Supply Chain Management

Managing Supply Chain Risks, Maintaining Resilience And Delivering Sustainable Growth

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DigitalCFO Newsroom | 6 September 2022

DIGITIMES will be hosting the “Supply Chain Summit” on 27-28th September 2022 at Taipei.

Taiwan’s role in the global supply chain has changed dramatically due to the importance of the semiconductor industry in technological development and its critical position at the core. In view of increasingly complex geopolitical situations, how we could maintain our operational resilience and help to deepen regional economic cooperation are topics of ever greater interest. Intensifying competition between China and the US, resulting in the rise of Asia’s global status, climate change, carbon footprint, etc. are also driving changes in industry structures and corporates’ business models.

DIGITIMES will be hosting the “Supply Chain Summit” on 27-28th September 2022 at Taipei, Taiwan (Hybrid Event). Over 50 leading companies/brands will be present, along with Taiwanese and international experts, to share their perspectives on how to manage global supply chain risks, maintain resilience, and deliver sustainable growth.

The event will lead experts to discuss the hottest topics, focusing on regionalization, digitalization, and ESG-issues in the electric vehicles, semiconductors, and smart manufacturing industries. Renowned speakers include the Harvard Business School‘s Professor Willy C. Shih (impact of supply chain decarbonization on logistics and global trade), the Wall Street Journal‘s chief economics commentator Greg Ip (“supply chain policymakers’ response to inflation and economic disruption”), and the Hinrich Foundation‘s research fellow Alex Capri (“impact of geopolitics on supply chain risk management”).

In addition, Tata Motors will lead KPMG, AWS, Schneider Electric, Chunghwa Telecom, Winbond Electronics Corp., and Advantech Co., to offer their views on supply chain management. We aspire to drive forward our industry’s overall development through knowledge and experience sharing.

We cordially invite you to invite you being part of the “DIGITIMES – Supply Chain Summit” which is a unique opportunity to understand the latest thinking, strategy, plans, and technologies in our industry. Beyond physical on-site participation, conference attendance will also be available online, with bilingual translation provided. Please sign up on our event site as soon as possible, limited places are available.

Accelerating Digitalization of Port Commodity Trade Helps Realize Interconnection Between Industrial Chain & Supply Chain

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DigitalCFO Newsroom | 19 August 2022

Experts believed that the high-standard interconnection infrastructure for the industrial chain and supply chain could be provided by accurately depicting the changes in port commodity trade.

At the 2022 Qingdao Land-Sea Linkage Seminar held on August 15, 2022, the International Shipping Hub Development Index — RCEP Regional Report (2022), the Xinhua-SPG Port Commodity Index Report (2022), and the RCEP Seaborne Trade Index Report 2022 were released. Experts believed that the high-standard interconnection infrastructure for the industrial chain and supply chain could be provided by accurately depicting the changes in port commodity trade as well as achieving the efficient linkage among port shipping, commodities, and trade.

The International Shipping Hub Development Index (ISHDI) — RCEP Regional Report (2022) compiled by China Economic Information Service was another world-class port and shipping evaluation index launched globally, with a focus on the competitiveness elements of shipping hubs based on the Xinhua — Baltic International Shipping Center Development Index. It aims to facilitate smooth cooperation and coordinated development of hub ports.

ISHDI incorporates 17 secondary indicators dividing into 5 primary dimensions, which are infrastructure capability, operation service, network connectivity, smart & green level of ports and economic vitality of the hinterland. To study the development of the ports & hubs in the RCEP region, ISHDI project team chose 29 major shipping hubs in the members of the RCEP by scale and representativeness. As per calculation, 29 sample ports are divided into four classes, Class A-D. As the leading force, Shanghai Port and Singapore Port are Class A shipping hubs playing crucial role in the world shipping industry, Shanghai and Singapore are also the world leading shipping centers. Ningbo-Zhoushan Port, Qingdao Port, Shenzhen Port, and Busan Port were rated as Class B. These ports not only have significant advantages in infrastructure capability, network connectivity, but also have their own characteristics such as good service, leading innovation, etc.

Xinhua-SPG Port Commodity Index was jointly developed and compiled by Shandong Port Group and China Economic Information Service. It was first released in Qingdao in October 2021. And the index system included the Crude Oil Price Index, Iron Ore Inventory and Entry & Exit Index, Coke Inventory and Entry & Exit Index, Steel Billet Price Index, and Hot Rolled Coils Price Index. The Iron Ore Price Index and Coke Price Index were newly released this time, forming a comprehensive monitoring system covering the iron ore and coke commodity prices, inventories, and entry & exit states in ports of Shandong Port Group. According to the planning, the categories involved in the later index system will be further enriched, and the coverage will also be extended to other ports along the coast, gathering more information on advantageous cargo types of the ports.

