Businesweek article. RACING TO GET ASIA GLOBALLY WIRED (int'l edition)
Excerpt: "Once it recovers, Asia should be a huge market for
networking equipment, software, and consulting services needed to bring
manufacturers into the Information Age. Sales of networking hardware in
non-Japan Asia is expected to nearly double, to $4 billion, by 2002, predicts
International Data Corp."
businessweek.com
Manufacturers must embrace
E-commerce--fast
The folks at Lite-On Technology Corp. can hardly believe how fast their world is
spinning. Just a year ago, the Taiwanese manufacturer of computer hardware
typically had a month to execute big orders from IBM, Compaq Computer, and
other foreign customers. Since then, the cycle time has shrunk dramatically.
Lite-On must be able to fill a U.S. order for color monitors within two days.
Notebook computers must ship out in one day. Now, the company is trying to
cope with Compaq's latest request: It wants Lite-On to ship CD-ROM drives
just four hours after it gets an order.
How can a supplier in Asia possibly keep up? By opening factories and
warehouses in North America--and wiring itself to the hilt. To meet the increasing
demand for just-in-time service, Lite-On has invested $5 million so far in
networking equipment to upgrade its electronic data interchange system. By
yearend, the $850 million company wants to integrate its customers, factories,
warehouses, accounting department, and parts vendors into one digital supply
chain. That will enable it to slash the time needed to take orders, coordinate
manufacturing in various plants, ship products, and bill for services. ''This system
is a must,'' says Cliff Chen, Lite-On's strategic planning vice-president. ''Without
it, our customers wouldn't want to do business with us.''
As response time becomes a bigger factor than low labor costs in keeping major
clients, Asian manufacturers of everything from PCs to garments are under
pressure to catch up with the E-commerce revolution. Banks, shipping
companies, trading firms, and even Asian governments are rushing to upgrade
their computer networks and switch to paperless transactions. Many are investing
in private networks that tie makers directly to customers through electronic data
links. Other companies are finding buyers for their wares through Internet sites.
The problem is that only a handful of Asian manufacturers have taken electronic
commerce seriously, either because managers are unfamiliar with the technology
or aren't yet convinced it will help the bottom line. And getting up to speed will be
tough. Because of the financial crisis, most of the region's exporters would be
hard-pressed to spend the millions of dollars required for first-rate private
networks. But failing to upgrade their logistics systems would be even more
damaging: Whether it's Wal-Mart Stores Inc. or Hewlett-Packard Co., foreign
customers now demand that their vendors deliver just in time and handle their
own inventory.
What's more, big U.S.-based electronics contract manufacturers, such as SCI
Systems Inc. and Solectron Corp., are not only much more advanced in
information processing technology but also have factories on the doorsteps of
U.S. clients. So even though Asia's currency devaluations have sharply lowered
the region's production costs, companies lose much of that advantage to the time
and expense of shipping goods across the Pacific. Shaving costs by making more
use of the Internet, therefore, could become essential. ''Over time, it's not going to
be a matter of choice,'' says Stephen McKay, Andersen Consulting's Asia
director for E-commerce.
TECH BACKWATER. Once it recovers, Asia should be a huge market for
networking equipment, software, and consulting services needed to bring
manufacturers into the Information Age. Sales of networking hardware in
non-Japan Asia is expected to nearly double, to $4 billion, by 2002, predicts
International Data Corp., and the value of commerce conducted over the Internet
should zoom from $160 million to more than $16 billion in three years. Andersen
has a dozen large E-commerce customers in Asia. And General Electric
Information Services (GEIS), which says Asia is the fastest-growing segment of
its 40,000-client global E-commerce business, has opened service centers in
Japan, China, Hong Kong, India, Singapore, and Korea.
Inroads already are being made in tech backwaters such as India. In a pilot
program using EDI, GEIS has helped Pune-based Bajaj Auto Ltd., the country's
largest maker of motor scooters, reduce the time it needs to get materials from
suppliers across the country from 15 days to 3. Now, India's Commerce Ministry
has asked the entire auto and banking industries to consider using such systems.
Meanwhile, the notoriously paperbound Excise Commission is studying a plan to
cut red tape by using electronic data links to collect monthly duties from makers.
But most Asian producers are too small to afford the pricey computer equipment
and dedicated high-speed phone lines needed for such systems. Instead, many
are discovering they can save time and money by taking to the Internet, which
allows them to avoid middlemen and sell directly to buyers overseas. Asian
Sources Media Group, a Manila-based trade magazine publisher, offers an online
service with a rapidly expanding database of 7,000 suppliers and 42,000
products. Among the major buyers using the service are retail chains such as
Toys 'R' Us and Woolworth, which post purchasing needs on customized sites.
One convert to the service is Henilon International Inc., a Hong Kong handbag
maker with $13 million in annual European sales that wants to branch into the
U.S. and Latin America. Henilon says it has received several orders over the
Asian Sources Web page, including one for $2 million. Increasingly, U.S. retailers
say they prefer to do all their buying online, says Henilon General Manager
Terence Chan. ''If our competitors fail to do business online, we might have an
opportunity to enter those chain stores.''
Governments also are pushing E-commerce. Singapore is investing heavily in a
network linking every computer on the island, and Taiwan hopes to help 50,000
companies use the Web for business transactions by 2001.
Hong Kong's government has invested in Tradelink, a private company aiming to
automate import and export declaration services and make all exporters
Web-savvy, so that trade can be handled electronically by 2000. ''We are trying
to gather sufficient critical mass so the whole thing will take off,'' says Tradelink
CEO Justin Yue. ''If Hong Kong companies don't wake up, they are likely to see
their competitive edge being eroded.''
Even Asian companies that focus on domestic markets can't rest easy anymore,
as high-powered multinationals take advantage of lower trade barriers. In
Taiwan, Procter & Gamble, Tait Marketing & Distribution, and the Hong
Kong-based Wellcome supermarket chain are using E-commerce to run circles
around local distributors of everything from shampoo to canned foods.
Scraping together the money for information technology may be difficult in a time
of crisis. But unless Asia's manufacturers bite the bullet, they may find that by the
time recovery comes, their customers already will have left.
By Jonathan Moore in Taipei, with Manjeet Kripalani in Bombay
RELATED ITEMS
TABLE: Hooking Up Asia
Updated Apr. 9, 1998 by bwwebmaster
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