Japanese manufacturers need to streamline and optimise their logistics operations to remaincompetitive while innovation and a customer-centric approach are important factors for the success
of Chinese export manufacturing companies, two separate UPS surveys have shown.The company’s first “UPS Japan Manufacturing and Trade Trends” survey outlines key challengesand opportunities for Japanese manufacturers in the context of global trade and logistics. Asimportant trends, it has identified a continuing shift in manufacturing from Japan to overseasmarkets and the emergence of new trade markets, particularly Southeast Asia while China remains akey trade partner for Japan.
According to a recent report from Transport Intelligence, China continues to be the“manufacturer of the world”, even as low-value and mass manufacturers steadily move to lower-costcountries such as Vietnam, Myanmar, Cambodia, Laos and Bangladesh. This shift in manufacturing isexpected to lead to greater trade opportunities within Asia.
The UPS survey showed that China is the top export (81.3%) and import (76%) partner of Japanesemanufacturers overall. Nearly 40% of the respondents agreed that China is currently the mostimportant market for their businesses, while the USA is the second most important market (20.4%),and Southeast Asia the third (16.8%).
Looking into the future, however, only 30.8% of the respondents continue to recognise theimportance of China. Meanwhile, one quarter of Japanese manufacturing companies anticipate thatSoutheast Asia, i.e. ASEAN countries, will gradually play a bigger role in intra-regional trade inthe future, nearly doubling the importance ASEAN holds today.
The report further revealed that the global financial crisis and Japan’s natural disasters inrecent years are likely to have contributed to many Japanese manufacturers shifting productionoverseas. According to the UPS survey, large enterprises with more than 300 employees indicatedconsiderable increases in overseas production sites (38.6%; 12.4% for SMEs), in overseas clients(37.3%, 21% for SMEs), and in third-country shipping (31.8%; 7.4% for SMEs).
Considering the importance of global trade, Japanese manufacturers also see how free tradeagreements can enhance their business. Around 56% of the respondents from large enterprises believethe Trans-Pacific Partnership (TPP) will positively affect their business. By contrast, half ofJapanese SMEs believe the TPP will have no impact on their business.
“Representing over 90% of businesses, SMEs in Asia are particularly disadvantaged by tradebarriers because they do not have the resources of large firms to overcome them. Trade agreementssuch as the TPP, can help SMEs by simplifying trade and eliminating trade barriers. The lowrecognition of free trade agreements among Japanese SMEs shows that there are still opportunitiesfor them to take advantage of trade liberalisation to capture new growth opportunities,” KK Leung,President, North District, UPS Asia Pacific Region, said.
The majority (88.6%) of the survey’s respondents see logistics as an important factor supportinginternational operations and trade. However, 53.7% admitted that they have yet to successfullystreamline and optimise their logistics operations. 74% of respondents said they use two or moretypes of transport modes for exporting, while 71% shared the same view for import shipments.
“Our survey shows that manufacturers recognise the need to move faster and more nimbly acrossthe world, as their sourcing origins and shipment destinations continue to expand internationally.With the growing complexity of the logistics process, UPS’s multi-model services and suite ofinnovative technology solutions will help the manufacturers to optimise their supply chain andexpand their business globally,” Leung concluded.
The inaugural survey was conducted with 1,010 respondents from Japan’s manufacturing industry,including large enterprises that consist of more than 300 employees and SMEs with less than 300employees. These companies are specialised in industries such as automotive, general purposemachinery, electronic components, industrial machinery, commercial machinery, plastic and rubberproducts, electrical machinery, metal products and others.
In a separate “Made in China 2.0” (MiC 2.0) Readiness Index”, UPS has identified important areaswhich Chinese manufacturers exporting globally need to work on to retain their leading position.Some of these include a deeper understanding of customers’ business, markets and environment,bringing customer relationships to the level of true partnership and using logistics to theircompetitive advantage.
The survey participants were categorised into three group – “Leaders” (8%), “Followers” (56%)and “Laggards” (36%) based on their performance in the MiC 2.0 Readiness Index. The survey showedthat Leaders are significantly outperforming their peers in profit (+16%), revenues (+16%), marketshare (+15%) and productivity (+15%). They are also more likely to have seen year-on-year increasesin the levels of business output (+15%), employment (+27%) and the prices they charge (+23%).
The survey findings also showed that Asia is the most common market for Chinese exportmanufacturers (73%) who plan to increase their presence in the region in the next two years. On theother hand, more than half (52%) of the respondents plan to export to Western Europe and a third toNorth America Oceania, South America and Central America.
According to the UPS survey, the “Made in China 2.0 Leaders” have a much larger global footprintthan other “less-ready” export manufacturers as they are more than twice as likely to sell theirproducts in the emerging markets of Eastern Europe, Africa, the Middle East and North Africa,Oceania and Central America.
In addition, those Leaders tend to have a customer-centric focus when it comes to strategies forfuture growth. They prioritise collaboration with customers on product innovation and increasingthe knowledge of their customers’ operating environment.
The research also examined the performance of exporters across three key vertical sectorsincluding retail, high-tech and automotive & industrial as well as four key manufacturingregions in China: Chengdu, Qingdao, Shanghai and Shenzhen. The analysis showed that exporters fromthe retail sector are most prepared for the new competitive environment with a score of 52 out of100 on the Index. Their fast “MiC 2.0 transition” can be attributed to the fact that they arefacing significantly more challenges than the other sectors to innovate and compete.
From a geographical point of view, Shenzhen-based manufacturers, who scored 52 out of 100, arebetter prepared for Made in China 2.0 than their peers in other parts of China. They also displayeda higher level of recognition of the MiC 2.0 priorities.
“UPS is well positioned to help Chinese manufacturers and their customers tap into the power ofadvanced global logistics in order to outperform the competition. We do this with our human talent,extensive global network and industry vertical expertise,” Richard Loi, President of UPS China,said. “The Made in China 2.0 Readiness Index is a new and exciting stage of our ongoing commitmentto China’s evolving generation of export manufacturing. To help propel this transformation, UPSwill continue to invest in China as part of our long-term China growth strategy.”
The Readiness Index, launched in collaboration with Caixin Media, is based on a survey of 1,000Chinese export manufacturing companies.
