Integrated Distribution Services: The Asian Context

INTEGRATED DISTRIBUTION SERVICES GROUP (IDS)

Redefining the Asia Distribution Landscape

THE ASIAN MARKETAn Overview

Opportunities in Asia

• Fastest-growing consumer market in the world

• Mosaic of Nationalities, languages, and cultures

• Provided the greatest long-term market potential

Challenges in Asia’s Supply Chain System

• Complex supply chain system• Difficulty in getting access to the final consumers• Freight cost = 8-12% of total product price

Background on the Asia Supply chain landscape

• Most brand owners generally used local Asian distributors to import goods

• Pre-1990’s :generally lacking in high quality consumer goods

• Local demand generally exceeded supply of imported goods

• Mark-ups of 20-30%

Background on the Asian Supply Chain Landscape

• Change around late 1980s• Global companies started to set up operation in Asia

(Wal-Mart, Carrefour)• Consumers had more product choices• Both Asian and Western brand owners started to

develop new products to capture growing consumer demand

• Consumers became more demanding (low prices)

• Traditional distributors started to feel the squeeze from both directions

• Brand principals no longer wanted to give distributors the lucrative margins

• Supply chain issues:

Logistics & Client Account

Warehousing Management

Background on the Asian Supply Chain Landscape

INTEGRATED DISTRIBUTION SERVICES GROUP (IDS)

Redefining the Asia Distribution Landscape

IDS Overview and Historical Context

• Challenges in Asia distribution landscape

• Li & Fung Group (LFG) over 100 years experience in Asia-West distribution

• IDS as a result of “reversing” LFG’s trading model

• Acquisition of Inchchape Marketing Services (IMS)

A New Business Model

Make use of old assets + Think of a Better Business Model = Value-Chain Logistics

Logistics as a fundamental enabler to drive maximum efficiency

Position logistics as the main front-end business connecting traditional distribution service and manufacturing

It now calls itself an Integrated Distribution Service Provider

STRATEGIC PLANS (1999-2001, 2002-2004)Reorganization and a Menu of Services

1999–2001, 2002-2004Challenges

Manage

change

Create a new

culture

How?

Allow customization.

Prioritize logistics, followed by technology.

Reorganize as a regional company with 3 business streams and key support functions across Asia.

Do away with country-based structures.

Business Streams

Logistics Distribution Manufacturing

Logistics

Ship

Store

Deliver

Distribution

Promote Sell Bill Collect

Manufacturing

Make Test Package

STRATEGIC PLAN FOR 2005-2007Rewarded in the Capital Market

Expansion

China

Malaysia

Singapore

United Kingdom

Taiwan

Philippines

USA

Customer Experience

Global brands as its key clients!

VSOperating the specific

functions internally Outsourcing

Global brands as its key clients!

IDS’ value proposition is “compelling”• Allowed the brand

owners to focus on their core competencies (e.g. marketing or product design)

Differentiator: China Advantage

• Invested significantly in operations in China• Built a national distribution network

• In 2004, IDS received a nationwide license• Expanded further

• Held first mover advantage!• Helped drive brand owners’ growth in China

Unique China Advantageover 100 years of China supply chain experience

acquisition of Inchcape assets and investments in various Asian countries

optimal supply chain serving this

region.

Challenges

Talent Management

Organizational Agility

Client Complexity

Competition• NO competitors in Asia that offered this type of complete

pan-Asia end-to-end array of services. • A pioneer of the ‘Value-Chain Logistics’ concept

• Only have competitors of varying sizes and capabilities in EACH of its menu service offerings

Growth and Aspiration

Organization Restructuring

Account-Focused Model for Revenue

Management

Redefining Value-Add The Three

Growth Drivers

Global Ambitions

I won’t call it a revolution; I think it’s been an aggressive

evolution.

Where is IDS heading?

IDS wants to be able to design comprehensive global supply chain solutions that are truly end-to-end: from the sourcing of the raw materials to the delivery of goods

to consumers anywhere in the world.

THANK YOU!

A Global Premium Beverage Alcohol Company

Each country’s market in Asia independently fed it’s respective demand forecast

Problems: high inventory build-up, slow response to market change, etc.

IDS asked to deliver a “regional hubbing solution”

Identify Optimal Geographic Location, Optimize tariff, Packaging Solutions

Location Selection

Customized Warehousing Solution

Value Added Services

Competitors