Global Logistics -- A New Way of Doing Business in Taiwan
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Transcript of Global Logistics -- A New Way of Doing Business in Taiwan
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Global Logistics -- A New Way of Doing Business in Taiwan
Chi SchivePresident
Taiwan Academy of Banking and FinanceAdvisor
Council for Economic Planning and Development
Global Entrepreneurship for the New Millennium
Syracuse UniversityAugust 21, 2000
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Global Logistics --A New Way of Doing Business in Taiwan
Outline
I. Introduction
II. Factors behind global logistics (GL)
III. The emergence of GL in Taiwan: a brief review
IV. Taiwan’s two-way investment flows
V. Production fragmentation by Taiwan firm: an integrator
VI. GL and information industry
VII. Infrastructure for GL
VIII. A new way of doing business in the region
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Behind the Emergence of Global Logistics
• Production fragmentation - Classic trade theory
To push cost down, vertically integrated production
processes are taking place across country borders .
• New phenomenon
Shortening product cycle is generating inventory
pressure.
• New phenomenon
ICT reduces the cost of information transmission and
goods transportation.
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Operation Characteristics in Taiwan: from OEM to GL
R&D Manufacturing Marketing andDistribution
OEM
R D Mfg Marketing andDistribution
ODM
R D Mfg Logistics M
ODL/GL
Before the mid-1980s
In the late 1980s and early 1990s
After the mid-1990s
: Local operations
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Japan
Taiwan U.S.
I: InvestmentM: Materials/IntermediatesQ: Finished product/commodityS: Strategic alliance
Before the mid-1980sLate 1980s and early 1990sAfter the mid-1990sASEAN
I&M
M
I&MQ
QS
Q
Q
Taiwan’s International Division of Laborfrom Triangle to Diamond
China
I&M
Q
S
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Investment in Southeast Asia and China
Thailand Malaysia Philippines Indonesia Vietnam ChinaUp to1986
577.5 50.4 7.8 170.0 - 100
1987 300.0 47.3 9.0 7.9 - 4201988 842.0 307.3 109.9 913.0 - 5171989 871.0 815.0 148.7 158.0 - 9841990 761.0 2,383.0 140.7 618.0 107.0 1,3921995 1,803.9 565.5 181.6 567.4 1,215.1 5,7771996 2,785.2 310.3 7.4 534.6 534.3 5,141
1997 414.3 480.4 13.1 3,419.0 247.8 2,814
1998 253.6 263.4 5.4 165.5 252.8 3,118
1999 211.1 70.3 5.0 3,309.7 173.0 3,370
Rank 4 3 5 2 2 3
According to Host Country StatisticsUS$ million
Sources: Board of Investment, Thailand; Malaysian Industrial Development Authority, Malaysia; Board of Investment, the Philippines; Investment Coordinating Board, Indonesia; State Commission for Cooperation and Investment, Vietnam; Ministry of Foreign Trade and Economic Cooperation, mainland China .
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Production Fragmentation by Taiwan Firms, 1998
% of MfgDomesticproduction
Foreignproduction
Manufacturing 100.00 89.35 10.65
Information electronics 35.71 82.03 17.97 Electronics, electrical machinery 34.90 82.06 17.94
Precision instruments 0.81 80.92 19.08
Metal machinery 23.91 97.62 2.38
Chemicals 23.35 89.05 10.95
Consumer products 17.04 93.50 6.50
%
Source: Ministry of Economic Affairs, Statistics Department, Survey on Manufacturing Activities,July 1999.
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Foreign production
TotalJapan,U.S.
Europe
MainlandChina
S.E.Asia
Others
Manufacturing 10.65 2.37 4.42 3.38 0.49Information, electronics 17.97 4.28 8.83 4.59 0.28
Electronics, electricalmachinery
17.94 4.37 8.64 4.66 0.28
Data Storage processing 26.53 8.89 10.45 6.92 0.27Telecom 22.33 0.09 7.14 15.10 0.00Electronic components 13.01 1.95 8.15 2.68 0.23
Precision instruments 19.08 0.61 17.08 1.37 0.03 Metal machinery 2.38 0.71 1.29 0.26 0.12 Chemicals 10.95 1.44 2.46 6.00 1.05 Consumer products 6.50 1.95 2.25 1.63 0.67
Foreign Production of Taiwan Firms, 1998%
Source: Ministry of Economic Affairs, Statistics Department, Survey on Manufacturing Activities,July 1999.
