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LSCMS Blog

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

June 23, 2015

For Trade Agreement Backers, It’s a Slow Path to Fast Track

Filed under: Economics,News,Newsletter,Supply Chain Management — admin @ 11:27 am

forecasting tradeOn Capitol Hill right now, “fast-track” is the slowest thing going.

The House of Representatives voted last week to give President Obama the authority to negotiate free-trade agreements with minimal interference from Congress. Following legislative review, the pacts would be subjected to a simple yes-or-no vote, with no amendments permitted.

In reality, the lawmakers’ action wasn’t quite so straightforward. House Republicans decided to move forward on fast-tracking, or what is officially called Trade Promotion Authority (TPA), without the protection of Trade Adjustment Assistance (TAA), a mechanism for aiding U.S. workers who have lost their jobs as a result of trade pacts.

The reason? House Democrats, who have previously supported TAA as a necessary safeguard against the impact of free-trade agreements on the domestic economy, shot it down earlier last week, even as they voted in favor of TPA.

At issue are two big trade agreements currently under negotiation: the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP), covering trade with Asia and Europe, respectively.

TPP, which includes 12 countries in the Asia-Pacific region, has been a particular lightning rod for criticism. Opponents charge the pact would result in the loss of U.S. manufacturing jobs, and place the interests of multinational corporations ahead of government policymakers.

U.S. backers argue that participation in TPP means an enhanced American presence in the Asia Pacific region. In its current form, the agreement pointedly excludes China, and it wouldn’t be farfetched to suggest that TPP is a calculated attempt to offset that nation’s growing economic and political clout.

This is supported by analysis from the Asian Trade Centre:

The process through which goods and services are produced and consumed is shifting rapidly. We are increasingly living in a world of global value chains (GVCs) or global supply chains. We’ve had supply chains of one sort or another in trade for centuries, as firms have traded with one another for raw materials, components, or final, finished goods. What is different now is that, with falling costs of communication and transportation, it is possible for companies to source exactly the right inputs from exactly the right geographic space to take advantage of different costs in materials, services, labor, and capital. The world is literally the “oyster” for global companies.

In this world, trade agreements have not kept pace with changes on the ground. The WTO agenda is nearly 15 years old. Bilateral agreements between two countries are not particularly helpful for value chains that span dozens of places.

Hence the drive to create larger trade agreements. In Asia, many governments have been very promiscuous, signing up to all sorts of trade deals. Singapore, for example, has more than 20 in force with more under negotiation. Such agreements can be helpful in spurring economic growth, especially for some companies or covered industries.

[Read more… Curated from Supply Chain Brain & the Asian Trade Centre]

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February 23, 2015

The True State of Global Connectedness

Filed under: Economics,News,Newsletter,Supply Chain Management — admin @ 11:12 am

PodcastGlobal trade: Love it or hate it. But don’t overestimate its impact on individual economies.

Proponents of trade point to the benefits of global “connectedness,” while opponents damn that very thing. Asked about the actual impact of trade on domestic jobs and products, however, people tend to wildly overestimate the figures. What’s more, a continuing study of trade’s impact, sponsored by DHL, suggests that the world isn’t quite so connected as one might think.

[Read more… Curated from Supply Chain Brain]

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December 24, 2014

Mexico, Brazil and Argentina Bright Spots in Overall Dim Manufacturing Picture in Latin America This Year

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

COGS.JPGA manufacturing production index for Latin America as a whole is expected to show this year experienced no growth – instead, it is forecast to decline a slight 0.1 percent. This challenging regional picture masks sizable differences across countries, however. The poor performance of the index published by the Manufacturers’ Alliance for Productivity and Innovation Foundation is explained by recessions in Brazil and Argentina that have offset the good performance of Mexican factories.

The MAPI Foundation’s Latin America manufacturing index is expected to rise a modest 1.8 percent in 2015 (a downward revision from the previous forecast of 2.1 percent). There is confidence that Mexico will remain the manufacturing growth leader in the region. Demand from U.S. factories will fuel manufacturing growth in Mexico, although homegrown political factors will put a ceiling on Mexico’s expansion.

