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3 essential items when sourcing from China & elsewhere

3 essential items when sourcing from overseas

Excerpts from Smart Company’s interview of PassageMaker’s Mike Bellamy about sourcing from China.

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Thanks to a massive improvement in quality, logistics and infrastructure over the past decade, it has become easier and easier for small businesses in Australia to expand beyond national borders and infiltrate huge consumer markets in purchasing powerhouses like China. However, it still can be a daunting task for small business owners to know where to start when it comes to getting their enterprises up and running outside of Australia. How do you choose the right suppliers? What countries offer the best quality and fabrics that you are looking for? How do you successfully communicate across language barriers?

Having worked with Australian customers for 15 years – at one stage they made up around 85% of my business – I’ve had the opportunity to observe first-hand the most common challenges small businesses have encountered when embarking on global expansion. Over the years I have developed a three-tiered approach, which I refer to as the ‘Holy Trinity’, for building a productive, mutually beneficial relationship with international suppliers to help take homegrown businesses to the world.

Mike Bellamy on Guanxi

I cannot express enough how important it is to build a strong, cohesive relationship with your international factories and suppliers; putting the human effort in is worth every cent. Mutual respect goes a long way and it’s vital for you to be regarded as a person, not just a purchase order number. I’ve found during my 20 years working as a Westerner in China that even the smallest things go a long way to developing ongoing, honest working relationships. It’s not necessarily all about learning to speak another language fluently or understanding all the cultural nuances; it’s about finding ways to connect and build a bond based on trust. Simple gestures like sending Christmas cards, encouraging your kids to be pen pals or visiting your factories in person are all great strategies for building on both your personal and professional relationship.

Mike Bellamy on Contracts

Small businesses can sometimes find the development and implementation of contracts overwhelming, especially when they face the challenge of communicating in a language (both figuratively and literally) that both parties can understand. Even if legal documents need to be bilingual, it is absolutely imperative to apply the common sense that you would use if you were doing the same type of business with an Australian company or supplier. Integrate simple and easy to understand clauses in all contractual agreements and if you’re working with China, ensure you register your intellectual property there before you even begin the sourcing process. Since the rise of the middle class and increase in China’s consumer market, there is a now a well-defined patent system in place that is cheaper and more streamlined than the domestic process. In fact, the most recent statistics from the World Intellectual Property organization show that 7% of international patents were filed in China.

Mike Bellamy on Supplier Verification

 When doing business at home, there is no way that you would commit your time and money to a supplier who hasn’t been validated and verified as operating within lawful industry parameters. In saying this, it is essential that when expanding your enterprise internationally you perform your due diligence and do your research just as you would at home. This can sometimes take weeks, or even months, but it can mean the difference between your business sinking or succeeding. The majority of companies and individuals who provide sourcing services or run a factory out of Asia are almost totally unregulated in terms of truth in advertising, codes of conduct and service standards.

Mike’s 10 quick tips for starting your international sourcing business:

  1. Know your product
  2. Understand where you want to sell it
  3. Establish access to the market that no one else has
  4. Ask yourself what is important to you as a buyer
  5. Think from the factory’s point-of-view
  6. Sell the factory on why they should work with you
  7. Structure payments to a supplier’s performance
  8. Request samples throughout the entire production process
  9. Manage your expectations
  10. If you find a good factory, hang onto them

Find the original article here.

Mike Bellamy is the founder of the PassageMaker Group and is an instructor at China Sourcing Academy. He will be presenting in-depth seminars at the upcoming International Sourcing Expo Australia in Melbourne.

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Day 31 – 恭喜发财 – PassageMaker’s Chinese New Year party!

Day 31 flowers for the new year or so i assume

恭喜发财, gōng xǐ fā cái, wishing you a prosperous new year!

More articles and weird stuff:

Day 31 – I awoke early and found that our apartment complex had been decorated with live flowers and orange trees for the Lunar New Year.

Day 31 flowers for the new year or so i assume

Flowers for the New Year

We had a productive morning at the Assembly Center, working on streamlining and improving our process documentation. I have a manufacturing background and enjoy working on such kaizen initiatives. Where I wear out is the day-to-day scheduling and personnel management. I can do it, but it quickly becomes tedious, especially HR (which is admittedly less of a problem than in the USA). For the next year we will have so many opportunities to make improvements, I don’t see myself getting bored anytime soon. It also helps we have so many new assembly-inspection-packaging projects rolling in, each of which needs process engineering to get it started. 2009 was actually a strong growth year for PassageMaker, with 19 new assembly projects launched. Selecting tools, writing work instructions, designing jigs and fixtures, laying out the line and setting the Drum-Buffer-Rope targets is the fun stuff. I really have an awesome job.

