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How to Integrate SMEs into the Global Value Chain Networks: The Challenge of UNIDO SPX Centres

How to Integrate SMEs into the Global Value Chain Networks: The Challenge of UNIDO SPX Centres. Patrick J. Gilabert SPX Programme Manager UNIDO Headquarters, Vienna, Austria. UNIDO GLOBAL NETWORK. UNIDO Field Representation: UNIDO is represented in 36 countries

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How to Integrate SMEs into the Global Value Chain Networks: The Challenge of UNIDO SPX Centres

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  1. How to Integrate SMEs into the Global Value Chain Networks:The Challenge of UNIDO SPX Centres Patrick J. Gilabert SPX Programme Manager UNIDO Headquarters, Vienna, Austria

  2. UNIDO GLOBAL NETWORK • UNIDO Field Representation: UNIDO is represented in 36 countries • UNIDO field representation comprises • Regional Offices (11) in: Colombia; Egypt; Ethiopia; China; India; Lebanon; Mexico; Nigeria; South Africa; Thailand; and Uruguay, • Country Offices (19) in Algeria, Bolivia; Cameroon; Cote d'Ivoire; Ghana; Guinea; Indonesia; Iran; Kenya; Madagascar; Morocco; Pakistan; Philippines; Senegal; Sudan; Tanzania; Tunisia; Vietnam; and Zimbabwe, and • Focal Points (6) in: Mali, Burkina Faso, Mozambique; Sri Lanka; Togo; Uganda • UNIDO Liaison Offices in New York, Geneva and Brussels maintain on-the-spot contacts with Member States and the other United Nations organizations / European Commission based there

  3. UNIDO GLOBAL NETWORK • Other Field Offices • UNIDO has a number of offices worldwide: • 21 Investment and Technology Promotion Offices (ITPOs), four Investment Promotion Units (IPUs) • 30 National Cleaner Production Centres (NCPCs), established by UNIDO and UNEP • 10 International Technology Centres and • 44 Subcontractingand Partnership eXchanges(SPXs) at various stages of development, that work closely with the Investment and Technology Promotion Offices

  4. 44 SPXs in 32 countries Industrial Subcontractingand Partnership eXchanges(SPXs)

  5. Global Outsourcing Trends Setting up…. Extracted from Raj Blogshttp://rgarg.blogspot.com/2005/10/humor-outsource-to-india.html

  6. Global Outsourcing Trends

  7. Total Costs = Planned outsourcing Costs + Hidden Costs Issues and Risks Search and contract Restructuring Communication Process Changes Cultural Differences Loss of Productivity Travel Governance Total (including extras): 1 to 2% 3 to 5% 1 to 3% 0 to 10% 2 to 3% 3 to 27% 2 to 3% 1 to 2% 17 to 80% Costs: Data combines Meta group and CIO magazine estimates Table data: Levina, N. IT Outsourcing, IOMS, Stern School of Business, NYU, 2006

  8. Issues and Risks 2005: Premature termination of outsourcing relationship: 51%. 1 60% of organisations that outsource will encounter defects and hidden costs. 1 Potential Risks Yet…. Forecasted 20% annual growth of outsourcing through 2008. 1 • RTTS Services: Outsourcing Statistics, 2005 – http://www.rttsweb.com/services/outsourcing/stats.cfm

  9. UNIDO SPX Programme

  10. SPX subcontracting Warehouse Supplier Subcontractor Main contractor Distributor Client What is an Industrial Subcontractingand Partnership eXchanges(SPX) ? “An SPX is a centre for technical information, promotion and the matchingof capacities,processes and production or industrial service specialities, in the form of anautonomous structure whose basic purpose is to help bring together enquiries for andoffers of subcontracting work and outsourcing.”