[Read more… 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 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 26, 2014

Vietnam Container Ports Development

With its lengthy coastline of some 3,200 km, Vietnam’s seaport network comprises of numerous small and medium-sized entities, the fragmented sea-side capabilities further hampered by inefficient land-side distribution. Most large ports are located on rivers, like Hai Phong and Ho Chi Minh City, typically with limitations of access from the ocean, water depth, quay length and container yard space, compounded by downtown city locations making cargo transfers to other modes of transport difficult and inefficient due to traffic congestion. Hence the development of modern deep-water port facilities at Cai Mep – further out from HCMC and closer to the ocean.

As discussed however in a recent ASEAN Ports and Shipping forum, the fragmented approach to the development of multiple container terminal facilities at the Cai Mep-Thi Vai port complex – situated on the southeast coast some 50 km from Ho Chi Minh City – has resulted in over-capacity, to the extent that operations at several of the new terminals have been suspended, due to a shortage of cargo and absence of ships.

Distance from major industrial zones, together with limitations in land side connectivity – and associated additional cost implications – all combined to make cargo owners reluctant to utilise the newly built facilities, in turn making shipping lines question the viability of making port calls at the new terminals.

Vietnam Ports

Picture: South Vietnam fragmented container port developments resulting in over capacity and underutilisation (source: ICF GHK Hong Kong)

Compounding the unfortunate scenario is the continuing operation of the Saigon city river ports in downtown HCMC, thereby supporting the existing inefficient operations within the busy city, with the related congestion and pollution, and further entrenching the incumbents’ reluctance to move cargo operations to the new Cai Mep facilities.

As a ray of sunshine amongst the gloom, CMIT (Cai Mep International Terminal) see many positive opportunities for Vietnam to capitalise on the newly constructed, modern, deep-water terminal facilities and their strategic geographic location near the ocean, not least of which is to connect south Vietnam to the major international trade flows from Asia to Europe and USA, eminently feasible assuming larger container vessels can be persuaded to return to Cai Mep and that multimodal hinterland connectivity can be enabled through effectively integrated logistics networks.

In the international context, Vietnam’s location on the South China Sea provides access to the main intra-Asia and inter-Asian shipping routes, which are forecast for above average growth in the coming years. Adopting a more holistic and integrated approach to deep-sea port development, and the related multimodal hinterland connectivity, will enable Vietnam to better capitalise on its strategic position and vast potential – with many opportunities to empower performance and growth throughout regional supply chain ecosystems in this Asia Era.

Mark Millar provides value for clients with independent, external and informed perspectives on their supply chain strategies in Asia. His series of ‘Asia Supply Chain Insights’ presentations, consultations, seminars and corporate briefings help companies to improve business operations, plan more effectively, and increase the efficiency of their global supply chain ecosystems. Clients have engaged Mark as Speaker, MC, Moderator or Conference Chairman at more than 300 events in 20 countries. The Global Institute of Logistics recognised him as “One of the most Progressive People in World Logistics” and USA-headquartered Supply & Demand Chain Executive named him as one of their 2014 Pros-to-Know in Supply Chain. mark@markmillar.com

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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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April 4, 2014

LogiSYM2014 a resounding success!

Filed under: Economics,Education,Events,General,Logistics,Newsletter,Singapore — admin @ 7:58 am

LogiSYM is the region’s first Supply Chain Symposium and Summit, focussed on bridging concepts, practice and technology in Supply Chain management, to real world implementation and benefits that result in increased Supply Chain pipeline velocity, profitability and performance. The symposium was held last in Singapore on the 26th & 27th of March at the National University of Singapore.

Coupling Supply Chain practice with input from specialist academics from the region, the event was a resounding success with more than 250 attendees from Singapore and the region. It has established itself as a platform for mid to senior level Logisticians from all areas of our very dynamic profession to share real solutions, network, develop and learn new skills that they can apply.