The managers and I head to the cafeteria for lunch, which is notable for a couple reasons. First, they order Coca-Cola. Now in the USA I might go six months without drinking a soda. I don’t particularly care for them and I have alternatives I prefer in the States, such as iced tea (unsweetened with lemon, if you please). Not so in China, where I know that sodas are safe to drink, and no one has iced tea without a pound of sugar in it (and then usually only in rare SE Asian restaurants). So I drink sodas pretty regularly in China, but I am the one who orders them, not the Chinese. More important to this anecdote is why my co-workers ordered the Coke.

The cafeteria was out of tea.

Being out of tea in China is like being out of wine in France or out of whiskey in Lynchburg, TN (Pop. 361). It doesn’t happen. It’s a sign of the apocalypse or something. I felt like walking outside to see if the sun was going nova.

They didn’t even have any 开水, kāi shuǐ, boiling hot water, which is also commonly drunk, the concept of sanitary cold (bottled) water being a recent innovation. This was truly bizarre. So we drank Coke from tea cups.

 

Day 31 how can a chinese restaurant in china run out of tea. we drink coke instead.

How can a Chinese restaurant IN CHINA run out of tea? We drink Coke instead.

Lunch was also memorable for four dishes, one I can’t wait to try in the USA.

Day 31 beef with sweet peppers.

Beef with sweet peppers – I don’t eat the peppers, but the flavor they impart on the meat is subtle and exceptional.

Day 31 spicy pork wood ears.

Spicy pork & wood ears. This was great – keep in mind this is like getting excellent food at your high school cafeteria.

Day 31 tomato egg soup.

Tomato & Egg soup – actually very good.

Day 31 bitter gourd omelet awesome.

Bitter gourd (also called bitter melon, 苦瓜, kǔ guā) omelet – this was absolutely exceptional – one of the best egg dishes I’ve ever eaten – the gourd tastes a bit like cucumber and matches beautifully with the egg – I can sometimes get 苦瓜 at our local Chinese market and I am going to try this at home. Awesome.

At around 4 PM, things start to wind down and everyone migrates about 10 minutes away to the banquet hall, because tonight is the joint PassageMaker, SafePassage and China Quality Focus annual Chinese New Year party! These companies have grown rapidly over the last few years, and we had about 160 people in attendance. I tried to capture the event, but my camera did a relatively poor job. Apologies in advance.

Day 31 1 we had an upstairs room at this banquet hall

we had an upstairs room at this banquet hall

Day 31 2 downstairs a much larger company was doing the same thing

downstairs a much larger company was also having their CNY party

Day 31 3 their stage show was far more formal than ours

their ‘stage show’ was far more formal than ours

Day 31 4 our banquet had 160 people total

our banquet had 160 people total

Day 31 5 each table prepare with drinks and snacks

each table prepare with drinks and snacks

Day 31 5 this is about a 3rd of the refreshments for the evening

this is about 1/3rd of the refreshments for the evening

Day 31 6 our emcees christina marc

Christina Feng, our Office Manager, did an exceptional job organizing this party. She and Marc Yue, Production Manager of the General Assembly Center, acted as our emcees

Day 31 9 candy teresa our very effective purchasing team

Candy Cheng & Teresa Chen – our very effective purchasing team. Teresa also serves as Mike’s right hand for company-wide operations. Again with the hand signals.

Day 31 10 hebe honey teresa

Hebe Wang, Honey Wu & Teresa Chen – I worked with this team (and others) on streamlining the format of our Product Quality Manual. I’ve got to find out about the hand signals.

Day 31 11 jesse pramod and adam

Jesse Chang, Accountant and Master Drinker; Pramod KC from Nepal, head of Project Management for those projects that have moved into regular production (“Vendor Coordination-Export & Logistics” in our parlance); and Adam Supernant, Project Manager from Michigan. And more hand signals. WTF.

Day 31 12 the buji team

Most of the management from our General Assembly Center (the precision Medical Assembly Center has a separate team). My lao pengyou, Sabrina Liao is on the far right. I caught them by surprise, so no time for hand signals.

