Management and ...
Trends and Challenges for Supply Chain Management and ...
Trends and Challenges for Supply Chain Management and ...
Trends and Challenges for Supply Chain Management and ...
Trends and Challenges for Supply Chain Management and ...
Trends and Challenges for Supply Chain Management and ...
Trends and Challenges for Supply Chain Management and ...
Trends and Challenges for Supply Chain Management and ...
Trends and Challenges for Supply Chain Management and ...
Trends and Challenges for Supply Chain Management and ...
Trends and Challenges for Supply Chain Management and ...
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Trends and Challenges for Supply Chain Management and ...

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  • 1. Trends and Challenges for Supply Chain Management and Logistics in China Global Supply Chain Management Joint Forum 2007 Hangzhou, November 14, 2007 Sebastian Chan VP, Supply Chain Operations UPS China Copyright © United Parcel Service of America, Inc. All rights reserved.
  • 2. UPS 2006 revenue $47.5 billion Employees 425,300 Daily delivery volume 15.6 million packages and documents Customers 7.9 million daily UPS.com Average 15 million daily on-line tracking Operating facilities 1,788 Express; 936 Supply Chain Delivery fleet 94,542 package cars, vans, tractors, motorcycles, plus 6,334 tractors and 22,364 trailers with UPS Freight UPS jet aircraft 273; 9th largest airline in the world Chartered aircraft 322 Airports served Domestic – 424; International – 389 Copyright © United Parcel Service of America, Inc. All rights reserved. 2
  • 3. Presentation Outline s What are the customers telling us Findings from UPS Asia Business Monitor 2007 s Development in China s Challenges for Supply Chain Management in China s UPS solutions to Value Creation – two illustrations Trade Direct SM UPS Capital s UPS in China Copyright © United Parcel Service of America, Inc. All rights reserved. 3
  • 4. What are the customers telling us UPS Asia Business Monitor 2007 - A Source of Insight for Asia’s SMEs Copyright © United Parcel Service of America, Inc. All rights reserved. 4
  • 5. Overview of Methodology s Total of 1,200 respondents • Australia: 100 • Indonesia: 50 • Philippines: 100 • China: 150 • Japan: 100 • Singapore: 100 • Hong Kong: 100 • Korea: 100 • Taiwan: 100 • India: 100 • Malaysia: 100 • Thailand: 100 s Fieldwork period: 15 November, 2006 - 10 January, 2007 s SME = Companies with fewer than 250 employees (Following EU standards) s Approximate annual turnover between US$500,000 and US$10 million s The average SME has been in business for approximately 20 years. s Industries: Automotive, Electronics & Electricals, Garments & Textiles, Gifts & Housewares, Healthcare & Pharmaceuticals, Timepieces, Jewellery & Optical goods, Toys & Sporting goods. s Interviews were conducted by an independent market research organisation using the respondents’ native language. Copyright © United Parcel Service of America, Inc. All rights reserved. 5
  • 6. Robust Economic Growth in 2007 Do you think your company’s overall prospects in 2007 will be better, worse or about the same as they are now? ABM 2006 : 62% 86% 69% 63% 61% 59% 59% 59% 66% 71% 71% 44% 38% 89% 79% 63% 69% 67% 66% 66% 60% 60% 60% 54% 54% 49% 28% 26% 14% 16% 6% 48% 21% 16% 13% 38% 14% 10% 2% 52% 50% 54% 47% 42% 35% 41% 41% 44% 40% 38% 36% 30% Much better Better Same Worse Much worse Regional India China Philippines Taiwan Malaysia Singapore Australia Thailand Korea Indonesia Hong Japan Kong Copyright © United Parcel Service of America, Inc. All rights reserved. 6
  • 7. China to Catch up with the U.S. How long do you think it will take China to catch up with the U.S. as the world’s biggest consumer market? 100% 8% 7% 13% 20% 80% 27% 38% 32% 60% 37% 23% 40% 25% 6% 33% 20% 17% 11% 20% 9% 11% 11% 9% 19% 8% 11% 5% 0% All Countries Except Korea Japan Taiwan China Never More than 20 years Within 16-20 years Within 11-15 years Within 6-10 years Within next 5 years Copyright © United Parcel Service of America, Inc. All rights reserved. 7
  • 8. Obstacles to SME Competitiveness How important are the following factors in contributing to SME competitiveness in your country? Which of the following factors do you consider to be lacking and are obstacles to SME competitiveness in your country? Access to market 100% Strengths intelligence and other business information Barriers Access to overseas Availability of a Qualified Entrepreneurial spirit markets Workforce 90% IT adoption Innovation Transportation infrastructure Supply-chain Access to Funding and Working 80% Free-market efficiency Capital economy Legal framework Government Support % Important Labour costs 70% Property leasing and management costs 60% Hygienics Future value add 50% 40% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% % Lacking Copyright © United Parcel Service of America, Inc. All rights reserved. 8
