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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.

A big China sourcing scam to watch out for!

A big China sourcing scam to watch out for

My friend Renaud Anjoran of the Quality Inspection Blog (which is fabulous, you should subscribe if you have not already done so) posted an instant classic today. Just when I think the chutzpah and sleaziness of Chinese trading companies can’t get any worse, it does. Forgive me for quoting at length:

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!

afternoon-factory

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 importance of parallels in supply chain management

The importance of parallels in supply chain management

Since I suck at blogging on a regular basis, you should really read Dan Smith at China Law Blogand 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.

China supply chain management 101

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.

I am betting I can beat Dan Harris and Renaud Anjoran at pool…

Only because I can’t beat them at blogging. I am daily reminded of how badly I am outclassed at blogging by the China Law Blog and the Quality Inspection Tips blog. I get daily gems from these two blogs, and these days if i post once a week I am lucky. Needless to say, I recommend you subscribe to both.

I am not nearly as erudite as these gentlemen. They daily manage to serve up something worth reading, and by that measure, if I produce something worth reading once a month, hallelujah.

I titled this post as I did, because it is a daily discipline that I play 4-5 games of 8 ball on my home table. I have a fine old AMF pool table and shoot a few games each night as I complete my daily correspondence with PassageMaker’s clients around the world. If you are ever in Salem around 10 PM – 1 AM Eastern, be sure to stop by for a game. This is nothing more than relaxation, so I shouldn’t read too much into it, but I will anyway for the sake of this blog.

I am a better than fair shot, and 5 and 6 ball runs are common in my game. I have only ever had one 8 ball run off the break, and my opponent in that blessed game has refused to play me ever since (nearly 20 years and counting).

The reason I torture you with such an agonizing metaphor, is that pool tables are NOT the same in China. You would think that pool is pool around the world, but as with so many things, local differences make ALL the difference.

I am a pretty good shot, but when in China, I have to adjust my game. Chinese pool tables have rounded bumpers around the pockets, versus the standard angled bumpers on American tables. This means that a shot that would go in in America will bounce out in China. This has taught me to have a gentle hand and plan my shots better than is required in the USA.

This is an apt metaphor for doing business in China. What is easy and straightforward in the USA is a miss in China. Not a week goes by that I don’t have a client that wants to cut corners and do things “quick” in China. I always push back, insisting that they take their time, whether that means finishing their design database (rather than leaving the engineering up to the Chinese suppliers) or taking steps to properly protect their intellectual property by filing for Chinese patents and trademarks.

My point is that you always have to assume that doing business in China will take longer and be more difficult than the same task in your home market. 99.9% of the time this will be the case.

China is the way to go for inexpensive tooling and production parts, but it is NOT always the easiest way to go. Before you decide to work in China, you need to make sure you understand the difficulties involved, something PassageMaker can help you with.

Because those round pockets are a bitch.