THE ELECTRONICS INDUSTRY has followed the example of many other industries in relocating its production lines to factories in mainland China. This is evident not only in the manufacture of consumer electronic items, but also of semiconductors and hi-tech information technology items. This has made mainland China a vital supply base for the industry. Hong Kong also plays an important role, especially in operations and managing international supply chains. Many big players still use Hong Kong-based firms to handle the importing of components, the distribution of semiconductors and the exporting of finished products to world markets. 'The challenges in managing distribution on the mainland are constant because of factors like the currency control structure, export regulations and import policies,' said Kelvin Kam, director, supply chain solutions, Arrow Asia Pac. The parent company, Arrow, is a Fortune 200 company and a major global distributor of semiconductors, or integrated circuits (ICs), and passive components for customers such as Intel and Motorola. Their clients include original equipment manufacturers (OEMs) and original design manufacturers (ODMs), plus contract equipment suppliers. Areas within the mainland can have different regulations and procedures relating to the movement of goods, and this constitutes part of the challenge. For example, shipping components from Shanghai to nearby Suzhou will add to the cost of doing business and possibly extend delivery times as well. Things can get more complicated when delivery deadlines, customer demands and specific regulations governing the type of materials used in manufacturing and packaging also have to be taken into account. This applies especially to exports destined to markets within the European Union. It is no surprise, therefore, that professional supply chain managers are in demand in the electronics and semiconductor sectors. However, finding qualified professionals who can manage all the complexities of the process is easier said than done. 'In the supply chain field, Hong Kong professionals are generally superior to those on the mainland,' Mr Kam said. 'They have greater experience in understanding and dealing with the detailed requirements of multinationals. 'To be successful, you have to understand how the various elements of the whole supply chain work together, and you must also know the customer's business.' For example, at the stage of product design, the selection of a particular semiconductor or component will have an impact on sourcing and procurement functions, inventory levels, lead time for re-supply, and forecasts of future demand. It may also be necessary to check safety and regulatory compliance and, in some cases, consider intellectual property issues. 'We have some 20 million items in our database,' said Mr Kam. 'Managing the supply chain successfully depends on the use of sophisticated techniques, such as the analysis of a client's business needs and individual product life cycles.' Arrow's Hong Kong team includes a supply chain solution manager, whose main responsibility is to understand customer needs, devise best solutions and form an implementation team. The aim is to go beyond ensuring smooth delivery to achieve total customer satisfaction. 'A major part of the job for the solution manager and implementation team is to support sales efforts by anticipating future customer needs and looking for opportunities to network and develop new business,' Mr Kam said. Other advantages for Hong Kong as a centre for supply chain and quality assurance operations are the rule of law and the ease of contact with the regional offices of multinationals. These factors are especially important for firms in the semiconductor sector. 'Hong Kong offers a transparent regulatory environment and a sound legal system,' said S.W. Cheung, vice-president of business development and technology support at the Hong Kong Science and Technology Park (HKSTP). 'Together they inspire trust and confidence about intellectual property protection measures, as well as materials quality and safety regulation compliance.' At present, the HKSTP has more than 30 companies involved in integrated circuit design. The government has encouraged their links with the logistics and supply chain industry, and this has led to work on various enabling technologies that should benefit both sectors. One is radio frequency identification (RFID), based on the same technology used at supermarket check-out counters. By applying an RFID tag to individual consignments, it is possible to scan and quickly identify what particular components are in a container. This reduces checking time and ensures accuracy of quantities in each delivery. The HKSTP is setting up an RFID/Logistics Technology Development and Commercialisation Centre, where Hong Kong companies can co-operate on the commercial development of supply chain management and logistics projects. 'They will be able to use the centre to develop their own logistics management systems and link them to their mainland operations,' Mr Cheung said. 'In this way, they can leverage Hong Kong's superior resources and implement best practices more efficiently.' In the chips Major businesses prefer to use Hong Kong as a base to oversee distribution and manage their supply chains. Hong Kong executives' key advantages are knowledge of China and experience in working with a multinational. Supply chain management professionals should make sure they know the customer's business. Understanding sophisticated management techniques enhances the prospects of promotion.