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Geographic Distribution of Sales of Domestic Production, 1998
Information electronicsElectronics
Electrical machinery
Man
ufa
ctu
ring
Datastorage
processing
Telecomdevices
Electroniccomponents
Precisioninstruments
Total 100.00 100.00 100.00 100.00 100.00 100.00 100.00
Domestic 59.21 31.97 32.03 13.94 36.01 33.49 29.58
Foreign 40.79 68.03 67.97 86.06 63.99 66.51 70.42 Japan 3.33 5.45 2.09 4.22 4.14 5.08 2.42 U.S. 15.31 28.93 29.18 43.77 36.19 23.62 18.09 Europe 7.85 15.41 15.48 25.42 11.28 11.73 12.27 Mainland China 3.98 2.10 4.95 1.08 4.36 2.30 27.41 Southeast Asia 6.52 10.76 10.84 6.15 4.17 17.50 7.16 Others 3.80 5.37 5.42 5.43 3.85 6.26 3.08
Source: Ministry of Economic Affairs, Statistics Department, Survey on Manufacturing Activities, July 1999. In Chinese
%
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Sources of Materials/Intermediates of Taiwan Domestic Firms, 1998
Information electronicsElectronics
Electrical machinery
Man
ufactu
ring
Datastorage
processing
Telecomdevices
Electroniccomponents
Precisioninstruments
Total 100.00 100.00 100.00 100.00 100.00 100.00 100.00 Domestic 57.84 47.70 47.32 49.76 44.95 32.29 64.26 Foreign 42.16 52.30 52.68 50.33 55.05 60.71 35.74 Japan 12.19 17.91 17.93 12.85 9.00 23.15 16.97 U.S. 9.19 14.06 14.29 17.58 22.40 12.87 3.78 Europe 5.26 7.28 7.39 2.95 6.59 15.09 2.46
MainlandChina
1.95 1.85 1.86 1.73 3.59 2.06 1.50
Southeast Asia 4.85 6.71 6.82 8.44 13.18 5.57 2.16 Others 8.73 4.49 4.39 6.79 0.28 1.97 8.87
Source: Ministry of Economic Affairs, Statistics Department, Survey on Manufacturing Activities, July 1999. In Chinese
%
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Production Sharing of Taiwan’s Information Industry
1995 1996 1997 1998 1999*
Total 100.0 100.0 100.0 100.0 100.0
Taiwan 72.0 67.9 62.6 57.0 52.7
China 14.0 16.8 22.8 29.0 33.2
Thailand 5.0 5.5 5.9 5.4 5.3
Malaysia 7.2 7.4 5.6 4.5 4.0
Other 1.8 2.4 3.1 4.1 4.8
%
* Estimates.Source: Market Intelligence Center, Institute for Information Industry.
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Exports to Mainland China
1998 1999
Share Share Growth
Electrical machinery and parts 18.9 23.7 45.1
Machinery tools and parts 14.1 14.3 16.7
Plastics 11.2 11.8 20.9
Iron and steel 5.6 5.7 17.8
Synthetic fibers 6.8 5.6 -6.3
%
Source: Board of Foreign Trade, ROC.
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Imports from Mainland China
1998 1999
Share Share Growth
Electrical machinery and parts 28.2 31.0 20.7
Machinery tools and parts 9.2 9.1 9.2
Iron and Steel 10.6 7.9 -17.9
Mineral fuels, mineral oils andrefined products
4.7 4.5 5.7
Zinc and products 2.8 3.3 29.6
%
Source: Board of Foreign Trade.
