Supply & Logistics Leadership in China What It takes to Win

Transcription

1 Logistics 20/20 Delivering Value Across the Supply Chain Government, Academic & Commercial Perspectives September 28, 2005 at Wang Gungwu House, Graduate House, The University of Hong Kong Supply & Logistics Leadership in China What It takes to Win Dr Stephen W. K. Ng President, The Institute of Purchasing & Supply of Hong Kong Visiting Lecturer, Department of Industrial and Manufacturing Systems Engineering

2 The Institute of Purchasing & Supply of Hong Kong Is here

3 Topics for this afternoon Leadership of Supply & Logistics Costs in China and its Trade Potential Supply Management Evolution, Integration and Collaboration The Relationship and the PPP What It Takes to Win in China

4 What is global logistics leadership? Source Manufacture Distribution Retail Customers Materials Dist n F casting Purchasing Manufact ing Order M gt Sales & Mktg Getting the right product, to the right customer, in the right quantity, in the right condition, at the right place, at the right time, and at the right cost. (Seven Rs of logistics-stephen H. Russell)

5 Logistics Definitions Global View

6 Past & Current Mode Challenges of the 21 st Century Corporation 廿一世紀企業挑戰 HIERARCHY SELF-SUFFICIENT UNITS Theme ORGANISZATION STRUCTURE Year 2001 and Beyond NETWORKING INTERDEPENDENT UNITS What you want? SECURITY AUTOCRATIC HOMOGENEOUS BY INDIVIDUAL DOMESTIC COST PROFITS CAPITAL BOARD OF DIRECTORS WHAT S AFFORDABLE PAPER & PEOPLE STANDARDIZATION TRAINING EMPLOYEE EXPECTATION LEADERSHIP WORK FORCE WORK MARKETS ADVANTAGE FOCUS RESOURCES GOVERNANCE QUALITY BUSINESS INTERFACE SERVICES GROWTH POTENTIAL GROWTH & SATISFACTION INSPIRATIONAL CULTURALLY DIVERSE BY TEAMS GLOBAL TIME CUSTOMERS INFORMATION STAKEHOLDERS NO COMPROMISES I, E OR M BUSINESS CUSTOMERIZATION Must Items for Leaders LEARNING ORGANISATION

7 Total Logistics Costs by Country as % of sales: 危 機 HKSAR : 8% China : 20% U.S.A. : 10% France : 7.2% Italy : 6.7% Germany : 6.3% United Kingdom : 5.1% Spain : 4.7% Netherlands : 4.6% Crisis and Opportunity Prof. X D. Zhang of BJU & Kerry Logistics- 2004

8 External issues are key drivers behind the need for change Environment and risk issues Increasing speed of technology change Aggressive global competition Corporation Industry consolidation and alliances Ever more demanding customers and consumers Changing market boundaries and new channels Increasing stakeholder pressures Shortening product lifecycles Source: PWC Survey 1998

9 The Power of China and Its Trade Potential Index of China s Real GDP Growth ( ) = Year Source: Nicholas R. Lardy Institute for Int l Economics & Kerry EAS in IFPSM, China

10 The Power of China and Its Trade Potential The Growth of China Trade Vs. World Trade ( ) 1977= Year China Merchandise Trade World Total Trade Source: Nicholas R. Lardy Institute for Int l Economics & Kerry EAS in IFPSM, China

11 The Power of China and Its Trade Potential China Import Vs. Export ( ) 800 US$ billion Import Export Year China's merchandise trade surplus rose in 2004 to $32.6 billion, from $25.3 billion in 2003, up 29%. Forecasted to rise to a remarkable $83.0 billion in 2005, over 50% Source: Nicholas R. Lardy Institute for Int l Economics & Kerry EAS in IFPSM, China

12 The Power of China and Its Trade Potential Retail Activities in China in 2004 Ranking Retail store name Revenue 2004 (in RMB 0000 ) No. of stores 1 Carrefour 1,624, Wal-Markt 763, Tesco 700, Metro 645, B&Q 201, IKEA 80, Dia 55, , OK 5, Retail Sales RMB5,395 billion (Grown 34 times since 1978) 2/3 of the world s top 50 retail enterprises (over 4282 stores) already established in China: Source: China Chain Store and Franchise Association, Kerry EAS and CFLP, China