  • 9. Obstacles to SME Competitiveness - China How important are the following factors in contributing to SME competitiveness in your country? Which of the following factors do you consider to be lacking and are obstacles to SME competitiveness in your country? Strengths Barriers Hygienics Future value add Copyright © United Parcel Service of America, Inc. All rights reserved. 9
  • 10. Top Three Business Issues What are the top three business issues that keep you up at night? All Countries 50% 48% 47% 43% 42% 28% 18 % Quality of products/services Customer loyalty Retention of a qualified workforce Financial performances Speed, flexibility and adaptability to change Government Corporate reputation Copyright © United Parcel Service of America, Inc. All rights reserved. 10
  • 11. Difficulty in Forecasting Demand What problems do you see with the supply chain management at your company? Problems encountered Lack of Supply chain is Lack of visibility Supply chain Use of unreliable % rating Difficulty in knowledge of “Disagree" + fragmented with of product management is logistics and “Strongly forecasting and expertise in too many parties movement and not seen as a shipping service disagree" demand supply chain inventory levels priority providers involved management All Countries 53% 37% 28% 27% 21% 16% Rated BY SMEs in… Australia 13% 25% 25% 13% 25% 0% China 57% 43% 43% 29% 0% 14% Hong Kong 56% 44% 33% 22% 44% 0% India 42% 33% 33% 25% 17% 33% Indonesia 100% 67% 33% 0% 33% 33% Japan 59% 32% 9% 27% 27% 5% Korea 63% 13% 13% 38% 0% 25% Malaysia 57% 43% 57% 43% 29% 14% Philippines 38% 50% 50% 25% 13% 0% Singapore 83% 33% 33% 50% 17% 33% Taiwan 60% 60% 20% 0% 20% 0% Thailand 50% 33% 17% 33% 17% 67% Copyright © United Parcel Service of America, Inc. All rights reserved. 11
  • 12. Presentation Outline s What are the customers telling us Findings from UPS Asia Business Monitor 2007 s Development in China s Challenges for Supply Chain Management in China s UPS solutions to Value Creation – two illustrations Trade Direct SM UPS Capital s UPS in China Copyright © United Parcel Service of America, Inc. All rights reserved. 12
  • 13. China has evolved from primarily an export-driven economy to a huge consumer market 14.0% 10.5 12.0% 9 GDP increase % 10.0% 7.5 Growth of total 8.0% 6 private consumption 6.0% 4.5 Total private consumption 4.0% 3 (RMB Trillion) 2.0% 1.5 0.0% 00 2001 2002 2003 2004 2005 Source: China yearbook and website: www.stats.gov.cn Copyright © United Parcel Service of America, Inc. All rights reserved. 13
  • 14. Growth at China’s inland cities GDP Growth s China national GDP 15% continued its growth at rates above 9% 13% s In recent years, Chinese inland cities 11% experienced growth at higher rates 9% 7% 5% 2002 2003 2004 2005 Year Inland Provinces GDP Growth % Total China GDP Growth % Source: China Yearbook and www.stats.gov.cn Copyright © United Parcel Service of America, Inc. All rights reserved. 14
  • 15. The growth of the interior China areas 0.8 Coastal vs Interior income gap 0.6 Ratio 0.4 0.2 Rural vs urban income gap 0.0 1978 1985 1990 1995 1998 2001 2002 2004 2005 Interior Household income relative to the Coastal Level Rural Resident income Relative to the Urban Level Copyright © United Parcel Service of America, Inc. All rights reserved. 15
  • 16. Generate more consumption and develop the interior and/or rural areas s China policies are to generate more consumptions in the next five years and beyond: reduce income inequality across regions change urban-bias development policy into more rural-bias one provision of more public goods to poor regions and families more investment and government spending on rural areas, education, health and infrastructure Copyright © United Parcel Service of America, Inc. All rights reserved. 16
  • 17. Infrastructure – highway network s China will spend RMB 2,000 billion in next 30 years to expand highway system Total of 85,000 km highway system covering 85% of major GDP cities “7918” Network 7 radial lanes connecting Beijing to Shanghai, Hong Kong, Kunming, Lhasa, Taipei, Urumqi and Harbin 9 vertical lanes from North to South 18 horizontal lanes from East to West Direct access to all provincial capital cities and major cities Direct access to 50 regional railway gateway, 67 regional air gateway, 140 road hubs and 50 seaports Linking Yangtze river delta, Pearl river delta and Bohao bay Copyright © United Parcel Service of America, Inc. All rights reserved. 17
