OEMs leverage supplier fairs in China
David Hannon -- Purchasing, 3/2/2006 2:00:00 AM
Buyers looking to find suppliers overseas are trying anything and everything to connect with suppliers. While the Internet has certainly made identifying global suppliers easier, in many countries face-to-face meetings are still the most efficient way to get a deal started. That's why global supplier fairs are being increasingly leveraged by buying organizations at many U.S. and European manufacturers. To further investigate this trend, Purchasing recently contacted the organizer of a supplier fair in China, as well as two attendees to get their impressions.
The International Sourcing Fair in Shanghai has been held annually since 2002 and organized by the Ministry of Commerce in China. It's currently one of the largest sourcing fairs in China today.
For the uninitiated, unlike a typical "trade show" it's not the suppliers that set up booths-it's the buyers. Suppliers roam the show floor and visit with buying companies they may be able to supply.
Tao Zhu is senior vice president of strategic procurement for Siemens Communication Group in China. In mid-2003, he came to Beijing to head up the Chinese sourcing effort for Siemens' communications businesses.
"The localization is one key element of the sourcing strategy in China," Zhu says. "One goal of our strategic procurement in China is to improve the cost position. Another positive effect is leveraging the high flexibility of local suppliers to give us competitive advantages for our supply chain."
Zhu says suppliers in China can basically be broken into three categories:
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First there are global companies that have set up manufacturing facilities in China for cost savings.
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Secondly there are Asian companies (from Hong Kong or Taiwan, for example) that have set up factories in China.
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Third are the native Chinese suppliers, which are the main focus of many major OEM buyers.
"By attending trade shows we can also meet these native Chinese companies in person and get a first impression of them," Zhu says. From there, the most promising suppliers can be analyzed in more detail through site visits and more in-depth communication.
Zhu says Siemens sourcing professionals in China attend at least two trade fairs a month in the quest for native Chinese suppliers. Siemens has been a supporter of the International Sourcing Fair in Shanghai and even held its own Siemens-specific sourcing fair in 2004. "The success of that event was very positive," says Zhu.
Michael Li is global sourcing director for printing services firm Domino Coding. In that role, Li is responsible for the global sourcing activities in Asia for Domino group companies worldwide.
Li says online sources help with general background and information in producing a long list of potential suppliers, but there are definite advantages to the in-person format of a trade fair. He's based in Shanghai and attends between seven and 10 trade fairs a year in China.
"Finding suppliers in China is the first priority for our company," he says, adding that electronic components and mechanical assemblies are high on the priority list. At the last Shanghai fair, he came across a cable assembly supplier that is now being qualified.
When it comes to translation of business goals or requirements between U.S. or European companies and Chinese suppliers, many of the issues are already in the past, say buyers on the ground in China.
Li says there are some cultural differences between U.S. and Asian companies that are best worked out in person. "What's most essential is good communication based on trust," he says.
Zhu says the assumption that Chinese suppliers can only handle low-end production is costing some OEMs big. "We've proven in China that local suppliers can also serve high end technology in certain areas," he says. "China is the most interesting and dynamic supplier market. You must not miss the opportunity to fully explore its potential."
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