I suck at blogging.  Dan Harris does it better.  Renaud Anjoran does it better.  Tom Lasseter does it better.  If you have not already done so, subscribe to those blogs.  Today.

I have not done much blogging this year, as the news has been so universally awful that I’ve been unable to summon the enthusiasm to comment.  Short version, it is ugly out there and it will only get worse before it gets better.  Plan accordingly.

However, as someone who works with entrepreneurs and inventors on a daily basis, there is reason for hope.  People keep coming up with cool new ideas they want to bring to market, and they ask for our help.  PassageMaker had a solid growth year in a bad economy, so I guess I should be Chatty Cathy these days, but a combination of so much work and so little global good news as dampened my blogging spirit.

My one comment for the day deals with bringing a new product to market.  Our contributions to the value chain – sourcing, supply chain management, contract assembly, logistics – are really the easy parts.  The hard work is building a brand and getting it recognized in the marketplace.

If you are thinking about launching a new product, PassageMaker can take the headaches out of the production process.  But we don’t (and can’t) help you sell it.

Too often in the last few years, I’ve seen clients invest thousands in engineering, patents, sourcing, tooling, etc., with little thought given to how to get the product in front of buyers.  If you are planning a new product launch, assume that you are the only one who thinks it is the greatest idea since the wheel and focus on how you are going to convince the rest of the world. And budget accordingly.

My advice:

1 – The internet is great, but not everyone knows how to use it.  If your plan is social media and SEO, make sure you are really the expert you think you are.  Or have the money to hire that expert.

2 – If you are going Big Box, understand what that means.  A PO from a major retailer can be a million bucks on paper and negative income in reality when you consider the lead-times, warranty agreements, performance penalties, etc.

3 – Advertise if you can.  Twenty-some years ago, Coca-Cola assumed that their brand was so strong that they could stop advertising.  They ultimately lost market share to Pepsi and had to spend a fortune to get back in the game.  If you are launching a new product, nobody knows who you are, so you have to get the word out.

4 – If you can’t do it yourself, bring in investors who can help.  I’ve seen businesses with ridiculous numbers of investors, none of whom contributed to making the business a success other than providing short-term financing.  If you are going to add an owner to the mix, make sure they have skills to make the company a success long-term.

The one mistake I see clients make over and over (twice today so far as it happens) is trying to get ANYTHING made without a complete design database.  This never works, and is of course also always my fault somehow.  This in large part is why I formulated Kelly’s 1st & 2nd Laws of China Sourcing.

CES just updated their website, so go take a look!

I told him that all the green energy projects in China were on top of all the new coal fired power plants.  As one wag put it, it’s like a 600 lb. man eating a 12 course meal and then finishing up with a Lean Cuisine microwave dinner as a bedtime snack because he’s “on a diet”.

This reminded me of an email conversation with one of our Endorsed Service Providers, who also has never been to China:

Our ESP – Hey, Whit.  Is it pollution, or fog in this website background?  http://ringvemedia.com/ [ed. - That's really cool website by the way. Make sure to click through.]

Me – pollution.

Ignore the hype.  Solar and wind won’t replace coal, oil and gas anytime soon.  Thorium may be another matter, but greens have a cow at the thought of anything nuclear, so my conversation partner wasn’t talking about that.

Face it, we outsourced our pollution.

My friend Gaetan, from Eyo Green Alliance, told me about an incredible story. I mean, incredible to people who don’t know the Chinese business environment. He gave me some photos as illustrations, and he blurred them to avoid any dispute.

Last month he scheduled two factory visits over the same day, in the city of Shenzhen (between Hong Kong and Guangzhou). He was looking for a good manufacturer of LED lamps.

The factory he saw in the morning seemed to have a storage problem — they even placed some cartons in the reception area.

In the afternoon, Gaetan noticed he was driven to the exact same building. It was the same place!

Below is a photo of the same reception area. You will notice two things:

• The cartons had disappeared, and revealed a large logo.
• The company name on the wall was different.

