Wednesday, April 21, 2010

Is it worth learning Mandarin Chinese?


This seemingly perennial question of the real value of learning Chinese never fails to generate a lot of activity in LinkedIn discussions generic cialis. This discussion started in the China Law Blog LinkedIn group inspired me to share my views online pharmacy viagra.

Let's rephrase the question. Is it worth the five years of intense full time study to gain fluency cialis? In short, it depends on your situation and your goals viagra online.

Here is my longer answer generic viagra.

Each person must determine his/her own cost-benefit ratio for learning a new language, such as Chinese. Results will vary . Unlike the benefits of learning a truly international language such as English or even Spanish (with regard to South America and select areas in the southern United States), the overwhelming majority of the value in speaking and reading Chinese tends to occur in China, Hong Kong and Taiwan. Contrary to what some may believe, the overwhelming majority of China is not set up for English speakers in much the same way Miami is for Spanish speakers. Just as not being able to speak English in Chicago is a handicap, not being able to speak Chinese in China is also a disadvantage. However unless you plan to reside in one of these regions, it is likely not worth it for the majority of students. Needless to say if you have a deep love of the language, culture and literature of China, you will find the time and energy to study Chinese no matter where you live.

Fluency in Mandarin alone does not guarantee business success in China. Many foreign language students fail to recognize the importance of having a technical skill in addition to their language proficiency. Without a technical skill or specialized knowledge, a language student has nothing other than translation or interpretation to offer clients or employers.

Internationally Chinese certainly carries less importance than English, as a language of business, international relations and diplomacy. If you were planning on going into any of these areas, English would be a necessity. Contrastingly Chinese skills are not likely to be of any utility in conducting business with the South Americans or the Europeans, but English speakers are very likely to be able to find counterparts who speak their language."Learning Chinese is extremely valuable from a personal growth and experiential standpoint, but there are gaping misconceptions about its practical value outside of China," writes Ben Ross, a Mandarin Chinese Interpreter/Translator, Ethnographer and Consultant. In this post he examines the reasons why Chinese fluency may not be helpful in securing a job outside of China.

Nevertheless while language skills are not an essential component for doing business in China, they can be extremely useful. What are the essentials for doing business in China? First, understanding the culture; second, being very informed about the China business environment and your market; third, being very knowledgeable about your product/service and technical skill; and fourth, great patience and perseverance. The greater Chinese language capability you have the easier it will be to learn the culture and the market. But experience demonstrates that there are other ways to acquire this knowledge. Acute observation skills are an essential part of learning culture and a vital component to understanding social interaction and communication. Since the Chinese themselves rely to a great degree on non-verbal communication, reading it accurately is essential to navigating China. As just one example, for politeness or face-saving, often a "yes" actually means a "no". I have written more about this here (search for the word "localization" and begin reading).

Even for the most fluent non-native Chinese speakers, it is often more efficient to delegate certain kinds of work, i.e. translations, to a native speaker. Therefore if even the most skilled can outsource their work, then non-speakers of Mandarin can do the same. However, note that the non-speaker/non-reader will be unable to verify the work without the help of someone he/she trusts, which is not an issue to take lightly.

"The [US Government] understands that you simply can't engage China effectively with managers that don't speak Mandarin," writes Rick Switzer,Foreign Service Officer US Embassy Bridgetown.
If you take the time to learn Chinese and can't find a company that appreciates the value that you bring to the table look up [the US Government], he understands the value bi-lingual/bi-cultural Americans. It still amazes me that major multinationals from the most culturally diverse country in the world seem to think that culture doesn't matter and anyone in the management chain is qualified to run their business in China without any specialized language or cultural training.

While cultural and language skills are invaluable, business success in China also requires knowledge of the market, China, international, or both, and specialized or technical knowledge related to a certain product or service.

Clearly legal and official environments value Chinese fluency. Here follows a related example, but as viewed from the U.S. public's perspective.