The RCEP Seaborne Trade Index Report 2022 took the 14 member countries except for Laos of the RCEP as the research objects and selected six major categories of cargo, including container cargo, iron ore, coal, petroleum products, LNG, and automobiles, which accounted for about two-thirds of the RCEP seaborne trade volume, as the analysis objects to reflect the annual development trend of the RCEP seaborne trade from the two dimensions — overall trade volume and seaborne trade volume. The RCEP Seaborne Trade Index was 101.1 in 2021, which had exceeded the highest level before the COVID-19 pandemic (2019). The report also pointed out that it would have a positive effect on the seaborne trade of goods in the region in the future, driving the RCEP Seaborne Trade Index to further go up, with the liberalization and facilitation of RCEP trade in goods as well as the continuous deepening of the rules for accumulation in the region of origin.

Sea transportation has been the main mode of transportation for global trade, and the ports are its hubs and bridges. Huang Youfang, Council Chairman of the 8th China Institute of Navigation and Vice Chairman of China Federation of Logistics & Purchasing, believed that as the digital information link, the release of the three upgraded indexes would enhance the status of ports as international shipping hubs, guide the hub ports to achieve smooth cooperation, and help global ports and shipping optimize resource allocation and achieve sustainable development.

Strategies To Cope With Rising Inflation

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Fatihah Ramzi, DigitalCFO Asia | 2 August 2022

With inflation probably here to stay, companies will need to take certain measures to ensure their business operations remain successful.

It is becoming more and more obvious that this inflationary period is not short-lived as consumer prices and global energy costs rise. Supply-chain-driven price rises will continue for the majority of this year, at least, according to economists and industry leaders, with stickier increases related to labor perhaps becoming permanent. Nevertheless, companies can take steps to improve their financial situation. For executives aiming to not only endure this inflation rise but also position themselves for success in the new normal of expenses, here are 4 strategies they can take.

Revise FP&A Process And Cash Flow Projections With An Emphasis On Agility

Because inflation is frequently unpredictable, businesses must be equally nimble. Businesses should utilize their financial forecast to execute “what-if” scenarios to examine the potential effects of inflation in order to respond swiftly and appropriately to changing situations, such as:

  • For critical positions, salaries rise by 15%.
  • Some raw resources have price increases of double.
  • Inventory builds up and revenue delays due to supply chain interruptions are 25% or larger

Companies should respond to the following strategic questions in order to gain the benefits of anticipating each what-if situation:

  • How will each scenario affect cash flow?
  • What evasive actions are possible in each situation?
  • Can dangers be reduced by taking precautions?
  • What signs should be kept an eye on to anticipate these events?

Businesses can proactively work toward desired goals and recognize the current trends that have an impact on their industry by planning for a variety of potential impacts. Not all businesses are affected equally by disruptive forces. For instance, during the epidemic, sales rose in several industries. It’s also appropriate to review longer-term scenario planning exercises, particularly if the most recent revision occurred at the height of the pandemic.

Diversify Supply Chains As Much As Possible

A supply chain cannot be made inflation-proof in the current environment, but mitigation measures are nevertheless prudent. Worldwide supply chain disruptions brought on by the epidemic are a major problem. Therefore, dealing with such a large shock, accompanied by global inflation and unpredictability, is not a simple task. A lean and cost-effective supply chain is still more susceptible to economic shocks, as many businesses discovered the hard way. Sustainability frequently prevails over trade-offs in the long run.

Investments in the sustainability and resilience of the supply chain can take many different shapes. Businesses can maintain output by diversifying their suppliers, using domestic alternatives, and having more essential goods on hand. Some actions, such as storing hypersensitive to inflation goods, will assist mitigate the effects of price increases. Other decisions are more focused on being able to deliver what clients want, when they want it, even if it means paying more.

Just like inflation, switching to domestic vendors or distributing orders among several sellers instead of going with the lowest cost option may result in margin erosion, thus experts advise also experimenting with price increases. To better prepare for supply-induced inflation and strike the correct balance, consider supply chain stress testing and look back on strengthening steps that may have been considered a year ago.

Use Inventory As A Physical Hedge

In order to combat the rising costs and longer lead times involved with sourcing and stocking goods, several businesses have claimed strategic stockpiling as their go-to approach. It is a wise use of money to gather materials that are crucial to the sales or movement of significant products given the lack of respite for inflationary pressure. Companies should prepare to leverage their working capital for inventory expenditures because it is anticipated that product prices will rise. Track indicators like average days in inventory and inventory turnover ratio, which indicate how long it takes for a company to sell an item once it has been purchased, to determine how effective strategic hoarding is.

