Posts

Contract manufacturing in China: The brand is the hard part

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.

Basically, setting up a solid China supply chain is an important step, but that pipeline only has value if you can move product through it. We’ll help you deliver, but nothing happens until you sell something. Worth keeping in mind in this tenuous world we live in.

Poka yoke, or Why a solid design database matters

Poka yoke, or Why a solid design database matters

So we have had a very hot summer thus far here in southwest Virginia. Not that it was any cooler or less humid when I was in Shenzhen for six weeks in late spring, but given that I am renovating an old home without central air while living in it, I am allowed to comment on the weather.

The old A/C units that came with the house were not up to the task, so rather than broil while we rip up half the house to install central air, off we go to the appliance store to buy some new window units. We bought several of the same model, and while I have never thought about an A/C unit needing a remote control, this model had remotes.

After I got them installed, we noticed a tiny little design flaw in the remote. See if you can spot it.

Poka yoke, or Why a solid design database matters

Were I a dedicated blogger, I would take one of these apart to show you the interior, but now that I have the wonder of a remote control for my A/C, I am not going to risk breaking one of these just for you. I prefer to luxuriate in my new found comfort like a stereotypical lazy American, thank you very much.

Were I to take the remote apart, you would see that the buttons are molded as one piece. Molding the buttons as a solid piece is the standard way of doing it, but by creating a part that was symmetrical (likely just a plain rectangle), the designer created a failure mode – the assembler could put the parts together backwards. What the designer should have done was analyze what could go wrong with the design – could it be assembled backwards? – and keyed one end so the the part was not symmetrical. Perhaps there is an internal feature that one end of the button strip could have been molded to mate with. Many companies I’ve worked with use the formal Failure Modes Effects Analysis (FMEA) process, and it is a great tool if you have the discipline to use it. The Japanese refer to this practice as“poka yoke” (mistake proofing), but often still translated as “idiot proofing”. I’m not a fan of that translation, because who’s the idiot – the guy would made the momentary mistake of putting it in backwards or the designer who created a flawed product?

PassageMaker often gets classified as a China sourcing company. While we do source products in China, that is only the smallest part of what we do. We are primarily a contract assembly company (with that label encompassing vendor coordination, inspection, the actual assembly, packaging, logistics, VAT rebates, etc.). And I can tell you that we see MANY severely flawed design databases, drawings that appear to have been made by someone who gave no thought to how to put the thing together.

If you are going to spend the money to have something made in China, a dollar’s worth of poke yoke is worth hundred times that in money saved doing inspections, warranty claims and just the general embarrassment of sending a functional part out into the world that is nonetheless defective.

In our Endorsed Service Provider network, we recommend two design engineering firms. Contract Engineering Services is based in Virginia, USA, and VentureTech is Dutch-owned, based in Shenzhen. Both do a fine job for our clients and even if you do your own engineering, I strongly urge you to learn from the lesson above and try an mistake proof your design. It might feel good to blame the Chinese assembly line worker, but who really made the mistake?

Your thoughts?

CHINA TRAVEL | CHINA LABOR

I originally titled this post, “You are one dumb SOB”.

When the Toyota “sudden acceleration” issue arose, I was the lone guy in my neighborhood saying that it was not a Toyota problem. It was bone-headed drivers hitting the wrong pedal, just as the Audi issue back in 1980’s was eventually found to be driver error.

Folks, coming from the automotive industry let me state loudly and clearly, NO CAR IS SOLD WITH BRAKES THAT WON’T OVERPOWER THE ENGINE.

Take a 500+ HP Roush Mustang, pin the accelerator pedal to the floor and get that bad boy up to 100+ MPH and slam on the brakes. What’s going to happen? IT WILL STOP.

You can’t sell a car in this country if the brakes won’t overpower the engine. Period. Paragraph. End of story.

All the STOOPIDITY that has gone on the last year has been just that. Blinkered, politically driven, UAW inflamed stoopidity.

This has been a perfect example of the “China syndrome” where every problem is blamed on the Chinese vendors. Often they deserve it, but more often than not the client is the one in the wrong. Not specifying proper materials, critical dimensions, product finishes, etc., is somehow always the vendor’s problem.

Do Chinese suppliers make mistakes? Sure. But you should always ask whether it is driver error first.

Why resist an audit?

Twice in as many days, I’ve had clients who tried to book Simple Factory Audits (sample report here) with our sister company China Quality Focus, only to have the vendors refuse. They are happy to have the client fly half way around the world for a visit, but no doing for a professional 3rd party auditor to set foot in the building.

