I delivered this presentation at the Odette conference in Paris during November 2005. It provides an overview of research that the AIAG conducted on B2B e-Commerce trends in China and suggests potential strategies for automotive OEMs seeking to further automate their supply chains in the emerging market.

1. B2B e-Commerce in China
What is Your Strategy?
B2B e-Commerce in China
What is Your Strategy?
Steve Keifer
Vice President
Industry Sectors
GXS
November 1, 2005

2. GXS – B2B e-Commerce in China November 1, 2005Slide 2
B2B e-Commerce in ChinaB2B e-Commerce in China
China Opportunity & Challenges
Automotive Solutions

3. GXS – B2B e-Commerce in China November 1, 2005Slide 3
China Market OpportunityChina Market Opportunity
‘95 ‘96 ‘10‘03‘00‘99‘98‘97 ‘01 ‘02 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09
2
4
6
8
10
12
Sales-MillionsofVehicles
Year
China will be the
World’s Fastest
Growing Market
through 2010

4. GXS – B2B e-Commerce in China November 1, 2005Slide 4
Three Opportunities in ChinaThree Opportunities in China
Sourcing of
Parts & Materials
Domestic & Export
Manufacturing
Domestic
Market Sales
Automotive leaders are adopting all three strategies
– Invest in wholly owned
production capacity
– React quickly to local
China market opportunity
– Source from third party
manufacturer
– Lower investment while
gaining cost advantages
– Capitalize on tremendous
market growth
– Operate independently or
with local partner

5. GXS – B2B e-Commerce in China November 1, 2005Slide 5
Domestic Market ChallengesDomestic Market Challenges
Transportation
Infrastructure
Changing
Regulation
Aggressive
Competition
Supply &
Demand
Capacity Constraints
Inter-Modal Links
Local Regulation
Fragmented Services
Tariffs & Quotas
Local Content
Retail & Distribution
Consumer Financing
Price Discounting
New Entrants
Mergers, JVs &
Partnerships
Raw Materials
Over-Capacity
First Time Buyers
Credit System
How do you compete in China’s rapidly
changing domestic automotive market?

6. GXS – B2B e-Commerce in China November 1, 2005Slide 6
Export ChallengesExport Challenges
Chinese
Production
Export
Processing
Ocean
In-Transit
Import &
Customs
Ground
Transit
European
Receiving
– Safety Recalls
– Engineering Changes
– Increases in Demand
– Decreases in Demand
Lead Time
How quickly can you respond to:

7. GXS – B2B e-Commerce in China November 1, 2005Slide 7
Success in ChinaSuccess in China
Retailers and
Aftermarket
Original Equipment
Manufacturers
Logistics
Tier 1
Manufacturers
Forecasts
Inventory Payment
Your Business
Supply and
demand
signals flow
freely through
the value chain
Business
partners respond
quickly to
changing market
conditions
Tier 2-3
Manufacturers

8. GXS – B2B e-Commerce in China November 1, 2005Slide 8
B2B e-Commerce in ChinaB2B e-Commerce in China
Defining a B2B Strategy
Automotive Solutions

9. GXS – B2B e-Commerce in China November 1, 2005Slide 9
B2B e-Commerce ReadinessB2B e-Commerce Readiness
Multi-National
Customers
Large & Mid-Size
Suppliers
Large, Domestic
Customers
Small
Suppliers
Your Enterprise Systems
Internet or
Private
Network
Internet or
Phone
Network
What level of
Enterprise
Systems exist
for ERP, EAI,
B2Bi?
How secure and reliable is the
power and network infrastructure?
Are technical support and
consultation available?
Which business processes are
being automated? What
document standards and network
protocols are being used?
What are SMBs
access to PCs,
Internet, and
Accounting
software?