  11. Institutional Set-up of SPX PRIVATE (CHAMBERS/ASSOC./FED) 50% MIXTE (PRIVATE & PUBLIC) 38% EXCLUSIVELY PUBLIC 12%

  12. 44 SPXs in 32 countries Industrial Subcontractingand Partnership eXchanges(SPXs)

  13. UNIDO Global Outsourcing Network • BOLIVIA: • - BSA-Fundacion, La Paz • - BOLSICRUZ-CCI, Santa Cruz • BRAZIL: • - BSI&N-SEBRAE, Sao Paolo • MEXICO: • - Red Mexicano de BSA, BEPIQ,Queretaro • - BSPI&DP-CAINTRA de NuevaLeon, Monterrey • (Mexican SPX Network also include: BSIM-CIMEG de Jalisco,Guadelajara, CEPED, Chihuahua, MOLTRO, Queretaro) • Etc… In America: 18 SPXs in 15 countries

  14. UNIDO Global Outsourcing Network In AMEA Countries: 17 SPXs in 13 countries • MAURITIUS: • - SUBEX-M, Port Louis • MAROCCO: • - BNSTP-M, Casablanca • SENEGAL: • - BNSTP-S, Dakar • TUNISIA: • BNSTP-T, Tunis • LEBANON: • - BSTP/SPX-L, Beirut • QATAR: • - SPX GOIC ALGERIA: - BASTP-Centre, Alger - BSTPE- Est, Constantine - BSTPO-Ouest, Oran - BSTPS-Sud, Ghardaia COTE d’IVOIRE: - BSTP-CI, Abidjan GHANA: - SPX-AGI, Accra MADAGASCAR: - BSTP-M, Antanarivo

  15. UNIDO Global Outsourcing Network In AMEA Countries: 17 SPXs in 13 countries FRANCE: - COSTEP, Auxerre - BSTE, Nancy SLOVAKIA: - SPX-SES, Bratislava TURKEY: - Turkish SPX, Istanbul

  16. UNIDO Global Outsourcing Network In Asia and Russian Fed.: 9 SPXs in 4 countries • CHINA: • SPX Chongqing, - SPX Beijing, • SPX Shanghai • INDIA: • - National SPX Network,New Delhi • - SPX-CII, New Delhi • - SPX-CII, Pune • - SPX-CII, Hyderabad • - SPX-KASSIA, Bengalore • (members of the Indian SPX network also include - SPX-SISI, Chennai, SPX-IAT, Ludhiana, SPX-ESC, New Delhi) • SRI LANKA: • SPX-SL, Colombo • RUSSIAN Fed.: • International Center forSubcontracting andPartnership,ICS, Moscow

  17. UNIDO Global Outsourcing Network SPX-Turkey Winner of the Best Small Business Project Award 2003 3rd World Chambers of Commerce Congress, Quebec, Canada Most innovative project undertaken by chambers of commerce around the world

  18. SPX sector distribution More than 10,000 suppliers audited and registeredfollowing UNIDO’s methodology

  19. http://www.unido.org/spx

  20. Supplier Subcontractor Main contractor The way forward 2007 - 2010 Building-up the Supply & Supply Chain Upgrading Programmes

  21. Building-up the Supply Strong demand for New SPXs Centres: • Russia (Vladivostok, Khabarovsk) • Kazakhstan • China (Harbin, Xi’an, Guangzhou) • France (Marseille) • Africa: Burkina Faso, Mali, Madagascar, Cameroon, Congo, • Nigeria, Uganda, South Africa, Mauritius • Iran, Colombia, Haiti Existing SPXs in Beijing, Chongqing (China) and Doha (Qatar) have also requested UNIDO’s technical assistance for a project phase II.

  22. Building-up the Supply • SPX Networks development 2007 • Algeria – Tunisia SPX Network, (Algiers, Oran, Constantine, Ghardia and Tunis) • Gulf Countries SPX Network (6 GCC countries) • India SPX Network • All China SPX Network • West Africa SPX Network • Latin America SPX Network • “UNIDO SPX World-Wide Network”

  23. UNIDO SPX NETWORK IN CHINA Six SPX centres strategically located on dynamic regions in the country 1. SPX Chongqing, at Chongqing Technology Exhibition Centre 2. SPX Beijing, at Beijing Productivity Centre 3. SPX Shanghai, at Shanghai Industrial Inv. Corp. (SIIC) 4. SPX Harbin, at China Harbin Fair for Trade and Economic Cooperation 5. SPX Guangzhou, counterpart to be selected by the Economic and Trade Commission of Guangzhou Municipality 2 6. SPX Xi´an, at the Xi´an Productivity Center 3 5 1 4 6 List of UNIDO SPXs, as of 25 January 2006 List of UNIDO SPXs, as of 25 January 2006