Day 31 13 distinguished guests

L-R – Dave Learn, head of Project Management for those projects still in development (“Vendor Coordination-Product Development”; once they go to production, they transition to Pramod’s team). Our distinguished guests – Mike Lopez of Campus Emporium, Tyson Daniel of LimbGear, Collin Peel of Camrett Logistics, and Brian Garvin, Director of New Project Development, my sales counterpart based in Shenzhen.

Day 31 14 brians wife ada

Brian’s wife, Ada, who also does hand signals. A wonderful lady.

Day 31 15 buji staff enjoying a day away from the assembly center they typically work 6 days a week well into the night to prepare for cny

Buji staff enjoying an evening away from the Assembly Center – they typically work 6 days a week, well into the night to prepare for CNY. All of them would be back at work by 9 AM the next day, a Saturday. Whenever I hear Americans bitch about “all the Chinese holidays”, I kind of want to tell them to shove it. This is one of the hardest working groups of people I’ve ever met. In the foreground is Josephine Ji, Manager of the Assembly Center and a very competent woman. Sadly, this is clearest photo of her I got all night.

Day 31 17 hunan cuisine many of our employees are from hunan the province to the north

Hunan cuisine – many of our employees are from Hunan, the province to the north

Day 31 16 hand knotted noodles in duck soup very elegant

hand knotted noodles in duck soup – very elegant

Day 31 18 mike and teresa give the annual address and announce the new profit sharing program to raucous applause

Mike and Teresa give the annual state of the company address and announce the new profit sharing program to raucous applause. Most of our employees are farm kids from the provinces. The idea that they were going to be able to earn a piece of the action blew them away. The party really got rolling after that announcement.

Day 31 19 can i get a witness

Can I get a witness? Mike had the crowd going.

Day 31 20 mike presenting a hong bao

Mike presenting a 红包, hóng bāo, literally “red bag”, a small red envelope containing money. Typically these are token sums, perhaps as little as $0.05, meant to foster luck and prosperity in the new year. Ours had real money and each one that was awarded had more than the last. The final hong bao had over US$100. Everyone also got a bonus hong bao for the New Year.

Day 31 21 julien roger of china quality focus was a big hit with his french accented mandarin

Julien Roger of China Quality Focus was a big hit with his French-accented Mandarin.

Day 31 22 one of the top prizes was a limbgear t shirt and a very generous hong bao

One of the top prizes was a LimbGear t-shirt and a very generous hong bao from our guests.

Day 31 23 jesse toasting an honored guest tyson daniel of limbgear

Jesse Chang toasting an honored guest, Tyson Daniel of LimbGear.

Day 31 22 all the lao wais were asked to speak draw names hand out hong baos drink

All the lao wai’s were asked to speak, draw names, hand out hong bao’s & drink…

Day 31 24 everyone drinks

…everyone drinks…

Day 31 25 and drinks

…and drinks…

Day 31 26 and drinks

…and drinks…

Day 31 27 and drinks some more

…and drinks some more.

Day 31 28 all are rapt with attention as the grand prize is announced

all are rapt with attention as the grand prize is announced

Later things got a little crazy, with dancing, card playing, and for some bizarre reason, arm wrestling. I was reminded of the Festivus Feats of Strength.

Day 31 29 jesse referees the arm wrestling

Jesse Chang referees the arm wrestling

All in all, it was a wonderful evening. Our guests were impressed by the camaraderie and team spirit and by shear amount of fun everyone was having. Having seen the USA go through the politically correct wringer in the last 15 years, during which all forms of corporate sanctioned fun were done away with and replaced by silly and useless “team building” exercises, aka “manufactured fun”, it is nice to be someplace where “corporate bonding” means cutting loose and eating and drinking and dancing and, you know, having fun. I left the automotive industry because the lawyers and the accountants and the buyers had drained every ounce of enjoyment and excitement out of it until it became a soul-draining slog. Life is to be lived and thank God the Chinese understand that.

I recently re-connected with an old friend from B-school living in Switzerland and he is much better networked with our class than I am. He tells me nearly all of our classmates have taken dull domestic jobs. What was the point of getting a degree in international business, he quite rightly asked? I know I did it to get out and see the world, to live a life less ordinary.

Some reading this will think our company frivolous. If you get that impression, I’m sorry you missed the point. PassageMaker, China Quality Focus and SafePassage all provide professional, affordable and reliable services in a timely fashion. Our Endorsed Service Providers do the same. A big part of the reason we are able to do our job so well is we still have the joie de vivre that keeps us excited about our work of helping our clients succeed. So have a drink and Happy Chinese New Year!

