SOLUTIONS FOR EMERGING MARKETS
When one of the world’s pre-eminent automobile manufacturers introduced some of its more popular U.S. car models into Chinese and Taiwanese markets, they set up local assembly capabilities through joint ventures and contract manufacturing relationships.
To drive this initiative, the automaker brought together an internal team to identify and evaluate supply chain requirements for entering these fast growing, competitive markets. The team quickly determined that market entry could be accelerated by collaborating with a global supply chain provider with trade financing knowledge, a strong logistics infrastructure in Asia Pacific and experience in global sourcing solutions.
- Support lean manufacturing strategy in new geographies
- Provide needed infrastructure in emerging markets
- Enable gradual migration to localized supply
- Provide process control and cost transparency
- Materials management and inventory planning
- Supplier management and training
- Domestic and international transportation
- Consolidation and deconsolidation
- Customs brokerage and trade financing
- Standardize international logistics processes
- 60 percent reduction in supplier accounts receivables
- 30 percent import tariff avoided
- 100 percent foreign investment in infrastructure
- Reduced supply chain cost with no hidden mark ups
Competitive pricing was critical to success in China and Taiwan. Vehicle launch costs had to be rigorously managed and balanced with China’s strict 40 percent local manufacturing content requirement. Failure to do so would add a 30 percent tariff to the finished vehicle cost, pricing the company out of the market. Supplier capabilities and strategic sourcing relationships were not well developed in the region. A key challenge for the automaker was to leverage existing North American suppliers to accelerate market entry while enabling a gradual migration to local production sources. The right solution would provide the visibility required to balance production requirements and capabilities against cost containment and service goals. This would ensure a cost effective supply of components with the right domestic content. DHL Supply Chain’s expertise in emerging markets could help the company get its arms around the critical factors for success.
DHL Supply Chain Solution
An experienced partner, like DHL Supply Chain, could also ensure compliance with strict local trade ordinances and government import regulations. From piece price quotations to inventory planning, DHL Supply Chain coordinated comprehensive cost analyses and other key activities to determine the best solution. But more importantly, DHL Supply Chain brought the systems and know-how to manage relationships with suppliers and the manufacturer, which ensured that the programme met all stakeholder requirements and delivered the desired results.
DHL Supply Chain’s design, solutions, operations and business development teams engineered a solution that was achievable, flexible and could be implemented quickly. The solution, which involved supplier and order management, materials management, domestic and international transportation, U.S. inventory consolidation, customs brokerage, and inventory-financing services, addressed each of the critical factors for success, including:
- Quickly finding and evaluating financially viable component suppliers in China
- Developing processes to avoid customs delays and regulatory penalties
- Establishing an effective quality and claims process for defective or damaged material
- Adopting a lean manufacturing strategy
Success of the programme depended upon the expertise of the team to assemble the right partners. DHL Supply Chain invested a significant amount of time and effort integrating the incumbent North American suppliers, as well as training suppliers on both continents in how the programme worked. The trade financing partner selected seamlessly managed the buy/sell transactions – including inventory financing – between suppliers. And DHL Supply Chain’s own International Services team in Detroit closely managed every detail of the implementation.
The solution fully complied with the manufacturer’s launch schedule for pilots and ongoing production operations. It standardised, streamlined and enhanced the manufacturer’s international supply chain processes – a key to successfully entering distant markets.
The market-entry solution delivered the desired results. The customer:
- Avoided China’s 30 percent import tariff by working cooperatively with local manufacturers and establishing sourcing relationships with sub-component manufacturers
- Gained emerging-market expertise quickly without the cost of building its own infrastructure in each market
- Rapidly deployed a predictable and controlled supply chain using proven systems and operational processes
- Provided complete cost transparency across the supply value chain
- Established component suppliers for the programme without incurring additional administrative set-up costs
- Improved supplier account receivables from 75 days or more to only 30 days; resulted in a 60 percent reduction of working capital
- Developed valuable business partnerships in new and emerging markets