Having been in the China sourcing business for almost 11 years now, I am often asked what is the most difficult aspect of working in China. My short answer is “Communication”. China manufacturers want to create the product you are asking for. What I have come to appreciate is just how nuanced our thoughts are, and how good communication is taken for granted. Continue Reading…
China – the land of high-volume manufacturing of anything and everything and home to one of the world’s densest populations – is not typically viewed by other countries as environmentally forward-thinking. But recent statistics just released by the China Association of Automobile Manufacturers, or CAAM, suggest that at least some Chinese manufacturers and consumers may be interested in helping reduce air pollution and emissions from fossil fuel burning. Or perhaps they are interested in the potential to save money on gas as fuel prices globally continue to rise. Continue Reading…
Usually I am writing detailed blogs about China Sourcing. But not this time. It is time to take a break from China Sourcing and celebrate life. One of the perks of being in China for over 10 years now is having the privilege of participating, in a small way, in the lives of my staff and friends in China. As I sift through all the memories of factory tours, difficult negotiations and solving a miriod of issues associated with each case, the things I remember the most from my 39 trips to China so far, are the personal memories. And what strikes me today as I write, is watching the children my close friends in China grow up. It is startling sometimes to see such big changes when I swoop in from the US 4 times a year.
China Sourcing: My personal experience.
To sum up part one briefly, China has a conundrum when it comes to intellectual property. On the one hand, they are the world masters at copying or knocking off. There is a cultural argument, or some might call it an excuse, that it in the tradition of Confucianism, it is considered an honor for your idea to be copied. And copying can even be rationalized as patriotic, as that it keeps Chinese employed. But as China transitions from low cost provider to the high tech leader they are determined to become, they are creating intellectual property that needs protecting world wide, including China. So the dynamic is changing, but still, rampant copying or knocking-off is occurring. This is a reality and the best way to deal with it is to divide and conquer so to speak. In other words, your China sourcing plan should include having different components made in different factories in different locations and the packaging and assembly in yet another location.
Go-Dome™, China Sourcing and Intelectual Property.
OK, that catches you up on part one of China Sourcing and intellectual property. Now on to a personal example. I also have another company called Go-Dome™. Go-Dome™ manufactures the world’s finest inflatable portable planetariums. We sell through distributors around the world. And most of what we provide is made in China as you might imagine. The dome cloth, the Go-Dome™ itself and the Newtonian™2 spherical projection cases are all made in different places in different locations. So the above mentioned scheme is critical to securing our place as the finest inflatable portable planetariums in the world.
From China Sourcing to selling in China.
And now I am actually selling Go-Dome™s in China this year. To do this, I have developed a relationship with a Chinese distributor. So it is even more critical to protect my intellectual property now. Since I have started this effort, a Chinese company has knocked me off. So I guess I should be flattered. It validates that China is a good market. But the big difference is that although my Chinese competitor knocked me off, it is a poor copy and gives me distinction in China. We are the BMW of inflatable planetariums in China and China loves quality. It is never a bad thing to have a competitor to be judged against. And as long as we keep improving and innovating, we will always be number one in the Chinese market. I can feel good about that because China is a huge emerging market. I am proud that this China sourcing story of my American company, Go-Dome™ is not only sourced and protected in China, but is also selling to the Chinese market.
China Sourcing seems precarious.
China has a reputation for knocking off or copying products.Â This reputation is well deserved. If you look at it from a neutral point of view, it is kind of amazing. I say amazing because, not only are the accuracy of knock-offs impressive, but the speed of copying a product is breathtaking. On one hand this is a good thing if it is your product Â and you are trying to source it in China. However this uncanny skill is not so good if you are thinking about a factory copying your product without your permission and penetrating your market.
China Sourcing with perspective.
But let’s take a step back. Usually, most knock-offs are commissioned by competitors outside of China and not initiated by the Chinese. And most of these knock-offs are introduced in third world markets and not head to head with, say a US or German market, because our markets are very difficult to enter. I know there are lots of high profile examples that seem to indicate otherwise, but I am talking about the majority of knock-offs I see. Â I am not excusing this practice either mind you. It is not good. But it is a reality. So it begs the question, what to do about it?
One more China sourcing diversionÂ before we talk about solutions. I am going to make a bold statement. Chinese people are are Â extraordinarily honest and honorable. Considering China sourcing issues I just talked about, how can I make such a statement? Here is how. China is not a nation of laws. If you think about it, China has only recently become a world player in the industrial age. And the laws and judicial infrastructure are not in place compared to the west. Just imagine how businesses in the US would behave if we were not a nation of laws. It boggles my mind when I think about it. So I am amazed at just how well behaved the Chinese are considering these factors. And that the integrity of the people and the culture. On a side note, this is why relationships are so important in China. It is difficult to take someone to court over a dispute so both parties must get to know each other and trust must be earned.
What to do about China Sourcing while protecting your Intellectual Property.
