Silk Road International Blog

I pray that the internet Gods won’t block this–for some reason I’ve not been able to post for the entire last 10 days–couldn’t have anything to do with a large gathering in North, could it?!

Anyway, here is attempt number 239 to post a simple tradeshow report.

A couple of final notes from the GS Tradeshow in Hong Kong before I post the SRI presentation.

First, Global Sources is starting a new website with information for people going to China. There are a number of articles written by yours truly and many other great resources. Check it out here.

Second, Allen Mathews is the only guy I’ve every meet that is honestly glad for the multiple degrees of Chinese bureaucracy. Why? Because of the information that they provide on Chinese companies for people that are doing due diligence on their potential Chinese partners. For more on the services that he offers check out Verify’s website.

Allen also said that US companies coming to China need to be wary that they are not involved with PEP’s in China—Politically Exposed People. Why? If these people in sensitive positions get into political or legal trouble it could be a PR nightmare for a foreign company that is even indirectly involved with an associated business entity.

Third, Michael Lavergne of Bureau Veritas (website) listed out the steps of an integrated supply chain and where you should be testing your products. The steps for audits, tests, or inspections include:
An initial Technical Factory Audit and a Social Compliance Audit;
Product Testing in Development.
System Line Review.
In-Line Inspection of Product
Production Testing of Finished Product or Parts.
Pre-shipping Testing of full or a Percentage of Total Order.
Distribution Center Testing (Too late for solving any problems).

Last, Mike Bellamy of Passagemaker (website) has a “black box” operation—the ability to coordinate various suppliers and control product quality and protect IP. The concept is that if you don’t any have your own presence in China you can use Passagemaker to both assemble and coordinate production with the confidence that your IP will be protected an you’ll get the product quality you demand. Good stuff!

I’ll post the entire “Qualitative Techniques for Finding the Best Factory” presentation later this week.

Tags: Business by David Dayton
No Comments »

I went to Macao for the NBA’ China Games 2007 last night. The game featured the Orlando Magic and the China All-Star Team from the CBA. Most of the Chinese team were the same guys that play for the Chinese National Team, minus Yao and Yi. They also added 3 foreign players from the CBA (China Basketball Association).

Basically, China was completely outclassed. Not surprisingly, since they don’t do very well against the US even when they have Yao and Yi. But there were some bright spots for them despite being behind by more than 20 points for most of the game.

First, I don’t know why Wang Zhi Zhi isn’t playing in the NBA. He was certainly better than the three (Outlaw, Foyle and Gortat) back up centers that the Magic played. He outplayed Howard in the first quarter and was the leading scorer for the Chinese. He is a smart player with skills at least as good as most of the back up centers in the NBA now.

Second, after getting burned three times in a row buy the faster Chinese guards the Magic’s Arroyo took the game into his own hands and completely schooled the younger, smaller Chinese guards. By the way, Arroyo and Wang were easily the best players on the floor. How is this a bright spot for the Chinese team? Well, they need to believe that they have good guards that are fast and can shoot—but just don’t yet have the attitude to compete for the full game. The guards themselves need to believe this—they obviously were scared or embarrassed or both after Arroyo took over. But that’s something they can learn with more international experience. Also, Arroyo has torched just about everyone, including Team USA, in the past. The fact that the Chinese guards got into his head at all means that he wasn’t ready for how good they could play. Backhanded to be sure, but a complement nonetheless.

Finally, the Chinese can shoot better than and are faster than the Magic. So why didn’t they run and gun?! Why did they continually try to post up their three big foreigners against the obviously better Orlando big men? This was absolutely the coach’s fault. When the Chinese were running and shooting outside they lead. When they slowed down and decided that they could play NBA style power ball they went from up 9 to down 10 in about 5 minutes. Shooting guard Sun shot and dunked over the Magic 2 guards just about every time the ball didn’t get dropped down low.

Now a word about the fans and venue. It’s very odd for me, as an American to go to a game and have the crowd cheer for both teams as well as the time-out acts. The fans loved the experience more than the game as many of them had no clue what was going on on the floor. To be sure there were a lot of Chinese NBA junkies there but it appeared to me that most of the people there were just folks with money rather than a basketball Jones.

But the Venetian was awful!. The security was a joke, the crowd control non-existent, the food bad and the line horrendously long. If you got there early you were required to check your camera and bag. I couldn’t do it. There was no security at the camera check desk, just an open desk in the main hall that was soon packed waist deep in expensive cameras—I’m sure that many were stolen—no way they couldn’t have been; I personally reached over and took my own bag after I had second thoughts about checking it. If you got there late you had to wait in huge lines. The security were so overwhelmed by game time that bags, cameras and people without tickets were all getting into the arena. There were at least 5 people in my little section that had cameras with telephoto lenses and scores of others around the arena. People were posing for photos with mascots and the only security I encountered was a guy telling us that we could have cups but not bottles of pop in the arena even though they were both for sale at the top of the stairs!

The game was fun despite the venue and the score. I got some great pics too!

Tags: China, Culture by David Dayton
No Comments »

More quality information from people that know how to do business in China. Here are some tips from the experts.

