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LSCMS Blog

Blog for updates and happenings in logistics in the Asia-Pacific region

June 7, 2015

Putting a Stop to Contaminated Product From China

Filed under: China,News,Newsletter,Supply Chain Management — admin @ 11:14 am

PodcastWill we ever cut off the flow of contaminated product from China and other offshore manufacturing sites?

The recent revelations surrounding Lumber Liquidators, which faces criminal charges for the alleged presence of the carcinogen formaldehyde in flooring made in China, are only the latest example of serious slip-ups in manufacturing quality control. It’s tough enough to police one’s overseas suppliers for violations of human rights in the workplace – and even more challenging to detect the use of unauthorized and potentially hazardous ingredients in toys, apparel, home furnishings and consumer electronics.

[Read more… Curated from Supply Chain Brain]

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March 21, 2015

A Supply Chain World Tour

Filed under: China,News,Newsletter,Supply Chain Management — admin @ 11:08 am

Aiming for global marketsglobCompanies doing business globally are learning to be more flexible to adapt quickly to uncertainty without sacrificing economy, speed and service.

Shifting demand dynamics, geopolitical volatility, currency fluctuations, government interference, lengthening and deepening supply networks, and cost reduction directives have conflated to consternate even the best supply chain strategies. That’s why U.S. companies are flexing Incoterms to optimize point-of-origin logistics and reduce freight costs. It’s why consignees are ordering smaller quantities from more suppliers, and using consolidation hubs in China and Hong Kong to fill containers. And it’s why mobile phone manufacturers are decoupling shipments of higher-value units and lower-value accessories, and using packaging postponement strategies to better optimize air and ocean modes.

There’s no doubt that the world’s middle class is marching toward Asia. Eventually, even more manufacturers and retailers will follow. The maturation of e-commerce, and the relative speed and ease with which producers and consumers can tap this emerging global marketplace, is beyond comparison. To remain competitive globally, U.S. companies need to be nimble to these demand changes. That means digging deeper into analytics, modeling potential inputs and outputs, and finding reliable logistics service providers that can facilitate new relationships and provide cover in growing global markets.

[Read more… Curated from Inbound Logistics]

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January 14, 2015

Taxman Looks to Take Bite Out of Chinese and Their Businesses No Matter Where in the World They Make Their Money

Filed under: China,Finance,News,Newsletter,Supply Chain Management — admin @ 11:08 am

Chinese FlagAs Chinese individuals and companies head overseas in greater numbers, the country’s tax authorities are starting to follow.

China’s tax officials are now demanding that citizens start reporting exactly how much money they earn overseas.

In asking for this information, national and municipal tax agencies in China are quietly beginning to enforce a little-known and widely ignored regulation: Citizens and companies must pay domestic taxes on their entire worldwide incomes, not just on what they earn in China.

The State Administration of Taxation in Beijing has begun a separate campaign to curb tax evasion by Chinese companies as they start to make big overseas investments.

[Read more… Curated from The New York Times]

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July 26, 2014

The Countries That Will Shake Up Global Supply Chains in the Coming Year

Filed under: China,Newsletter,Supply Chain Management — admin @ 11:09 am

Podcast.GIFWhen it comes to assessing supply-chain risk and opportunity in emerging markets, the landscape never stops changing.

Today, China is the go-to country for cheap manufacturing. Tomorrow, it’s somewhere in Southeast Asia, or even Latin America. Shifting political, economic, legal, environmental and labor conditions make it tough for businesses to decide the best places for sourcing and selling their products.

[Check out the podcast… Curated from Supply Chain Brain]

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July 15, 2014

China Logistics Sector Developments

Traditionally the logistics sector in China was focused on moving products from factories within China to the coastal ocean ports for export to developed markets. More recently the emphasis is just as much on moving goods within the domestic mainland China market in order to reach increasingly prosperous consumers, located all over this huge country. In particular, the residents of second, third and fourth-tier cities in central, western and northeastern China are driving a new wave of domestic consumer demand. Although logistics in China is the backbone of the supply chain, the industry itself remains hugely complex, expensively inefficient and massively fragmented, with the top 20 companies sharing just 7 percent of the total domestic logistics market.