  • 18. Presentation Outline s What are the customers telling us Findings from UPS Asia Business Monitor 2007 s Development in China s Challenges for Supply Chain Management in China s UPS solutions to Value Creation – two illustrations Trade Direct SM UPS Capital s UPS in China Copyright © United Parcel Service of America, Inc. All rights reserved. 18
  • 19. Implications for logistics and supply management in China What the customers are saying … s Optimistic about growth s World’s biggest consumer market s Challenges Innovation Implications Availability of qualified workforce s People Access to funding & working capital Government Support s Network coverage s Business Issues s Domestic Capability Quality of product / service Customer loyalty s Supply Chain Retention of qualified workforce financing s Supply Chain Management s Integrated Services Difficulty in forecasting demand Lack of knowledge of and expertise in supply chain s Information management Management Supply Chain fragmented with too many parties involved The macro environment … s Development in Interior China s More consumer spending s Expansion of Infrastructure Copyright © United Parcel Service of America, Inc. All rights reserved. 19
  • 20. People s Increase in breadth of services and depth in geographical coverage means a strong need for logistics professionals Knowledge and experiences in integrated supply chain solution Exposure to international business environment Knowledge in China operating environment Mobility domestically in China and internationally Innovative approach to supply chain solutions s Challenges Qualified middle to senior management to cater for the strong growth in the industry Well-trained and experienced junior operators Shortage more pronounced in inland cities Copyright © United Parcel Service of America, Inc. All rights reserved. 20
  • 21. Air Express Industry Contributes to the Development of China According to a study by the US-China Business Council, an unrestricted integrated air express industry can bring additional US$3billion investment to the major export industry, additional 84 billion industrial output and add 800,000 job opportunities. [from 2003-2008] The study also indicated one of the benefits the air express industry brings is the balance of development gap between the coastal area and the inland areas. When a company in Xi’an has the same access as a company in Beijing or Shanghai to the global express network, the advantages of resources and cost in the west area will not be offset by any higher costs or longer time in transportation. Copyright © United Parcel Service of America, Inc. All rights reserved. 21
  • 22. Presentation Outline s What are the customers telling us Findings from UPS Asia Business Monitor 2007 s Development in China s Challenges for Supply Chain Management in China s UPS solutions to Value Creation – two illustrations Trade Direct SM UPS Capital s UPS in China Copyright © United Parcel Service of America, Inc. All rights reserved. 22
  • 23. Copyright © United Parcel Service of America, Inc. All rights reserved. 23
  • 24. UPS Trade Direct SM Finished Goods Origin Shipping Destination Delivery Freight (All Trade Terms) B2B Distribution Orders shipped individually Warehouses Production by ocean / air freight Facility End Customers Production Facility Express (Ex-works/DDU/DDP) Small Package Express B2B/B2C service (door-to-door air) Production Facility Trade Direct SM (All Trade Terms) Retail Stores B2B Each order is labeled at origin, Shipment is then B2B consolidated & shipped as one deconsolidated after Production shipment (air, FCL or LCL) customs clearance Facility B2C Consumers Copyright © United Parcel Service of America, Inc. All rights reserved. 24
  • 25. UPS Trade Direct SM Process Flow A complete, integrated, multi-modal solution PICKUP / CLEAR DECONSOLIDATE FINAL CONSOLIDATE CUSTOMS SHIPMENTS DELIVERY SHIPMENTS FULL VISIBILITY: End-to-end tracking provided throughout the supply chain. Freight and Consolidated Freight moves Package and LTL individual shipment crosses via LTL shipments are packages are the border in a delivered direct to Packages enter picked up, single customs multiple retail UPS package labeled and clearance stores and/or end delivery consolidated customers network Copyright © United Parcel Service of America, Inc. All rights reserved. 25