13 Power of China and Its Trade Potential Cumulative FDI in China ( ) Huge Opportunities for Supply, Logistics, Transactions Services and Trade Facilitation Upgrade Business Source: Nicholas R. Lardy Institute for Int l Economics & Kerry EAS in IFPSM, China

14 The Power of China and Its Trade Potential Key highlights of China s Potentials beyond /2 1.3 billion consumers, the power of spending, up in speed (PCI: 1978 US$ 338 Vs US$ 1090) GDP increased to US$ 1.65 Trillion in 2004 (US$ 0.8 Trillion in 1997, over 100%, target to exceed to US$ 4 Trillion by 2020, 7%CGR) Foreign Direct Investment of US$ 60.7 Billion, 10% of world total (400 out of Fortune 500 have invested over 3000 projects) Retail Sales over US$650 Billion in 2004 (34 times since 1978 leading by Carrefour and Wal-Mart) Huge Market of the World, facilitate importation activities and transaction services our Logistics Business Power Factory of the World, provide the best-in-class manufacturing costs Source: Nicholas R. Lardy Institute for Int l Economics, IPSHK & Kerry EAS in IFPSM, China

15 The Power of China and Its Trade Potential Key highlights of China s Potentials beyond /2 Approach Sourcing for the World, total purchasing in terms of imports and exports achieved over US$ 1154 Billion (import: US$ 560 and export: US$590) Procurement Centre for the World, total purchases increase to US$ 50 Billion in 2005 forecasted Vs. US$ 20 Billion in 2002 (Fcst to over: Wal-Mart:US$15 B; HP:US$10 B, and IBM, Motorola, Siemens, Carrefour etc. to exceed multi US$ Billions in total) Total Public Procurement in China reaching RMB$ 214 Billion Huge opportunities for China in Trade Facilitation business, UN estimated a potential savings of US$ 490 Billion from world trade (transaction costs range from 2.5 to 15% of the value of traded goods - OECD 2003 and 7 to 10% of the value of world trade UNCTAD 1994)- Arne Jensen IFPSM 2005 Source: Nicholas R. Lardy Institute for Int l Economics, IPSHK & Kerry EAS in IFPSM, China

16 世界已經改變 However, World has changed 企業不論大小, 速度取勝 It s no longer the big beats the small, the new business game is that the fast eats the slow 客户滿意為先

17 Over the last thirty years, there have been significant changes in: the nature of the economic and social structure; the form and structure of organizations; the nature of management; the tools and technologies; and the needs and wants of high customer expectation.

18 Customer Expectation is One of the key Drivers for Change OLD OLD TRADITION Good Quality Fast Fast Delivery Low Low Prices Pick Pick Any Any Two! Two! NEW TREND Increase Customer Satisfaction While reducing total total cycle cycle time time and and costs costs

19 Global Logistics & Supply Management Evolution From 1970 of PDM to 2000 of Collaboration 70 s 80 s 90 s Beyond 00 s Warehousing Physical Distribution 倉庫及貨物之銷售 Logistics & Planning 物流計劃 Supply Chain & Change 供應之改變 Global Supply Management, CRM, VRM & ERM 全球供應管理 Storage & Transport Product Movement Cost Focussed Cost Focussed Not Integrated Customer Emerges Material Planning Silo Operations Technology Enabled Customer Focussed Business is tougher SCM with SCM A Passion for Service CRM + ERM to win Process Orientation EDI/XML/EPC Strategic Collaboration Global/RFID Relationship Integrated Operations

20 The Evolution of Procurement to Strategic Performance Focus on price/mfg Costs Product - centred Focus on quality, Speed, reliability, responsiveness, and total cost Process - centred Strategic focus - supplier relationships - forecasting - cycle time - results Relationship based Strategic Performance

21 Total Materials Management Overview The Relationship of Purchasing/Procurement/Supply Management Activities and Material Decision Purchasing and Supply Management, by Donald W. Dobler et al.

