Turnkey Group. CHINA Wind Power - Managing Asia s most complex supply chain Ecosystem

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Mavis Washington
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1 Turnkey Group CHINA Wind Power - Managing Asia s most complex supply chain Ecosystem

2 PRESSURE FOR SUSTAINABLE ENERGY SOURCES INCREASES

3 CHINA S 12 TH FIVE YEAR PLAN TO 2016 HEAVY FOCUS ON THE ESTABLISHMENT OF ENVIRONMENTAL AND SUSTAINABLE MANUFACTURING AND ENERGY SOURCES. THE INCORPORATION OF OFFSHORE WIND POWER LIES AT THE FOREFRONT OF MODERN CHINA S ENERGY CONSUMPTION Ini$a$ve Target Year ReducXon in Energy Intensity 16% ReducXon per unit of GDP 2016 Increasing use of Non Fossil fuel energy sources ReducXon in Carbon Intensity (Co2 and Co2 Equivalent) 11.4% as a total of country energy use % reducxon per unit of GDP 2016 Coal ConsumpXon Cap 4 Billion Tons Total consumpxon 2015 Carbon Trading Scheme Under EvaluaXon and progressive incorporaxon for 2016 planning 72.1 GW of inefficient plant closures have occurred since plan began, with energy transference to non fossil genera$ng power GW planned closure (Source: CLP energy and environmental report 2013)

4 CHINA S SUPPLY CHAIN A COMPLEX ECOSYSTEM Air Ocean Freight Free Trade Zones Equipment Bulk Carriers LegislaXon Trucking Wind Power China Entry and operaxon State owned Enterprise 3PL s E- Commerce Sustainability Suppliers Barge IT Quality Control Customs Clearance Rail Port operaxons Product Maintenance Warehousing Security

5 COMPLEXITY EXACERBATED BY GEOGRAPHICAL SIZE VAST NETWORK INFRASTRUCTURE REGIONAL DIFFERENCES NO ONE COMPANY FITS ALL NEEDS COMPLEX LEGISLATION INCREASING LOGISTICS COSTS MANUFACTURING MOVES TO THE WESTERN PROVINCES

6 MANAGING THE SUPPLY CHAIN ARCHITECTURE IN CHINA GLOBAL THE TOP 20 GLOBAL NETWORK HQ IN USA / EUROPE STATE OWNED KEY INFLUENCERS HUGE REGIONAL NETWORK GOVERNMENTAL FUNDING ASSET OWNERSHIP LOOKING TO GLOBALIZE PROVINCIAL 1000 S OF PLAYERS KEY TOWARDS SUPPORTING DOMESTIC SUPPLY CHAIN BUSINESS THROUGH GUANXI LOCAL 20,000+ COMPANIES - SUPPORT SOE - SPECIALISTS - REGIONAL OR COUNTY SPECIFIC INCORPORATING GLOBAL AND LOCAL PLAYERS WITHIN AN END TO END (e2e) SUPPLY CHAIN IS KEY TO SUCCESS IN CHINA

7 INCREASING BENEFITS OF INDEPENDENT LEAD LOGISTICS MANAGEMENT COLLABORATIVE CREATION OF AN EFFECTIVE MARKET ENTRY PLAN 1 Entry 3 Maturity UNDERTAKE A RIGOROUS DUE DILIGENCE PROCESS TO SECURE OPTIMAL NETWORK ARCHITECTURE 20, Specialists - Support SOE q Skill Specific - Cost sensixve MANAGEMENT OF THE SUPPLY CHAIN THROUGH A NEUTRAL SOURCE INCORPORATE PLANNING TO MINIMIZE COST AND MAXIMIZE EFFICIENCY 2 Foothold HANDS ON AND NOT THEORETICAL LIAISON BETWEEN THE MANUFACTURER AND THE SUPPLY CHAIN

8 LEAD LOGISTICS ROADMAP Industry Ver$cal Complete Wind Market Value Chain Coverage 3D Network Support Support Chain Advisory Support IT Support QA Support Warehouse Surveying Legal Support Supply Chain Port Port Customer

Free Time in non bonded facilixes The New Facility IncorporaXon of IT replenishment tracking PO

