Find­ing new bear­ings for devel­op­ment

Shang­hai unit to play key role in the sus­tain­able growth plans of Swedish firm

China Daily (Canada) - - BUSINESS - By HE WEI in Shang­hai hewei@chi­nadaily.com.cn

While ar­chi­tects of the China (Shang­hai) Pilot Free Trade Zone aim to cat­a­pult the city to the fore­front of global fi­nan­cial, trade and lo­gis­tics cen­ters, they may never have ex­pected to wel­come a l i k e - minded en­ter­prise so soon.

On June 10, just months af­ter the pilot zone took off, SKF Group, the world’s largest ball bear­ing maker, launched its North East Asia Dis­tri­bu­tion Cen­ter in the Waigao­qiao bonded zone, an in­te­gral part of the FTZ.

The en­deavor brought SKF’s global chief ex­ec­u­tive of­fi­cer Tom John­stone to Shang­hai to at­tend the in­au­gu­ra­tion.

“The move in­di­cates the at­trac­tion of China mar­ket in terms of its strate­gic sig­nif­i­cance, as well as SKF’s con­tin­ued com­mit­ment to China,” said John­stone, who has spent 37 years with the Swedish firm and been at the helm of the com­pany for more than a decade.

Be­fore the es­tab­lish­ment of the cen­ter, trade trans­ac­tions by SKF in China were gen­er­ally con­ducted in for­eign cur­rency by its Hong Kong sub­sidiary and lo­gis­tics was largely han­dled by its Sin­ga­pore unit.

Amid the global eco­nomic cri­sis in 2009, given SKF’s devel­op­ment prospects in China, the com­pany con­ducted a string of sur­veys be­fore it de­cided to in­te­grate and move such func­tions to the new Shang­hai fa­cil­ity.

John­stone said Asian busi­ness has ex­panded greatly and ac­counted for 24 per­cent of SKF’s over­all sales in 2013. The quick devel­op­ment of mar­kets in north­east Asia area made it es­sen­tial to split the lo­gis­tics ser­vice in the Asia re­gion into south­ern and north­ern parts to bet­ter serve cus­tomers. Both ar­eas were pre­vi­ously served by SKF Sin­ga­pore.

SKF North East Asia Dis­tri­bu­tion Cen­ter in Shang­hai, set up at the start of 2013. It in­te­grates lo­gis­tic, trade and set­tle­ment func­tions and cov­ers 47,275 square me­ters.

“Through the cen­ter, we aim to in­crease flex­i­bil­ity on stock­ing plans, re­duce com­plex­ity of in­ven­tory struc­ture aris­ing from multi-cur­rency trans­ac­tions, and pro­vide sup­port for our global re­source al­lo­ca­tion and cost re­duc­tion,” John­stone said.

As in many busi­ness nar­ra­tives, SKF’s early pres­ence in China fol­lowed the route of ap­point­ing an agent, set­ting up a sales com­pany and, af­ter decades of in­ac­tiv­ity, re­sum­ing busi­ness and in­tro­duc­ing man­u­fac­tur­ing fa­cil­i­ties fol­low­ing the launch of the re­form and open­ing-up pol­icy.

SKF makes prod­ucts for around 40 in­dus­tries, in­clud­ing au­to­mo­biles, aero­space, wind en­ergy, con­struc­tion and in­dus­trial trans­mis­sion. Its bear­ings are widely used in prod­ucts rang­ing from house­hold ap­pli­ances to air­craft and he­li­copters.

SKF has also evolved from be­ing a bear­ing maker to a bear­ing sup­plier. It is also present in sec­tors like lu­bri­ca­tion, seals, mecha­tron­ics and ser­vices with its ac­tive merg­ers and ac­qui­si­tions.

The com­pany op­er­ates 18 man­u­fac­tur­ing units and sev­eral ser­vice units in China. Pri­mar­ily a busi­ness-to-busi­ness com­pany, it de­liv­ers prod­ucts, so­lu­tions and ser­vices to orig­i­nal equip­ment man­u­fac­tur­ers and end-users.

“One of the pri­or­i­ties of Shang­hai Free Trade Zone is to fos­ter and de­velop Asia-Pa­cific op­er­a­tion cen­ters and op­er­a­tional head­quar­ters in­te­grat­ing lo­gis­tic and set­tle­ment func­tions, which highly cor­re­sponds to the devel­op­ment goal of SKF North East Asia Dis­tri­bu­tion Cen­ter,” said Dai Haibo, ex­ec­u­tive deputy direc­tor of Shang­hai Free Trade Zone Man­age­ment Com­mit­tee.

Ac­cord­ing to John­stone, the fa­cil­ity has al­ready car­ried out some in­no­va­tive trade and set­tle­ment mea­sures with the sup­port from Shang­hai Free Trade Zone, in­clud­ing clas­si­fied su­per­vi­sion by sta­tus of goods, strength­ened func­tion of de­liv­er­ing goods in batches, mak­ing cen­tral­ized cus­toms dec­la­ra­tion, and open­ing in­ter­na­tional set­tle­ment ac­counts.

These greatly fa­cil­i­tated trade and con­trib­uted to the ef­fi­cient and quick flow of funds.

“In a sense, the fu­ture devel­op­ment of SKF North East Asia Dis­tri­bu­tion Cen­ter will be the epit­ome of China’s ef­fort to strengthen its con­struc­tion as a re­source al­lo­ca­tion hub in the global trade sys­tem,” he said.

China ac­counts for more than 12 per­cent of SKF’s global sales of 63.6 bil­lion Swedish krona ($9.3 bil­lion) in 2013.

While partly off­set by the tem­po­rary cool­ing in the world’s sec­ond-largest econ­omy, growth still out­paced that of most other re­gions, John­stone said.

Though eco­nomic un­cer­tainty has seen some multi­na­tional com­pa­nies wind­ing down op­er­a­tions, SKF has never been hes­i­tant about adding in­vest­ment here.

John­stone fore­sees the au­to­mo­bile, rail­way and re­new­able en­ergy sec­tors en­joy­ing growth.

To sus­tain its growth, SKF has put more re­sources into re­search and devel­op­ment and the coun­try’s au­to­mo­tive mar­ket by es­tab­lish­ing a new SKF cam­pus in Shang­hai’s sub­ur­ban Jiad­ing district to sup­port growth in China and across Asia.

The 700

mil­lion

kro­n­ain­vest­ment in­cludes the set­ting up of a new au­to­mo­tive fac­tory that pro­duces hub-bear­ing units for pas­sen­ger cars and also the re­lo­ca­tion and ex­pan­sion of the Global Tech­ni­cal Cen­ter China, SKF So­lu­tion Fac­tory and SKF Col­lege.

The ra­tio­nale of John­stone is that the cam­pus ef­fec­tively in­te­grates var­i­ous SKF re­sources in prod­uct devel­op­ment, engi­neer­ing, man­u­fac­tur­ing, test­ing and train­ing, which at­tract cus­tomers with more high value-added prod­ucts and ser­vices.

Be­ing in China on-and-off for 20 years, John­stone ad­mit­ted to not see­ing enough China from a non­busi­ness per­spec­tive.

The merg­ing cul­tures of SKF and China make John­stone op­ti­mistic about the fu­ture.

“It is im­pres­sive to see the speed of the devel­op­ment of the past two decades in China,” he said.

“As a knowl­edge-based engi­neer­ing com­pany, we will con­tinue to in­no­vate, and at the same time, cre­ate more value via in­no­va­tion of com­mer­cial op­er­at­ing mode and uti­liz­ing SKF’s knowl­edge,” said the CEO.

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