Cross Border Journal

Traveling to Korea

I am currently at Narita Airport waiting for my flight to Seoul. I will be there until Wednesday morning, and so posting will either be light or non-existent until I return.

Korea Logistics Report 1

When it comes to supply chain management, there are many days when I feel like Koreans are more innovative, or at least more ambitious in driving supply chain innovation, compared to Japanese in the logistics industry. Mostly, however, I feel Korea suffers from many of the same problems as Japan--primarily in that the logistics industries in both countries have traditionally been isolated from global competition and thus innovation has happened at each their own pace, or in ways very unique to the market--in other words, typically slower than in the West and not applicable outside the country.

Of course this is changing rapidly in both countries with deregulation, gradual consolidation, the introduction of new technologies and via the impact of increasing links with China's rapidly growing economy. When I travel to Korea for 4 days from this Saturday, I plan to inquire on some of the "on-the-ground" trends taking place on the peninsula and look forward to sharing some insights here next week.

In the meantime, I will also be translating a couple articles from the online logistics press in Korea related to logistics investment and also the creation of an investment fund targeting the logistics industry.

Until then, I want to point out an absolutely incredible and excellent collection of links on the Korea-US Free Trade Agreement over at Ben Muse. This FTA, if approved by both countries' congresses, will have a definite impact on the supply chain industry on the Korean peninsula, which I expect to ripple across all industries--even the ones that remain protected.

China Logistics Report 1

Even though I am in Japan, since I now work for a global company I am more frequently coming across news on China logistics via one form or another. Whether it is through a friend in the industry or via reading China-focused blogs, it is easy to find articles and posts to point out to readers.

Over at the logistics blog at China Economic Review, they mention a new air hub being established by UPS in Shanghai. That is right on the heals of news regarding DHL's new contract logistics hub in the area.

Over at All Roads, Rich has posted a nice write-up on infrastructure investments in warehousing on the Mainland, along with an update on the Three Gorges Dam. I don't currently have time to analyze the warehousing post, but I want to come back to it in a later report.

Lastly, be sure to follow all the links on China at 3plWire--there are a few on recent ports data. Tomorrow, the Logistics Report travels to Korea!

Japan Logistics Report 1

It seems appropriate that I post my first "Japan Logistics Report" this evening as today's Logistics Japan newspaper provides a summary of the trucking logistics market across the country for the month of January. This is a regular thing for the newspaper, and so I plan to bring the survey results to this blog for public consumption. The newspaper is in Japanese, so this English translation should be an added bonus.

Overall, the tons transported by 32 regularly surveyed special package hauling firms was down 98.8% of 2006 and breaks a streak of year-on-year monthly gains since May 2006. As for standard haul trucking, it was up from last year at 101.9%. More specifically, the Tokyo and Nagoya areas were down at around 98.0% while Okinawa and the Osaka regions were both over 115%.

Focusing on Tokyo, because that is where I am, the decrease was driven by reduced hauling of metal products, machines, foods, and daily goods. Next month and beyond is expected to see flat movement.

On the air cargo side, domestic (3.3%) and international lanes (2.6%) were both up over 2006 for January.  Overall, the value of exports by air was up 16.5% and imports up 10.6% over January 2006. For sea freight, the value of exports was up 20.1% and imports 10.2% over 2006. Domestic rail freight was down across car and container types.

In the future, I will be pulling from a range of articles published in Logistics Japan for this report, which I intend to do on a weekly basis except for holidays. Each day will cover a different region of Asia, except for Friday when I focus on the topics of resilience and globalization.

Shaping Supply Chains to Shape the World

As I progress through my career in supply chain management, I have been stepping back lately to put the work I am doing in more perspective. It is easy for all of us to get caught up in daily activities, the issue of the moment, and hitting the numbers. But for myself, I can't leave work and say that I find satisfaction in simply succeeding in my everyday responsibilities. Hitting my professional goals are important, but in the bigger picture, I am focused on where I am having impact in the world.

The reality is that, no matter where a person is in a supply chain, that person has a part in shaping the world of those on both the supply-side and demand-side. Although the size of an individual person's role and impact may vary, this does not diminish the fact that certain roles are essential for high-performance supply chains.

Why are high-performance supply chains important? Ultimately, a high-performance supply chain should be aimed at creating a better and more positive life experience for those it impacts. When thinking of a larger community, its success is a guage of how it develops, manages and participates in high-performance supply chains. This is key not just in an economical sense, but also in how a larger community handles supply chains that support political institutions, security, and the flow of people in their life activities.

As supply chain managers, we must educate up, down and across our organizations on the bigger picture and the impact each of us has in shaping the world for the better. 

Leveraging Partnerships for Strategic Advantage

In my April 9th post on the investments required in building business and customer relationships in Japan, I framed the strategic dilemma for small firms and business units trying to gain a foothold in the Japanese market, especially with larger Japanese businesses. After discussing the market realities in Japan, I summarized:

Thus, a firm in this situation cannot be completely dissatisfied with short-term losses associated with such an investment of resources. It is a cost of doing business in such a market and requires a combination of patience, steady determination, and a commitment to relationship development. At the same time, for a business unit evaluated on profitability, such a situation eventually requires tough choices--drop the project all together or work your tail off to find new sources of cash flow elsewhere in order to subsidize already dedicated resources.

I didn't touch on ways to find new sources of cash flow, but recently a few online magazines have recently made notice of the announcement by Manhattan Associates and IBM to strengthen their commercial partnership--a move I would categorize as one strategic way of opening new sales channels and building a solid project pipeline.

On way towards discussing how such a partnership can work in our dilemma above, I want to briefly detail the Manhattan-IBM partnership via a couple articles. The first is from Logistics Management and titled, "New Manhattan Associates, IBM partnership aims to offer shippers more integrated platform."