Despite these challenges, the domestic contract logistics industry continues to grow at healthy rates, being serviced by a mix of multinational logistics service providers (MNC LSP) and local Chinese companies. Valued at USD 88 billion in terms of 3PL revenue, China’s logistics market is the second-largest in the world and is projected to become the world’s largest 3PL market by as early as 2016, with growth forecasts of 12 to 16 percent over the next 10 years.

For quite some time, one of the biggest questions customers need to consider when outsourcing their logistics in China to a Third-Party Logistics service provider (3PL) was whether to work with a local Chinese 3PL or a multi-national 3PL – each category had their respective strengths and the options were reasonably clear. Whereas the local Chinese 3PL companies had the on-the-ground knowledge, local connections and typically operated on a lower cost basis, the international MNC 3PL service providers such as DHL, CEVA and DB Schenker provide global management expertise and deployed sophisticated technology solutions, together with international best practices and sector specific knowledge and experience. Today the differences between these categories of logistics providers are becoming increasingly blurred – multinationals have extended their market knowledge, sector expertise and geographic reach in China, while local service providers have gained more international exposure and experience and are increasingly investing in technology platforms and solutions. In recent years a few privately owned Chinese 3PLs have grown to become national service providers, however, they tend to be the exception rather than the rule. In the fragmented China logistics industry, servicing nationwide domestic distribution typically involves several third party providers – in some cases shippers are using more than 20 different companies to distribute their goods throughout China.

It is clear that in order for the industry to become more efficient and to meet the market demands, consolidation amongst logistics service providers will continue. More local Chinese companies will group together in alliances to form stronger regional and national networks and we can expect more formal mergers between local Chinese companies. Meanwhile, the international 3PLs will continue to seek acquisitions as a means of expanding their network within China.

MM Speaking at Global SCM Summit Shanghai 11-2013China based since 2002, MARK MILLAR delivers value for clients with informed and independent perspectives on their supply chain strategies in China and Asia. He serves as International Advisor to the Shenzhen Logistics and Supply Chain Management Association (LSCMA), the organisers of the China International Logistics Fair (CILF) 2014.

Whilst living in Shanghai he led sales and marketing for start-up joint venture Platinum Logistix and served as Honorary Chairman of the China Supply Chain Council. He subsequently led business development initiatives in China for Exel Contract Logistics (now DHL Supply Chain) and across Asia for the Supply Chain Solutions division of UPS.

Mark has visited more than 30 Chinese cities, and is now based in Hong Kong, where he serves as Logistics Committee Chairman at the British Chamber of Commerce and Chair of International Relations Committee at the Hong Kong Logistics Association.

A regular Speaker at industry events across Asia, including China, Hong Kong, Singapore, India, Thailand, Malaysia, Vietnam, Indonesia, Philippines and Myanmar, Clients have engaged Mark as Speaker, MC, Moderator or Conference Chairman at over 300 events in more than 20 countries.

The Global Institute of Logistics recognised him as “One of the most Progressive People in World Logistics” and London business publishing house Kogan Page have recently commissioned him to write the book “Global Supply Chain Ecosystems”.                

Contact him at:       mark@markmillar.com

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June 16, 2014

European Firms Cooling on China

Filed under: China,Logistics,Newsletter — admin @ 11:11 am

1093355_financial_crisisBEIJING—European companies doing business in China are finding the market less attractive due to rising labor costs, a slowing economy and lack of adherence to the rule of law, the European Union Chamber of Commerce in China said Thursday.

Other factors hurting the business climate, according to the latest survey of 552 Europe-based companies operating in China, include difficulties attracting and retaining staff, market access barriers and “discretionary enforcement of regulations.”