Having enough inventory on hand to fulfill client orders can enable businesses to be smart with pricing, which can also reduce expenses and provide them a competitive edge. To ensure availability and capture supplier costs concurrently with or in advance of client orders, businesses have frequently been forced to make large working capital investments in their raw material inventories. This stage does come with a warning, though: Finding warehouse space now comes with a lot more trouble and expense. Companies who want to accumulate goods will need to have the necessary capacity or extra space in their brick-and-mortar retail locations; otherwise, storage will be challenging and expensive.

Reduce Labor Costs With Automation

It is a good time to consider strategies to lower labor costs because businesses are currently being impacted by skill shortages as well as increasing salary and benefit prices. Streamlining the company’s product line may reduce demand, but management must also carefully consider the labor expenses connected with the products that remain given the pressure on wages to rise.

Perhaps now is the right time to start that automation project that has been talked about but put on hold in previous years. Investing in automation and technology is a common strategy for reducing inflation. Businesses that do not follow the trend risk falling behind. Automation results in a decrease in the amount of labor required to run activities. Additionally, it will allow employees to concentrate on strategic value-added tasks, which will help the company and boost retention. Whatever the situation, raising productivity is always the most effective and long-lasting approach to fight inflation.

Businesses may minimize the possible effects of rising inflation so they can continue functioning with the least amount of interruption by adopting a proactive approach to it. This will enable businesses to weather the potential storm and emerge as a thriving enterprise.

APAC Region Will Suffer From Reduced Demand For Its Exports

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DigitalCFO Newsroom | 15 July 2022

Singapore’s Ministry of Trade and Industry (MTI) estimated that the country’s quarter-on-quarter GDP saw zero growth in the second quarter.

The Institute of Management Accountants (IMA), they have just released their quarterly Global Economic Conditions Survey (GECS) report for Q2 2022. The survey took place between 8 and 17 June 2022 with 949 responses from ACCA and IMA members, including over 100 CFOs. 

Just yesterday, Singapore’s Ministry of Trade and Industry (MTI) estimated that the country’s quarter-on-quarter GDP saw zero growth in the second quarter. IMA’s GECS report for Q2 2022 anticipates that due to the slowing of growth in advanced economies where it is possible that it will come to a standstill, the APAC region will suffer from reduced demand for its exports. The report also highlighted that accounting and finance professionals are more confident in the APAC region as compared to major regions as confidence fell by the least and a slight increase in the orders index, one of only two regions to record a rise. This observation is attributed to the improved picture in China, helped by the lifting of the Shanghai lockdown. 

Other key findings of the report also include:

  • An observed sharp drop in global confidence due to the surge in inflation, exacerbated by the war in Ukraine 
  • Close to 60% of respondents perceived supply shortages and supply chain issues as the highest risks followed by the increased interest rates in response to higher inflation at 55%. While this quarter saw a drop in perceived risk relating to further waves of Covid-19 infections and associated restrictions 
  • Almost 70% of respondents expressed concern about rising operating costs correlated with rising energy and transport costs caused by supply shortages in the GECS index of concern

Sentiments of weak growth for the rest of this year based on the GECS Q2 report is also in line with the adjusted forecast by the Organisation for Economic Co-operation and Development (OECD) as the organisation also downgraded its global GDP forecasts to just 3% this year which is 1.5% points weaker than the projected figure in Dec 2021.

The GECS has been conducted for over 10 years. Its main indices are good lead indicators of economic activity and provide valuable insight into the views of finance professionals on key variables, such as investment, employment and costs. 

CAITEC Report – Are There New Possibilities To Reshape Global Supply Chains In China?

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DigitalCFO Newsroom | 23 June 2022

According to the report, despite the accelerated restructuring of global supply chains, multinationals still see China as an important destination for global investment.

The 3rd Qingdao Multinationals Summit, co-organized by China’s Ministry of Commerce and the Shandong provincial government, was held in Qingdao, East China’s Shandong province, on June 19. The report, Multinationals in China: New possibilities in Reshaping of Global Supply Chains, compiled by the Chinese Academy of International Trade and Economic Cooperation (CAITEC), a consultative body directly under the aegis of the Ministry of Commerce, was published during the summit to elaborate on the opportunities afforded by changes to global supply chains amid a new situation, with topics on the reshaping of global supply chains, the investment confidence of multinational companies in China, the role of China in global supply chains, and how China would fit in to the evolving global supply chain structure in the future.

According to the report, despite the accelerated restructuring of global supply chains, multinationals still see China as an important destination for global investment due to its strong core competitive strengths with a mature industry supporting environment, huge headroom for market growth and high labor productivity.

In 2020, FDI inflows into China’s manufacturing sector declined to US$31 billion due to the pandemic. However, the amount increased 8.8% year-on-year to US$33.73 billion in 2021 following the government’s success in COVID-19 prevention and control. The increase is 1.1 percentage points higher than the growth rate of global manufacturing FDI.

