Your SlideShare is downloading. ×
Tba on sourcing firms for csc roundtable   18 dec 2012 - final ho
Tba on sourcing firms for csc roundtable   18 dec 2012 - final ho
Tba on sourcing firms for csc roundtable   18 dec 2012 - final ho
Upcoming SlideShare
Loading in...5

Thanks for flagging this SlideShare!

Oops! An error has occurred.

Saving this for later? Get the SlideShare app to save on your phone or tablet. Read anywhere, anytime – even offline.
Text the download link to your phone
Standard text messaging rates apply

Tba on sourcing firms for csc roundtable 18 dec 2012 - final ho


Published on

Published in: Business
  • Be the first to comment

  • Be the first to like this

No Downloads
Total Views
On Slideshare
From Embeds
Number of Embeds
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

No notes for slide


  • 1. Shanghai, 18 December 2012 Sourcing Firms Roundtable Perspectives from The Beijing Axis on ‘Sourcing Firms’ Kobus van der Wath Founder and Group Managing Director The Beijing Axis China-focused International Advisory and Procurement The Beijing Axis 1 Disclaimer This document is issued by The Beijing Axis. While all reasonable care has been taken in the preparation of this document, no responsibility or liability is accepted for errors or omissions of fact or for any opinions expressed herein. Opinions, projections and estimates are subject to change without notice. This document is for information purposes only, and solely for private circulation. The information contained here has been compiled from sources believed to be reliable. While every effort has been made to ensure that the information is correct and that the views are accurate, The Beijing Axis cannot be held responsible for any loss, irrespective of how it may arise. In addition, this document does not constitute any offer, recommendation or solicitation to any person to enter into any transaction or to adopt any investment strategy, nor does it constitute any prediction of likely future movements or events in any form. Some investments discussed here may not be suitable for all investors. Past performance is not necessarily indicative of future performance; the value, price or income from investments may fall as well as rise. The Beijing Axis, and/or a connected company may have a position in any of the investments mentioned in this document. All concerned are advised to form their own independent judgement with respect to any matter contained in this document. The Beijing Axis 2 The Beijing Axis’ Knowledge & Network Synergies Beijing Axis Commodities • Commodity Marketing • Commodity Procurement Beijing Axis Capital • Transaction Origination • Corporate Finance Advisory Beijing Axis Procurement • Comprehensive Procurement Solutions Beijing Axis Strategy • Strategy Formulation • Strategy Implementation • Founded in 2002; has successfully worked with many international and Chinese MNCs • Operates in four synergistic, cross-border China businesses • Provides services across various sectors, with a core focus on the MINING, RESOURCES, INDUSTRIAL, ENGINEERING, CONSTRUCION, INFRASTRUCTURE and OTHER SERVICES sectors • Provides solutions to international firms as they act in unfamiliar territory in China/Asia and to Chinese/Asian firms as they venture out and ‘go global’ • Committed to safety and sustainability, with solutions emphasising ‘actions and transactions’ The Beijing Axis - China-focused International Advisory and Procurement The Beijing Axis 3 There is a dynamic global sourcing timeline. From Western-Europe to North America in the 50’s, to Japan to NIEs, to new Dragons, to China, to India and Vietnam … (and next Myanmar, Laos, Cambodia, Africa?) Global Sourcing Migration (1940-2020) Source: Dennis Arnold, ‘Textile & Apparel Sourcing: the complexity behind low cost labour in supply chains’ 1940 1950 1960 1970 1980 1990 2000 2010 2020 North America to Japan Japan to HK, Taiwan, Singapore and Korea SE Asia and Mexico/Latin America China to India and Vietnam Britain, W-Europe to USA Indo-China? Africa? PNG? ??? Latest LCC Era Next LCC Era NIE’s to China, SE Asia, and Sri Lanka The Beijing Axis 4 • Fragile global markets … • … but highlights the counter cyclicality to sourcing business as clients look at cost/savings • China’s cost increases in some cases are reflective of quality improvements but in some cases do constitute a loss in competitiveness … knowing the difference is key (especially to know ‘what/where’ to source) • In the last 2-3 years, we have done more complex manufactured products and services in China but simultaneously branched out more into other low cost sourcing destinations i.e. India and South East Asian economies (usually for lower-end manufactures) • More capital projects; more services – this is a niche that requires more technical skill, but its less competitive • Clients usually need a lot of help if they source complex goods and services. There are many sourcing firms that do not have the platform, systems, processes, methodology, resources (financial, commercial, technical, logistics), supplier relationships, etc. to support high-value/high-risk project execution. But is a higher cost model • Generally need to offer more comprehensive service offering (i.e. abilities in evaluating the changing/evolving market dynamics; supporting the RFx process; negotiation; contracting; post-PO QA/QC/expediting; logistics management; etc). Again, higher cost model – requires disciplined business management Perspectives on the big picture for Sourcing Companies The Beijing Axis 5 • Sourcing is itself becoming a ‘high cost’ endeavor; must attract, develop, retain talent • Can be a competitive terrain – need a differentiated positioning. But must co-exist with other players • There will always be many small sourcing players…but they must find their niche • Category focus and expertise a must – can be generalist but within a certain cluster of categories. Staff also do not want to source complex machinery one day and simple paper cups the next day… • Clients will go direct if you do not add value • If you only do ‘China sourcing’ you may be challenged by the client – the need is for ‘global sourcing’, but capacity is a constraint • Abnormal returns cannot be sustained – build a robust business that can stand test of time. Brand, capacity, value, etc. • New players (i.e. EPCM’s, BPO’s, Consultancies) are establishing China/Asia/LCC sourcing positions and project execution platforms. Some of that could drive sourcing firm acquisitions Perspectives on the big picture for Sourcing Companies
