How to Invest in the Right Business by sjg16368

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									   Doing Business In China




Dave D’Angelo –   VP - Product Development, Sourcing and Operations – Staples Inc.
                   Agenda
   Essentials for success
   Why companies source?
   Is China the right place?
   Managing your sourced business
   Finding the right supplier
   Technology enablers
   Protecting your rights
   Social responsibility
   Defining your requirements / quality
   Financing
   Supplier reliability
   Demand planning / ordering
   Shipment
           Essentials For Success
1.   Teamwork: Someone who understands your
     business and the local landscape and work
     effectively with your US organization
2.   Research: Invest your time and thoroughly
     search for the best suppliers that respect and
     understand your business
3.   Contingency: Be prepared for your worst case
     scenario
4.   Defend: Protect your rights and assets
5.   Coordination: Supply chain coordination
     internally & externally is essential to a well
     executed plan
             Why Source Overseas?
   Many of the largest western companies are
    making strategic sourcing outside of the US
    one of their top priorities for a host of
    reasons ….

    •   To remain cost competitive in the global market
    •   Be closer to their customers or suppliers
    •   Diversify risk in supplier base
    •   Quality
    •   Cost
    •   Capacity
        Is China The Right Country?
   In many cases… yes
Why?
    • Supporting infrastructure
            Raw Materials
            Logistics
            Mold / tooling development
            Business friendly climate
    •   Manufacturing investment
    •   Cost
    •   Growing capacity
    •   Established and growing experience with
        western countries and improved manufacturing
        techniques
             Managing Your Business
1.     Building a team in Asia
            Someone who knows your business and
             can teach local staff and suppliers
                                                                ++
            Local staff in key positions of authority
            Someone who knows the local landscape
             Technical / operational expertise




                                                                Cost
         

            Sense of urgency


2.     Knowledgeable US team willing to travel
            Strong collaboration with supply chain
            Strong technical skills that can be applied with   +
             suppliers
            Authority to make decisions

3.     Other methods depending on scale
     Invest for success!!
     Targeting the Right Supplier Partner
         The Right Supplier Partner
 Be clear on what you value most and what can tolerate
   Low                                   High
                                 Cost

                               Quality


                         Design / Innovation


            Reliability / Integrity / Social Accountability


                           Supplier Scale


                          Financial Stability

      These dimensions depend on you and your business
What are you good at and willing to bring to the partnership?
                            Case Study
   Need – Quality footwear production for the S. Korean / Japan Markets
   Date : Fall 1997
   Situation: Asian Financial Crisis

      Fragile local supplier base
      Massive bankruptcies for many local footwear providers
      Un-stable local economy

                            Priorities
              Pre-Crisis                  Post Crisis
           1. Quality                    1. Financial Stability
           2. Cost                       2. Capacity
           3. Reliability                3. Quality



Lesson: Invest in roadmap of back-up suppliers before you need them
                            Case Study
    Need – Quality power protection products at good costs and consistent
             shipping performance : China
    Date : Spring / Summer 2006
    Situation: Soaring copper commodity market
      Hoarding of copper capacity
      Daily market prices
      Unpredictable shipments
      Air-freight!
                            Priorities
              Pre-2006                    Summer 2006
           1. Quality                    1. Capacity
           2. Cost                       2. Quality
           3. Reliability                3. Cost


Lesson: Deal with suppliers of scale vs. big customer in a small factory
              Finding The Right Supplier

   Key raw material suppliers
    • The most trusted names in raw materials typically sell globally and are
      the best source for great suppliers

   Industrial design companies
    • Their clients looking to expand customer base

   Industry quality experts
   Web sourcing services
   Trade shows
   Trading companies / agents
                    Challenges
   Are they really who they say they are?
    • Sub-contractor
    • Trading Company
   Who’s in charge day to day?
   What happens when I’m not here?
   Good financial data on companies is poor
   Philosophy match
    • Quality / social accountability etc..
   Do they respect what your brand stands
    for and are they willing to protect it?
                 Who am I
                  dealing
                  With?