Large foreign investment projects maintained rapid growth in China. Of the newly approved foreign investment or capital increase contracts, the number of large projects valued at more than US$100 million surged from 834 in 2019 to 1,177 in 2021, continuing double-digit growth for three consecutive years.

Thanks to the improving investment structure, China’s high-tech manufacturing sector sustained high growth with the support of foreign investment, accounting for over one-third of the total FDI, while the number of major foreign investment projects maintained double-digit growth for three years in a row. With rapid economic development, some central and western provinces and cities are emerging as new contributors to the manufacturing sector by attracting additional foreign investment. Multinationals witnessed an increase both in revenue and profits.

#dltledgers strengthens their Extended Supply Chain Business Network solution with #dltledgers 2.0

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DigitalCFO Newsroom | 5 May 2022

The partnership with R3 and use of Corda will help #dltledgers to tap into industry-leading blockchain technology for delivering a frictionless and secure multi-party transaction experience.

Singapore-based fintech firm #dltedgers has announced the release of #dltledgers 2.0, a much-anticipated update to the expanded supply chain and digitization platform using blockchain technology. Powered by Corda, the update adds new multi-party transaction capabilities with customizable smart contracts to enable more business flexibility and transparent supply chain visibility.

This new release of the #dltledgers 2.0 platform is designed to enable more seamless transactions across international trade, global supply chains, and cross-border trade financing. Today, international trade demands and adheres to significantly more regulatory oversight designed to increase transparency and governance for all parties. As a result, the increased documentation requirements and added processes burden an already cumbersome payment and management structure. These then complicate efforts to enable seamless cross-border trade and international financing.

Farooq Siddiqi, Chief Executive Officer, #dltledgers said: “By reducing friction across the trade, supply chain, and the financing process, automated, repeatable, and digitally executable transactions allow businesses to remain focused on investing in their business growth. The #dltledgers 2.0 platform engenders trust, increases privacy and security for all involved in cross-border trade and financing.”

The #dltledgers platform was developed on a blockchain technology platform that is a ‘no-code,’ plug-and-play ecosystem that enables digitalization, promotes seamless collaboration and authenticates transactions across the global trade and supply chain. This #dltledgers 2.0 platform increases transparency across the multi-enterprise supply chain business network through customizable multi-party intelligent contracts.

Introducing a customizable multi-party innovative contract system simplifies the sophisticated process of securing cross-border trade financing that is crucial to business growth, enabling seamless collaboration between internal-external parties while maintaining the privacy and integrity of business data and enhancing audibility.

#dltledgers is built to enable seamless collaboration while being the single source of truth in multi-party transactions. The integrated digital solution is protected with enterprise-grade security through distributed ledger technology; the integrated digital solution delivers real-time transparency, visibility, and even adequate risk monitoring against financial disequilibrium.

With 55 percent of the world’s trade growth forecast to flow through Asia by 2025, businesses must increase their digital initiatives to drive greater productivity, efficiency, and value. The #dltledgers platform has since been used by more than 4,000 businesses globally, providing financing and supporting cross-border trade and transactions totaling more than USD4 billion worth of work.

#dltledgers 2.0 continues its partnership with R3 and its use of R3’s  industry-leading permissioned peer-to-peer (P2P) distributed ledger technology (DLT) platform, Corda. The partnership will extend Corda’s benefits to enterprises that are moving  towards digitizing their extended supply chain, all while supported by R3’s expertise in regulated markets and trust technology.

Cathy Minter, Chief Revenue Officer, R3 said: “We are very excited to lend our expertise in trust technology and strengthen our partnership with #dltledgers. As one of the world’s fastest-growing supply chain digitization platforms, we are proud that #dltledgers has selected Corda. The opportunities  to transform the industry in the road ahead are immense, and we look forward to working closely with the #dltledgers team and jointly lead the blockchain industry towards a new digital future for supply chain and trade finance.”

Farooq Siddiqi, Chief Executive Officer, #dltledgers added: “In reducing their dependence on manual legacy systems, organizations are removing inertia and friction in multi-party collaborations, which slows cross-border trade and reduces transparency, which is ultimately costly. We are excited about our partnership with R3. They bring unrivaled expertise in regulated markets, which, when mixed with our supply chain expertise, will deliver measurable benefits to companies and supercharge their digitalization journey.”

Samir Neji, Chief Product Officer, #dltledgers – We envisioned the multi-party transactional gaps in the supply chain back in 2018 and have resolved the guesswork in the extended supply chain. We built our metaverse platform on a highly scalable enterprise-grade blockchain framework. We enable multi-party transactions with ease, trust, authentication, and integration across the extended supply chain business networks, offering value to all parties. We are the exclusive platform for ESCBN in R3’s Corda, offering a ready-to-go extended supply chain business network for global enterprises, banks, and logistics. Both R3 and #dltledgers are committed to our global customer demands and will continue innovating to enable digitalization, collaboration, and authentication in multi-enterprise business networks.”