First, in a description of the partnership:

Supply chain software vendor Manhattan Associates announced earlier today it has bolstered its partnership with IBM in an effort to implement and sell supply chain technology offerings that are built on IBM's open technologies for global shippers in the retail, consumer goods, manufacturing, and transportation sectors.

The companies said that this initiative will focus in on certain geographic markets, including Asia-Pacific, Europe, Latin America, Middle East, as well as its current interests in North America, where they share roughly 1,000 customers.

"This partnership is a great opportunity for us and makes a lot of sense with what are are doing with our supply chain solutions-and the innovation we are bringing to our customers-along with what IBM offers in terms of technology and R&D," said Jeff Cashman, Manhattan Associates senior vice president of business development.

Prior to today's announcement, the partnership between the two companies was described as a "go to market" relationship by Cashman over the last 15 years. It focused on re-selling hardware and the concept of working together in the future on global services, as well as possibly using IBM software.

Later in the article, I think it hits on where such a strategy will help deal with the above dilemma:

In terms of how today's news positions Manhattan in a highly competitive marketplace, Cashman said that IBM's global reach is a boon, along with its technology expertise in the industry.

The second article from Computer Business Review Online, titled "Manhattan Toasts New IBM Partnership," is more to the point:

Manhattan is hoping to tap into IBM's global sales and marketing channels and strong service capabilities to push its supply chain offerings to market.

Basically, this set-up allows Manhattan to reduce the risk in developing new sales channels and customers in a market like Japan where it requires more unrecoverable costs. At the same time, IBM is able to tap into Manhattan's expertise in supply chain execution technologies to deliver better solutions to its customers, both current and potential.

The Chinese IT firm I worked with in Beijing also utilized this strategy in a partnership with IBM. However, because IBM is so big, at the time it seemed certain parts of the business had poor visibility of what other business units were doing in China. The firm I was with, in just one week, outbid IBM for one project, joined a presentation and news conference with IBM on their partnership, and received a sales visit from two reps from a division of IBM. Thus, a company like Manhattan has to be sure they can manage this type of partnership dynamic and be able to interact consistently with the entire IBM organization.

For my former Chinese company, it was quite embarrassing for the IBM sales team to arrive in office and yet have no clue that IBM was a partner on the mainland. 

Note: SupplyChainer also mentions the news.

Hutongs Transplanted to Typepad

My friend, David Wolf, who works out of Beijing, has moved his two blogs--Silicon Hutong and Peking Review--to Typepad along with a third, fledgling blog called Ecohutong. I encourage all my readers to check out David's work as he provides a great deal of insight into business management in China, particularly in the media and technology industries.

I just yesterday thought of Ecohutong because of news here in Japan of an intention between China and Japan to cooperate on developing environmental initiatives in the vein of the Kyoto Protocal. Visiting Ecohutong this morning, I see David has already posted on the news.

As David notes, there are many reasons to doubt that such an initiative will have success. I have similar feelings, but only at the government level. Those who actually have to make such an initiative work at the ground level are already interacting with Japan to benchmark and bring new technologies or environmentally-friendly ideas to the Chinese mainland. One such area is biomass production. Others are studying Japanese public transportation systems and public space utilization/design to improve the public environment in Chinese cities. Where the government initiatives may lag and stall, I believe the private sector will take advantage of viable opportunities and develop alternatives to current business practices that contribute to mainland pollution.

I look forward to the Ecohutong providing updates on this interaction.

Upfront Investments to Relationship Building in Japan

One of my colleagues asked me the other day why projects with more traditional Japanese companies, or with more traditional Japanese employees, fail to reach decisions quickly, even after several meetings on the same subjects. I told him that the transformational change often expected by Western companies on many projects is still quite new in Japan; that Japanese have long preferred breakthrough achievements as the result of several incremental improvements.

Toyota is one example of this, with their steady rise in the USA now resulting in a seemingly unstoppable momentum and market strength. On the other hand, there is also the example of more sudden, transformative change implemented by Nissan domestically within Japan. As more Japanese return from overseas to take executive positions in Japan, the approach will change per project or initiative. But a true change in the foundation of Japanese business society will require many more years and generational turnover.

As my colleague expressed his frustration, I realized perhaps more consciously than before that a lot of the benefit of relationship building in Japan must be preceded by a comfortability with the fact that you may not know early on how any particular business relationship will develop. In Asia, this I believe is more of an art than in Western countries where written rules and contracts take precedence.

For businesses in this environment, it means investing significant resources up front for a potential deal with a very rough estimate of future cash flow. For larger, well-resourced firms, this type of investment can be creatively subsidized by other, more established businesses or contracts. But for unsubsidized smaller firms and relatively unsubsidized new business units in a market like Japan, this scenario can be taxing on the health of the overall business. Especially if the target customer and respective contract is very large, a smaller firm may end up living and dying in the short-term by the results of such a contract. The resources required to sustain momentum are significant, and yet if the project doesn't move quickly as can happen with large Japanese customers, there is not enough cash flow to sustain that momentum (assuming parallel projects are limited and running at breakeven). But to simply cut the opportunity off the books severely impacts future expected cash flow.

Thus, a firm in this situation cannot be completely dissatisfied with short-term losses associated with such an investment of resources. It is a cost of doing business in such a market and requires a combination of patience, steady determination, and a commitment to relationship development. At the same time, for a business unit evaluated on profitability, such a situation eventually requires tough choices--drop the project all together or work your tail off to find new sources of cash flow elsewhere in order to subsidize already dedicated resources.

In the end, if the strategies in place do not accurately reflect the business's market realities, customers will be selected inappropriately and resources utilized inefficiently in building a strong foundation for future success.