How to organize your sourcing from China? - Tips and advice from the Swedish Trade Council - By: Jens Wernborg, Swedish Trade Council in China

Transcription

1 How to organize your sourcing from China? - Tips and advice from the Swedish Trade Council - By: Jens Wernborg, Swedish Trade Council in China

2 FROM WHERE DO WE GET OUR KNOWLEDGE? During 2004 and 2005 we have executed: > 25 establishments of factories > 20 establishments of sourcing and sales offices > 150 assignments where we have helped Swedish companies to buy or produce in China Today: > 45 people at the STC > 50 people hired by us on behalf of Swedish companies about 25 of them working with purchasing 1

3 AGENDA To find and establish contact with manufacturers To evaluate a supplier What should it cost? What to expect? Purchase = production? Problems What others have done (case) More help how to take the next step? 2

4 CHINA IS NOT A COUNTRY BUT A CONTINENT 3

5 A huge factory

6 MORE THAN 120 LARGER MANUFACTURERS OF CAST, FLATTENED OR EXTRUDED ALUMINIUM Hong Kong 5

7 MORE THAN 2000 MANUFACTURERS OF SHOELACES AND RIBBONS Hong Kong 6

8 WHERE DO THE PRODUCTS COME FROM? 7

9 CHINA S EXPORT IN EASTERN CHINA? 8

10 CHINA S EXPORT ON SOUTHERN CHINA? 9

11 Eastern or Southern China -Which is right for you?

12 How should one proceed when wishing to start buying from China?

13 To find a supplier Choose Your Supplier Do not let the Supplier choose You

14 FAIRS The Fair of fairs in China The Canton Fair East China Fair Yiwu fair always open Also has a special fair Swedish Trade Federation Good and bad fairs? 13

15 VIA THE INTERNET

16 OTHER SOURCES Organisations and Associations Hong Kong Productivity Council HKPC Hong Kong Trade Development Council HKTDC Guangzhou Automotive Manufacture Association Dongguan Plastic Manufactures association Dongguan Metal Works Association China Council for the Promotion of International Trade (CCPIT) Shanghai Automotive Trade Association (SATA) Shanghai Electronic Manufacturing Profession Association Shanghai Communication Industry Association But language might be a problem for some of these. 15

17 To establish contact and who s the contact?

18 TO KEEP THE CONTACT AND WITH WHOM TO STAY IN CONTACT? To establish a contact. is today the most efficient but be aware when it comes to @soho.com.cn Look over your own SPAM / Abuse filter that your IT department might have installed Fax Where is your fax today? Who s the contact? The Contact is mobile How is the contact related to the company? sometimes they bring customers. 17

19 LANGUAGE PROBLEMS? Most often the one to take the decision does not speak the language meaning you will involuntarily get a representative. Keep text simple and in bullet points. Make sure to have your own interpreter in meetings. Do not rush.. 18

20 AGENDA To find and establish contact with manufacturers To evaluate a supplier What should it cost? What to expect? Purchase = production? Problems What others have done (case) More help how to take the next step? 19

21 IS ALL WHAT IT SEEMS TO BE? Quote from Automotive component Group Leader - Svenåke Berglie Certificates like ISO9000, QS9000 and ISO/TS16949 is something treated with the uttermost respect and precision in the automotive industry. In China the certificates are on the walls, in brochures and even in portals of steel. We saw certified companies light years from the quality level a certificate corresponds to. One company even had a certificate for a product that didn t even exist yet. The Chinese have a pragmatic approach A product does not necessarily have to be good, as long as it is perceived as good enough by the buyer. Peter Rosta former General Manager STC, Peking 20

22 INFORMATION ABOUT THE COMPANY Corporate information UC? Credit reports? Certificates? -> Issued by whom? -> Ask the person who evaluated it ->.. Go all the way.. Create your own opinion Visit the factory Meet the owner Ask for references Important: Keep contact with the company throughout the process Are there bad guys and crooks? 21

23 Be careful with what you ask for

24 1 & 2 Guangzhou XXXX Co., Ltd. YYY Processing Co., Ltd. HOW WE EVALUATE A SUPPLIER -GOOD INFORMATION TO ASK FOR Company Address Webpage Contact Person Title Telephone Mobile Fax Number of Staff Year of Establishment Factory Area Ownership Product Line CSR! Brand Name Used Turnover Export Percentage Exporting Countries OEM Import & Export Right Certification Acquired Material Provided Remarks 23

