1. How to organize production in Russia – Opportunities and restraints
Business Park Vyborg
How to organize production in Russia –
Opportunities and restraints
Timo Koivumäki
Gothenburg

2. Company
Finnish mother company Business Park Vyborg Ltd, Russian daughter ZAO Business Park Vyborg
Assists foreign manufacturing companies to establish in North West Russia
A service concept covering full range from planning and budgeting through ramp up to full production
Based on 18 years experience about production in Russia
Alliance with Integria SCM

3. Russian Vehicle Industry Market development
Light vehicles
Creation of new production capacity, changes in the industrial assembly regime
Development strategy and trade policy promoting domestic production
Recovery of the Russian economy and, to lesser extent the US and EU development
Heavy vehicles
General economic recovery and improved financial situation in Russia releasing credit resources
Need to upgrade the commercial vehicles fleet and bus fleet
Expansion of the lending and leasing markets

4. Russian Vehicle Industry Requirements and local response
Logistics requirements
The severe shortage of capable component manufacturers
Excessive lead times and unusual safety stocks in production
Distant and inflexible inbound supply chain inhibits adaptive production planning
Regulation on domestic origin
The regulation of domestic origin favors local production or refining
The supply of Russian vehicle is heavily directed by Industrial Assembly Regime
This act requires a % level of domestic supply in 5-6 years.
Capability of local supply
Very few Russian vehicle component manufacturers meet the industry’s requirements
This is verified by several supplier analyses performed by foreign OEM’s operating in Russia

5. Match of demand and supply

6. Match of demand and supply
Huge market (7 Billion Eur)
Limited/no competition
Profitability better than in EU (if cost control ok)
Political support in Russia
OEM’s forced to do something

7. Opportunities Huge market (7 Billion Eur) Limited/no competition
Profitability better than in EU (if cost control ok)
Political support in Russia
OEM’s forced to do something

8. Where to go OEM’s and Tier 1’s scattered OEM driven supplier parks
3 or 4 clusters
OEM driven supplier parks
Nissan, Hyundai, GAZ, Sollers, Kamaz
J/v’s / partnerships with OEM’s,
Kamaz
Sequencing requirement?
Talk to customer

9. Issues to consider Problems appear back home, rather than in Russia
Russian operations define time frame and usage, Responsible people are away from domestic operation
Russians do not intend to become ”Finns” or ”Swedes”
Must to find Russian partners/employees whom is posible to trust to

10. Issues in setting up operation
Time from decision to start up
Permits, inspections and authority clearances
Recruiting/Staffing
Middle management
Choosing location
Asian mentality

11. Cost drivers High property prices / rental fees Local banking terms
Taxation value / market price
Local banking terms
High interest, short payback times
Relatively low salary level
Huge variation between regions
Accounting and taxation bureaucracy
4 times more staff than in Nordics

12. Hints Structures are not an issue
Premises are an issue, but not a problem
Focus on people, knowledge and culture
Emphasis on middle management training
Make sure you know the law and order
Ensure all documentation to be properly in place
Customers know local business, ask for start up support
Networking helps problem solving
Alliances for cost saving

13. Twin hub model Sourcing Distribution Capital Information Material
BORDER CROSSING
Capital
Information
Sourcing
Distribution
Material
Admin practices
Kouvola / Imatra Logistics Hubs
Vyborg business park

14. Service structure
Business Park Vyborg provides production support services
Premises are provided by property developer, but a sublease arrangement via Business park Vyborg is possible depending on agreement model

15. Services Planning phase services Start up phase services
Running phase local services
Running phase trans-border services
Exit phase services

16. Examples of available services
Planning phase services
Market studies trial sales
Operations planning & budgeting
Start up planning and budgeting
Start up phase services
Site reconstruction
Recruitment
Personnel background surveys
Data systems development
Permissions acquisition
Equipment import and installation

17. Examples of available services
Running phase trans-border services
Warehousing (Finland)
Customs clearance services
Transport services
Exit phase services revenues and cost
Premises vacation and equipment relocation
Employment termination and personnel relocation
Permissions and responsibilities transfers
Logistics and customs clearance transfer

18. Examples of available services
Running phase local services
Authority clearance
Staffing
Local maintenance
Small purchases
Personnel transport
Canteen
Back office
Security services
Forwarding and transport services
Company health care
Waste removal

19. Business Park Vyborg

20. Production premises standard sample

21. Timo Koivumäki Managing Director Vanha Talvitie 11 C, 6th fl.
FI HELSINKI
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