Ladies and gents, this is a three-alarm fire bell. You are not dealing with a reputable firm if they won’t stand an independent audit. They are a trading company or a bad factory, plain and simple.

I came out of the automotive industry, which the best crucible for grown-up business I know. I can remember auditors from Mack Trucks, Peterbilt, etc., showing up unannounced to inspect our facility. We even had an ISO audit starting when OSHA showed up for a surprise inspection. I stood two audits in one day on my facility and passed both with flying colors. So don’t give me your *bleeping* sob story.

A Simple Factory Audit is the cheapest insurance policy you can buy. If your supplier won’t allow it, run screaming in the other direction. It is only going to get worse if you stick around.

Life is uncertain – eat dessert first

So say the T-shirts at are local ice cream parlor. I think it’s a great line and not a bad philosophy.

It got me think about our services. Despite the copious amounts of verbiage on our website, I spend a good chunk of each day explaining what we do and how we do it – which is one of the drivers behind developing the upcoming video tours, which we hope to post soon.

Some time ago, casting about for a good analogy for our company, my obscene fatness landed upon the concept of an a la carte menu. You can use our services in the typical order – Sourcing Feasibility Study (sample report here), Vendor Coordination, Assembly-Inspection-Packaging (sample Product Quality Manual here), etc. – or you can start anywhere in the process you like. Skip the salad and go straight to the main course. Or eat dessert first. We are nothing if not flexible, and our only goal is to help the client be successful in China.

And now I want ice cream. Damn.

That’s the good thing about the Dark Side. Eventually, your eyes adjust.

That’s my favorite line from the incomparable James Lileks, appropriately enough referring to brand loyalty.

If you’ve noticed that blogging has been slow these past weeks, it’s been because a number of trips, client visits, etc., but the main reason has been an ongoing grind of computer trouble. I have a high-end Windows machine from one of the big American brands. It was bought a year ago because my prior machine, a super-crappy XP laptop from one of the other big American brands had finally given up. The new machine purchase was ill-timed as I had to get a Vista machine.

Short version, it sucks. Vista is, was and will be terrible. But the machine itself was not much either. Fit and finish were poor (screen was scratched and scuffed out of the box) and like all Windows machines, the thing was crammed with bloatware. Despite its specs, it was slow from the start.

Three weeks ago, Windows download a bunch of updates and all hell broke loose. The Blackberry also updated its software at the same time, which caused another slew of problems. Worst of all, Outlook, which is the only Microsoft product I prefer to use, stopped working reliably. I tried Thunderbird but found it a poor substitute (I love Firefox though). After four (4) different IT folks took a look, after upgrading to Windows 7, after reinstalling Outlook twice, I gave up. My Macbook Pro arrives today. After 20+ years as a Windows user, I am switching (back) to Mac.

Note to Steve Ballmer – when your “productivity software” is this unreliable, it is no longer productive for me to use it.

It will be an adjustment, I am sure and there will be plenty of cussing no doubt. But I had the opportunity to play around with one the IT professional’s Macbook and his iPhone 4G, and both blew me away. I have bitched before about how little I like my Blackberry Storm 2, how unimpressed I am with my current carrier and now I am plotting my move (back) to AT&T so I can get a phone that was designed from the ground up to interface with my computer. When the only office you have is two devices you can hold in your hands, you just can’t afford this kind of garbage.

Why do I include this in a blog about doing business in China? Because both my current laptop and the new Macbook were made by the same company – Foxconn – and yet the fit and finish are night and day.

I have the feeling the company who’s name is on the current Windows laptop just goes to Foxconn and asks what’s new that they can slap their name on and market. I know that Apple does not do that.

I have said it before and I’ll say it again now – you get the quality in China you are willing to pay for.

China’s Mexico is inside China

300x250 run backup

This analogy has a number of problems with it (like most analogies), but I got the point the first time I heard Mike Bellamy make it.

Too many American industries rely on illegal labor to remain cost competitive, thus the constant drama on the border issue.

The China nearly every Westerner sees is the coastal veneer. The majority of China still dwells in the poor, mostly agrarian interior. Their source of cheap labor in internal.

And as this article in Slate by Brett Edkins points out, in a sense, many of those Chinese migrant workers are “illegal” anyway. Key paragraphs:

The United States could begin by conceding one of China’s principal arguments: Human rights are not just about individual liberty, but also economic opportunity. The Chinese “economic miracle,” which lifted 500 million people out of poverty in just one generation, is itself an unprecedented human rights achievement. Yet it gave rise to other pressing human rights concerns, including an issue that threatens to destabilize China’s Communist regime—growing discrimination against the roughly 200 million Chinese citizens who left their rural homes to find jobs in China’s booming cities.