 

Why I don’t brew beer (anymore)

20 years ago I wanted to be a brewmaster. The American microbrew movement was just taking off, and it was a good time to get in. I attended beer festivals, visited breweries, did research (in the days before the internet no less), etc. Ultimately I had two banker’s boxes full of information on techniques, equipment, business models, etc. Today this would occupy about 5% of the free flash drive you got for opening your checking account last year, but this was 1989, and paper was still state of the art. And I still have all this information, thank you very much.

I used this copious research to sell the idea of a brewpub to two entrepreneurs opening a new restaurant in a location I had long had my eye on. It was tremendously exciting being even obliquely involved with the start up and I enjoyed working there as an assistant brewer. As great learning experience all the way around, and should either of those entrepreneurs read this, thank you sincerely for the opportunity.

And what I ultimately learned from that experience was I did NOT want to be a brewer anymore. Beer from the store is just fine thanks.

Now, onto the tortured analogy section. Many of our clients are new to doing business in China. Many have done awesome amounts of research, days spent on sourcing websites like Global Sources, and they are totally jazzed about this new experience, much as I was 20 years ago. They want to travel, try new things, etc. Then they realize that the China trade is work, and the fun wears off quickly.

There are brewers who get up every day excited to go to work and make beer. I admire them and wish them well at their chosen craft. Thanks to them, I get to have a drink without all the scalding water, acids, caustic sodas, foul-smelling slime and general hard-work-nastiness that goes into making beer.

The PassageMaker Team and our friends at China Quality Focus are a collection of such dedicated “brewmasters”. I know I wake up every morning happy and enthusiastic about my chosen field. Our Sourcing Feasibility Study, Vendor Coordination and Assembly-Inspection-Packaging service offerings are all designed to help our clients have a successful experience in China. Most importantly, we want to take care of things on the ground in China so our clients can stay at home with their families, instead of spending $10k every other month traveling back and forth to visit vendors. When you do choose to come to China, we want you to come for a relaxing guanxi tour, not to fight fires. We’ll even help you with your travel arrangements and buy you a drink!

The importance of food (and drink); or learning to love Pig Brain Soup

080319 pig brain soup2 300x239

Business books aplenty have been written on the importance of guanxi or relationships in China. And most of them are boring, so I won’t add to the pile.

From my personal experiences over the last 15 years in Asia, as a round-eye you build relationships by eating anything put in front of you and drinking too much. And bringing Purchase Orders.

Thankfully, I like nearly everything I’ve eaten in China. I’d traveled extensively in the USA, Mexico, Europe and Africa before I ever set foot in Asia, but my first night in Singapore in 1994 changed my whole life. And the food was what really hooked me. Prawn mee soup, jumbo prawns cooked in a banana leaf and Tiger beer at 2 AM in Newton Circus. I’d never seen any of this food before, didn’t know it existed, never seen a Chinese spoon, never used chopsticks, yet it was all like mother’s milk. I learned to use chopsticks in about 30 seconds, and to this day I eat noodle soup for lunch at least 3-4 days a week. Tiger is still my favorite beer.

From this experience, I’ve become a more adventurous eater (and drinker) than you’d expect for someone raised in Salem, VA. That adventurousness has served me well in China. When you visit a supplier, it is de rigour that you be hosted for a lunch or dinner banquet. Chinese street food is generally light and nutritious (oh, how I miss the vegetable dishes at the little restaurant around the corner from our office), but the banquet dishes are lavish, heavy and designed to show off and feel you out. Oh, and get you blind drunk in the middle of the day. The Chinese eat darned near anything, especially the Cantonese, so get ready for offal, strange ingredients and powerful flavors and scary textures.

If you hold up under this onslaught of unfamiliar cuisine and frankly toxic baijiu, you pass the test and provide your hosts with some entertainment. If you wind up in the hospital from food or alcohol poisoning, it is even more entertaining for them. But if you flat refuse to partake for anything other than religious reasons, you establish yourself as a wet blanket not to be taken seriously.

So what to do if you just cannot summon the courage to drink snake wine or eat pig brain soup? Option 1 – stay home and let the PassageMaker team deal with the vendors. Option 2 – come to China but let us arrange your trip and we’ll make sure you are not exposed to the scarier fringes of Chinese cuisine.

PassageMaker wants to make sure you enjoy your experience dealing with China, even if you never visit. And I frankly want to keep my record for days on an IV and days hungover after a banquet (4 and 5 respectively) intact.

080319 pig brain soup2 300x239

P.S. – It’s really delicious. One of my favorite dishes. I’m serious.