by Paul W' Bradley

1
PECC INTERNATIONAL ROUNDTABLE
The Development of the China Aerotropolis
and its Link to the Global Supply Chain Network
by Paul W. Bradley
6 September 2003
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The Aerotropolis (A Wider Definition)
An aviation linked urban infrastructure
consisting of an airport core, light industrial
space, hotel/retail/entertainment complexes, and
ocean ports, fully integrated across global
supply chain networks.
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HORIZONTAL VERTICAL INTEGRATION
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An Example of an Inefficient Distribution Model
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Streamlining Asias Supply Chains
China
Philippines
Thailand
Malaysia
Indonesia
Europe
U.S.
Australia
Supply Chain Management Hubbing
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The Evolutionary Path of Total Supply Stream
Integration

Traditional Logistics
Total Logistics
Supply Chain Management
Advanced Supply Chain Management
TOTAL SUPPLY STREAM INTEGRATION

• Traditional Logistics Activities

• Total Logistics Activities

• Supply Chain Management Activities

• Virtual Warehouse Presence
• Virtual Inventories
• Virtual Manufacturing
• Virtual Sales Force Deployment Strategies

• Suppliers
• Customers
• Improved IT Integration (converting fixed costs
  to variable costs)

• Shipping (Ocean Air)
• Freight Forwarding
• Standard IT Integration

• Local Warehousing
• Inventory Control
• Trucking

Transforming the chains into a seamless stream
with an efficient and dynamic flow through
revolutionary IT integration
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Evolutionary Path of Manufacturing
To Virtual Manufacturing Dynamic Global
Manufacturing Networks
To Manufacturing Centers of Excellence Regional
Hub Manufacturing Strategy
To Establishing Strategic Manufacturing
Facilities Clusters of Manufacturing Plants in
key Markets to meet In-country consumer demand
From One Dimensional Manufacturing Model
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Leveraging Virtual Manufacturing

• Converting fixed costs to variable costs
• Re-channeling capital from fixed assets to
  enhance RD, advertising, or bottom-line
  profitability
• Sub-components can be produced in multiple
  factories and then consolidated and assembled
  into end products for distribution
• Creating flexible manufacturing capacity to react
  to changing consumer demand

• Ability to continuously shift manufacturing
  capacity to exploit production cost opportunities

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SCM Technology Total Visibility Control
across the Value Chain
Supply Chain Execution
Virtual Manufacturing
ExFty
LDP
FOB
CIF
HUB
Airfreight Shipping
Manufacturing Control, Inspection
Sourcing Vendor Selection
Raw Material Sourcing
Distribution Centres
Retail Stores
Consolidation
Freight Forwarding
Custom Clearance
Product Development
Integrated Information Pipeline
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Supply Chain Integration
Supply Chain Execution
Virtual Manufacturing
Local Transport
Product Development
Consolidation
Raw Material Sourcing
Export Documentation
Production Planning
International Shipping
Factory Sourcing
Customs Clearance
In-Country Distribution
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Air Commerce - The logistics backbone to the new
economy
Ecommerce warehouses
Survival of the fastest
Rise of E-commerce
Centralized repairs, logistics centers
Subic bay generated 2.5b in investment
Hubbing
LAX responsible for 400,000 jobs
Emergency parts center
Presence of Airport increases the number of jobs
Nearby Support Facilities
Air Cargo today is 200b
Time-sensitive goods facilities
2/3 of all US air cargo is 24-48 hour shipments
Just-in-time supply chain
Development Strategies
Canals of industrial economy
50,000 employed at Schipol Airport
Sea Ports
Employment grew 11000 due to Dulles and National
airports
Railroads opened up interiors to manufacturing
and trade. Eg. Atlanta
40 of the value of world trade today goes by
air, 2 by weight.
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Connecting The 21st Century
LOGISTICS IS THE BASIS FOR FUTURE COMPETITION
MAKE IT FASTER
SELL IT FASTER
SPEED RULES SURVIVAL OF THE FASTEST WILL BE THE
LAW OF COMPETITIVE SUCCESS
DESIGN IT FASTER
Logistics Real Time Supply
DELIVER IT FASTER
etailers
Order Fulfilment
e
Knowledge Management
SERVICE IT FASTER
40 OF THE VALUE GOES BY AIR
Reverse Logistics
SERVICES
200 Billion Industry
AIR LOGISTICS
ITS ABOUT THE NETWORK NOT THE NODES
KNOWLEDGE WORKERS USE AIR TRAVEL MORE THAN OTHERS
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Supply Chain Integration
SUPPLY CHAIN INTEGRATION
Supply Chain Nightmare in Asia

