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 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

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 Subcontracting and Partnership eXchanges (SPXs) at various stages of development, that work closely with the Investment and Technology Promotion Offices UNIDO GLOBAL NETWORK

44 SPXs in 32 countries Industrial S ubcontracting and P artnership e X changes (SPXs)

Extracted from Raj Blogs Setting up …. Global Outsourcing Trends

Global Outsourcing Trends

Issues and Risks Costs: Table data: Levina, N. IT Outsourcing, IOMS, Stern School of Business, NYU, 2006 Total Costs = Planned outsourcing Costs + Hidden Costs 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% Data combines Meta group and CIO magazine estimates

Potential Risks 1.RTTS Services: Outsourcing Statistics, 2005 – : Premature termination of outsourcing relationship: 51%. 1 60% of organisations that outsource will encounter defects and hidden costs. 1 Yet…. Forecasted 20% annual growth of outsourcing through Issues and Risks

UNIDO SPX Programme

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

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

44 SPXs in 32 countries Industrial S ubcontracting and P artnership e X changes (SPXs)

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 Nueva Leon, Monterrey (Mexican SPX Network also include: BSIM- CIMEG de Jalisco, Guadelajara, CEPED, Chihuahua, MOLTRO, Queretaro) -Etc… In America: 18 SPXs in 15 countries UNIDO Global Outsourcing Network

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 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 UNIDO Global Outsourcing Network

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

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 In Asia and Russian Fed.: 9 SPXs in 4 countries RUSSIAN Fed.: -International Center for Subcontracting and Partnership, ICS, Moscow CHINA: -SPX Chongqing, - SPX Beijing, -SPX Shanghai UNIDO Global Outsourcing Network

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

More than 10,000 suppliers audited and registered following UNIDO’s methodology SPX sector distribution

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

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 Building-up the Supply Existing SPXs in Beijing, Chongqing (China) and Doha (Qatar) have also requested UNIDO’s technical assistance for a project phase II.

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” Building-up the Supply

List of UNIDO SPXs, as of 25 January UNIDO SPX NETWORK IN CHINA Six SPX centres strategically located on dynamic regions in the country 3. SPX Shanghai, at Shanghai Industrial Inv. Corp. (SIIC) 2. SPX Beijing, at Beijing Productivity Centre 1. SPX Chongqing, at Chongqing Technology Exhibition Centre 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 6. SPX Xi´an, at the Xi´an Productivity Center 6

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

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

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

Introduction to Supply Chain Management

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. Warehouse Client Distributor Factory Supplier

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 Warehouse Client Distributor Factory Supplier Source: INSEAD Supply Chain Management Programme 2004

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

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 …”. Bad Supply Chain Management costs a lot! Source: Levina, N. IT Outsourcing, IOMS, Stern School of Business, NYU, 2006

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

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 Supply Chain: The Potential Source: Levina, N. IT Outsourcing, IOMS, Stern School of Business, NYU, 2006

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

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

UNIDO Supply Chain Upgrading Programmes Objectives to be achieved by local suppliers 1.Cost control 2.Pricing policy 3.Technological improvements 4.Use of main contractors’ production facilities by subcontractors (instruments, moulds, prototypes, patterns, quality control equipment) 5.Total quality (zero defects) management 6.Client certification procedure 7.Organization of work within the enterprise 8.Logistics (just-in-time practices) 9.Environment 10.Supply Chain Management and Design Supply Chain: The Potential

Patrick J. Gilabert SPX Programme Manager U N I D O Tel: Fax: CONTACT