25 BE SYSTEMATIC Branchorganizations Databases Past experience Contacts >30 Trade Fairs Interviews Potential Manufacturers 24

26 AGENDA To find and establish contact with manufacturers To evaluate a supplier What should it cost? What to expect? Purchase = production? Problems What others have done (case) More help how to take the next step? 25

27 Wage levels in China Is China cheap? & What should you expect?

28 SMALLER MANUFACTURING COMPANIES Background: Family owned company with about 50 employees manufacturing transport equipment. Was copied in China saw prices decrease rapidly on the market Need/ wish: Wished to achieve better margins, tried contract manufacturing for a while but finally decided to set up wholly owned production unit in China. 27

29 WAGE EXPENSES Estimate the following costs per month: (Including social fees Up to 40%) Worker (15): SEK Receptionist (1): SEK Accountant/Administrator (2): SEK Foreman (3): SEK Plant Manager (1): SEK General Manager(1): SEK Rent for the premises per cbm (2.500 cbm): (36.500) SEK Difference in unit price in percentage (%) including freight to Sweden: 50% Wage increases? Might reach 10% in coming years 28

30 IS EVERYTHING CHEAP? Sum up: Total monthly cost 330,000 SEK (wages + electricity + water.. ) Around 4 millions per year in total to run the factory add raw materials on top of this Companies must consider / investigate: Raw material costs Electricity Quality 29

31 DO BUSINESS IN A CORRECT AND ETHICAL MANNER Put up rules for what is acceptable Create your own standards!. SA8000 Swedwatch, Respect Europe, Amnesty Business Group,. Follow examples such as. H&M. 30

32 AGENDA To find and establish contact with manufacturers To evaluate a supplier What should it cost? What to expect? Purchase = production? Problems What others have done (case) More help how to take the next step? 31

33 Production = Purchase Be prepared!!

34 AGENDA To find and establish contact with manufacturers To evaluate a supplier What should it cost? What to expect? Purchase = production? Problems What others have done (case) More help how to take the next step? 33

35 PROBLEMS Important: Keep in contact with the company throughout the process Problem we have encountered Payment Quality the first 10 ok but then To involuntarily trespass others intellectual property Don t do business in China in in another way than you would do business in Germany. 34

36 A SIMPLE EXAMPLE OF HOW EASILY THINGS CAN GO WRONG 35

37 TIME MOVES FAST IN CHINA KEEP UP WITH IT! 36

38 AGENDA To find and establish contact with manufacturers To evaluate a supplier What should it cost? What to expect? Purchase = production? Problems What others have done (case) More help how to take the next step? 37

39 HOW FAST CAN HAVE YOUR OWN SOURCING OFFICE IN CHINA? November 2004 Decision to recruit January 2005 Recruitment ready March full-time person in China October 2004 First visit May 2004 First conversation 38

40 WHY YOUR OWN PERSON IN CHINA? Sourcing of suppliers or companies to purchase Arranging transports Investigating legal issues / rules regulations 30% help 20% help 10% help Inspections DDs STC employee that works part of his / her time for the Swedish company during a start up phase Solving customs problems 39

41 AGENDA To find and establish contact with manufacturers To evaluate a supplier What should it cost? What to expect? Purchase = production? Problems What others have done (case) More help how to take the next step? 40

42 SUMMARY 1/2 China Background / A huge factory Remember that China is big plan your time Consider that there are many choices Plan your entry To establish contact with manufacturers Choose Your Supplier Do not let the Supplier choose You. Use different sources To evaluate a supplier Scratch the surface Price / Production (case / practice) Production is cheap but raw materials and reaching the right quality can be costly. 41

43 SUMMARY 2/2 Problems? Do not do business in China in another way than you would do business in Germany. Get good insurances Go well prepared Always ask all the questions you have! 42

44 TO CREATE A STRATEGY FOR CHINA Get information Seminars, Network Sketch your plans on a piece of paper create a timeline Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Ask yourself Why do we do it like this? 43

45 HOW DO I PROCEED HOW CAN STC HELP A COMPANY? During 2004 and 2005 we have executed: > 25 establishments of factories > 20 establishments of sourcing and sales offices > 150 assignments where we have helped Swedish companies to buy or produce in China > 120 recruitments Today: > 45 people at the STC > 50 people hired by us on behalf of Swedish companies about 25 of them working with purchase > 25 companies whose economy we take care of We travel to Sweden once a month to meet with companies 44

46 Thank you!