With many business, cultural and technical challenges in the Asian automotive market, implementing supply chain on-demand solutions have proven successful.
Global supply chain solutions are commonplace in business. Only companies with purchasing and production sites distributed in the right locations around the globe can survive global competition. This applies, in particular, to the automotive industry where competition is very intense. As product development and production costs become key factors in manufacturing and revenue growth, the need to look globally for expansion and cost-cutting challenges moves the longitude and latitude lines to other parts of the world.
The global supply chain in the automotive industry has expanded from North America and Europe to the Asian region – in particular China, Hong Kong, Japan, Korea and Taiwan. Along with this, business migration brings challenges in culture, technology, and implementation of global business processes. As the need to expand into Asia increases, so must the transition of existing products and services to support these endeavours.
Asia is recognised as a business opportunity supporting supply chain management and supplier communications objectives. More than 60 percent of North American and European manufacturers source components from Asia as part of their low-cost sourcing strategy. Their outreach to this part of the world brings with it a number of cultural, technical, and supply chain management challenges.
It is imperative today in a global economy to understand who your customer is and what they expect in a business relationship. Imposing your values in the relationship without collaborating first on requirements and expectations would cause conflict later; even in business, first impression is important. Non-Asian companies need to display their commitment in a relationship through experience and recognised value. This goodwill will be returned as opportunities and rewards to companies that show potential and a willingness to adapt; remember trust is earned by actions not by words.
Close consideration of local market conditions is also crucial in Asia. This includes both the technical infrastructure and business process features covering cultural characteristics. It is difficult to impose an external (North American/European) process and expect it to be accepted by the Asian market. In Asia, the business solutions should be localised. Closeness to customers and servicing their needs is expected to be a starting point in the relationship.
English as a business language works well in Hong Kong, Korea, and Taiwan but is challenging in other parts of Asia, especially in China. Ninety-two percent of the Chinese market prefers to access the Internet in their local language. English is seen as the stumbling block when communicating with the Tier 1 and Tier 2 automotive companies. For example, SupplyOn modified its existing applications to support Mandarin and offers a Chinese hotline, local telephone number under local working hours, and works with a local training partner to enhance the supplier implementation process.
Establishing standardised and transparent business processes allows for uniform standards to gain maximum benefits at a global level. The value in process efficiencies and shared costs are fulfilled when harmonised solutions are adopted globally. Asian companies prefer to adopt and deploy business processes that are proven solutions developed in North America and Europe. Asia strives toward continuous improvement, and wants to be flexible in the long-term using short-term solutions. These companies are more focussed and more results-oriented as competition increases. There are more than 10,000 middle and low-level automotive companies in Asia, all striving to become successful. Asian companies do not want to start from scratch, but take advantage of quality, manufacturing, and process efficiencies from successful companies that already have achieved similar goals in other parts of the world.
Business process solutions (i.e. Sourcing, Quality and Logistics) developed over the last thirty years in western cultures, are adopted and fine-tuned to suit the Asian companies. The challenge for companies in North America and Europe is the change required to execute a standardised process and stay flexible enough to achieve the desired result during global implementations.
In 2007, the adoption of technology in Asia is tracked as the fastest growing segment in the Asian culture today by passing North American and European usage. East Asia is the leading user of wireless usage accessing quick-hit applications such as stock quotes, banking, weather, traffic and sports. Asia also has an extremely high turnover of cell phones. In Japan, users change cell phones every three to six months compared to an average of nine months in Hong Kong. Aligning feature rich and technology-enabled solutions with the expectations of the Asian user transforms into challenges when the same users move into business expecting similar expectations and gratifications. As the user moves into business where traditional processes do not move as fast as the social environment, higher expectations and continuous change affect the expectations of the end-user. “China likes to try new things,” states Zixi Zheng of SupplyOn who heads the company’s Asian office. Businesses want new functionality and improvements in technology. Keeping an Asian company to use the same technical solution for two years is a major challenge for technology providers.
On-demand products and services are development and deployment of Internet based solutions designed to enhance the collaboration of users and information towards a common goal. The type of on-demand applications adopted in the automotive industry consists of Engineering, Sourcing, Quality, and Logistics business processes. On-demand model is a mature and growing method for large and medium-sized businesses to quickly and cost-effectively implement a new solution inside/outside the organisation without added IT development and implementation costs. North American and European businesses wanting to manufacture or source from the Asian region will find on-demand products and services to be quick alternatives to developing in-house solutions.
According to the Aberdeen Group, a leading provider of fact-based research and market intelligence, nearly two-thirds of Asia-Pacific companies have implemented on-demand supply chain management solutions, outpacing similar implementations in North America and Europe. The widespread adoption of B2B tools is good news to western supply chain managers seeking to take advantage of low-cost countries with the potential for increased sales opportunities. On-demand solutions provide a quick and low cost approach to setup business in another part of the world and still maintain the data integrity and process improvements as defined by headquarters.
SupplyOn’s customers, Bosch, Continental Automotive Systems, Siemens VDO, and ZF have each rolled out existing SupplyOn on-demand business process solutions at their Asian offices. The on-demand delivery model is a good fit for Asian companies with fewer and less mature installed infrastructure technologies at their disposal. Though Asia offers a huge potential to implement a business process on-demand model, there are some key technical and cultural issues to consider. Convincing suppliers to participate in on-line sourcing tools affects their long-standing co-development, cross-ownership supply relationships and long-term business relationships. While North American and European companies view the depth of application functionality as the most important criteria in selecting on-demand providers, Asian users value application breadth as more important.
It is also observed that Asian buyers like to try new things and require new functionality after only a short period of time. Not only are language and local support major considerations in the business relationship, but so is the performance of the application. System response and reliability are one of the top three key performance indicators measured by the Asian business user that software providers need to adhere to. Small and medium size manufacturers in Asia have embraced Enterprise Resource Planning (ERP) applications utilising a larger percentage of ERP functionality quicker than found in similar implementation in North America and Europe. This trend can be viewed as positive for technical and business process adoption improvements; Asia understands the value of technology and its use to grow the business.
Flexible, pay-as-you-go solutions for the buyer as well as the supplier are very important. Surprisingly, Asian businesses are willing to try out on-demand solutions but have high standards towards the use of those solutions in a long-term relationship. Trust towards western developed solutions are scrutinised at a very compelling level. Asian buyer organisations want proven solutions, with recognised account references and a demonstrated track record.
Supply chains expand globally covering a multitude of challenges (culture, adoption of technology and business processes) and so must the strategy of how to develop and support the new business prospects. As commerce moves from North America to Europe, and now to Asia, the potential growth is even greater than ever as the automotive market opens up a multitude of new opportunities. Risk brings reward or failure in a new market. It all depends how well the end-user adapts to and accepts new business relationships. Understanding the Asian nuances and working them into the overall solution will better prepare your company for success in the shortest amount of time.