22 Worldwide Challenges Globalisation is requiring governments to pursue multilateral cooperation and compete for businesses and knowledge workers Technological Innovation Waves of technological change are opening up opportunities to streamline procedures, adopt flexible skills and management systems Economic Globalisation Governments around the world Scarce Resources This marketplace has taught customers to expect compelling, convenient, and personalised services Customer Expectations Fiscal constraints are requiring governments to carefully guard resources and show proof of value for money By E.U. of SAR, HK

23 Worldwide Responses New Public Management Reinventing Government Joined-up Government E-Government E-channel / Multi-channel Government Contact Centres Shared Service Centres Citizen Centric Services Private Sector Involvement Market testing/competitive tendering Strategic Outsourcing Public Private Partnerships Privatization Managing for Performance Quality initiatives Benchmarking Resource accounting By E.U. of SAR, HK

24 Distribution and transportation Outsourcing in the Supply Chain Continues to Grow Warehousing Information management Production New product development Supply chain management Now Within 5 years Purchasing In-house Outsource Source: PWC Survey in Europe, 1998

25 Partnership communication flow Supplier Customer Upper Management Upper Management Marketing Merchandising Accounting/Finance Accounting/Finance Sales Buyer Logistics/Manufacturing Distribution/Trade

26 The CEO and G.M. More radical approach Thinking out-of-the-box Pushing Supply Management to think: Cross functional, Boundary spanning, Integrated supply chain, Toward virtual supply chain Culture change

27 SCM is to make it happen! Integrated Supply Management Process information is shared across the supply channel more accurate and more efficient replenishment drive unnecessary costs out of the supply chain strengthen partnerships with customers and suppliers turn inventory from a cost into an asset demonstrate effective leadership

28 What it takes to win? In China

29 High Supply chain impact Understand the Extended Logistics: the Emerging Concept Retention of shippers core business: manufacturing; marketing and sales; product development Value added logistics Warehousing Service logistics Extended logistics management Distribution Low Transportation Simple Logistics service providers core business Complexity Complex Source: PricewaterhouseCoopers

30 Manage The Future Supply Network with Relationship Key Suppliers Distribution Consumers Primary Resources Manufacturing Network Shared Savings Flow Retail Outlets Consumer Value Interactive Data Base and Exchange Information Flow By Charles C. Poirier Flow of Goods and Services

31 Recognize China is now an important manufacturing area for the world Manufacturing Centers: USA 1945 ~ 1960 Japan 1960 ~ Little Tigers 1975 ~ 1990 Guangdong & Shanghai (PRC) 1990 ~ 2005 Sir Gordon Y.S. Wu, KCMG Will it shift to other low cost region and face with tough competition? 2006 ~ 2010

32 Handle Professionally the Ethical Dilemma in Supply Management

33 Importance of Business Ethics Company Reputation Customers Confidence Competitiveness Market Share Employees Integrity Staff Management

34 No. of Reports 5000 No. of Corruption Report ( ) '00 '01 '02 '03 '04 Total 3746 Private Sector 2176 Gov t Dept 1286 Public Bodies 284 Year

35 What China needs and wants in Total Supply Management-1/2 Quality and Speedy Distribution Channels & Networks: - Reduce total logistics costs down from 20% - Channel Make-in-China products at anytime and to anywhere in the world - Build & manage a lean supply chain process Effective and Reliable Legal Systems: - Enforce contracts in product: plan, source, make, store, sell, deliver and return - Protect intellectual property right and law enforcement

36 What China needs and wants in Total Supply Management-2/2 High Ethical, Trust and Credible Business Environment - Develop credit and people culture - Share business information - Refuse corruption Effective Leadership in Total Service Concept - Open, honest, forward-looking and fair-minded - Develop, empower and inspire others - Lead & build world-class team and new culture - Learn & develop a learning organization - Be a good example

37 Speed & Quality = Responsiveness

38 What is coming up on a global basis Focus on China with obvious reasons, to win in business Emphasize on Supply Management, which initiates most of the Global Logistics Activities Manage Strategic Relationship with your partners and build a strong Supply & Logistics Network Watch and Learn the Key Areas that are CSR (corporate social responsibility), KM (knowledge management), HEBP (high ethical business practices), GW (green world) etc. Capture Huge Logistics Business coming from PPP, outsourcing/insourcing and trade facilitation Build Competence and Confidence with People whom you want and need to work with Manage and Lead Changes for above and be an effective leader to demonstrate a Professional Leadership Model in supply and logistics world And have Fun From Total Supply, Logistics point of view

39 World-Class Leadership of Supply & Logistics in China is Quick Response and is Led towards Customer Loyalty GET YOU THERE QUICKLY, ACCURATELY, AT THE LOWEST TOTAL COST, IS A WIN-WIN-WIN AND IS OUR FUTURE! P. 29

40 Logistics 20/20 歡迎交流