Oh, and also… The prices he was quoted in the afternoon were 25% lower than in the morning!

Could he have spotted it before the visits? No. The company names were different, and one address referred to the area while the other gave a street address.

Read the whole thing.  I have thankfully not had anything so dramatic happen to me, but this is an example of why it pays to do your homework and have an agent on the ground. If this kind of thing happens to experienced buyers, what makes you think you can avoid such situations buying online from the USA?

The new America Invents Act, signed into law last week by President Obama, will have a substantial impact on the pace of innovation in the country, according to Alan C. Marco, a Washington and Lee University economics professor who specializes in intellectual property rights.

Much of the media coverage of the new law focused on the change in the way the U.S. will award patents to inventors from a first-to-invent basis to a first-to-file basis.

Marco, who spent a recent leave as an expert adviser with the U.S. Patent and Trademark Office (PTO), said that while the shift is important, he believes it is even more significant that the patent office will now be able to set its own fees and manage its own budget.

“Allowing the director of the patent office to set fees will permit them to take those fees and invest them in more patent examiners and better technology that will hopefully improve quality and speed of the process,” said Marco. “The PTO will still be required to be revenue-neutral, in the sense that it must set aggregate fees to recover its long-run costs.”

This part of the new act will, Marco said, help address the growing backlog, which has meant that it takes inventors seeking a patent up to three years to get the first decision and as long as five years to get the patent grant. Since the patent term runs from the date of application, examination delay effectively shortens the period where patent holders can recoup their research costs.”

In addition, Marco said that by now allowing the patent office to set its own fees rather than having to seek permission from Congress, the fees will be set in what he calls a “rational way from an economist’s perspective.”

Said Marco: “It enables the patent office to establish fees that are more in line with consumers’ interests and with innovation.”

Meanwhile, the shift from the first-to-invent standard to a first-to-file brings the U.S. more closely in line with the rest of the world.

“We are not adopting the same system of first-to-file that is the case in the rest of the world,” noted Marco. “Instead, we are adopting the first inventor to file. That’s a significant difference.”

“In the past in the U.S., it had been first-to-invent. So if there was a question about whether or not you were the first to invent, that could be a pretty painstaking and bureaucratic process. Now it is the first inventor who files. If there are multiple inventors, the first one to file is the one who gets the patent. We won’t have people sitting on the sidelines, grabbing an idea and still getting a patent. Furthermore, the new system means that inventors have an incentive to bring their ideas forward in published applications. That information benefits everyone.”

Marco said some people fear that this new system will prove a disadvantage for small inventors as opposed to large companies since the small, individual inventor with the same resources of a big company may have a harder time getting to the office as fast.

The new act provides tactics that small inventors can use, Marco said. There are, for instance, provisional applications that serve as placeholders for 12 months without having to be fully developed patent applications.

“I think the ability of small inventors to use those provisional applications really handles a lot of problems with the first-to-file system,” Marco said.

In addition, there is now a fast track that will allow, at the outset, 10,000 applicants to pay a higher fee but get a guaranteed 12-month response for the first decision.

“For those who are worried about the backlog and delay, this provides an opportunity for them to get quick responses. This could be important for big firms, but this can be vitally important for small entrepreneurial firms that are seeking venture capital funding,” Marco noted. “When venture capitalists are looking at small startups, one of the things that they are interested in as a signal of the quality of their inventions is patents. This can be really important in gaining funding. It is a higher fee but not something that would be prohibitive to a smaller firm.”

Marco also noted that the new act establishes a “micro-entity” status that provides a 75 percent discount on the fees and is targeted at individual inventors.  There is also a new system under which someone can challenge the validity of a patent by going to the patent office rather than having to make that challenge in the courts.

“If someone goes to the patent office in a certain period of time to make a challenge, the opposition will be handled in house,” said Marco. “There will always be an appeal to the federal courts but this new process could allow inventors to challenge an issued patent without having to go to the courts.”