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Shipment Distribution of Taiwan-based Companiesby Countries of Major Investment
Total From TaiwanFrom
MainlandChina
FromElsewhere
ForCompaniesInvestingMostly in 1997 1998 1997 1998 1997 1998 1997 1998
U.S. 100.0 100.0 88.3 86.5 6.1 7.2 5.6 6.3
Hong Kong 100.0 100.0 77.6 77.0 13.8 13.8 8.6 9.1
Mainland China 100.0 100.0 63.2 59.3 34.7 38.4 2.2 2.2
Malaysia 100.0 100.0 80.1 78.3 7.6 8.5 12.4 13.2
Singapore 100.0 100.0 86.7 85.9 7.6 8.8 5.7 5.3
Thailand 100.0 100.0 80.5 75.4 3.8 5.1 15.6 19.5
Indonesia 100.0 100.0 69.5 67.4 3.3 4.3 27.1 28.3
Philippines 100.0 100.0 78.1 75.5 2.4 2.9 19.5 21.5
Vietnam 100.0 100.0 66.1 62.4 4.1 4.3 29.3 33.3
Source: Ministry of Economic Affairs,. Survey on Foreign Investment by the Manufacturing Industry, 2000. Taipei, Taiwan.
%
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Central Geographic Position
Sydney Singapore Tokyo Seoul6:15 4:55 4:15 4:00
Manila Shanghai Hong Kong Taipei3:30 3:25 3:05 2:55
The average flight time between Taipei and other Western Pacific cities is the shortest.
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High-Tech Share of Taiwan’s Exports
20
30
40
50
60%
52.1
26.0
Manufacturing Strength
17
666158
4954
38 39
0
20
40
60
80
1996 1997 1998 1999
UPS66
Unscheduled flights
Unit: flights/week
FedEx
Source: UPS, FedEx
No flight prior to the establishment of transit hubs
63
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Achievements - Air Transportation
Flights by foreign couriers up 42% in 4 years.
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16.6 16.414.3 13.1
9.27.2
4.0 3.7
-8.3%-5.8%
-9.1%
-3.9%
0.4%
-6.7%-2.9%
-25%-30
-20
-10
0
10
20
30
Air cargo volume(100,000 tons)
Growth Rate(%)
Source: ACI (Airports Council International).
CKS Airport was the only Asian airport that maintained a positive growth of air cargo in 1998.
CKS Airport was the only Asian airport that maintained a positive growth of air cargo in 1998.
Hong Kong
Tokyo Seoul Singapore Taipei Bangkok Kuala Lumpur
Manila
Performance of Asian Airports after the Crisis
20
3.4
7.7
21.7
14.3
27.8
13.4
10.1
1.7
4.4
18.1
12.48.6
0
3
6
9
12
15
18
21
24
27
30
1996 1997 1998 1999
Taiwan
Hong Kong
Singapore
Source: Institute for Information Industry, TAS homepage, OFTA homepage
%
Unit:%
Achievements - Telecommunications
Popularization of Internet use
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1. DELL sends a request to Taiwan upon a Singaporean client order
2. The U.S. firm sends CPU to Taiwan
3. China sends cases and power supplies to Taiwan
4. China sends semi-assembled parts to Taiwan
5. Malaysia sends PCB to Taiwan
6. Taiwan sends DRAM mainboard and semi-asembled parts to Singapore
7.China send monitors to Singapore
8. Singapore assembles and sends the finished PC to the client
9. DELL sends the payment to Taiwan
Singapore
China U.S.
DELL
5
PCB
6
1
2
4
Order
CPU
MO
NIT
OR
9
DRAM main-board
8 PC
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Source: Prepared by CEPD.
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Taiwan as a Global Logistics Center
Taiwan
Malaysia
Steps 1 to 8 take 2 to 5 days to complete
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A New Way of Doing Business in the Region
30
35
40
45
50
55
60
65
1980 1985 1987 1989 1990 1991 1992 1993 1994 1995 1996 1997
NAFTA
East Asia
Taiwan
EU
Intra-regional Trade as a percent of Total Trade