China Automotive Systems Reports Fourth Quarter And Fiscal Year 2021 Results

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DigitalCFO Newsroom | 31 March 2022

China Automotive Systems Inc., today announced its unaudited financial results for the fourth quarter and the audited results for the fiscal year ended December 31, 2021.

China Automotive Systems Inc., a leading power steering components and systems supplier in China, today announced its unaudited financial results for the fourth quarter and the audited results for the fiscal year ended December 31, 2021.

Fourth Quarter 2021 Highlights

  • Net sales declined by 5.3% to $138.8 million from $146.5 million in the fourth quarter of 2020
  • Gross margin was 14.2% compared with 15.6% in the fourth quarter of 2020
  • Income from operations was $0.6 million compared to loss from operations of $4.0 million in the fourth quarter of 2020
  • Net income attributable to parent company’s common shareholders was $5.0 million, or diluted net income per share of $0.16, compared to a net loss of $3.2 million, or diluted loss per share of $0.10 in the fourth quarter of 2020.

Fiscal Year 2021 Highlights

  • Net sales were $498.0 million compared to $417.6 million in 2020
  • Gross profit increased by 30.4% to $72.1 million compared to $55.3 million in 2020. Gross margin increased to 14.5% from 13.3% in 2020
  • Operating income was $5.5 million compared to operating loss of $8.1 million in 2020
  • Diluted net income per share was $0.36 in 2021 compared to diluted loss per share of $0.16 in 2020
  • Total cash and cash equivalents, pledged cash and short-term investments were $161.3 million
  • Net cash flow provided by operating activities was $28.3 million.

Mr. Qizhou Wu, Chief Executive Officer of CAAS, commented, “We are pleased to report that our operations returned to profitability in the fourth quarter in a challenging macroeconomic environment. According to the China Association of Automobile Manufacturers, overall sales of automobiles in China only grew by 3.8% in 2021. Our net sales increased by 19.3% year-over-year to $498.0 million in 2021 as sales in the domestic Chinese passenger market, our revenue from North America and our Brazilian operations all had strong growth.  Our electric power steering (“EPS”) revenue increased 86.0% year-over-year and represented 23.2% of total revenues in 2021 compared with 14.8% a year ago. To enhance our New Energy Vehicle (“NEV”) products, we purchased a 40% interest in Sweden’s Sentient AB, and we also developed new steering for Alfa Romeo’s first luxury plug-in-hybrid SUV, the model 2021 Tonale.” 

“We are encouraged for the 2022 year as passenger vehicle sales have risen in the first two months of 2022 and government policies have become more growth oriented,” Mr. Wu concluded.

Mr. Jie Li, Chief Financial Officer of CAAS, commented, “We maintained our financial strength as total cash and cash equivalents, pledged cash and short-term investments were $161.3 million, or approximately $5.23 per share at year end. We continued to generate strong free cashflow.” 

Fourth Quarter of 2021

In the fourth quarter of 2021, net sales decreased by 5.3% to $138.8 million compared to $146.5 million in the same quarter of 2020. The net sales decrease was mainly due to a change in the product mix and lower demand for automobiles in the fourth quarter of 2021 compared with the fourth quarter of 2020.   

Gross profit was $19.7 million in the fourth quarter of 2021, compared to $22.8 million in the fourth quarter of 2020. Gross margin in the fourth quarter of 2021 was 14.2% compared to 15.6% in the fourth quarter of 2020, primarily due to lower sales volume and a change in product mix.

Gain on other sales was $1.8 million in the fourth quarter of 2021, compared to $1.4 million in the fourth quarter of 2020.

Selling expenses were $3.4 million in the fourth quarter of 2021, compared to $5.6 million in the fourth quarter of 2020. Selling expenses represented 2.4% of net sales in the fourth quarter of 2021, compared to 3.8% in the fourth quarter of 2020.

General and administrative expenses (“G&A expenses”) were $7.6 million in the fourth quarter of 2021, compared to $14.3 million in the same period in 2020. G&A expenses represented 5.5% of net sales in the fourth quarter of 2021, compared to 9.8% of net sales in the fourth quarter of 2020. The significantly higher G&A expenses in the fourth quarter of 2020 were mainly attributable to a one-time, non-recurring expected credit loss provision of $6.4 million related to a customer’s bankruptcy reorganization proceeding.

Research and development expenses (“R&D expenses”) were $9.9 million in the fourth quarter of 2021, compared to $8.3 million in the fourth quarter of 2020. R&D expenses represented 7.1% of net sales in the fourth quarter of 2021, compared to 5.7% in the fourth quarter of 2020. Higher R&D expenses were mainly related to higher investments in EPS and NEV products.

