Silk Road International Blog

This is the third posting from SRI’s current Intern, Eric Luker, from BYU’s Kennedy Center for International Studies.

Living in China

Having been here in china for several months, I now feel that I am getting used to some of the cultural differences that make living in China hard, at least for many people. That said, I was in China for a few months last year studying and have also spent several years dealing with the Chinese people, which has made it easier for me. However, since my trip to China last year I have gotten married and this is a whole new experience for my wife.  When we were preparing to come to Shenzhen for this internship we were surprised by how much attention was given to her, as I was the one that would be working. After the first week I realized how much of a culture shock it was to move here and why she was given such attention. So I’m going to try and talk about the largest obstacles that we have faced trying to live here and a few things to do to feel a little more comfortable.

Language: The most abrupt change that occurs as you get off the plane and which makes everything else that much harder is the language. We are better off than some because I speak Mandarin, but that doesn’t help my wife much when I’m at work and she needs to go shopping or do some other errand. During the first few weeks it was not unusual for my wife to come home with some new story about the language difficulties she encountered during the day. One such experience happened when she was trying to meet a friend at Walmart. When she walked out of the apartment complex, there were hundreds of police and military men all over the streets, blockading most exits. She kept trying to ask people what was going on and why the buses were blocked but everyone just laughed at her. Helpless, she returned home and rescheduled the trip for a different day. My wife is generally a pretty capable woman and can handle her own, but in China she has found that not being able to speak the language creates a vulnerability that can be quite frustrating and even frightening at times. So spending some time everyday to pick up a little mandarin will make China a much more enjoyable place.

Driving: The first time I got into a taxi here I thought I was going to die. It was night and all I can remember was weaving in and out of traffic at high speed with neon lights quickly flying by the window. I did make it to my hotel without any incidents and since then I have had the same experience many times. Driving in China is not like driving in the US or Canada, the only other countries I’ve been to. First, in my opinion, the taxi drivers are actually some of the best drivers on the road. I have never seen a taxi stop in the middle of a fast moving road to switch lanes or to cross three lanes of highway to get to a freeway exit they almost missed. I’ve been told that most of the population with driver’s licenses has been driving for under a year. In essence, that’s like a city full of stereotypical high-school drivers. The only difference is that instead of being too aggressive they just don’t move. Thus, I have yet to see a bad accident but once while driving home from a factory I saw three fender benders in five minutes. So if you want to get a license and drive in China, good luck. If want to take a taxi, don’t freak out when see that you are three inches from the car next to you. Because of these reasons and price, I don’t want to spend twenty dollars each time I go across town, we have found that public transportation, such as a bus or the subway, is the best way to get from point A to point B.

Subway: My wife and I are not the biggest explorers, but we have found that the subway will take us to most of the places we want to go. Yes, there are lots of people that use the subway, but I have never been unable to get on the subway due to it being overcrowded. Also, there are few places that you will go in China that don’t feel “crowded”, whether it’s the grocery store, side walk or the road. It shouldn’t take long until you know which stops to get off at. The bus is almost as convenient but you do need to know how to tell the attendant on the bus where you are going. Usually the same attendant will also let me know when to get off, which is a perk of being a foreigner. It will take longer to figure out the bus system than the subway but when used together they can get you almost anywhere.

Food: Everyone always wants to know about the food. In my opinion, authentic Chinese food is better than any rip off like Panda Express or even P.F. Chang’s, but this is one thing my wife doesn’t always agree with me on. I like the variety of flavors regardless of what it is, but she is more of a boneless person and everything has bones. Textures can also be very different from what the west is used to like tofu and artificial fish balls, which are common for hotpot. So to each his own but going out on a limb to try something may pleasantly surprise you.

Cooking: There are lots of things that have prevented us from getting the hang of cooking at home. The first is the lack of ingredients for western food and the price of dairy products. Also, it can be nauseating to walk around the meat section of the local grocery store and see stacks of goose heads, piles of ground meat that you scoop into bags and lots of body parts you won’t see anywhere else. Our solution to this is simply picking a different store, since there are three within walking distance of our complex. One of them is much milder in content and even has boneless chicken breasts, a rarity in China. Most stores will have an import aisle where you can find a few types of pasta and sauce but that is about where the average store stops, and some don’t even have that.  We have started looking up simple Chinese recipes online to fill out our weekly menu and I have also found that there are many general sauces for beef, pork and even some vegetables that make cooking a lot easier.

There are lots of other cultural things that will take time to get used to, if it is even possible. There is a book that I just read about Chinese business culture by Scott D. Seligman that has some great information about why the Chinese do things the way they do and some advice on how to work within the culture. I would recommend it to any new comers and wish the best of luck to all foreigners who wish to make China a place of residence.

Tags: China, Culture by David Dayton
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One of the most frustrating things that I hear on a regular basis from suppliers in China is some version of this: “This project is really difficult.”  I agree.   Most things of value in life are.  What’s the point behind the words, though is the real issue?  It’s a complaint.  But there is a point; some hidden meaning in the sentiments.