First, from Global Sources, Bernie Holmbraker presented the 5 R’s:

1. Re-learn. Realize up-front that working in China is different from buying domestically. You need to go in without any preconceptions.
2. Research/resources. Because you need to re-learn China, take advantage of the online and professional resource available to you. Ask: What can you do to learn more about what you are doing (both importing and production of your own product & the Chinese processes). New resources can be found at: www.importfromchina.globalsources.com.
3. Relationships (guanxi). Business is more personal here than in the west. Trust is first, business is second.
4. Requirements—yours and theirs. Be more than specific than you would be on a PO in the West; get everything in writing, confirm it before you pay for it.
5. When in Rome… Be polite, culturally appropriate and do as much as you can to make the process as comfortable and effective as possible for all involved.

Second, Allen Matheson from Verify, said that because China is seen as risky, too many businesses don’t do any DD—they assume that there is risk so they just jump into China and forgo any DD because “hey, it’s risky anyway.” There is much that can be done in China; sometimes even more than what’s available elsewhere. At the very least a simple credit reports should be doing on all potential suppliers.

Third, Michael Lavergne from Bureau Veritas, listed out some steps that you can take to ensure you are getting what you expect and that you are doing it the right way (legally). You should ask: Am I confident? Are my products safe? Am I doing what is right?

Also, he agreed that choosing your supplier is probably the most important decision you will make. Choosing a good supplier is half the battle for getting good product.

And, since your name is on the product and you’re paying the money, it is the buyers’ (your) responsibility to verify and confirm the claims made by potential vendors/suppliers.

Remember, A VENDOR IS ONLY AS GOOD AS THE INFORMATION YOU GIVE THEM. So, standardize information formats, keep it as simple as possible, document everything, and provide as many appropriate samples as possible.

Testing and inspections are essential so you need to know: What is required by law? What are your customer’s requirements? Are you testing for additional high-level risk issues? Finally, who is paying for it? When you test use only recognized testing labs, standardized procedures and document everything.

Good stuff. Good luck.

Tags: Business by David Dayton
No Comments »

Quite a bit of really good information at the Global Sources Show today. The show was, as usual, packed and surprisingly the presentations had hundreds of people attend as well. Surprising only because (I was told) there were lingerie and swimsuit models downstairs in the exhibition hall (it’s a lingerie, swimsuit and electronics show). Outside of missing the “show” downstairs to listen to some suits speak, the only downside to the presentations was that we started late and Q&A time was limited.

The presentations were generally geared toward SME’s coming to China for the first time. In addition to myself, Mike Bellamy was the other buyer on the panel. Both of us have had about 10 years of experience in China and fielded the most questions from the audience. Allen Matheson, Sabastian Tschackert and Michael Hetzel represented professional DD, shipping and 3PQ services respectively.

The most repeated take away from all these speakers was that it is incumbent upon you, as the importer, to verify all the materials, claims, quality and processes that will ultimately bare your company’s name. You must either hire someone to do it for you or plan on doing all verification yourself. If you don’t do this you can plan on having either quality issues, financial issues or both—probably both.

Another big issue was the structuring of deals and contracts. All contracts need to be both legal and extremely detailed. If you expect to realize any specific result you had better contract for it specifically. If it’s not on paper, and signed/registered/notarized it doesn’t really exist.

Allen spoke to the impressive availability of business and legal information in China today. He says that there may in fact be more information about potential suppliers available in China than in Western countries. For example last year’s P/L filings, corporate and individual credit reports, company registration information, due diligence reports, litigation history, and PEP listings are all available from government and private agencies in China at relatively low cost. He also mentioned that too few Western companies do enough DD on their China supply chain.

Each of the presenters commented on the fact that you’d better be legal with all your contracts, agreements and processes. Mike Bellamy mentioned that legal contracts made in China are more effective in China than contracts made outside of China—makes sense, and I agree, if you are dealing with a 100% domestically owned company. My experience with JV’s has been that if the factory you are working with has a foreign office, you can get better legal resolution outside of China. Either way, you need to have your legal bases covered.

Michael Hetzel emphasized that you’ve better be managing and doing QC on your entire supply chain—not just the one “dimension” or single factory that most buyers think about when coming to China. He says, and I couldn’t agree more, you’d better be doing QA on the entire process from start to finish.

More presentations to come—Sunday the 14th and then at the House wares and Crafts shows later this month.

Tags: Business by David Dayton
No Comments »

Just another shameless plug for SRI’s presentation at the Global Sources China Sourcing Fair to be held at the Asia World-Expo in Hong Kong this week.

The presentation is part of Conference Program for buyers being held at the Fair.

David (me) is speaking at 12:30 on the 12th and 14th. Both presentations will be in Room 201C.

In addition to my presentation there will be other speakers and a panel of experts to answer questions about buying in China.

Included on the panel are:

Mike Bellamy, China Operations Director, PassageMaker Sourcing Solutions.

David Dayton, Chief Executive Officer, Silk Road International (SRI).

Michael L. Hetzel, Vice President/Americas, Pro QC International.

Bernie Holmbraker, Export Communications Consultant, Global Sources.

Allan Matheson, General Manager, Verify Ltd.

Sebastian Tschackert, General Manager, Shenker International (Hong Kong) Ltd.

Tags: Business by David Dayton
No Comments »