Well, if you want to manufacture a product in China while minimizing being copied, the most straight forward solution is to have components of your finished product produced in different factories and assembly and packaging in yet a separate factory or even back home, wherever that may be. This way, no one company sees the whole picture or understands the function of your product. Also you should trademark, patent and copyright your products in China. The irony is that as China strives to evolve from the low cost provider to more sophisticated manufacturing, it is starting to produce its own intellectual property that needs to be protected not only world wide, but from the Chinese themselves. So patent, copyright and trademark laws are starting to be enforced in China out of necessity. I have seen dramatic change just over the past few years. (For more information, read this from the WSJ – “Is China Finally Getting Tough on Piracy?)
In part two of this blog, I will give you a personal example of a product I source in China for world distribution and what I have done to protect my Intellectual Property. (Hint: China Sourcing, Go on the offensive.)
On the surface, China Sourcing sounds risky. Working half way around the world, with a completely different culture and system, with Â a very difficult language, sets off flags in many a CEOs mind. But we all know that if you are stagnant and not expanding you are atÂ risk in today’sbusiness environment. We also know that China in not only the quality manufacturer to the world, but now the second largest market. So where is China in yourÂ business plan? I said it before; China is either a place to cut your manufacturing or distribution cost, anÂ emerging market or a direct competitor. Sometimes all three.
The China Sourcing factor:
So if you are not factoring China Sourcing in your business plan, there is a good chance that you are putting your company at risk by playing it safe. China Sourcing companies like Avela Corporation can help you develop yourÂ China strategy, but regardless of how you approach China, you need help.Â Some see risk as a four letter word but, I equate risk with positive outcomes like opportunity, stability and growth. And the safe way to manage risk is through your business plan.
China Sourcing missteps:
Many companies realize that they need to be in China and spend a lot capital making missteps along the way. I hear too many stories of someone who “knows a guy” in China who can help me with my China Sourcing. These stories always start off well, with some success. But too may times end badly. Or countless stories of developing internet relationships that result in bad outcomes. Business in China is about finding the right fit and building a relationship. And knowing a guy or working through the internet is how I define risky business.
My over all point is that you need to include China in your business plans, and when you are ready to act, get professional help. Experts hire consultants, athletes have coaches and seasoned travelers hire guides. So do the safe thing and take a risk. And if you are considering China Sourcing in your business planning, manage the risk by getting help. Contact Gary at Avela for your China Sourcing business strategy.
China Sourcing, Mergers, and Acquisitions…What I learned at Vistage
At my Vistage meeting last week, we listened to a speaker about mergers and acquisitions. And as usual, I was trying to imagine how this great information would pertain to China sourcing. He said that 65 percent of mergers and acquisitions fail because parties spent time putting out fires and not planning properly. That sounds simple, but there was much more to it. We learned that there are four principles that the successful 35 percent adhere to which keeps them on the success track. These principles are as follows: Plan, Inspire, Focus and Follow through. Sounds simple enough on the surface, but when you get into the details of merging business cultures, things become very complex.
And How Does this Relate to China Sourcing?
And I realized that these principles also apply to sourcing products and services in China. After all, my company, Avela Corporation, acts as the liaison, merging completely different business and cultural differences in order to create an environment for success.
Our speaker had a great quote regarding planning by Dwight D Eisenhower. “In preparing for battle I have always found that plans are useless, but planning is indispensable.” I was struck by how profound this is. Planning for all contingencies helps eliminate firefighting and is critical in supports reaching your goals.
Inspiration is about getting everyone’s buy in. It is all about clear and honest communication. If done with purpose, autonomy, and mastery, you get understanding and engagement.
Our speaker implied that focus is about providing the resources necessary to do the merger correctly.
Accountability is the key to China Sourcing….
And of course follow through is all about accountability and doing what you said you would do, when you said you would do it.
Many details were merger and acquisition specific, but I found that many of the ideas and principles presented were not only applicable to China sourcing and building lasting relationships; theyÂ were winning principles in general. Principles not to forget or lose site of.
As we push through the details of the days, weeks and months of 2011, we may discover that we are putting out more and more fires in our business. If so, it is probably a good time to reexamine these principles in ernest and get back on the 35 percent success track. Avela Corporation has over 10 years of success in china sourcing and creating relationships necessary for your business.
Accountability: The Key to China Sourcing
I am asked quite often; “How can you guarantee that my order from China will be perfect?” I usually say that we have procedures and a process to work through quality issues. We have a whole list of things to do including the development of check lists, photos and video confirmation, and third party materials testing — just to name a few. But I don’t talk too much about what we are doing behind the scenes to increase accountability on the China and client sides. It dawns on me that maybe I should be bragging (just a little) about our accountability effort and how it saves time, money and benefits all three parties (our client, the factory in China and us- Avela Corporation).
And just like my last blog (I am not the hammer and you are not the nail) about negotiating by relationship and not through leverage, relationships play a large part in achieving accountability. An investment in relationship is an investment in accountability. When you have a real relationship, both parties do not want to let the other down. And that fosters accountability. But there are more layers to accountability than just having the clarity and good communication from a good relationship. Anther layer is commitment. Nothing sings louder than showing a Chinese factory that you are committed to your business, your product’s quality and to their success. No commitment is a template for failure in China.