  24. Building-up the Supply UNIDO Global Outsourcing Network • 1) similar nodes = UNIDO SPXs • 2) same software = new OUTSOURCING 2007 • 3) same language = Industrial Nomenclature • 4) communication = UNIDO 2007 SPX WEB PORTAL • 5) information flow = Inquiries + Opportunities • 6) synergies = ITPOs, NCPCs, privileged partners

  25. SPXs Centers are part of the UNIDO “Supply Chain Upgrading Programme” UNIDO´s Corporate Strategy, Services and priorities for the medium term 2004 – 2007, February 2004

  26. Supply Chain Partnerships Organizing, jointly with SPXs, which act as facilitators or brokers, “Supply Development and Upgrading Programmes” to provide assistance to clusters of small-scale suppliers and subcontractors, in order to upgrade their technical and commercial skills and their capability to meet quality requirements of the international buyers and main contractors. UNIDO´s Corporate Strategy, Services and priorities for the medium term 2004 – 2007, February 2004

  27. Introduction to Supply Chain Management

  28. Supplier Factory Warehouse Distributor Client Supply Chain • A Supply Chain is a network of suppliers, factories, storage facilities, distributors, transporters and clients that participate in the sale, delivery and production of a specific product.

  29. Supplier Factory Warehouse Distributor Client Supply Chain Management • Supply Chain Management (SCM) is the practice of coordinating the flow of goods, funds and information as they move along the supply chain. Material flow Financial flow Information flow Source: INSEAD Supply Chain Management Programme 2004

  30. Example of a Supply Chain: Dell Computer Monitors by SONY (Mexico) Dell Assembly Plant Keyboards by Acer (Taiwan) Customers order computers on-line CPU by Intel (USA) Other components Client Factory Supplier Source: INSEAD Supply Chain Management Programme 2004

  31. Bad Supply Chain Management costs a lot! Boeing aircraft, one of America's leading capital goods producers, was forced to announce write downs of $2.6 billion in October 1997, due to “Raw material shortages, internal and supplier parts shortages…”. Source: Levina, N. IT Outsourcing, IOMS, Stern School of Business, NYU, 2006

  32. Bad Supply Chain Management costs a lot! • Sony PlayStation 2 could ship only half the consoles Palm, Inc. This has generated a revenue loss of 10-40% • Compaq had 600,000-700,000 unfilled orders • Arrow Electronics $3Bn of inventory (6 MOS) and Solectron $4.7Bn of inventory Source: Levina, N. IT Outsourcing, IOMS, Stern School of Business, NYU, 2006

  33. Supply Chain: The Potential • It is estimated that the grocery industry could save $30 billion (10% of operating cost) by using effective logistics strategies • A typical box of cereal spends more than three months getting from factory to supermarket Source: Levina, N. IT Outsourcing, IOMS, Stern School of Business, NYU, 2006

  34. Supply Chain: The Potential Supply Chain and Financial performance SCM improvements Value levers Value drivers • Effective supply chain management practices can improve the financial performance of a company. Increase revenue Reduce out-of-stock situations Profit increase Increase labor productivity Reduce costs Decrease distribution costs Value creation Reduce working capital Reduce inventory Invested capital reduction Increase utilization of fixed assets Reduce fixed capital Examples of SCM practices that can impact financial performance

  35. Partnership Supplier assessment programs Supplier development programs Long-term contracts No inspection Certification Quality On-time delivery Technology transfers Trading agreements Traditional Price emphasis Multiple sources Inspections Many transactions Time The evolution of the customer-supplier relationship Supply Chain: The Potential • To improve sourcing efficiency, UNIDO SPX develop partnerships with local suppliers to develop a strong supplier base

  36. Supply Chain: The Potential UNIDO Supply Chain Upgrading Programmes Objectives to be achieved by local suppliers • Cost control • Pricing policy • Technological improvements • Use of main contractors’ production facilities by subcontractors (instruments, moulds, prototypes, patterns, quality control equipment) • Total quality (zero defects) management • Client certification procedure • Organization of work within the enterprise • Logistics (just-in-time practices) • Environment • Supply Chain Management and Design

  37. CONTACT Patrick J. Gilabert SPX Programme Manager U N I D O E-mail: spx@unido.org Tel: 43 - 1 - 26026 6414 Fax: 43 1 - 26026 6806

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