Heart of East AsiaWorld’s 3rd biggest seaport Comprehensive inland waterway World’s busiest cargo airport
PEMUDAH includes easing restrictions and requirement to hire expatriates, shorten time to do land transfers and other procedures
DHL recently estb. NE Asia hub in Shanghai,
SAIC Motor, one of the three biggest automotive corporations in China, is located in Shanghai, and has strategic partnerships with Volkswagen and General Motors.China’s largest steelmaker Baosteel Group is located in Shanghai
High Clock speed industry
Texas Instruments has its largest DC in the world in Singapore.STMicro also has it DC’s present in Singapore.
Malaysia by the Production Sharing Contractors has resulted in the discovery of 163 oil fields and 216 gas fields.
Logistics of Spare Parts in Asia
1SERVICE PARTS DCAnalyzing the regional requirements forestablishing a service parts DC in Asia Anshuman Gupta GTID: 902858894 Heng Jiang GTID: 902755298 Jinbin Lin GTID: 902897221 Muhammad Hyder GTID: 902896898 Xinyan Zeng GTID: 902864269
2Agenda• What we’ve been doing for the last 3 months• Analysis of major logistics hubs in Asia• The What, When, and How of Service Parts• What we’ve developed for you• Key for success
3What we’ve been doing…• Researching on different service parts industries• Interviewing industry practitioners and academia• Analyzing regions in Asia w.r.t service parts DC’s• Developing recommendations for the investors
4Key logistics hubs in AsiaWe identified 5 major regional logistics hubs• Singapore• Hong Kong• Malaysia• India• ShanghaiWe have evaluated all regions based on an assessment criterion.
5 Assessment CriterionCategory Customs Air Sea Land Infrastr. Human Market Labor Currency Land Process Connect. Connect. Connect. Capital Access Cost Stability PricesBronze >5 hrs <3000 <300 Access developi Scarce <1 billion >5$/hr Fluctuate >600 USD :Air flights/wk ports to < ng (depend people s often PSF 200m s on within 6 >5 days To <100 cust. Univ.) hrs of :Sea cities flightSilver 1-5 hrs 3000- 300-500 Access Develop available 1-2 billion 1-5$/hr Relatively 200-600 :Air 5000 ports to 200m- ed but people stable USD PSF flights/wk 1bil cust. needs within 6 3-5 days improve hrs of :Sea To 100- ment flight 150 citiesGold <1 hrs >5000 >500 Access Highly Readily >2 billion <1$/hr Stable <200 USD :Air flights/wk ports to 1bil develop Available people PSF cust. ed (>5 top within 6 <3 days To > 150 ranked hrs of :Sea cities Univ’s) flight
8 Assessment Plate: Singapore Customs Process Air connections Sea connections Land connections InfrastructureHuman Capital Market access Labor cost Currency Stability Land prices
9Singapore: The Highs• Strategic geographical location• Access to a market of 3 billion people within 6-7 hours of flight• Ranked 4rth by World Bank for low effective personal and corporate tax rates• Ranked as top place in the world for ease of doing business by World Bank and has the best labor force in the world (BERI)• Singapore is one of the major biomedical research and manufacturing centers in the world• Highly efficient customs procedure• Politically stable
10Singapore: The Lows• High inflation rate of 5.3% has resulted in high labor costs (Historical average is 2.8%)• The property prices have risen dramatically, 7.2% in Q1 2012
13 Assessment Plate: Hong Kong Customs Process Air connections Sea connections Land connections InfrastructureHuman Capital Market access Labor cost Currency Stability Land prices
14Hong Kong: The highs• Access to a market of 3 billion people within 6-7 hours of flight• Ideal gateway to mainland China and Southeast Asia• Ease of doing business is second only to Singapore• Very efficient customs clearance procedure• Logistics professionals are available
15Hong Kong: The lows• Hong Kong is ranked as world’s third most expensive city, the labor costs are high (Automation of DC’s is an increasing trend)• Due to limited space availability, land prices are very high, surging up to USD 1080 per square foot• Skilled labor is not readily available but Govt. is working on improving the situation
17 Assessment Plate: Malaysia Customs Process Air connections Sea connections Land connections InfrastructureHuman Capital Market access Labor cost Currency Stability Land prices
18Malaysia: The Highs• Emerging logistics hub with the aspiration from Singapore• Increasing number of Air and Sea connections with major cities in the world• Ranked as the 4th best place to do business among East Asia and Pacific region• High economic growth rate forecasts• Manufacturing plants shifting from China
19Malaysia: The Lows• Currency is not traded internationally• A possible access to a market of 3 billion people within 6-7 hours of flight• The customs process is not very convenient but it is being improved. Govt. has implemented the policy of “PEMUDAH”, which means "simplify" in Malay.