China Sourcing is about the details…
And of course you have heard of the old business axiom, “What gets measured gets done“. Chinese factories respect this concept, so the more specific and detailed you are about your product and how it is made, the more accountable they will be. It shows that you care and are serious. In other words, if you provide every detail they need to succeed, you are not one of those “high maintenance” clients. Yes, they have similar stories of high maintenance and tell me that getting good information from a client is like pulling teeth.
Naturally, accountability is a two way street, so they will ask you about your responsiveness to problems and willingness to listen and consider their advise as they parse the issues involved in creating your product. When you show accountability, you get accountability. This leads me to one of my favorite phrases, “No plan survives its collision with reality” by the author of Fierce Conversations- Susan Scott. For me, that means we need to allow time, financial investment and patience to achieve a real success in China.
You need an experienced liaison for your China sourcing project
And as the sourcing liaison between our clients and the China factory, we perform these efforts as second nature now. But it was not always this way. It took us time to learn to foster accountability through the language and cultural and even the social political differences that exist. And I am thinking I need to appreciate my team more for how accountable they are and say thank you more often.
China Sourcing Agent : Avela Corporation is an experienced China sourcing agent which will assist your company in manufacturing project in China.
Relationship Sourcing in China
There are tons of articles and books on the do’s and don’t of etiquette and culture in China. Everyone who wants to do business in China should have this basic understanding. But once you are past these formalities and want to develop a long term relationship, the foundation I like to build on is “I am not the hammer and you are not the nail”
Sourcing in China – When I Started My Business….
10 years ago when I started my China sourcing business, I saw China as a cheap place to produce goods for my clients. And my job was to get the lowest price possible at an acceptable quality. Sounds reasonable right? I was the hammer and they were the nail. I was a relentless negotiator. And this worked fine for awhile. I had found success. But as my business matured and I was looking for repeat orders and not event driven, one time deals, it became apparent that I needed to build relationships and my hammer/nail strategy was not working. In fact, it was not long before I found out I was not even getting the lowest price I thought I was. How could that be? I was getting bids from multiple sources and pitting them against each other. What I found was that these manufacturers were used to guys like me and knew exactly how to work me. I was the nail and they were the hammer.
Sourcing in China Requires Being a Good Listener?
So I took the time to stop negotiating and start asking questions and being a good listener. And what I heard was that these manufacturers wanted the same things but we were not listening to each other. We both wanted relationships. But in China you need to invest in the relationship. The fact that you are the buyer does not hold as much weight as you might think.
So what does that relationship investment look like? First the Chinese manufacturers want commitment. They would like to know that you are ready to give as well as take. They want to understand your long term goals so they can begin thinking about how they can contribute to a mutual future. They want to connect with you on a more emotional level to see what kind of person you really are. They want to build trust over time. And the thing that struck me the most was how I had ben missing the point all along. Stability and relationship were factors in not only the price but quality as well. As I changed my tact and became attentive to stability and relationship, I found out that price and quality took care of themselves.
I am not saying you still don’t negotiate price. You absolutely do. But you do it in a more sophisticated way. And you do have to watch quality closely, but when trust is part of that equation, communication and goals become aligned. When goals become aligned, greater accountability follows. And instead of a hammer/nail relationship you have an investment in your future in China. Contact Gary for your sourcing in china needs.
Every year at this time I am giddy with excitement and anticipation at the prospect of attending the Canton Fair in Guangzhou China. I have attend the Canton Fair over 12 times in the last 10 years and I am always amazed. Maybe I am easily impressed but you tell me if there is anything trade show wise that is more impressive than the Canton Fair?
- Phase 1: 15th-19th October 2010 9:30-18:00
- Phase 2: 23rd-27th October 2010 9:30-18:00
- Phase 3: 31st October – 4th November 2010 9:30-18:00
- Exhibition Space: 1,125,000 square meters (12,100,000 square feet)
- Number of Booths: 56,915 standard booths
- In 2009 the number of international buyers to attend the October Canton Fair was 188,170 from 212 countries
The organizers completely change out this vast facility 3 times during the 20 day event to accommodate the three phases. Just that alone amazes me. I am struggling with descriptors of this amazing event which happens each October and April in China so I thought I would attach a video I made of the fair from last year.
If you are involved with merchandising or manufacturing in any way you really should treat yourself and spend at least 3 days at this fair. If you have never been there, I promise you it will blow your mind. And even though I have been to the Canton Fair many times with clients in tow, every time I go, it starts the creative juices flowing for new products available for my customers, and ideas of new customers I need to be calling on because of what I have experienced at the Canton Fair.
I always say that there are three big reasons to have China on your radar.
- 1. Sourcing Products and Services in China to save cost and make your business more competitive.
- 2. Understanding the 2nd largest market in the world, which is China of course. You should be considering offering your products and services to the Chinese market which is growing by leaps and bounds.
- 3. China is a competitor with almost every business category you can name and it is a very good idea to get to know your competition.
And in many cases it is all three of the above reasons. And there is no better way to get your arms around China than to attend the Canton fair.
This seasoned Canton Fair attendee wonders if you are ready to attend and if not, why not?