10. GXS – B2B e-Commerce in China November 1, 2005Slide 10
Infrastructure Challenges in ChinaInfrastructure Challenges in China
Vendors 24x7 technical
support in Mandarin or
Cantonese remains limited
Documentation in Chinese
remains limited for technology
software and services
Electrical power infrastructure
is overburdened resulting in
unpredictable black outs
Reliability of the “public”
Internet varies based upon
provider and location
Central and Western regions
have poor communications
infrastructure
Availability of personnel with
prior B2B e-commerce
experience is low

11. GXS – B2B e-Commerce in China November 1, 2005Slide 11
ERP Readiness in ChinaERP Readiness in China
ERP Trends
– Adoption primarily from Western Multi-
Nationals
– State owned enterprises and private
Chinese corporations have purchased
but still have limited usage
– Most vendors provide modules for
automotive and other manufacturing
disciplines
– Traditional accounting software vendors
evolving into business process suites
Sample ERP Vendors
Digital China
Epicor
IFS
Infor
Intentia
Microsoft Business Solutions
Oracle
QAD
SAP
SoftBrands
SSA Global
ERP Challenges
– Difficult to adopt new business practices
during periods of rapid growth
– Localized consulting and technical
support is in high demand

12. GXS – B2B e-Commerce in China November 1, 2005Slide 12
SMB Accounting VendorsSMB Accounting Vendors
User Friend Software
Kingdee Software
Beijing Anyi
Hangzhou New Grand
Langchao Guoqiang
Tianjin Tiancai
Powerise Software
Beida Jade Bird
NeuSoft
Topsoft Software
Tsinghua TongFang
Beijing Peking University Founder
Superdata Software
UFSoft
Leading Accounting VendorsSMB Accounting Market
– In 2006, 98% of the 12 million
small companies in China will be
using accounting software
Adoption Trends
– Manufacturing alone consumes
25% of accounting software usage
– Market is highly fragmented with
vendors focus on specific
geographic region
Key Selection Criteria Factors
– Cheap price and easy to use
– Certified for Chinese accounting
rules

13. GXS – B2B e-Commerce in China November 1, 2005Slide 13
B2B e-Commerce in ChinaB2B e-Commerce in China
AIAG’s China E-Commerce Survey
Automotive Solutions

14. GXS – B2B e-Commerce in China November 1, 2005Slide 14
B2B E-Commerce SurveyB2B E-Commerce Survey
– Assess readiness of Chinese automotive
supplier community
– Diverse group of state owned enterprises,
private enterprise, joint ventures and
wholly owned foreign enterprises
– Diverse group of Tier 1, 2, 3 and
aftermarket suppliers with domestic and
export operations
– Business processes, document standards,
e-commerce tools
– Educate North American OEMs and
suppliers on Chinese technology readiness
– AIAG E-commerce steering committee to
provide a recommendation for the Chinese
market
Sponsored by:
and
Analysis performed by

15. GXS – B2B e-Commerce in China November 1, 2005Slide 15
Survey Demographics
220 Chinese Automotive Suppliers Surveyed
Survey Demographics
220 Chinese Automotive Suppliers Surveyed
Distribution by
Ownership Type
Function in Domestic
Value Chain
Chinese Private
or State Owned
Enterprises
(42%)
Wholly Foreign
Owned
Enterprises
(19%)
Joint
Ventures (33%)
28%Aftermarket
Tier 3
Tier 2
Tier 1
28%
51%
55%
Multiple responses accepted
Does not indicate international value chain function

16. GXS – B2B e-Commerce in China November 1, 2005Slide 16
Computerization of Business FunctionsComputerization of Business Functions
Suppliers plans for automation of other critical
cross-enterprise business processes
Purchasing
From
Suppliers
Receiving
Materials from
Suppliers
Managing
Inventory
Shipping
Materials to
Customers
Strong Interest in
Automating B2B
Processes
100%
75%
50%
25%
Today
End of 2007
Source: AIAG China B2B Survey sponsored by GXS and QAD – September 2005 – 200 Chinese Automotive Suppliers

17. GXS – B2B e-Commerce in China November 1, 2005Slide 17
Customer Interaction TechniquesCustomer Interaction Techniques
Which method do your customers normally use to
communicate materials requests?*
Verbal (Phone
or In Person)
Paper (Mail or
Messenger)
Fax Computer
(Any Method)
Manual
techniques still
dominate most
customer
interactions
Today End of 2007
100%
75%
50%
25%
*Multiple responses
were accepted
Source: AIAG China B2B Survey sponsored by GXS and QAD – September 2005 – 200 Chinese Automotive Suppliers

18. GXS – B2B e-Commerce in China November 1, 2005Slide 18
Computer Based Customer InteractionsComputer Based Customer Interactions
For companies receiving materials requests through
computer, which method do you use?
E-Mail
Exchange
Customer
Web Portal
Direct
Terminal
Connection
Computer to
Computer
Computer to
Computer
Doubles to reach
typical 20%
threshold
100%
Today End of 2007
75%
50%
25%
Source: AIAG China B2B Survey sponsored by GXS and QAD – September 2005 – 200 Chinese Automotive Suppliers