21 Assessment Plate: India Customs Process Air connections Sea connections Land connections InfrastructureHuman Capital Market access Labor cost Currency Stability Land prices
22India: The Highs• GDP has grown at an average rate of 7.2% for the past 12 years, although the growth is slowing down recently (7.5% FY-2013, IMF)• Links to Middle Eastern markets i.e. UAE, Saudi Arabia and Iran• 187 minor ports and 13 major ports spread across the nine maritime states. 250 Airports with paved runways• Recent measures to standardize the state tax code are very positive• World class IT support system• The government in India is actively pursued policies to promote foreign direct investments into logistics sector
23India: The Lows• The currency is on the down-fall and depreciated against USD last year by more than 20%• Lack of Highly skilled labor• Infrastructure is not as well developed as some other Asian countries like China, Singapore etc.• Logistics professionals are not readily available.• Unionized workforce
25 Assessment Plate: Shanghai Customs Process Air connections Sea connections Land connections InfrastructureHuman Capital Market access Labor cost Currency Stability Land prices
26Shanghai: The Highs• Access to a market of 2.5 billion people within 6-7 hours of flight• Very close to Korea and Japan markets• Shanghai is the major production center in China for the machinery, chemical, metal and transport equipment• Suzhou and Wuxi, the two large industrial cities are within 700 mile from Shanghai.• Regional Financial center
27Shanghai: The Lows• Non-efficient & unpredictable customs procedure• Due to complex Govt. regulations, getting a construction permit is difficult• In the future the growth would slow down• Labor costs are on the rise
29Service Parts DC’s• Objective: To provide a high speed service at an affordable cost to the customers• The location for a DC should offer a desired mix of facilities• Distribution centers are part of multi echelon systems
30Service Parts (SP’s)We identified 5 major Service Parts industries • Automobile • Medical • Aerospace • Electronics • Oil & GasEach industry has its own special requirements
31Automotive SP’s Excellent Seaport connections• Approximately 50% of the profits made in the auto industry come from service and Proximity to parts customers• Global automobile spare parts logistics is a Proximity to $12.51b industry suppliers• Complex supply chains, high number of SKUs, multiple paths of material flow• 98% - Ocean shipments, 1-2% - Air shipments.
32Automotive SP’s• Echelon level: Towards customers • To fulfill the needs of China consumers (China is world’s largest Shanghai luxury car consumer) • Suzhou and Wuxi, the two large industrial cities are within 700 mile from Shanghai. Singapore • A wide level access to Australian and many other markets • Efficient seaport and airport Malaysia • Low labor and land cost • Sea connections to major ports
33Medical SP’s Excellent Airport connections• Spare parts availability is extremely critical to the business, time sensitive Integrated research network• Global medical service parts logistics is a $1.93b industry Proximity to suppliers• 90% - Air shipments, 10% - Ocean shipments.
34Medical SP’s• Echelon level: Towards customers •Proximity to Chinese market •Excellent human capital and knowledge based Shanghai/HKG environment •Excellent Airport connections •Knowledge based economy with available talent (Biomedical research) Singapore •Sound political environment, skilled labor, excellent Air connections
35Aerospace SP’s• Spare parts availability is critical to the business• Global aerospace spare parts logistics is a Excellent Airport connections $2.6bil industry Skilled workforce• 98% - Air shipments, 1-2% - Ocean shipments. Proximity to customers
36Aerospace SP’s• Echelon level: •Proximity to market in mainland China •Excellent human capital and knowledge based Shanghai/HKG environment •Excellent Airport connections •Knowledge based economy with available talent Singapore •Sound political environment, skilled labor, excellent (Boeing) Air connections •Low tax rates, and research conducive environment
37Electronics SP’s• Timely delivery is extremely critical to the Excellent Airport business connections• Global electronics service parts logistics is a Efficient customs $6.7b industry procedure• Complex supply chains, high number of SKUs, multiple paths of material flow Proximity to suppliers/customers• 98% - Air shipments, 1-2% - Ocean shipments.
38Electronics SP’s• Echelon level: Middle Shanghai/HKG •Proximity to manufacturers in mainland China •Excellent human capital and knowledge based environment (STM) •Excellent Airport connections Singapore (TI, •Knowledge based economy with available talent •Sound political environment, skilled labor, excellent Air connections STM) •Low tax rates, and research conducive environment Malaysia(TI) •Manufacturing facilities •Cheap land and labor
39Oil & Gas• Annual growth rate of 12.9% for the period Excellent Seaport connections spanning 2006-2010.• Oil & Gas SP DC’s are located in locations Sound business that are best situated for where its business is infrastructure conducted. (i.e. Halliburton) Proximity to• Localized sourcing: Greater speed to market Manufacturing and faster response.
40Oil & Gas• Echelon level: Towards customers Malaysia •Malaysia has163 oil fields and 216 gas fields. •Attractive incentives by the government and availability of high skilled labor •Good Sea connections, cheap labor and land Singapore •World’s 3rd largest petroleum refinement center •Sound political environment, skilled labor, excellent Sea and Air connections •Low tax rates, and research conducive environment India •Proximity to Middle eastern markets •Cheap labor and land
41SummaryAutomobile Aerospace Electronics Oil & Gas Medical Shanghai Shanghai Malaysia Malaysia Shanghai Hong Hong Hong Malaysia India Kong Kong Kong Singapore Singapore Singapore Singapore Singapore
42Key for SuccessWe believe that the analysis presented would serve as a guideline to the investor. The ultimate location of the DC is dependent on the business patterns, prospective markets, and inventory profile of the DC.
43Companies shifted from China to other countries• Nike • India• Adidas • Vietnam• Pepsi • Indonesia• Nestle • Philippines• NEC mobile • Bangladesh• Panasonic• Philips• Lufthansa