The act is seen as the most significant change to the patent laws since the 1950s. Marco agrees with that assessment.

“It doesn’t mean that you’re going to see flying cars in a matter of years,” he added. “But I do believe it will improve innovation.”

I guess I feel a little better now, but the proof will be in the execution.  Maybe Dan Harris at the China Law Blog will weigh in soon.

Mr. Borlaug’s inventions produced a great deal of good for the world – fewer starving children strikes me as quite good – but his detractors argued that cheap plentiful food was a bad thing.  Too much food would lead to too many people, and Gaia must be saved.  Their compassion only extended to mankind in the abstract.  I guess some people are never happy.

Now today a coworker sends me a fascinating article on the passing of Keith Tantlinger, the inventor of the modern shipping container.  While Malcom McLean usually gets most of the credit for moving the world to containerization, Mr. Tantlinger was the man who actually designed the containers themselves.  If there is one item that made “Made in China” possible, the shipping container is it.

Here is his obituary and here’s the blog post sent by my coworker.

I don’t know if Mr. Tantlinger knew he was creating technology that would truly change the world, enabling the export led growth that allowed so much of Asia to crawl out of miserable poverty in such a short period of time. That change allows me and millions of other consumers around the developed world to enjoy inexpensive imported products that would be priced out of the market if they were Made in America.  Indeed, many of these products would never have been brought to market, as the initial investment in tooling would have been prohibitively expensive.  Anyone up for a $2500 iPhone?

I know what the pessimist side will say, international trade has cost American jobs.  I can probably find a thousand economists on either side of this argument, but my first hand impression having done business in emerging markets like Mexico, Eastern Europe and China is this – economic growth is a good thing and not a zero sum game.  The Czech Republic right after the fall of communism desperately needed economic growth to recover from the damage done by the previous regime.  Should we have refused to trade with the Czechs? What would have happened had there been no blossoming of the export sector?  I can’t think of any alternate scenario with a happy ending.

I could write for days on why American industry is or is not competitive or why you should or should not source in China.  I will agree that there is always a cost to every transaction (there is a benefit too), and sometimes that cost is measured in manufacturing jobs lost to foreign competition.  I will agree that “free trade” with China is a stacked deck.  But billions of people are benefiting from global trade and the USA has seen its ship rise right along with everyone else.  None of this would have happened without containerized freight.

So thank you Mr. Tantlinger, may you rest in peace.  Those of us in the China supply chain management game wouldn’t be here without you.

My view on China sourcing can be summed up thus:

1. I might change things in the rulebook if it were up to me, but it’s not.  The games is played by rules written by others, and until someone makes a change, the world is a global market and one man or one company cannot change the system by refusing to play.  When I came back from my first experience living in Asia in 1994, I told everyone in our company that the “great sucking sound” from Mexico was not what we were really hearing.  It was the tidal wave headed across the Pacific from China.  I knew that our company was not going to stop that wave and we could either drown on the beach trying, or get a board and learn how to surf. PassageMaker’s services can be described many ways – China supply chain management, vendor coordination, China sourcing, China contract assembly, blah blah blah blah blah – but we are really surfing instructors for hire.  It’s my job to keep you from drowning, not change the world.
2. China moving from a desperately poor nation to a more prosperous one is a good thing.  I would rather 1.3 billion Chinese people feed themselves than starve waiting for foreign aid.  That doesn’t mean I’m in love with the government or that I think Chinese people are perfect or better than Americans.  America’s problems are mostly our fault and entirely up to us to fix.  The solutions are there, and most business owners I know, regardless of political affiliation, will prescribe the same solution – get the government out of the way and let me get to work.  Nothing is accomplished by blaming others or giving up hope.  To quote Jerry Pournelle:

Despair is a sin.