In many ways, these rural migrants resemble undocumented immigrants in the United States. In China, they provide indispensable labor for vast urban construction projects and work in menial jobs as guards, waiters, cooks, or barbers. They are often mistreated by employers, generally live in poor conditions, and receive few social benefits and limited protection from the police. And their children are regularly denied public education.

Chinese newspapers, “Netizens,” and even Communist officials are calling for reforms. Their main target is China’s 50-year-old household registration, or hukou, system. Began as part of China’s state-run economy, the hukou system labels individuals as “rural” or “urban,” indicating their proper place of residence and binding laborers to the land. Today, rural residents are permitted to travel to the cities, but they can still be fined or forcibly returned home if they are caught working or living outside their designated hukou. Obtaining a temporary urban-residency permit from the police is beyond the means of most migrants, requiring a fee and employment documentation. Permanently changing one’s hukou by attending university or joining the military or the Communist Party is similarly out of reach.

Life for a city dweller with a rural hukou is difficult. Their hukou denies them urban welfare and access to public housing. It also excludes them from publicly funded health-insurance schemes. Since fewer than 3 percent can afford health insurance, most avoid medical care altogether. City judges often impose harsher sentences on rural migrants, and employers frequently withhold wages, knowing undocumented workers cannot complain to police without risking exposure.

I will admit I not a fan of the author’s wording, “undocumented migrants”. If you illegally cross a national border anywhere else in the world (including Mexico), you’ve broken the law. Only in the modern American journalist and politician world does that deserve an obscurant euphemism.

However, the point of the article is that despite the rapid advances, parts of the Chinese state are stuck in the Maoist past. One good thing about dealing with PassageMaker, you know our employees are treated well and legal. As a foreign owned firm, the government would come down on us like a ton of bricks were it otherwise.

Regardless, I am happy to see people in China, including members of the Communist Party, start to address the problem.

Some miscellaneous articles

Feeling lazy today. Sometimes the juices ain’t flowing. In no particular order:

Maybe get to some travel blogging tomorrow. Or not. You’ll have to check back to see.

More comments on “Sheer Import Genius” and a great post from Renaud

Renaud Anjoran is a fine fellow who runs an excellent blog about quality control in China. I’ve linked to him in the past, and he’s returned the favor.

He commented on my recent post, “Sheer Import Genius“. This led me to read two excellent posts on the the good and bad trading companies in China.

His points are spot on. One of the reasons PassageMaker formulated the Sourcing Feasibility Study (SFS) was to identify and eliminate piss-ant trading companies that don’t add value.

Li & Fung is a tremendous company, and we have sought to emulate them in many ways. PassageMaker focuses on SMEs – Small to Medium Enterprises, not Li & Fung’s market. Many of our customers are Tier 1 suppliers to Fortune 500 companies, but they themselves fall into the SME category. In my mind, this is a fine market to serve.

PassageMaker is not a middleman. We are not a traditional trading company. We add tangible value with our SFS, Vendor Coordination, Assembly-Inspection-Packaging and Factory Formation services. Most importantly, the entire process will be transparent. We don’t exist by keeping our clients in the dark.

Let us know how we can be of assistance. If you are not 100% sure about every step of your supply chain, you need our help. Trust me, you do.

Great China Law Blog post related to “Sheer Import Genius”

A most excellent post on the importance of protecting your supply chain from Dan Harris of the (most excellent) China Law Blog. If you are not a subscriber, you should be. He is kind enough to link to my post yesterday, “Sheer Import Genius“.

The importance of contracts and compartmentalizing your supply chain cannot be overstated. You have invested too much to build the business. Don’t give it away because you are too lazy or too cheap to do the work to protect that investment.

Money ‘graph:

The other day, a really savvy client of ours stopped by the office. This company has been doing business in China for a long long time and it has non-disclosure/non compete/non circumvention agreements with all of its Chinese suppliers and US Buyers I mentioned the above conversation (no names or other identifiers, of course) and we talked about the benefits of the contracts his company has both in China and in the U.S. He then reminded me that this was also one of the reasons his company had set up its own trading companies in China. This company gets its product from about a dozen different Chinese factories, but the records in both China and the United States all point to the U.S. company’s own trading company as the exporter. This company has never had a problem with its customers going around it.

PassageMaker can help you secure your China supply chain. Our “Black Box” Assembly Center is a far less expensive option than setting up your own trading company. If you still want your own presence in China, we can help you with our Factory Formation service. Give us a call, and when you need a lawyer in China, you could do far worse than Mr. Harris.