Income from operations was $0.6 million in the fourth quarter of 2021, compared with a loss from operations of $4.0 million in the fourth quarter of 2020. Increase in the income from operations in the fourth quarter of 2021 was mainly due to a 25.9% year-over-year decrease in total operating expenses as both selling and G&A expenses declined significantly.

Interest expense was $0.5 million in the fourth quarter of 2021, compared to $0.4 million in the fourth quarter of 2020.

Financial expense was $1.5 million in the fourth quarter of 2021, compared with $2.0 million in the fourth quarter of 2020.

Loss before income tax expenses and equity in earnings of affiliated companies was $0.4 million in the fourth quarter of 2021, compared to a loss of $5.7 million in the fourth quarter of 2020.

Income tax expense was $0.7 million in the fourth quarter of 2021, compared to an income tax expense of $1.9 million for the fourth quarter of 2020, mainly due to a change in the valuation allowance recognized in the fourth quarter of 2021.

Net income attributable to parent company’s common shareholders was $5.0 million in the fourth quarter of 2021 compared to net loss attributable to parent company’s common shareholders of $3.2 million in the fourth quarter of 2020. The net loss in the fourth quarter of 2020 was mainly due to a one-time, non-recurring $6.4 million expected credit loss provision for a customer’s bankruptcy reorganization, net of minority interests. Diluted income per share was $0.16 in the fourth quarter of 2021, compared to diluted loss per share of $0.10 in the fourth quarter of 2020.

The weighted average number of diluted common shares outstanding was 30,853,822 in the fourth quarter of 2021, compared to 31,851,776 in the fourth quarter of 2020.

Fiscal Year 2021

Net sales increased by 19.3% to $498.0 million in 2021, compared to $417.6 million in 2020. The increase was mainly due to the recovery in net sales in the first half of 2021 from the COVID-19 pandemic’s impact on automobile sales in China and North America. In 2021, sales of hydraulic products increased by 7.6% year-over-year while total sale of EPS systems increased by 86.0% year-over-year. EPS sales represented 23.2% of total revenue in 2021 compared with 14.8% in 2020.  Net sales of vehicle steering systems to the Company’s North American customers increased by 10.4% year-over-year in 2021.

Gross profit in 2021 increased by 30.4% to $72.1 million, compared to $55.3 million in 2020. The gross margin increased to 14.5% from 13.3% in 2020 mainly due to changes in the product mix. 

Gain on other sales amounted to $4.4 million, generally consistent with $4.3 million in 2020.

Selling expenses were $18.3 million in 2021 compared to $14.5 million in 2020, mainly due to higher transportation expenses. Selling expenses represented 3.7% of net sales in 2021, compared to 3.5% in 2020.

G&A expenses declined 11.6% to $24.4 million in 2021 from $27.6 million in 2020. The decrease was mainly due to a decreased provision of allowance for doubtful accounts related to one customer’s bankruptcy reorganization in November 2020, which was partially offset by higher personnel costs. G&A expenses represented 4.9% of net sales in 2021 compared to 6.6% of net sales in 2020.

R&D expenses were $28.2 million in 2021, compared to $25.7 million in fiscal year 2020. The increase was primarily due to higher investment in EPS products. R&D expenses were 5.7% of net sales in 2021, compared to 6.2% of net sales in 2020.

Income from operations was $5.5 million in 2021, compared to a loss from operations of $8.1 million in 2020. The income was mainly due to a 30.4% increase in gross profit, with an offsetting impact of a 4.6% increase in total operating expenses in 2021. The loss in 2020 was primarily due to lower net sales and a one-time, non-recurring expected credit loss provision related to a customer’s bankruptcy reorganization.

Interest expense was $1.4 million in 2021, a slight decline from the $1.6 million in 2020.

Net financial expense was $2.4 million in 2021, compared with $4.9 million in 2020, primarily due to a decrease in foreign exchange losses.

Income before income tax expenses and equity in earnings of affiliated companies was $8.4 million, compared to a loss before income tax expenses and equity in earnings of affiliated companies of $12.2 million in fiscal year 2020. The change was primarily due to generating income from operations and lower net financial expense in 2021.

Net income attributable to parent company’s common shareholders was $11.1 million in 2021 compared to net loss attributable to parent company’s common shareholders of $5.0 million in 2020. The loss in 2020 was mainly due to lower sales and a one-time, non-recurring $6.4 million expected credit loss provision from a customer’s bankruptcy reorganization, net of minority interests. Diluted net income per share was $0.36 in 2021 compared to diluted loss per share of $0.16 in 2020.

The weighted average number of diluted common shares outstanding was 30,855,431 in 2021 compared to 31,077,196 in 2020.

