by David Dayton in 'Silk Road International'
For those of you not able to attend the HK show, here is my presentation from the Buying From China: What New Buyers Need to Know show last week.
What New Buyers Need to Know (video link). Once I get out of China, I'll post it on Youtube so the video can be in this post and not just a link.
I'll be presenting this same presentation on Wednesday the 20th in HK at the Global SourcesGifts & Premiums, Dental and Home Shows at the Asia World Expo out by the Hong Kong Airport. A complete April '11 SRI speaking schedule is here.
A couple of things from Asia Inspections QC presentation were also worth passing on:
First some info about China. While the benefits are well-known, it bears mentioning since many people are now looking at other options. China's advantages include: Low-cost overall production (including labor), a mature supply chain and less regulations and more competition than most other markets.
For me the most significant of these three is the mature supply chain. Probably no other place that we've managed production in the past 10 years has what (southern) China has—a mature, deep and very broad supply China. Taiwan, Thailand and Malaysia have mature supply chains too, but they are not as deep or as broad as what can be found in southern China. Vietnam, India, Indonesia, Cambodia are all decades behind. And don't even get me started about the infrastructure advantages China has.
Even though southern China is not the low-cost leader any more, it still has significant advantages over northern China and South and Southeast Asia. I'm always complaining about the quality and problems that we have working in northern China vs. Guangdong province and people who are not here are on the ground often question my logic (because of course "China" is all the same, right?). But Asia Inspection has the numbers to back up my concerns.
It's a statistical reality, southern China is better—lower failure rates over thousands of 3PQ inspection visits across hundreds of industries. What does that mean for you? When you combined better quality production with a deeper more experienced supply chain you have lower overall costs even if the cost of goods is actually higher. We see this with almost every project we've ever done in Zhejiang or Vietnam—cost of goods is lower, but the cost of doing business there (QC, logistics for components, dealing with difficult "management," repairs/replacements/returns) is so much more expensive.
Second, "don't believe anything that's told to you from a factory." Couldn't have said it better myself. If you're just taking your factory's word and not buying third-party business information, testing certificates, and QC reports, you're asking to be ripped off. There is no reason for a factory to tell you the truth if they think that they will lose your business by being honest. If you require 3PQ or CPSIA or ISO or a bank account with the actual company name on it and they don't have or can't meet these requirements just about everything can be faked for a few hundred yuan.
Third, a comment by HSBC about the RMB was shocking to me. They said that by 2020 the RMB will be fully convertible. While technically this could be true, this means that in the next 8 years the banking system in China will have to go through a RADICAL upgrade and the government evolvement in that system will decrease significantly. I don't know that I believe that that can/will happen. I'm sure that HSBC is correct in their understanding of the banking world (and I know nothing) but if they are indeed right then we can expect major changes (for the good) in the financial system in China. Woohoo!