“The economic slowdown is a real game-changer for European companies in China,” said Jörg Wuttke, president of the European Chamber at a news conference. “For multinationals, China is still important but not as important as it was a few years ago.”

Despite Beijing’s promise to enact far-reaching economic reforms, only 53% of the companies polled said they expected to see changes implemented in a meaningful way. “A new sober reality is developing,” the report said. “An abiding sense of pessimism for future performance is setting in.”

Some European companies appear to be voting with their feet, or at least thinking of doing so. While the world’s second-largest economy remains a hugely important market, many said they were scaling back investment plans. Only one in five ranked China as their top destination for new investments, down from a third in last year’s survey.

[Read more… Curated from Wall Street Journal]

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June 10, 2014

Reverse Logistics – the Opportunities outweigh the Challenges

Filed under: Asia Supply Chain Insights,China,Economics,Newsletter — admin @ 1:05 pm

Reverse Logistics is complex and disjointed but represents big opportunities for value creation. It includes the key processes involved in moving product back through the supply chain to accommodate overstocks, returns, defects and recalls, and is defined by the Center for Logistics Management at University of Nevada as “the process of moving goods from their typical final destination for the purpose of capturing value, or proper disposal”.

For product returns, Accenture report that on average it takes 12 times as many steps to process returns as it does to manage outbound logistics. The additional steps include activities such as assessing, repairing, repackaging, relabeling, restocking, reselling, recycling and refurbishing, which can result in the cost of reverse logistics being four to five times those of forward logistics. However, best-in-class practitioners can directly correlate their reverse logistics expertise and systems to positive impacts on Customer Satisfaction, Brand Equity, Competitive Differentiation and Profitability.

Reverse logistics is big business – in the USA it is estimated that manufacturers and retailers are now dealing with $100 billion of products being returned on an annual basis. Here in Asia, product returns are destined to expand exponentially, driven by two rapidly accelerating consumer trends – online shopping and the proliferation of electronic gadgets.

Why are products being returned?

According to the Reverse Logistics Association, products are returned for numerous reasons:

What is interesting about these reasons for returns, is how by improving processes within the forward supply chain, companies could surely eliminate many of these returns – for example Late Delivery, Missing Parts, Damaged, Not Functioning – representing some 46% of returns. Furthermore, one could argue that additional diligence during the sales and customer service processes may further reduce the volume of products that are returned due to No Reason, Different than Expected, Not Satisfied with Performance, Did not want Product and Found better competitive product – another 39% of all returns.

In practice however, companies do need to balance their acceptance of product returns in line with their philosophies and policies for their brand, warranties and customer service. The complexity of reverse logistics involves many more transactions than the forward supply chain and the various activities relating to product returns will span across many functional departments – sales, customer service, finance, warehouse, repairs and transportation.

For the majority of these functions, product returns are likely seen as much more of an annoyance rather than a priority. However, with effective returns management providing tangible opportunities for businesses to reduce costs, recover value and improve customer service, appointing one senior leader to be responsible for all aspects of product returns will focus attention and harness the resources to capitalise on the opportunities.

Mark Millar MBA, FCILT, FCIM, FHKLA, GAICD provides value for clients with independent, external and informed perspectives on their supply chain strategies for China and ASEAN. He has been engaged by clients as Speaker, MC, Moderator or Conference Chairman at more than 300 events in 20 countries and is recognised by the Global Institute of Logistics as “One of the most Progressive People in World Logistics”. Mark serves on the Advisory Board of the Logistics and Supply Chain Management Society (LSCMS). mark@markmillar.com

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May 7, 2014

LSCMS Advisory Board Member Recognised

Filed under: Asia Supply Chain Insights,Awards,China,General,Newsletter — admin @ 8:52 am

MM Speaking at Global SCM Summit Shanghai 11-2013USA-headquartered Supply & Demand Chain Executive, the executive’s user manual for successful supply and demand chain transformation, has included Hong Kong-based industry leader Mark Millar in its latest annual listing of Pros-to-Know in Supply Chain.