  • 26. UPS Trade Direct Portfolio of Services sUPS Trade DirectSM Air Combines air freight and customs clearance with final UPS package or LTL delivery. Enables you to get your product to customers with the benefit of bulk shipping and the speed of individual direct express shipments by transparently combining the best features of both. sUPS Trade DirectSM Ocean For economical movement of shipments in major trade lanes worldwide, with delivery direct to retailers and end consumers. Combines ocean freight and customs clearance with final UPS package or LTL delivery. sUPS Trade DirectSM Cross Border An end-to-end solution providing complete dock-to-door movements of packages and freight shipments across borders between NAFTA markets. Origin-to-border movement is by ground trailer. Copyright © United Parcel Service of America, Inc. All rights reserved. 26
  • 27. Benefits of UPS Trade Direct SM Increased speed to market can increase order-to- Speed cash cycle, improve response time and overall service Reliability Repeatable processes create dependable service, decreased risk of error, loss or damage caused by multiple hand-offs Flexibility DC by-pass reduces physical asset requirements due to impact of seasonality and market fluctuations Cost Containment Removing unnecessary handling, labor and equipment costs reduces overall logistics costs Effectiveness Better inventory management increases inventory turns and reduces carrying costs Efficiency Consolidated invoice for more efficient processing Complete on-line tracking for proactive Control management and greater control Single point of contact simplifies management and administrative requirements Copyright © United Parcel Service of America, Inc. All rights reserved. 27
  • 28. Presentation Outline s What are the customers telling us Findings from UPS Asia Business Monitor 2007 s Development in China s Challenges for Supply Chain Management in China s UPS solutions to Value Creation – two illustrations Trade Direct SM UPS Capital s UPS in China Copyright © United Parcel Service of America, Inc. All rights reserved. 28
  • 29. About UPS Capital s Founded in 1998 as the financial services subsidiary of UPS s Staff of over 700 professionals s Offices throughout the U.S. (FCI member) as well as Hong Kong (FCI member), Taiwan (FCI member), Shanghai, Canada, and the United Kingdom s UPS Capital develops financial solutions and introduces additional UPS resources that enable companies to operate more effectively. Copyright © United Parcel Service of America, Inc. All rights reserved. 29
  • 30. Supply Chain Convergence Physical Supply Chain Services Financial Supply Chain Services Transportation PO Processing Export/Import Compliance Letters of Credit Document Management Open Account Management Shipment Tracking Pre & Post Shipment Financing Inventory Management Invoice Presentment Global Parts Management Insurance Management Security Management Receivables Financing Contract Management Global Asset Based Lending Warehousing Payables Financing Fulfillment Inventory Financing Information Copyright © United Parcel Service of America, Inc. All rights reserved. 30
  • 31. Trade Finance Market Trends s Buyer strength is dictating terms of relationship Buyers are demanding open account terms on trade transactions. Buyers are placing large orders to fewer vendors. This has created working capital strains on their vendors, especially as letters of credit usage continues to decline. Globalization has stretched the supply chain and has increased strain on working capital. The result: An opportunity for financial institutions and logistics companies to collaborate in developing lower risk open account solutions, while leveraging logistics data to mitigate risk. Copyright © United Parcel Service of America, Inc. All rights reserved. 31
  • 32. UPS Capital Global Supply Chain Finance s We leverage UPS Supply Chain services and information to provide financing and risk mitigation tools at varying points within your supply chain. s We offer working capital financing solutions to address a company’s needs around accounts receivable, accounts payable, and inventory. Copyright © United Parcel Service of America, Inc. All rights reserved. 32