At the end of World War II, much of Germany was in ruins. Large parts of its infrastructure was attacked or bombed by the Allied Forces. The city of Dresden was completely destroyed. The population of Cologne had dropped from 750,000 to 32,000. The housing stock was reduced by 20%. Food production was half the level it was before the start of the war; industrial output was down by a third. Many of its men between the ages of 18 and 35, the demographic which could do the heavy lifting to literally rebuild the country, had been either killed or crippled.
During the war, Hitler had instituted food rations, limiting its civilian population to eat no more than 2,000 calories per day. After the war, the Allies continued this food rationing policy and limited the population to eat between 1,000-1,500 calories. Price controls on other goods and services led to shortages and a massive black market. Germany’s currency, the reichsmark, had become completely worthless, requiring its populace to resort to bartering for goods and services.
In short, Germany was a ruined state facing an incredibly bleak future. The country was occupied by four nations, and soon it would be divided into halves. The Eastern half became a socialist state, part of the Iron Curtain that was heavily influenced by Soviet policy. The Western half became a democracy. And caught in the middle was the former capital of Berlin, which was divided in two, eventually separated by what became known as the Berlin Wall.
But by 1989, when the Berlin Wall fell and Germany was once again reunited, it was the envy of most of the world. Germany had the third-biggest economy in the world, trailing only Japan and the United States in GDP.

Read more: http://www.investopedia.com/articles/economics/09/german-economic-miracle.asp#ixzz1YRwTIuT4

There is a way out of this Depression. Our lands do not lie in ruins. Our fields are not cratered from bombs and filled with mines. Many of our idle factories still exist. Wonderful machine tools and laboratory instruments are sold at scrap value on eBay and at public auction. There is lots of unused productivity in this land, and we know the formula for prosperity. It is liberty. That has always been the secret of American exceptionalism. We had founders whose goal was to insure the blessings of liberty for themselves and their posterity.

Freedom is not free. Free men are not equal. Equal men are not free. We have always known this. We know it still.

China sourcing is a tool businesses can employ to help make themselves more competitive.  That doesn’t mean you should source in China. And that doesn’t mean it is the only way to compete.  Blaming others solves nothing.  Time to get to work.

Since I suck at blogging on a regular basis, you should really read Dan Smith at China Law Blog and Renaud Anjoran at Quality Inspection Tips.  It’s not that I don’t see two dozen things each day I want to blog about – I have hundreds of articles archived that I fully intend to blog on someday, probably after each is three years out of date – but I just run out of time each day.

Well today Dan had something that really struck a chord with me.  In his post, “Moving On Out To China’s West Side. Why Things Go Slowly.“, he writes:

…we were hit with a flurry of companies looking to move out from places like Suzhou and Shenzhen and Dongguan to places like Yantai, Jinxue and Datong. Two of these have already begun the process. Note though that I intentionally used the ambiguous term “move out from” as opposed to “leave” because in none of the cases is the company going to shut down any operations. At least not yet. Their plans are to open ancillary facilities elsewhere, see how those go, and then, based on that, decide what to do with their existing facility or facilities.

This is priceless advice.  In years past it was not uncommon for me to have clients shut down existing domestic supply chains before the Chinese supply chain was properly up-and-running; in some ridiculous cases, before the Chinese suppliers were even really identified.

DO NOT DO THIS.

If you are ever thinking of establishing a new supply chain, regardless of where it is, get it established and running in parallel with your current system.  And then run it in parallel for a couple of years, slowly changing the ratio so that the majority of your product comes from the lower cost source.  Then once all the bugs are worked out and you are absolutely convinced you are ready to shut down the old in favor of the new, run them in parallel for another year just to be safe.

PassageMaker can help you manage your Chinese suppliers, but I will advise you NOT to give me 100% of your demand right away if you have existing suppliers or your own production lines. Keep your existing system as back up and average your costs down.  My goal is that you be successful and making me immediately responsible for your whole world is not a good decision for anyone.

But that’s just my rant for the day.  Your thoughts, please.