MLM Consultant: International
A New Asia
The explosive growth of the Direct Selling industry in Asia has attributed to the outstanding success of many Direct Selling companies. While that growth has slowed somewhat in some mature markets, there are still many Asian countries that have yet gone largely untapped.
Robert Johnson, Chief Global Markets Officer for Unicity International , says "In the maturing Asian Markets, consumers have never been as educated, option literate, savvy, and demanding as they are now." As a market matures, supply chain and logistics issues move more to the front of executive thinking as companies seek to create more cash to expand into new markets. Mr. Johnson adds, "One key to maintaining a competitive economic advantage by any company in these markets will be the extent to which they are able achieve increasing effectiveness and efficiency by applying emerging best practices in the management of its order fulfillment process."
Singapore has long been the easy choice for Direct Selling companies who wish to expand their business opportunities into Southeast Asia. With arguably the most business friendly government in the world, English spoken fluently throughout the country, highly educated population, and tremendous financial stability, one can understand why some of the largest multi-national companies across the globe have made Singapore a key partner in their business operations.
Using Singapore as a satellite manufacturing center for Asia can allow you to get your products into many countries without the prohibitive tariffs that can limit your world growth.
For many companies in the Direct Selling industry, Singapore tends to be used more as a jumping off point for the more populous countries such as Malaysia, Indonesia, Thailand, and the Philippines. With a population 2% the size of Indonesia, Singapore may not have the typical exponential growth curve in sales and recruiting that you might have in other Asian markets. The operational and logistical impact, however, that Singapore can play in your company strategy for Asia can be absolutely stunning.
Will Halterman, President of Global Trade Services , says, "Singapore is perfectly positioned from a geographic, infrastructure and technology standpoint to provide logistics services to the Asian region. In fact, the city-state provides the perfect platform for market expansion throughout Asia and the Indian subcontinent as well as servicing already established markets."
Free Trade Agreements
Singapore has many free trade agreements with countries throughout the world and throughout Asia. In the Direct Selling world, some of these countries are mainstays in the industry. Countries like Japan, Australia, New Zealand, Indonesia, Korea, Malaysia, Thailand, and the Philippines are well-established countries for many Direct Selling companies.
How could a free trade agreement between Singapore and a country like Japan work to the benefit of your company and your products? In Japan, for example, tariffs for dietary supplement and food/juice products range between 15% and 25% customs duties. If you were to add significant value to the manufacturing process of your product by manufacturing it in Singapore either with your own equipment or that of a third party manufacturer, your duties are zero. The rules of origin vary from country to country, but Japan requires that there must be enough of a change to the product to warrant a change in the harmonized tariff code. While you probably couldn't just package your products in Singapore and still meet the necessary requirements for zero tariffs in Japan, the rules are flexible enough to warrant your company looking into this type of strategic action.
You can see how using Singapore as a satellite manufacturing center for Asia can allow you to get your products into many countries without the prohibitive tariffs that can limit your world growth.
As your company experiences growth, the amount of cash expended in building up your inventories in each country becomes enormous. For the Direct Selling industry, this is perhaps more true than almost any other industry that you can think of. The reason is that a backordered product directly affects your sales associate out in the field. It is quite disheartening to go through the difficult evangelical process with a potential recruit, selling them on the company and the product, only to have a backorder situation kill the momentum and excitement generated by the sales associate.
All Direct Selling companies either know this intuitively or learn the hard way very quickly. The consequence of the damage caused by backorders causes companies to keep a rather large inventory of each item so that they don't run out. This is complicated when you are working in many different countries with huge inventories in each country. The cyclical nature of this industry means that it will never be able to go to a "Just-In-Time" philosophy with product delivery. In fact, there are many marketing guys out there who shudder at the thought that their operations people are getting "too efficient" to handle any spikes in demand and volume.
By using Singapore as a regional distribution center (RDC), your company has the potential to handle the spikes in volume to any Asian country by taking advantage of a flexible labeling technique called "bright labeling". The way the process works is that you could keep a product such as glucosamine chondroitin, or possibly a health drink that would use the same exact formula in several different countries. The bottles of the product are filled, sealed, and capped as usual, but there is no formal product label affixed during packaging, the only identifying mark is an ink jet code printed somewhere on the bottle. When a market has a need for the product, a quick labeling production run with your bottles can be made very quickly with the appropriate labels for that country at the time of demand.
Let's say that you use the same formula for Japan, Taiwan, and Malaysia. Instead of keeping the industry average of four to six months of inventory in each market, you could keep 1 to 2 months of that product in each market because you can get re-supplied by your Singapore RDC quite quickly. The process is so fast and the delivery times by sea are so short from Singapore, that you can get your product delivered on a regular basis very cost effectively. If you had an unusual spike in Taiwan that caused an inventory shortage in that country, you could get your product labeled and air freighted to Taiwan within 24 hours!
Charlie Kok, Vice President - South East Asia, Bax Global concludes, "We believe that bright labeling gives network marketing companies a tremendous advantage in managing their demands world wide. You can trust Singapore's highly efficient and productive workforce, excellent infrastructure and strategic location to get your products and supplies ready for each market on time, every time. In today's highly competitive environment, good supply chain management practices such as achieving high inventory turns and optimum velocity would be the key to continual success."
Taking Advantage of Ocean Freight
The more products that you are able to move by sea versus air, the cheaper your freight costs are going to be. You will typically spend 20 cents for sea freight for every air dollar. Of course, you are trading time for money. To ship your products from the United States to re-supply your markets in Asia via Ocean, the freight can take anywhere from 15 to 30 days of transit time. The lack of proper planning, a glitch in manufacturing operations, or any other delay in your supply chain can force your company to use air freight extensively and expensively.
If you are able to use Singapore as a regional distribution center, your freight time via ocean shrinks dramatically due to the fact that Singapore is the busiest seaport in the world with no Asian country being more than 10 days away by sea. This can give your company a tremendous advantage in inventory control, and more importantly, free up that cash to be used for what you do best…SELLING!
Mr. Halterman adds "Without a doubt, regional distribution is the way of the future for the network marketing industry in Asia, Europe and other areas of the world. The potential cost savings, faster turnaround times and decreased localized inventory requirements make these centers invaluable."
Meeting Your Needs
The Direct Selling industry has really matured in most markets throughout Asia. Now that your company understands how to sell in these countries, it is time for your logistics operations to align themselves properly with your international needs and capabilities. There is no country in the world that is more innovative in their approach to meeting the operational and logistics needs of the Direct Selling industry than Singapore.
|Jeffrey A. Babener
Babener & Associates
121 SW Morrison, Suite 1020
Portland, OR 97204
|Jeffrey A. Babener, the principal attorney in the
Portland, Oregon law firm of Babener & Associates, represents many of the leading
direct selling companies in the United States and abroad.
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