The 2014 Provider Pros to Know is a listing of individuals who have helped their Supply Chain clients or the Supply Chain community at large prepare to meet the industry challenges they face in the year ahead.

As managing partner of M Power Associates, Mark leverages 25 years global business experience and an exclusive network of best-in-class supply chain practitioners to provide value for clients with informed and independent perspectives on their supply chain strategies. His series of ‘Asia Supply Chain Insights’ corporate briefings, consultations and seminars help companies navigate the complex landscapes in China and ASEAN, improve the efficiency of their supply chain ecosystems and make better-informed business decisions.

Speaking from the Multi Modal trade show in Birmingham, England – where he is hosting a seminar on ‘China Supply Chain Strategies’ – Mark said: “I am honoured to be named in this prestigious listing of supply chain leaders, which reflects my continued focus on helping clients to understand and improve their global supply chain ecosystems. These ecosystems play a crucial role in enabling global trade, highlighting why all businesses should put Supply Chain firmly on the strategic agenda in 2014.”

Barry Hochfelder, editor of Supply & Demand Chain Executive, said: “Supply Chain is increasingly recognized as a strategic differentiator and Supply Chain Leaders have become crucial to the success of the enterprise in meeting the challenges of what truthfully has been called a turbulent economy. Our Pros to Know listing highlights many of these outstanding executives and their accomplishments.”

“This honor highlights the many thought-leaders who are helping to shape the Supply Chain industry and advance Supply Chain as a respected discipline in the enterprise,” Hochfelder added. “Their efforts in developing the tools, processes and knowledge base necessary for Supply Chain transformation, and in promoting new approaches to supply chain enablement, have earned them a place on this year’s Pros listing.”

Pros to Know 2014 SDCEWell-known throughout the logistics and supply chain communities across Asia, Mark has been based in Hong Kong since 2005, prior to which he lived and worked in industry roles in Shanghai, Sydney and Singapore. Acknowledged as an engaging and energetic presenter, Mark has been engaged as speaker, moderator, MC or conference chairman at over 300 events in more than 20 countries.

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May 1, 2014

China at the Heart of Two Worlds – Global and Local

In continuing its impressive development path of recent decades China has become two economic markets that are interconnected and converging:

– its Global market which is driven by mass production for export to developed countries, and

– its Local market which revolves around rapidly expanding domestic consumption.

Multi-national companies first came to China to capitalise on the abundant supply of low-cost labour and take advantage of the incentives to establish operations in Special Economic Zones. Nowadays they remain in China to sell products to Chinese consumers in the local market.

Factories and shops are interconnected and converging – the workers have become the shoppers. One development has fuelled the other, increasing economic prosperity across the nation. The latest saying is that the foreign companies “came to China for the workers, now they stay in China for the shoppers”.

From the China logistics perspective, the emphasis is therefore no longer purely on transporting products from factories to the ocean ports on the eastern seaboard for export to the developed markets. Nowadays there is just as much emphasis on distributing goods within-and-throughout the domestic China market – in order to reach the increasingly prosperous consumers located all over this vast country.

Continuing economic development in both production and consumption sectors brings new challenges and opportunities for the logistics industry. Although logistics in China is the backbone of the domestic supply chain, the industry itself remains complex, inefficient and fragmented.

Whilst we are seeing improvements in the quality of warehousing infrastructure – largely driven by a combination of property developers and the increasing presence of foreign enterprises and their related investments – the domestic transportation sector remains massively fragmented and hugely challenging.

As China’s economy continues to develop, the logistics sector will gradually mature, and outsourcing levels increase. The increasing presence of multinational companies in the domestic market – in particular the consumer, retail and electronics sectors – will accelerate the deployment of international best practices in logistics – embracing multi modal transportation, structured distribution networks and more efficient supply chain ecosystems.