9 SOME EXAMPLES OF LEAD LOGISTICS MANAGEMENT AN ACCESSORIES WAREHOUSE FOR WIND POWER IN NORTH CHINA Loss of Stock No OperaXng System No management process Huge costs in replenishment of stock Exceeded Customs Free Time in non bonded facilixes The New Facility IncorporaXon of IT replenishment tracking PO management Free Trade Zone Turnkey Group Limited, Phoenix building, ﬂoor 19, 23 Luard Road, Wanchai, Hong Kong

10 SUPPLY CHAIN OPTIMIZATION PLANNING Detailed review of route opxmizaxon from factory to port. Regulators Provision of Equipment ForecasXng ConXngency planning Management of Suppliers Equipment Checking ReporXng to Client based on SOP s. COMBINATION OF TURNKEY SERVICES AND LOCAL PROVIDERS

PORT PLANNING EvaluaXon of port network for onshore and oﬀshore manufacturing structure Combining container and bulk services within a network Water Depth studies Vessel size and

11 PORT PLANNING EvaluaXon of port network for onshore and oﬀshore manufacturing structure Combining container and bulk services within a network Water Depth studies Vessel size and loading ability MinimizaXon of surface transport CosXng / Infrastructure / ExperXse Load inspecxons Turnkey Group Limited, Phoenix building, ﬂoor 19, 23 Luard Road, Wanchai, Hong Kong

AcXve v ReacXve Maximizing the value of the Supply Chain

12 MARKET INTELLIGENCE China Market is rapidly changing Understanding Trends and operaxng armed with knowledge Pro AcXve v ReacXve Maximizing the value of the Supply Chain Architecture Maximize Efficiency and Reduce Cost Transparent Supply Chain Architecture

13 THE NEXT CHALLENGE Development (MW) Offshore InstallaXons Offshore CumulaXve China Government Target is 5GW for 2015 and 30 GW by An important $me for Industry and the Logis$cs Sector to collaborate on the management of the supply chain based on the five year forecast. Logis$cs face high cost of asset development and management without confirmed commitment Greater need to look at industry specific needs COLLABORATIVELY as the Offshore sector grows significantly in China.

14 WORLD BANK LOGISTICS PERFORMANCE INDEX 2014 A2sia Rank Economy (Total 160) Global Rank Customs Infrastructure Logis$cs Quality and Competence Supply Chain Transparency Timeliness 1 Singapore Japan Hong Kong Australia Taiwan Korea Malaysia China Thailand Vietnam

EXPECTATIONS TO DEVELOP MORE INNOVATIVE IT

15 THE FASTEST GROWING IT AND TECHNOLOGY MARKET THE LAUNCHPAD FOR WIND POWER IT INNOVATION CHINA APPETITE FOR TECHNOLOGY IS INSATIABLE. EXPECTATIONS TO DEVELOP MORE INNOVATIVE IT AND TECH SOLUTIONS TO MANAGE INDUSTRY PROCESSES GENERATION OF IT SAVVY WORKFORCE

THE LABOUR DYNAMIC Second Tier Regional Labour Cost Increase 2012-2013 1400 1200 1000 RMB Month 800

Forecast is for Labour Costs to increase approx.

16 THE LABOUR DYNAMIC Second Tier Regional Labour Cost Increase RMB Month Guangzhou Zhuhai / Dongguan Shantou / Jiangmen Shaoguan / Heyuan Chaoyang/Zhaojiang Forecast is for Labour Costs to increase approx. 20% year on year for the next five years in the emerging second Xer sector. LogisXcal local distribuxon costs are correlaxng in line with the Labour cost increase.

17 CONCLUSION Growth opportunixes in China remain strong The need for emerging industry such as offshore wind and clean- tech will escalate to the forefront of the 13 th Five Year Plan The management of the supply chain is complex. No one partner can cover the enxre end to end geographic in an opxmal way. Without a strong supply chain structure, the cost element related to distribuxon will escalate significantly More emphasis on creaxng and maintaining a robust supply chain Engagement in local players in collaboraxon with a global 3PL is growing among many market sectors (Retail, Manufacturing and Building sector) Cost opxmizaxon requires higher levels of due diligence, and management of an enhanced supplier base. Ensure that there is a strategy for conxnual improvement to offset the rising operaxng costs in the region.

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