• OPPORTUNITIES
• Flow Management of Product
• Optimize Information Flow
• Inventory Management
• Financing
• Demand Management

ASIAN POWER HUBS
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PROVINCES IN CHINA
HEILONGJIANG
Harbin
Changchun
JILIAN
Shenyang
N E I M O N G O L Z I Z H I Q U
LIAONING
HEBEI
Urumqi
BEIJING
TIANJIN
Taiyuan
Hohhot
XINJIANG
Shijiazhuang
SHANXI
Jinan
Yinchuan
SHANDONG
G A N S U
NINGXIA
Zhengzhou
Lanzhou
Xining
Xian
JIANGSU
HENAN
ANHUI
SHANGHAI
QINGHAI
Nanjing
SHAANXI
Hefei
HUBEI
Hangzhou
Chengdu
Wuhan
ZHEJIANG
Changsha
Nanchang
XIZANG
SICHUAN
HUNAN
JIANGXI
Fuzhou
Xining
FUJIAN
GUIZHOU
Guiyang
GUANGDONG
Kunming
Guangzhou
GUANGXI
Nanning
YUNNAN
Hong Kong
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China Challenges Opportunities

• China will become the Manufacturing Center of the
  World
• China will be the Largest Consumer Market of the
  21st Century (in stages)
• This will require radical changes in global
  business strategy

A member of the Li Fung Distribution Group
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Major Transport Logistics Centre
Developmentsin Hong Kong
Ref www.info.gov.hk/gia/
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Hong Kongs Competitive EdgeLinking the Pearl
River A5 Aerotropolis

• Hong Kong
• Thought Center to meet consumer expectations
• Manufacturing Virtual manufacturing
  co-ordination Center
• Supply Chain Quality Control Center
• Adapting global technology to Chinas unique
  environment

Port Airport
Port Only
Airport Only
Guangzhou
Huangpu
Lianhuashan
Nansha
Yantian
Shekou
Zhongshan
Zhuhai
Macau
Hong Kong
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"A5" China Aerotropolis
Guangzhou
Pearl River
Delta
Shenzhen
Zhuhai
Airport Sea Port
Macau
Hong Kong
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Entrepot between China and the World
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Li Fung Group
Li Fung (1937) Ltd
Financial Investors
Public Shareholders
Li Fung (Retailing) Ltd
Li Fung (Distribution) Ltd
Li Fung (Trading) Ltd
Core Business Export trading of soft goods and
hard goods to US EU
International Supply Chain Management
In-country Logistics
Retailing in Greater China and ASEAN countries
Marketing Services Contract Manufacturing
Global sourcing network of 68 offices in 40
countries
US 1 Billion 5,000
Turnover
US350 Million 2,000
US 4.5 Billion 5,000
Employee
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Li Fungs Fashion Wear Supply Chain Network
CUSTOMER
Li Fung does the High Value-Added
Front-and-Back end activities in Asia

• FRONT END
• Design
• Engineering
• Production Planning

BACK END Quality Control Testing Quota
Management Logistics
Textiles
Yarns
Organizes the lower-value-added middle stages
through its network of worldwide suppliers and
factories
Raw Material and component sourcing
Managing Production
Buttons
Zippers
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Example of Fashion Wear Supply Chain Network
Korea (Dyes)
United States (Fashion Wear)
Europe (Fashion Wear)
Japan (Zippers)
Shanghai (Fabric Components)
HK PRD Finished Garments
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The Pearl River Delta Aerotropolis A New Path
to Competitive Advantage
Creating a dynamic virtual manufacturing and
supply chain network linked across China to
respond to global consumer demand
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The Li Fung Groupis uniquely positioned to
Enhance Value Across the Asian Supply Chain
A member of the Li Fung Distribution Group
iSCM Asias Proprietary Information - Strictly
Private