Mark Millar provides value for clients with independent and informed perspectives on their supply chain strategies in Asia. Clients have engaged him as Speaker, MC, Moderator or Conference Chairman at over 300 events in more than 20 countries. London based business publisher Kogan Page have recently commissioned Mark to write the book entitled “Global Supply Chain Ecosystems”, due for publication in 2015.  Mark serves on the Advisory Board of the Logistics and Supply Chain Management Society (LSCMS).

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February 11, 2014

Changing Landscape of China’s Supply Chain

Exploring the key dynamics impacting low cost manufacturing in China . . .

As China continues its impressive development path of the last twenty years, it has now become two economic markets that are interconnected and converging – its Global market which is driven by mass production for export to developed countries, and its local market which revolves around rapidly expanding domestic consumption.

Multi-national companies first came to China to take advantage of low-cost labour and Special Economic Zones. Nowadays they remain in China to sell products to Chinese consumers in the local market. One development has fuelled the other. As quoted by the Economist ‘foreign firms came for the workers, now they stay for the shoppers’.

The logistics emphasis is therefore no longer just on transporting products from the factories to the ocean ports on the eastern seaboard for export to the west. Nowadays there is just as much emphasis on distributing goods within and throughout the domestic China market in order to reach the increasingly prosperous consumers located all over this vast country.

Amongst the many dynamics influencing shifts in China’s production landscape, Labour related challenges are one of the key driving forces for change:

Labour Shortages – the migrant labour force in the coastal areas, in the range of 200 million workers, is reducing in size. There is now more work available in the inland provinces, where workers can live at home with their families, instead of in a cramped dormitory at a coastal factory. Some migrant workers who have worked away from home for 20 years or more may have saved enough money that they do not need to work in the factories anymore. Living costs in the developed coastal cities are continually rising, so in many cases the lower cost of living in a rural province more than offsets the lower wages, resulting in more actual spending power from the workers’ net disposable income.

Labour Costs – in coastal areas the cost of labour is becoming more expensive, with the minimum wage increasing by an average of over 18% last year. Local governments are committed to raise workers’ wages, with Guangdong province having a mandate to increase the minimum wage by 20% for each of the next five years. This reflects national priorities to increase domestic consumption and thereby reduce the economic dependency on exports.

Labour Unrest – there is emerging unrest and dissatisfaction amongst factory workers in the coastal cities. Historically these migrant workers had little choice but to accept the poor working conditions in the factory complexes. However, the latest generation of young migrant workers are better educated and technologically enabled. They are much less willing than previous generations to put up with the hardships of factory life. As digital natives they are constantly connected through technology and thus become more organised and vocal in their protests for higher wages and improved conditions.

Supply and demand economics thus come into play, whereby the reduced supply of labour commands a higher price. In Guangdong province, there are currently one million vacancies for production workers, even with most factories offering salaries above the minimum wage. These labour challenges, together with government incentives to attract investments into the provinces, and potential cost savings in the region of 40% on land and 50% on labour, are resulting in some of China’s production moving inland.

To address these dynamics and capitalise on the rapid emergence of inland consumption, companies will need to adapt and adjust their business models accordingly – reconfiguring their supply chain ecosystems to focus on the expanding domestic markets throughout China.

Businesses that successfully address this challenge will become empowered to gain competitive advantage and drive profitable business growth – accessing the knowledge and networks that provide independent and informed supply chain insights will be critical to your success.

Mark Millar provides value for clients with independent, external and informed perspectives on their supply chain strategies in China and Asia. Clients have engaged Mark as Speaker, MC, Moderator or Conference Chairman at over 300 events in more than 20 countries. The Global Institute of Logistics recognised him as “One of the most Progressive People in World Logistics”.  Based in Hong Kong, Mark serves on the Advisory Board of the Logistics and Supply Chain Management Society (LSCMS) 

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