Balance Sheet

As of December 31, 2021, total cash and cash equivalents, pledged cash and short-term investments were $161.3 million. Total accounts receivable including notes receivable were $210.3 million. Accounts payable including notes payable were $228.0 million and short-term bank loans were $47.6 million. Total parent company stockholders’ equity was $321.0 million as of December 31, 2021, compared to $303.2 million as of December 31, 2020. Net cash flow from operating activities was $28.3 million in 2021, compared with $57.4 million in 2020. Cash paid to acquire property, plant and equipment and land use rights was $9.3 million in 2021, compared with $15.8 million in 2020.

Business Outlook

Management provides revenue guidance for the fiscal year 2022 of $510 million. This target is based on the Company’s current views on operating and market conditions, which are subject to change.

From Just in Time to Just in Case: The Shift in Logistics Being Made by the World’s Top Companies

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Karen Clarke, Managing Director, Anaplan APAC | 25 January 2022

Avoiding disruption in the new Supply Chain

Karen Clarke, Managing Director, Anaplan APAC

“In with the new and out with the old” is a popular Chinese saying that is synonymous with the spring cleaning of homes and buying of new clothes during the Lunar New Year season – traditionally the most important holiday of the year for Chinese communities worldwide. However, supply chain delays that continues to persist worldwide, could be frustrating for Asian families looking to get new clothes and furniture in time for the upcoming festive season. Just last year, companies like Apple and Amazon have already cut their projected earnings for the Christmas holidays, following huge losses in Q3 due to supply chain problems. Anyone in Asia who ordered a new iPhone or iPad back in November for the Christmas season would only receive the shipment in 2022 — a rare occurrence for the distribution mavericks at Apple who typically get products in the hands of customers in a timely manner and historically have been consistently placed in Gartner’s Supply Chain Top 25 since 2013.

In the west, we witnessed the supply chain warning of a shortage of small turkeys as families celebrated Thanksgiving only with their immediate family members due to ongoing pandemic concerns. We could see a similar occurrence here in Asia, where the Lunar New Year celebration is a significantly scaled down version from pre-pandemic times.

The issues most consumers experienced during Christmas could unfortunately just be a dress rehearsal for further supply challenges during the upcoming Lunar New Year celebrated throughout Asia from February 1 onwards. Typically, across China, factories are closed and capacity across the supply chain is drastically reduced as Chinese everywhere take time off to celebrate this most important festive season. While the long break during the Lunar New Year typically results in some disruption in the supply chain every year, the coming one will have serious ramifications to an already-traumatized supply chain and global freight market likely be felt well into the second quarter of the new year and beyond.

What does planning ahead mean in these uncertain times?

While it may seem that better connectivity across the supply chain and knowing “where my stuff is” are obvious answers, solving it is a Herculean task. That’s because many companies in the supply chain ecosystem in Asia still rely largely on legacy technology.

Today, many procurement planning teams still rely on business intelligence software to aggregate invoices and look at historical costs. Even before the pandemic hit, the limitations of these outdated platforms were obvious and had been challenged by factors like weather, oil prices, and changing customer trends. Today, there is no doubt that companies have hit the ceiling with these legacy applications, given the unpredictable consumer demand in the last two years combined with historical data becoming increasingly useless in demand-sensing and forecasting.

In an Anaplan-commissioned 2021 supply chain survey conducted by Reuters, approximately 60 percent of respondents said ‘they classed digitally transforming their operations as the “highest priority right now”.’ Indeed, the visibility companies have, typically reflects a lag of over a week. Companies today need to see even further, with daily or even intra-day visibility to give them a handle on better risk management and alternative sourcing arrangements. Just seeing problems coming—forwards to customers and backwards to suppliers and logistics—is not enough.

In fact, if the last few months have demonstrated anything, it’s that companies that have largely been reactive, transactional, and operating on a “what happened” mentality now face the vulnerabilities from their inability to act or pivot. They need to help their peers and partners understand that as much data as they appear to get from legacy systems, they need to digitalize completely to harness global supply chain data, and get real-time, multi-enterprise collaboration to drive actionable insight. That’s because as important as visibility is, companies need the agility to understand the implications and act. The Reuters survey revealed that approximately 20 percent of respondents indicated they were ‘data rich but insight poor’.

Given the amount of uncertainty, the ability to connect, share and collaborate with suppliers and partners can help companies enhance their operations, identify bottlenecks and embark on scenario-based planning—to become proactive, and switch from a “what happened” to “what if” mentality. The onus is on supply chain leaders today to plan for just in case, not just in time.

They can start by relying on connected platforms built for the supply chain and supporting ecosystems, so that they can approach their business operations in multi-faceted ways and anticipate the problems of tomorrow. Anaplan on Google Cloud, for instance, features a “supply chain twin” a virtual representation of their physical supply chain–by orchestrating data from disparate sources to get a more complete view of suppliers, inventories, and other information.