What it means is: “This is going to cost you more (time and/or money) than I originally estimated.  We won’t be able to do what we agreed to.”  Notice I didn’t say “we can’t do” but rather said “we won’t do” it.  That’s the real point–what the supplier is willing to do.

For example:

1. “These molds are really difficult to make. We usually don’t make them like this.”  Just about any tooling is expensive and detailed tooling takes both time and skill (aka money).  When factories agree to do projects that require new tooling they often do not do a lot of research into the details of the new product if it’s similar to items that they are doing currently.  There are often, we found, sight design details that affect the look or the functionality of a product that have not been included in previous products.  Thats not a profound statement, I know.  But the follow up is that many of these unique design details have been excluded for a very good reason–they can’t be done with normal everyday mold/tooling technology.  This means that once an engineer (as opposed to a sales guy) really gets into your tooling designs they quickly realize that there will be additional monies, time and maybe even a new factory involved in getting things done correctly.  Or you can change your designs, eliminate the unique functions and pay the original bid price.

So who eats the costs for the under-researched bid?   Unless your order is HUGE or your a major client, you do, of course.  Your supplier will not be willing to do pay these additional costs just because you tell him about your products “potential” or how big your next order will be.

What happens is you refuse to pay?  With tooling you may not even have this choice.  More than any other production step, deposit money for tooling can be returned fairly easily since it’s a) not usually more than a few hundred to a few thousand dollars, and b) they haven’t invested in any raw materials that may have already been delivered.  If you don’t want to do more expensive tooling (which usually means going to a different mold & die factory) then you typically have to start all over with a new supplier or with new art.

2. “This packaging is really hard to do.  Wow, it’s taking us tons of time.”  Time is money–it’s true in the West and more and more it’s true in China.  Gone are the good old days of extremely-cheap, never-ending labor supply.  Now you’re going to be paying a piece rate or a price per action rate.  Problem is, accurate forecasting is not yet as urgent a skill as is finance.  So bids for labor are often too low and do not include enough time to actually get things done correctly.  And of course, bids never include extra time needed to ramp up to full capacity, correct problems, or re-do any mistakes.  But when you find out that the costs are higher than originally bid, you’re usually 10-15% into the fulfillment, you’re committed, you’re within 1-2 weeks of your ship date, you can’t back out.  Your supplier knows this too.  Unfortunately, this often means that unless you’ve detailed out every step in the packaging process (and photographed and translated them and had them signed by the factory) you’re going to be asked to pay more just to get what you thought you already had agreed too.

What happens if you refuse to pay?  This is much more complex than the the situation with tooling.  At this point not only have your invested money and time, but your supplier is into the project even more than you are (they’ve paid 100% of the project costs already).  If you refuse to pay you better have a) unlimited time to wait them out, or b) the ability to both let your projects die (and lose your money and see your product sold on the black market), or c) have a great local negotiator that can get you what you want with either a manageable or no price increase.

Tags: Business, China, Culture by David Dayton
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I’ll be the first to admit that I’m addicted to Asia–I love the people, the history, the art and architecture ,the languages, the beaches, the massages, the food, the religions, the hustle and bustle of huge cities, the calm countrysides, beautiful mountains.  But even though I’ve lived in Asia for more than 16 years now, I’m red, white and blue through and through.  My great grand parents were immigrants to the US and I remember learning Danish songs from my Nana when I was little.  My grandfather was active Air Force in WWII, Korea and Vietnam.  My father was active duty in the Air Force.  Currently I have one uncle and 6 cousins serving in the Air Force–four of whom now serving in or rotating tours through Afghanistan and Iraq. I regularly cry at presentations for Memorial Day, Independence Day, Veteran’s Day, Olympic victories and just about anything else that involves flags.

I just wanted to use this public forum to thank those that sacrifice to make the US better, free and safe.  Thank you to all the veterans.

If you know a Veteran, even if you don’t agree with the politics of wars, thank him or her for all that he/she was willing to do to make your life what it is today.

Uncle Mike, Cousin Kurt, General Petraeus

*Apologies to Fletch and the LA Police Department.

Tags: Uncategorized by David Dayton
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Sometimes getting something is just not better than getting nothing. For example, 60% of your order on time and the rest weeks later not only isn’t helpful if you have to deliver 80-90% on-time to a single distributor, it can be downright disastrous for your future business.

My experience is that most factories in China just don’t get this—they don’t understand the strict nature of delivery dates and wholesale responsibilities in the west. AND, they don’t want to give you bad news either. The thought process is that some product on time will help you (or at least pacify your anger). They don’t know that if you don’t get what you ordered on time, sometimes there is no “later” opportunity. AND they usually hide as much of the problems as they can from you and either keep asking for more money (a sign that there are problems) or keep promising delivery on-time despite the fact that your own numbers are saying otherwise. When the ship date arrives and they can’t ship qtty’s even close to 100%, they’ll have a great story, “Your QC was too strict,” “Component X was much harder to work with than we expected,” but they won’t have what you ordered.