  • 33. UPS Capital Global Supply Chain Finance Payables Discounting sSupplier Benefits sBuyer Benefits sSupplier obtains financing earlier in sAbility to extend payment terms to the supply chain. supplier. sLeverages buyer’s credit strength to sDecreases cost of goods sold by obtain favorable cost of funds. providing earlier financing solutions to suppliers. sReduces days sales outstanding. sBuyer has visibility of products sSupplier has visibility of products throughout the supply chain. throughout the supply chain. Copyright © United Parcel Service of America, Inc. All rights reserved. 33
  • 34. UPS Capital Global Supply Chain Finance Inventory Financing sSupplier Benefits sBuyer Benefits sSupplier obtains financing earlier in sBuyer has visibility of products the supply chain. throughout the supply chain. sLeverages buyer’s credit strength to sBalance sheet optimization. obtain favorable cost of funds. sCreates better cash flow availability. sSupplier has visibility of products sResults in improved profitability. throughout the supply chain. Copyright © United Parcel Service of America, Inc. All rights reserved. 34
  • 35. UPS Capital Global Supply Chain Finance Receivables Financing sSupplier Benefits sBuyer Benefits sSupplier obtains financing earlier in sIncreases working capital by the supply chain. eliminating letters of credit. sSupplier may obtain higher advance sCan negotiate better payment terms. rates against approved invoices. sEnhances financial stability. sEliminates buyer credit risk. sReduces collection costs. Copyright © United Parcel Service of America, Inc. All rights reserved. 35
  • 36. Presentation Outline s What are the customers telling us Findings from UPS Asia Business Monitor 2007 s Development in China s Challenges for Supply Chain Management in China s UPS solutions to Value Creation – two illustrations Trade Direct SM UPS Capital s UPS in China Copyright © United Parcel Service of America, Inc. All rights reserved. 36
  • 37. UPS in China s Established in China since 1988 s 45 locations covering more than 330 cities s Employees: 4,518 in China Shenyang Express 2,600 Supply Chain 1,918 Beijing Dalian s Delivery Fleet: 553 Tianjin Shijiazhuang Package vans, trucks, trailers Qingdao Xian s Operating Facilities: 87 Nanjing Kunshan Distribution centers, Package centers, Chengdu Wuxi Shanghai Suzhou Hubs, Gateways, Offices, Freight Changzhou Changzhou Hangzhou Ningbo Warehouses Chongqing Wenzhou Wenzhou Fuzhou s Products Kunming Fuoshan Xiamen SM Dongguan UPS Worldwide Express Plus , UPS Worldwide SM Express , UPS Express Saver, UPS Worldwide Zhongshan Guangzhou SM SM Hongkong Expedited , UPS World Ease , UPS Air Cargo and SM Shenzhen + Yantian UPS Trade Direct . Heavyweight Air, Ocean, Ground freight transportation, International trade services, Supplier Management, Logistics and Distribution UPS Express Facilities Services, Post Sales support. Financial services through UPS Capital Corporation. UPS Supply Chain Solutions Offices (Exclude Hongkong and Taiwan) Copyright © United Parcel Service of America, Inc. All rights reserved. 37
  • 38. UPS International Air Hub in Shanghai - 2008 Overall Land Size: 96,000 sqm, including office & warehouse: 35,000 sqm Plan to operate in the 3rd quarter of 2008 at Pudong Airport West Freight Handling Area. Copyright © United Parcel Service of America, Inc. All rights reserved. 38
  • 39. UPS Connects China and Asia to the World Seoul Anchorage Qingdao Tokyo Osaka Dalian Europe Beijing Xiamen Taipei Guangzhou Shanghai Shenzhen Hong Kong Rockford Bangkok 747-100 Newark Bombay Clark Cebu Penang Louisville Kuala Lumpur Ontario Singapore Honolulu Jakarta Fiji Sydney Copyright © United Parcel Service of America, Inc. All rights reserved. 39
  • 40. UPS China Official Logistics and Express Delivery Sponsor of the Beijing 2008 Olympic Games • Official BOCOG Designations include: • UPS has been – Official Sponsor of the Games of the XXIX Olympiad appointed as the – Beijing 2008 Sponsor Beijing 2008 Logistics – Beijing 2008 Logistics and Express and Express Delivery Delivery Sponsor – Official Sponsor of the Beijing 2008 Sponsor. Olympic Games – Official Logistics and Express Delivery • All of our affiliated Sponsor of the Beijing 2008 Olympic companies in China are Games covered by our – Official Logistics and Express Delivery Sponsor of the Beijing Organizing sponsorship. Committee for the Games of the XXIX Olympiad • We are also sponsors – Official Logistics and Express Delivery of COT, COC and Sponsor of the Beijing Organizing Committee for the 2008 Olympic Games Paralympics – BOCOG Logistics and Express Delivery Sponsor Copyright © United Parcel Service of America, Inc. All rights reserved. 40
  • 41. Thank You Copyright © United Parcel Service of America, Inc. All rights reserved.

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