As the supply chains of yester-year continue to metastasize and the rippling impact is felt even during the happiest time of the year and the upcoming Lunar New Year, one thing is clear: consumers’ wallets and spending will take a beating, and so will businesses if they can’t fix the supply chain.

It’s time key decision makers across the logistics sector started challenging the status quo. While change is difficult for any industry, let alone one that’s been knee-deep in problems for so long, the good news is we are more ready than ever to tackle them. We simply need more business leaders to be better prepared to respond in timely fashion to emerging demand signals, to help them align their resources accordingly. In the spirit of the new Lunar Year, it is perhaps time for the supply chain to adopt an approach that promises to be “in with the new”, stay ahead of the competition, and be more than ready to confidently tackle volatility.

Karen Clarke, Managing Director, Anaplan APAC

Karen Clarke is Managing Director of Anaplan Asia-Pacific, based in Singapore. She leads and sustains business growth across Australia, New Zealand, Japan, India, North and South Asia. She was formerly VP for Northern Europe.

Previously, Karen spent 20 years at Oracle, in various leadership roles across the EMEA region.

Karen has a keen interest in women’s leadership, digital, and STEM skills development. She has held non-executive director and business advisory roles to software start-ups.

Overcoming talent crunch and supply chain upheaval among biggest success indicators for tech in 2022

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DigitalCFO Newsroom | 23 December 2021

Overcoming supply chain logistics challenges now critical to business continuity

Increased volatility rising out of the evolving COVID-19 pandemic has led to a reshuffling of priorities for the global technology industry. Emerging as the top opportunity for the year ahead in this landscape (up from fourth position last year) is the imperative to attract and retain a motivated workforce. This is according to the annual EY report, Top 10 opportunities for technology companies in 2022, which ranks the biggest industry success drivers based on EY analysis.

The COVID-19 pandemic has increased the urgency to address already pressing issues around talent strategy in a hybrid working world. Tech companies are exploring how best to introduce a staged return to the office, with 9 out of 10 employees indicating that they are prepared to resign if they are not offered flexibility in where and when they work. At the same time, demand for engineers and salespeople is growing exponentially for those investing in growth.

Barak Ravid, EY Global TMT Strategy and Transactions Leader, says:

“The COVID-19 pandemic has challenged tech employers to re-examine the entire value-proposition for talent. In order to build a motivated workforce, employers must prioritize finding ways to solve the puzzle of optimizing rewards, flexibility and experience, to create a package that cultivates the best talent while managing the associated costs.”

Supply chain disruption presents existential challenges

In 2021, supply chains came under extreme pressure from market volatility, due to the COVID-19 pandemic and Brexit, among other market-defining geopolitical events. For the tech industry, two major bottlenecks have been around logistics and the availability of components. The report reflects this, ranking the need to de-risk the supply chain in order to secure business continuity in third place for the second consecutive year.

Ravid says: “Tech companies need to holistically review their entire supply chain. Different risk profiles in the chain require different policies around inventories and sourcing contracts. Logistics issues could lead to changes in preferred manufacturing and distribution footprints. Real-time visibility will help mitigate problems at an early stage, while new technologies such as digital twins and 3D printing could reduce the degree of disruption.”

More than just environmental sustainability

The call to take a strong position on environmental, social and governance (ESG) issues debuts at fifth position on the ranking, with stakeholders now demanding more from tech companies. Employees want to make a tangible difference; investors are seeking sustainable investment options; and customers are looking to the industry to implement new tech that drives sustainable outcomes. The report highlights that companies must respond by taking the initiative to draw up a long-term value proposition and adopt transparent KPI-led reporting.

Meanwhile, leveraging mergers and acquisitions (M&A) to strengthen the growth profile rises from tenth position last year to second place on the 2022 ranking. With 51% of technology executives stating that organic growth could be a challenge in the near term, M&A will be key to sustaining growth for many. The report indicates that despite increased regulatory scrutiny and financial uncertainty, the deal market is expected to remain healthy.

Ravid says: “Acquisitions across the industry will reignite growth by adding solutions, technologies, end markets and distribution channels to a companies’ portfolios. Divestments could also help companies steer away from slower growth market segments or solutions that require the business to build new capabilities. Overall, having the right M&A strategy in place will be critical to realizing a better growth profile.”

The full list of top 10 opportunities in technology for 2022 are:

  1. Attract and retain a motivated workforce in a hybrid working environment
  2. Leverage M&A to strengthen growth profile
  3. De-risk the supply chain to secure business continuity
  4. Embed security into the design of new activities
  5. Lead by example in ESG to strengthen stakeholder relations
  6. Transform business to excel in consumption based sales
  7. Realign tax organization with digital business models
  8. Streamline operations to increase agility
  9. Instill customer trust to drive digital engagement
  10. Prepare for adoption of 5G