At the Global Sources New Buyer Shows I tell first time buyers:  if you’ve mortgaged your home and expect to deliver product from China within a window of less than a week, you’re going to lose your house.  If you have to deliver to a single location, if you have a delivery window of only a few days or if you are paying more for multiple shipments, it’s often better to delay shipping partial qtty’s and wait for the entire order to ship at once.

But this can be a double edged sword. Yes, it means that you’ll get it all at one time. But once you tell a factory that 100% qtty has to be completed and shipped on the same date–any delay means that they now have permission to miss the original shipping date for the entire order. But unless you’re very clear, demanding 100% on a single day can mean that “the day” may be a long time in coming.

Where you have some leverage is in the fact that factories don’t want to wait or hold product. Factories don’t want to be responsible for product or for re-do’s or for additional shipping charges or give you time to renegotiate. They want to have you book the containers and then they fill them with as much as they can on the ship date, regardless of if it’s what you’ve requested or not. Once the container has left their facilities they can’t call it back and they (nor you) can get it out of customs once it enters the port yard. Once they get it out the gate, it’s gone—and that’s the goal: Just get it gone!

The analysis goes like this: We have to deliver something. We’ll work on what they expect and get as much done as we can (as much as they want to within the context of other clients’ needs, raw materials’ price changes, other cost changes, etc.). If it’s not 100%, we can always just add the missing qtty’s to the re-order. You can use this desire to get stuff gone to get what you want on time–if you catch the problems early enough AND if you are in the factory and can enforce changes quickly enough. Usually this means that your QC or project manager steps in as soon as there are issues–with in hours or a couple of days of finding issues. If you wait a week (because your out of the county, it’s too late).

Either catch it early or ship late. There are few other options. Factories will never give you money back. They will discount reorders, they will give you “free” additional qttys on re-orders, they will fix or repair current orders, but they will never just hand cash back to you. Why would they? What are you going to do if they don’t? Exactly. Nothing. So just don’t ever expect to get your money back.

Factories will also never take product back once it’s been delivered to you. Not only will they not even talk about it, if you do actually put it on a boat and return it, chances are the Chinese government won’t even let it into China. Again, once it’s gone, it’s gone.

Recent example: “We know that about 10% should be rejected, but the cartons are packed and the container is loaded. We’ll just give you 10% more for free.” That’s great, thanks for the free stuff but who pays for int’l shipping of crap? Who pays for the rejects and the domestic shipping returns from the retail stores to me? Who pays for my damaged reputation in the market? What about the wasted warehouse space for the bad product? And how about the wasted time to sort and restock? How about the fact that you know you did it wrong but you didn’t do or say anything about it until it was too late? What if I don’t want the product at all now (a real threat if the reject % is too high)?

There are really only two solutions to having bad or late product. You can accept it or you can delay it. Accepting it means that you have to deal with the reaction from your market and buyers. Delaying it to rework or replace it means that you’ll get it right, but you’ll also be late and that may mean that specific buyers may no longer take the product at all. So what do you do? First, you either get into the factory your self or you have some one in there for you. You never find out about problems until you’re supposed to ship unless you’re there. If you’re not there at all you’re asking for trouble—you’re basically trusting someone else with your money, and that someone else does not have the same goals as you do. You want the best product you can get (and you’ve contracted for such). They want to save as much as possible on each and every piece they ship out.

Second, you follow production as closely as possible—any red flag comes and you immediately investigate. If you’re getting red flags in edited and controlled email communications, you know that production is not nearly as good as what you’re being told and the problems are probably worse. Third, step in to resolve issues ASAP. Don’t assume that they’ll get it right or even take responsibility for mistakes. Work with them to fix issues, but do work and work quickly to get questions and problems taken care of sooner than later. Or you’ll be stuck with the choice of crap on time or quality at some later date.

Finally, if you’ve got delays due to quality and the factory has shipped out a majority of the goods for you already, you actually now have the upper hand in negotiations. And you may be getting, by default, better payment terms too. I would never advise anyone to abuse this new power position, since it WILL come back to bite you, but I will say this: use this to get what you want done right and make sure that you get EVERYTHING you contracted for before you pay.

For example, we had a multi-container order last year that didn’t all go out at the same time because of quality delays. After shipping about 5 of the 6 or 7 containers they played the old “we won’t ship the last container until you pay the full balance” card. Of course se said, “Fine. Keep it. We won’t pay for the 70% outstanding balance.” They shipped two days later. This is a simple example where they just didn’t play it very smart and a lot of times it’s more complex than that. But don’t be vindictive about withholding money or demanding extra product or perfect quality for the last container. Keep your side of the bargain and be fair. Remember the goal is to get as much as possible as on-time as possible and then to get the rest done correctly before it ships.

Tags: Business, China, Culture by David Dayton
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