Saturday, January 21, 2012

"The Cinderella Consulate” OR “Going Global in East Asia" - by Stephan Brackertz and Mike Chen

Click Here for Chinese language version - 中文版本

Last year I applied for a visa at the Chinese consulate in Frankfurt. The consulate was located in a dirty and run-down area of the city. I remember double checking with Google Streetview to confirm whether I was at the real location or if there was a mistake with the map. It was for real… a consulate wedged in between a cheap computer store, a bad pizzeria and a used car lot.

Just this morning, I applied for another visa to China – and to my surprise, the consulate is now located in the best area of Frankfurt; in a brand new, shiny building. This struck me as a nice little Cinderella moment…how quickly things can change! It almost seems as if the “upgrade” of the consulate is linked to macro-level changes on the world stage. To me, this was just another indication that as China shifts the global economic balance, we all need to be prepared to rethink globalization.

In case you think “globalization” is just another buzzword or that China and the rest of Asia are far away lands that are important only to ex-pats and consultants, let’s look at two rather astounding examples of how the world is changing as a result of the influence of Asia:

  • Chinese car sales have exploded to reach 18.5 million1 new vehicles. China is now the world’s largest market for vehicles. With this, the number of units in operation has rapidly expanded – in 2011, China overtook Japan in terms of carparc. Soon, China will also surpass Japan as a market for aftersales parts and service.
  • On the commercial vehicle side, China overtook the U.S. as the largest global consumer in 2009. In 2010, China had a market share of 30% of the global market. This growth has been mirrored in the rest of Asia and the region now accounts for nearly one in every two commercial vehicles sold worldwide. Bottom line – If you’re not firmly managing your aftersales business in China, you may miss out on a huge opportunity.
  • Another example…Take a look around your office and the desk you are sitting at: almost everything you touch was manufactured in Asia – from your Samsung screen over your Lenovo laptop to your Konica Minolta printer. Oh, and don’t forget the components of your Apple iPhone... Global imports and exports have changed our everyday lives forever.
As a consequence of such changes, we, as service parts executives, need to give East Asia the attention it deserves.

Last October, Carlisle held the first East Asia Parts Benchmark in Beijing. You are probably already familiar with our supply chain benchmarks for service parts OEMs in North America, South America, and Europe. The East Asia benchmark follows the same model; Carlisle facilitates the event on behalf of the group of motor vehicle OEMs. Service parts executives gather together to discuss benchmark metrics and share best practices. There are presentations, roundtable discussions, panels and social time. The scope of the benchmark covers the whole of the supply chain in East Asia, but with – understandably – focus on logistics in China. In truth, we at Carlisle held this event focused on East Asia because our clients (you) asked us to do so!

The East Asia Parts Benchmark was a great success – so much so that at the event debrief meeting all the attending companies already agreed to repeat the event in October 2012. We at Carlisle are ready to start recruiting for this event, so don’t be surprised if we reach out to you about joining. What’s more, we are pleased to report that three Chinese automotive manufacturers have already agreed to participate in the 2012 event!

Continuing on our theme of globalization, allow me to share some nuggets pulled from the 2011 EAPB benchmark. These are some things that we found when comparing East Asia warehouse data to North America and Europe:
  • Fill rates in East Asia are lower.
  • Back orders take a lot longer to clear.
  • Inventory levels are much lower.
  • East Asian warehouses are significantly less productive.
  • Labor costs, on average, are lower.
  • South Korea is home to the most productive warehouse in the benchmark.
  • Japan is the country with the most consistent and highest productivity.
Beyond these data insights, we also took away some highlights from the discussions at the event:
  • This region is important and will continue to grow.
  • There is a ton that companies can learn from each other!
  • Most non-Asian brands still have country-by-country “import solution” networks, not integrated pan-Asian networks.
  • Although service requirements in Asia are high enough to be comparable to North America or Europe, fill rates are low.
  • Many supply chain initiatives are currently focused on China.
  • Sophisticated concepts, such as “lean”, RIM, LDCs, and same-day delivery are being applied in Asia.
  • On balance, organizations still need to evolve from simply “supplying parts” to providing “service excellence”.
By the way, next week is the Spring Festival in China. This celebration of the lunar New Year is the biggest holiday of the year, in which millions of Chinese travel to visit their families. If we only count railroad passengers, the traveler total reaches 235 million! (You read that right.) Not long ago, I was completely unaware of this dynamic. However, in this increasingly globalized business world, we need to get used to putting events like the Spring Festival on our calendars. In the hopes of embracing opportunities for our business, perhaps we should put the East Asia Parts Benchmark on our calendars as well?

1Some sources say 16.6 million vehicles, but that’s splitting hairs. It’s still the biggest car market in the world.

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