Title: Presented by Judy Huang President
1Presented by Judy HuangPresident CEO889
Global Solutions Ltd.
2Why Consider Sourcing in China?
- To be more competitive!!
- By incorporating sourcing of higher volume or
difficult margin products to supplement your own
manufacturing process. - By taking advantage of the lower labor costs and
the growing sophistication of Chinese
manufacturers.
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5Chinas Unique Environment 3D
- Legal/regulatory legal infrastructure, body of
rules, application of rules, enforcement of
rules, transparency. - Structural economic entities/behaviors, banking
systems, post, media, transportation. - Social/cultural ethics, language, psychology,
human resources, demographics.
6Why the rapid development of world-class
suppliers in China?
- Abundant, well educated, cheap labor
- Stable, mature government and infrastructure
- Increasing domestic Chinese and world market
demand - US Tier One and Tier Two suppliers began to
follow their - customers to China and each multinational
company would - pull 10 international suppliers to China
7Chinas General Information
- Population 1.3 Billion
- GDP Growth 9.1
- 4th Largest Trader in the World!
- China is expected to have the worlds largest
economy by 2040! - Great export performances and rising foreign
investments forecasts a positive outlook for
Chinas economy!
8Best candidates for China sourcing
- High labor content
- Require secondary operations such as assembly,
surface plating and chrome plating - Low cube/weight
- High volume and quick sellers
- Troublesome profits
- Infrequent engineering changes
- Castings subject to environmental control
9Poor candidates for China sourcing
- Specialized products
- Engineering intense
- Frequent modifications required
- New products
- Low volume products
10Potential pitfalls of sourcing direct
- No relationship, no business.
- Qualityqualityquality becomes an issue when
communication and mutual understanding of quality
standards fail. - Legal recourse and product liability insurance
issues arise if taking a direct approach. - Payment and shipping terms
11Special Considerations
- Western managers tend to look at suppliers as
business partners with common goals and long term
relationships. - Many Chinese suppliers are salesmen first and
tend to over-promise in order to get the
business. - Dont be wined and dined into a partnership.
- Get professional help and advice.
12Determinants of Sourcing Fees
- Labor needed to staff the project
- Special technical skills needed for QA work
- Number of sub-suppliers that need to be
coordinated - Location of suppliers
- Difficulty of production
- Starting from blue prints or off the shelf?
- Frequency of orders
- Consolidation of shipping location
- Coordination of export and banking documents
13Risk Management Intellectual Property
- Trade secrets and the competitive edge
- Keep the Crown Jewels safe at home
- Separate manufacturing process of the whole
product into several different manufacturers
14Risk Management Quality Control
- Clearly specify the inspection requirement to the
supplier. - On-site inspections and monitoring
- Samples
- Pre-approval of changes
- Set per shipment failure tolerances
15Risk Management -- Currency
- Pressure of currency devaluation has caused
- Increase in raw material cost therefore raising
cost production costs - Increase cost in commodity items
- Decrease of trade rebates to Chinese
manufacturing factories - Devaluation of currency have taken place of 2
last year and plan to further devalue in 2006 by
another 2-5
16Risk Management -- Arbitration
- Choose arbitration over litigation
- Internal arbitration in China subject to nepotism
and inadequate arbitrators - Hong Kong Arbitration is well respected and
likely to be enforced.
17Transportation Infrastructure
- 16 major shipping ports in China
- Capacity of 5 million tons per year
- Combined total national shipping capacity 1400
million tons. - Major upgrades to Port of Shanghai
- Shanghai Model Port Alliance drives many of the
upgrade - Improvements include
- automate port facility
- minimize loss of goods and transit times
- help Customs collect more accurate tariffs.
- If successful
- program will be repeated in other parts of the
China.
18 - ?? ni hao How are you ?
- ?? zai jian Good-bye .
- ?? xie xie Thank you.
- ?? hao chi Delicious !
19889 Global SolutionsYour China Connection