Last December the express and package delivery giant announced that it had taken an equityposition in NetCel360, a provider of business-to -business e-commerce solutions forcompanies operating in the Asia Pacific region. The investment was made through UPS’sStrategic Enterprise Fund, established in 1997 to invest in new markets and emergingtechnologies. The alliance hopes to provide the sort of supply-chain transparency in Asia that is available inother parts of the world. “One of the reasons for NetCel and UPS getting together is toprovide full supply-chain integration,” said Peter Winslow, managing director of UPSWorldwide Logistics for Asia Pacific.
“People expect to have information available at everypoint along the chain. Today that is not available in the region. “NetCel360 was founded in 1998 by Phillip E. Kelly, who previously had put in 14 years atMotorola followed by a move to Dell Computer in 1994. At Dell, Kelly was in charge of theAsia Pacific region where he built up a made-to-order, direct sales operation similar to theDell infrastructure in the United States.
In the process, he became aware of the uniquechallenges faced by companies seeking to expand their Internet-based operations in thediverse and complex region. “The Internet market in the U. S. is built upon a significant infrastructure that was built up bydirect sales and catalog guys,” said Kelly. “Asia Pacific does not have the same infrastructureto enable e-commerce.
“It’s going to need one, though. Kelly said e-commerce in the region is expected to grow from$3. 3 billion in 1998 to over $100 billion by 2003, while the number of Internet users isexpected to increase from 30 million to over 100 million. To capitalize on that growth rate,Kelly founded NetCel360 in 1998 to provide one-stop outsourcing services and helpcompanies establish pan-Asian relationships along their supply chains. Services include webconsulting and design, field repair capabilities, call centers, customer interface and a full rangeof financial and translation services.
Kelly is bullish on Asia. The economic crisis has largely abated, he said, and money andoptimism are returning to the region. Partnering with UPS Logistics Group, one of the leadersin global logistics and supply-chain management solutions, is also cause for joy. “Asia Pacificis so diverse and government regulations are so vast;’ said Kelly. “There are different currencylanguages for each of 50 countries.
It’s not like moving product from Arizona to Tennessee. UPS provides full logistics across the region. That’s the critical component of our alliance. “Kelly cited credit card payments as an example of the difficulties of doing e-commerce inAsia. ln most countries payment is taken and cleared and then moved to other banks, but inAsia Pacific there is no single financial institution with a regional presence.
Each individualmarket has its own regulations and currency, and six different credit cards control the market. Also, 35 to 40 percent of business transactions are done on a cash basis, as opposed to 3percent in the United States. “For each company to set up a financial infrastructure is timeconsuming,” said Kelly. “We helpthem get to market a lot quicker rather than each having to go down the learning curve. “Perry Chao, UPS vice president of e-commerce solutions for Asia Pacific, said that despitethe obstacles to the growth of ecommerce in the region, such as a ban on foreign ownership inChina, it is a juggernaut that can’t be stopped. Asian countries from Singapore to Taiwan,from Korea to Malaysia are pouring billions of dollars into the information superhighway.
“Each market is growing at such a fast rate and thousands of net companies are set up eachday,” said Chao. “Companies know they have to get into this but they don’t know how. UPSand NetCel will play a big role in handling goods and information. “Part of what is driving business-to-business e-commerce in the region is a push by web-savvyU.
S. companies to get their Asian suppliers online. Chao likened it to the push by majorglobal companies to get their vendors to adopt the ISO 9000 global quality standard. “If youare not on the web, soon you will not be able to be a vendor,” he said. Another one of the benefits of the UPSNetCe1360 alliance is in providing a model ofefficiency and modernization for regional customs authorities. Some Asian customs agenciesare less than transparent and slow to clear goods.
They are just learning to work with the fastflow of information that “B2B” e-commerce demands, and a working partnership with thecompanies setting the standard in the new business paradigm can only help the regionalcustoms modernization process. “We are helping regional governments have an open mind in embracing information,” saidChao. “That’s what package releases are based on. As interaction with the private sectorbecomes more mature, and governments learn the benefits of efficiency, customs processeswill start to change.”