19. GXS – B2B e-Commerce in China November 1, 2005Slide 19
Computer to Computer InteractionsComputer to Computer Interactions
For computer-to-computer based document exchange,
no dominant standard exists in China today.
Over 50% use customer
preferred format for electronic
document exchange
Customer Preferred Format
XML
VDA (Odette)
EDIFACT
EDI - ANSI X.12

20. GXS – B2B e-Commerce in China November 1, 2005Slide 20
B2B e-Commerce in ChinaB2B e-Commerce in China
Execution of B2B Strategy
Automotive Solutions

21. GXS – B2B e-Commerce in China November 1, 2005Slide 21
Impact Analysis for B2B ProgramsImpact Analysis for B2B Programs
Supply
Chain
China
Supply
Chain
Imports
Demand
Chain
Exports
Demand
Chain
China
China Operations

22. GXS – B2B e-Commerce in China November 1, 2005Slide 22
Three Levels of Technical CapabilitiesThree Levels of Technical Capabilities
Small Chinese
Corporations
Large Chinese
Corporations
Multi-National
Corporations
Segmentation helps to identify early adopters
– No experience with B2B
e-Commerce
– Very low participation
rates today
– Expertise in ERP, EAI
and B2B e-Commerce
– Large programs being
deployed in China today
– New to ERP, EAI and
B2B e-Commerce
– Selected programs being
deployed in China today

23. GXS – B2B e-Commerce in China November 1, 2005Slide 23
Capabilities of Value Chain Participants
Example Segmentation
Capabilities of Value Chain Participants
Example Segmentation
Multi-National
Corporations
(China)
Chinese
Corporations
(Large)Chinese
Corporations
(Medium)
Chinese
Corporations
(Small)
Multi-National
Corporations
(Imports)
High
B2Be-CommerceCapabilities
Low
Volume of Transactions
(Varies per Supply Chain)
HighLow

24. GXS – B2B e-Commerce in China November 1, 2005Slide 24
Chinese Enterprise ChallengesChinese Enterprise Challenges
Extremely
Rapid Growth
Product Quality &
Customer Support
Mergers &
Consolidation
Increased
Competition
Minimize Errors
by Automating
Information
Exchange
Scale Rapidly by
Eliminating
Manual Processes
Centralize
Information for
Decision Making
Reduce IT
Systems
Integration
Timeframes

25. GXS – B2B e-Commerce in China November 1, 2005Slide 25
B2B e-Commerce Readiness - SummaryB2B e-Commerce Readiness - Summary
Multi-National
Customers
Large & Mid-Size
Suppliers
Small
Suppliers
Large, Domestic
Customers
Your Enterprise Systems
Internet or
Private
Network
Internet or
Phone
Network
ERP, EAI and
B2Bi trends are
encouraging but
still in early
phases for many
Infrastructure is maturing to meet
reliability and capacity needs.
Shortages of experienced
personnel and 24x7 support slow
new IT initiatives.
No dominant e-Commerce
standard exists in China. XML is
most popular. Replenishment and
materials management processes
are first to be automated.
Widespread use
of accounting
SW, but the
market is
fragmented.

26. GXS – B2B e-Commerce in China November 1, 2005Slide 26
Guide to B2B e-Commerce in ChinaGuide to B2B e-Commerce in China
Guide to B2B e-Commerce
– China Market Opportunity
– China Supply Chain Challenges
– Technology Deployment in China
– Enterprise Resource Planning
– SMB Accounting Packages
– Technology Value in China
– Developing a B2B Strategy in China
– Executing on the Strategy
– Integration with Large Customers
– Integration with Large Suppliers
– Integration with Small Suppliers
– GXS Capabilities in China
B2B e-Commerce Strategies
For the Chinese
Automotive Market
A Guide for North American and
European Automotive Manufacturers

27. GXS – B2B e-Commerce in China November 1, 2005Slide 27
China B2B Experience - GXSChina B2B Experience - GXS
– Local presence – 24x7 technical
support, consulting and operations
– Local language support and
understanding of customs
– Ability to integrate domestic and
international trading partners
– Relationships with government
agencies and standards
organizations
– Experience with B2B e-commerce
deployments in China
– Understanding of US, European and
Japanese automotive business
practices