How do they
Manage their                   How do they treat
raw materials?                 their workers?




                  Good
                  production
                  controls?
            Technology Enablers
    Integrating suppliers into your processes
    is vital

   Web based tools that provide for ease of
    collaboration with suppliers
    •   Design
    •   Engineering
    •   BOM’s
    •   Supplier management
    •   Lifecycle tracking

   Integration with operational systems is essential
    • Planning & inventory
    • Order management
    • Shipment / delivery
           Supplier Agreements
   Seek advice of a Trade Attorney
   Protect your rights
   Be specific with terms that are important
    to your business
   Require supplier to have product liability
    insurance with your company as a named
    insured party on the policy
   Define what happens if they can’t ship on
    time
   Contractually obligate suppliers to be
    C-TPAT compliant
                Intellectual Property
    Protect your intellectual property
      • Seek patent protection not only in the markets
        where you sell, but where you anticipate
        having it manufactured

    BEWARE!: China is the “First to File”
     country
      • Make sure your rights are protected before you
        disclose any designs or IP to suppliers



    Worldwide IP theft is a growing problem that costs the U.S. industry
    roughly $250 billion annually, according to the U.S. Chamber of Commerce
     Selecting Socially Responsible Suppliers

   Make it the ante for suppliers to work with
    you!
   If they don’t respect this, then they are not
    a true partner
   Ensure they know your standards
   See for yourself and spend time at suppliers
   Validate with 3rd parties often
   It’s the right thing to do and it’s best for
    your brand
   Award new business on supplier’s
    compliance
           Defining Your Requirements
-   Performance requirements
-   Material specifications
-   Minimum order quantities
-   How the products packed
-   Lead-times
-   INCOTERMS ( FAS / FOB / Ex-Works …etc )

Validate performance before placing orders
             Validating Quality
   Make purchase orders and payments
    contingent on quality
   Collaborate with suppliers on poor results
    and corrective actions
   Ensure suppliers know you will conduct
    final inspections before shipments
   Set high quality standards on your first
    interactions with suppliers
   Trust… but verify!!
                       Financing
   Many new business relationships are still conducted by
    “Letter of Credit” ( LC )
     • Secure for buyer / seller
          Costly bank charges

          Complex documentary requirements



    • With your LC, many suppliers can get pre-export
      financing to purchase raw materials by discounting LC’s
      with banks
    • As relationships mature this typically evolves to some
      other form of less secured payments

   Other forms of electronic payment gaining momentum
         Supplier Reliability
                           Factories hardly ever work
                           on the lead-times you need

                            As long as they are consistent
                            and predictable it’s manageable




There was a fire at the
   factory last night



  Air-Freight!!

                          …and did we mention that your molds
                          were damaged beyond repair!!
    Demand Planning / Ordering
   Expect many challenges in your demand planning
    if moving from domestic to import
    • If you aren’t good at this domestically then shifting to
      imports can be a shock
   Many suppliers in new business relationships
    don’t act until they get your orders or secured
    payment
   Prepare for delays as you ramp-up
   Carry additional safety stock in the event quality
    is not up to standards or some other form of
    delay
   Impose fines for late shipments
                        Shipment
• Contract with a reputable forwarding agent at
origin to manage your needs at origin is critical

   •   Are they licensed by FMC?
   •   Financial stability?
   •   Experience and knowledge at origin?
   •   Who are their existing clients?
   •   Services and network at origin & destination
         • Consolidation
         • Labeling
         • EDI capabilities
         • Dedicated Account Manager
         • Customs clearance
         • Capable staff and ability to flex with your business
         needs

 There are many capable options at your disposal in Asia
                  Summary
   Build a solid team to help you grow the
    business and get off to the right start
   Invest the time in finding the right
    manufacturing partner that has the best
    philosophical fit for your business
   Have a sound back-up plan
   Protect your rights
   Closely coordinate with your supply chain
    partners and internal stakeholders
Thank You

								
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