As Vice President of Discrete Industries, Asia-Pacific and Japan for SAP and based in Shanghai, I’ve seen a tremendous amount of change in the 25 years that I’ve been in the region. In addition to social and political change, the greatest changes that I’ve seen are in the area of manufacturing, business and investment. These changes have had a significant impact on the IT requirements of companies in the region, as well as software providers helping them to solve the challenges resulting from this change.
One of the most visible and well-known changes that have taken place during this time is the growth of manufacturing in Asia, first in Japan, then in the Asian “Tigers” (Singapore, Thailand, Malaysia, Indonesia, Philippines) and now—China. This manufacturing growth has been accompanied by changes in outbound investment patterns which have significantly changed the enterprise software requirements of companies in the region.
For example, in the 70’s and 80’s, Japan’s manufacturing industry grew primarily within the Japanese borders. Lower labor and other costs, high savings and significant infrastructure investments allowed Japan’s manufacturing industries to grow significantly. Most MRP and other enterprise software systems were custom-developed to serve the needs of purely Japanese operations. However, in the 90’s and continuing today, many of those cost advantages no longer apply, supply chain requirements have gone global along with Japanese automotive companies’ operations and more production capabilities are being located in other parts of the world, such as China and Southeast Asia. With these changes, Japanese auto manufacturers found that custom-made software suitable for their Japanese operations no longer suited their needs and now they are turning to SAP to provide packaged software that can be implemented in practically any country and used locally to help run their factories, manage their local, regional or global supply chains. With the serious supply chain disruptions caused by the 2011 earthquake and resulting tsunami, this outbound investment and the associated packaged software such as SAP’s ERP, SCM, CRM and analytics solutions continue to accelerate.
What is not as well known, and is a relatively new development, is that Chinese companies are now also expanding their operations globally. The Chinese Ministry of Commerce predicted in January that Chinese outbound investment will reach $560 billion annually by 2016, up from a record $60.1 billion in 2011. This goes beyond the traditional investment in mining and agriculture resources, or portfolio investments such as shares in companies or government-backed securities. Rising costs at home and the same globalization demands are also driving China’s automotive companies to expand their operations globally. Acquisition of famous car brands was the first wave, but now we are seeing more operational investments taking place. With these changes come the same requirements for globally integrated manufacturing, supply chain, CRM and analytics software provided by SAP.
I was recently in Bangkok meeting with a new joint venture between one of Thailand’s largest companies and one of China’s largest automotive manufacturers. The office was still being organized, PC’s were still in boxes and many desks still had plastic covers on them. But the activity was feverish and planning on white boards taking place in every room. The goal: Planning of a new automotive factory and brand to be produced in Thailand and exported regionally and eventually, globally. And SAP is central to their IT plans, from MES to ERP to SCM. SAP will continue to facilitate the operational and IT needs of our Asian automotive customers as they expand globally. We will be with them every profitable step of the way.