Supported by major Supply Chain companies like Toll and DHL, participants of the event have asked the organisers to keep the momentum going by arranging a number of smaller activities throughout the year until the next symposium.

A few members of the Organising Committee

A few members of the Organising Committee

For more pictures and information on LogiSYM, visit www.logisym.com

 

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March 10, 2014

Robotic Ships may become reality.

Running away to sea has been a dream of escape for centuries, but unless you plan to be a tap dancer on a cruise ship, that door may be closing. In a report on the future of cargo shipping, Rolls Royce Vice President for Innovation, Engineering and Technology, Oskar Levander, outlines a vision for a time not far from now when freighters and other ships are unmanned robots that cruise the oceans under remote control by shore based captains.

Imagine it’s 20 years from now and a cargo container ship bigger than anything afloat today approaches the port of Shanghai. Despite its size, it looks surprisingly simple with a hull designed for extreme efficiency. It has Flettner rotors for catching the wind and helping to save fuel, but below the slim equipment mast there’s no superstructure. There’s no space for crew’s quarters, and there aren’t even lifeboats or guardrails. When the pilot comes aboard to guide the ship into port from the minimalist bridge (if it has one) there’s no one to greet him or offer a cup of tea because the vessel is a robot, without a single person on board.

According to Levander, this scenario may come about because of the economic pressures being put upon the merchant fleets of the world. The Rolls-Royce report works on the assumption that the era of cheap energy is over and that rising fuel costs will require alternatives to the heavy fuel oil that currently powers the world’s shipping. In addition, shipping companies will have to contend with increasing burdensome national and international regulation, especially in regard to greenhouse gases, which will produce major rises in costs.

This will require a great deal of innovation, such as converting ships to burn biofuels, developing more efficient hulls, and installing solar panels or wind propulsion in the form of Flettner rotors and the like to cut down on energy bills. However, the biggest cost to shipping is labor – in fact, industry consultant Moor Stephens LLP put this expense at 44 percent in an interview with the BBC.

This cost isn’t just in the form of salaries and pensions. Crews need living quarters, galleys, washing facilities recreation areas, lifeboats, and a lot of other things to keep them safe and comfortable. These cost money to build and maintain, as well as fuel to cart it all around the world. Rolls-Royce’s plan is to take an holistic approach to future ship design aimed at tackling the problem by incorporating new hulls, engines, solar power systems, and partial sails.

In all of this, the most radical is turning merchant ships into robotic craft, where Horatio Hornblower sails his ship all over the world without ever leaving Plymouth. That may not seem like much fun, but it’s a path that marine engineering has been on since the time when some ancient ship’s master figured out how to balance his sails, so he wouldn’t have to steer so much. Since then, all sorts of automatic steering and navigation mechanisms have been developed until today when it isn’t uncommon to read news stories of ships steaming into port of their crews abandoned them prematurely in some disaster.

Even with the largest ship, steering a course is relatively simple and its rare for a helmsman to touch the wheel between ports. What’s really needed is the ability of a ship to pilot itself and keep watch under the guidance of shore operators. Many ships are already equipped with all sorts of cameras that can see at night and through fog, not to mention radar, sonar, GPS and a plethora of other sensors hooked up to high speed satellite data relays. Rolls-Royce foresees a time when these sensors and automatic systems will allow onshore crews to control and monitor ships from land-based centers with little difficulty.

Aside from the more obvious cost advantages, such an arrangement would allow one person ashore to control several ships. Levander sees this as both safer and making it easier to retain skilled crews, saying that it’s better for a ship to be operated by five operators on shore as opposed to 20 wrestling with the ship in a gale in the middle of the North Sea.

However, shiphandling is a complex task and a ship doesn’t operate in isolation. Before robot ships can set sail, there are serious safety issues to be answered about collision avoidance and similar concerns. There are also many legal hurdles about responsibility for the ship and compliance with regulations and maritime law, which might see a token crew kept aboard with nothing to do except fulfill salvage law. If these and other objections can be overcome, then the seas may be a safer and more efficient place, albeit a less romantic one.

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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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