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Sourcing Notes from Asia…. China Focus
June 5, 2007
Many companies have focused on outsourcing products in China.There are several classifications of enterprises here on mainland China.
First there are the fully owned foreign companies (non Asian) that can do work for you, especially in the electronics area.Those companies include electronic manufacturing services companies (EMS) from many western countries.You can expect a western style commitment both in quality and delivery from these entities though pricing maybe higher, probably due to increased overhead.
Second are the Asian owned companies of mainly Hong Kong, Taiwan, and Singapore ownership.These are the vast majority and my guess is that Taiwan leads the pack as far as number of companies and employment.An example is here in Shenzhen one Taiwanese firm alones employs over 100,000 people in one location, and one needs to remember that that includes dormitory housing, meals, and uniforms. These firms have western style quality and most likely good delivery but you need do your usual due diligence for qualification.Prices from these firms may normally be some what lower than mentioned above. These firms also include EMS, ODM, and OEM facilities, for doing everything from electronics to clothing.
Third are fully owned ‘private’ Chinese firms.Prices should be less, but quality and delivery can be spotty.Many are sub tier firms doing plastic, printing, metal work, or resin products. Due diligence is the highest here, but so is the cost savings.Technical and manufacturing experience may vary widely, and so may the age of the production equipment.Some will not have automated MRP or ERP system, relying on labor and paper for production documents.You may have some English problems with communications with these firms.Beware of having great written communications because the English education here (I taught English at the university) has a foundation in written training, and if you call, you may find a lack of oral communication ability.
Lastly is the Chinese Government owned firms (or partially owned), which are usually much larger with, at times, good technical and production capabilities.Some of these large firms are fast approaching world class approaching like ZTE and Hauwei in telecommunications.The bidding process maybe longer and also the lead-time, as sometimes the sense of urgency is lost in the ‘bureaucracy’.Finding good English skills should be not a problem as these companies have been dealing internationally for a good length of time.
This is just the basics, though size maybe be an issue and of course current capacity of the facility.Here in China, I would classify a small factory as 2000 works for less, medium as 2000 to 5000, large at 5000 to 10,000. Some are what I would ‘giant’ at 10,000+, all in one general location.Many companies have more than one manufacturing facility location in China, and your sourcing should locate all the facilities. Some have both southern and northern factories, which export out of different ports.
Please provide comments or questions…I actively support a lively forum on global issues.
WEB links: www.ism.ws
http://www.travelchinaguide.com/cityguides/
http://weather.china.org.cn/english/
Posted by Walter E. Buczynski on June 5, 2007 | Comments (4)
In response to: Sourcing Notes from Asia…. China Focus
Etienne Charlier commented:
I am the owner of a sourcing and supplier management assistance company (procurAsia). I usually use a classification with State Owned Enterprises (SOE), joint-ventures (JV) and private companies. But you fourth category (Asian managed companies) is a good addition. Many companies managed by owners from Taiwan or Hong Kong are well managed. In most cases, the average private company in China will have less than 5 years of operations and the management will only pay limited attention to process and quality. But among the many poor suppliers, you will find some pearls: Chinese private companies led by an owner with vision and growing at an incredible pace. We are specialized in industrial products and we regularly see some of these. They share a few characteristics: focus on learing, eager to improve, very pragmatic, focus on developing durable business abroad.
In response to: Sourcing Notes from Asia…. China Focus
Carl Hung commented:
Hey Walter, Great post. I, like Etienne above, forgot about the fourth classification you mentioned. My company is of the second class you mentioned. We deal with a are beginning to deal with a lot of Chinese-owned supplier, and it has sometimes been quite a nightmare. In your experience, how have you filtered them and found those "pearls" as Etienne mentions? Regards, Carl Hung carl@seasoncom.com
In response to: Sourcing Notes from Asia…. China Focus
Walter Buczynski commented:
Hi Carl, Well not an easy task.. I hope to find some that already have some good references as western customers, and I will call the PM to see how they really are doing. Also I look for more sophistication in their cost and job cost tracking systems, to see if they know what they are bidding, and not just living on rising revenue. No real tricks...just a more difficult due dilligence.
In response to: Sourcing Notes from Asia…. China Focus
Matt Miller commented:
More and more companies are using supplier assessment or pre-qualification surveys to collect detailed information about organizations. I could share many stories of organizations wanting to bid on multi-million dollar contracts when their revenue is about the same. These surveys can very rapidly narrow down the list of potential good fit suppliers. For a free supplier assessment tool, check out www.k2sourcing.com/erfp.php. They list a trial version, but a free version is available if you ask.