  • 2. The Beijing Axis 6 Why source from China? Source: The Beijing Axis Analysis The Beijing Axis 7 What to source from China? Source: The Beijing Axis Analysis The Beijing Axis 8 How to source from China? Source: The Beijing Axis Analysis The Beijing Axis 9 A number of new issues and trends are reshaping the procurement landscape in China - rising material and labour costs are the major concerns; quality is increasingly less of a concern (but only for those buyers that lead in experience) Major Issues in Terms of Impact on Foreign Companies in China (2009-2010 survey) Source: Booz & Co. China Manufacturing Competitiveness Study; The Beijing Axis Analysis 0 5 10 15 20 25 30 35 40 45 Material price increases Reduced demand in home country Wage increases RMB appreciation Shortages of qualified personnel Concerns over IP protection Poor employee retention Sluggish product launch readiness Product quality Difficulties to find adequate suppliers Issue with the third highest impact Issue with the second highest impact Issue with the highest impact No. of Votes Labour shortage is forcing companies to boost wages These used to be a major concern – not anymore RMB appreciation and shortage of qualified personnel are becoming an issue IP is becoming less of an issue Growing concerns Surveyresultsbasedon75respondents The Beijing Axis 10 Supply chain shifts that underpin industrial development in Asia are still evolving. Over the past decade, machinery exports’ share as increased considerably from China Export Growth of Commodities Produced by Top Asian Countries (USD bn, 2001-2010) Source: UN Comtrade; The Beijing Axis Analysis 0 600 1,200 1,800 2001 2010 Machinery and Electrical Equipment Textile and Textile Articles Base Metals Transport Equipment Miscellaneous Manufactured Articles Chemical Products Others 32% 44% China 7% 8% 0 100 200 300 2001 2010 0 200 400 600 2001 2010 43% 37% 0 300 600 900 2001 2010 South Korea India Japan 41% 34%Increasing export share Increasing export share Decreasing export share Decreasing export share The Beijing Axis 11 International companies are using various ‘models and sourcing structures’ for China procurement Various Sourcing Models in China Note: (1) Also use EPCMs for projects (3) FIFO: Fly-in-fly out Source: Various; The Beijing Axis Analysis No China SourcingNo China Sourcing Sourcing via AgentSourcing via Agent Fly-in-fly out (FIFO) Fly-in-fly out (FIFO) via a Procurement Service Provider (PSP) (1) via a Procurement Service Provider (PSP) (1) Office in ChinaOffice in China • No agents • High use of agents • Medium use of agents • Light use of agents • Very light use of agents • No fly-in-fly out (FIFO) • Light FIFO (3) • High FIFO • Medium FIFO • Medium FIFO • No PSPs • Light use of PSPs • Medium use of PSPs • High use of PSPs • High use of PSPs • No Office • No Office • No Office • No Office • Small Office • Very light use of agents • Light FIFO • Medium use of PSPs • Medium Office • Very light use of agents • Light FIFO • Light use of PSPs • Large Office Small Medium Large Level of Engagement and Commitment PrimaryandSecondaryChannels
  • 3. The Beijing Axis 12 Beijing Axis Procurement has a tried and tested service delivery platform & methodology for sourcing SupplyChain Management& Support Procurement needs analysis and China procurement competitive analysis Supplier pre-qualification, due diligence & final selection Transaction monitoring Systematic industry search & supplier identification Commercial process, contracting & contract management Negotiation, tender evaluation Quality mgmt. (QA/QC), Expediting & 3rd party mgmt. Logistics 1 2 4 875 Analysis Initial scoping, supplier evaluation, due diligence and final selection, and localization strategy and planning Supplier Engagement Supplier engagement, client visits, testing, application of detailed filters and negotiation Supplier Process Management Transaction monitoring, quality assurance, expediting, 3rd party management and logistics Strategic Sourcing SupplyChain Management& Support 6 11109 Coordination & assistance on site (material mgmt., commissioning, etc.) 12 Supplier evaluation by application of high level filters 3 Site inspections, sample testing & standards Supplier engagement, RFQ & tendering (SOI, RFP) • Overall Project Management • Holistic Risk Management • Strategic Relationship Management Service Delivery Platform & Methodology OperationalProcurementProcessAnalysis TotalLifeCycleModelling Localization Strategy and Implementation Beijing, China Cheryl Tang Director & GM, China Shanghai, China Julia Wang Procurement Specialist Hong Kong TBA Secretary Corporate Office 3806 Central Plaza, 18 Harbour Rd Wanchai, HK Singapore Andrew Kagoro, Finance & Projects Penthouse & LV 42 Suntec Tower 3, 8 Temasek Blvd Singapore Perth, Australia Kobus van der Wath Founder & Group MD Johannesburg, South Africa Dirk Kotze Director & GM, Africa London, UK/Europe Matt Pieterse MD, Beijing Axis Capital Russia Desk Lilian Luca (Beijing) Non-executive Director Latin America Desk Javier Cuñat (Beijing) Associate Director Yangon, Myanmar Dr. Wong YF Chief Representative India Desk Ankit Khaitan (Singapore) Beijing Axis Strategy Eastern Africa Desk Walter Ruigu (Beijing) Beijing Axis Strategy COPYRIGHT© The Beijing Axis Ltd. 2012. No part of this publication may be reproduced or transmitted in any form or by any means without prior written consent of The Beijing Axis. China-focused International Advisory and Procurement Kobus van der Wath Founder and Group Managing Director, The Beijing Axis THANK YOU!