This is an idea originally hatched by many offshore suppliers who set up similar warehouse operations in Thailand to deliver products to Thai buyers within a few hours after purchase orders are issued. These suppliers argue that even though their goods can be air-freighted to buyers in Thailand within two or three days, it is not fast enough. In order to outstrip other competitors, they cut delivery time down to only two or three hours. Customers make available warehouse facilities to store products shipped into Thailand by the suppliers who purchase insurance to cover all risks. Whenever a customer wants any products, it issues an order and within one or two hours, suppliers generate invoices electronically and authorise customers to pull products out of the warehouse.
Inventory is adjusted automatically.
Many plants working around the clock will have access to the goods within two hours. Customers never carry inventory on their books and can reduce the amount of working capital they need. Foreign suppliers can set up warehouses in Thailand due to the tax exemptions offered by the government. However, if Thai companies want to set up similar offshore warehouses, they run into tax problems under Section 70 of the Revenue Code. It stipulates that all exports from this country, even those destined for storage offshore in a company's own warehouse, are deemed sales from Thailand, and their profits and losses including foreign exchange must be recognised immediately.