Joe Wong, a well-spoken Chinese-born American, illustrates in this performance at the Annual Radio and Television Correspondent's Dinner (C-SPAN2) how to win over the hearts and minds of the citizens of your adopted country when cultural knowledge, language mastery and localized humor are combined with great artistry.

Has anyone ever seen a foreign-born speaker of Chinese leave a room full of mainland Chinese journalists and politicians with deeply respectful smiles of joy as Mr. Wong has done?

In my six years in China, I certainly have never seen anything like this. Whether this is an illustration of the poor Mandarin abilities of most foreign-born speakers of Chinese, a reflection of the inability of foreigners to access the sophisticated aspects of Chinese humor, the humorlessness of Chinese journalists and officials, or a combination of all of the above, I really don't know.

Maybe I am just never invited to the right parties.

Saturday, April 17, 2010

Reduced risk factory selection in China


Robert G has been sourcing in China for over a decade. He works on products manufactured in quantities of 100k, and often up to 1 million or more, and usually works with factories that have at least 7000 workers. Here I interview him about how he goes about choosing a contract manufacturer.

Read my previous post on Robert G's engaging, concise guide to sourcing in China.



I wonder if you would care to comment on how you choose a contract manufacturer?

I'll try to cover all of your questions.

How do you go about determining whether a factory is reputable, and more importantly whether it has good processes and a good culture? To me this is the one of the natural follow-ups to the larger discussion on sourcing in China.

I might be different than other little guys in that I am usually working with or for a more established company that (hopefully) has some reputation and working capital. That lets me approach factories differently than someone who just goes to Alibaba and starts emailing.

First, I have never cold called a new factory. I always approach them through an introduction by a mutual acquaintance. This guarantees that I'l be given some level of credibility when I begin the conversation with them. Starting from zero would be much more difficult and luckily I have never had to.

Second, I would only work with a factory that has manufactured products for a competitor, preferably one of the top people in the field, and they must be a factory that ships product to retailers like Target and Walmart. If this is the case then I can be pretty sure right away that they have been audited by all of those entities. Fortune 500's can afford to be much more thorough than I ever could. This also means that they have all of the difficult-to-obtain industry certifications and they will work very hard not to do anything to jeopardize them.

The downside is that I am probably not at the cheapest factory around and I'm going to be a small fish in a big pond. That's something I can live with given the reduction in risk.

Are these factories open to establishing a relationship, a partnership, to improve their processes (with a smallish virtual company from the U.S.)? How important do you feel this type of partnership is? How would you realistically envision such a partnership?

Once I manage to get into a new factory I work very hard to fit in and let them know that I am there to do anything they need to help them complete their task. The relationships that I build with factories are incredibly important to me because they let me do what I do. I view each job with a factory as a stepping stone to a future project with them.

In your mind what processes are most important? Are processes enough, or do you think one really needs a good culture? How would you define a good factory culture?

If the factory is incompetent or questionable in any way then I try to get out asap- the project is guaranteed to end badly. They NEVER improve over time.

I have noticed more and more foreign companies with business units in China seeking Operational Excellence/Lean/Quality/Six Sigma experts as well as individuals skilled in creating curricula for corporate universities or training centers. Have you seen this trend occurring within Chinese companies?

They never talk about six-sigma\lean\etc with me. That might be something they pitch to the CEO of a big, new customer but I've never seen it. I go out of my way not to seem like an executive so that may be why they skip it around me.

How common are contract manufacturing factories that have good processes/good culture?

Each factory that I work with does have an industry-standard workflow in terms of the stages of production and the requirements at each stage. They have plenty of internal meeting and reviews so they can be sure that the product will pass the customers QA and the legal regulations. They know that a product that fails QA will never be paid for.

Do they tend to be based in a particular region of China, or owned and managed by a particular sort of person or team?

The other thing to be very aware of is what team you get assigned to within a factory. In bigger factories there will be more than one engineering manager/director. I might have a totally different experience than you if we are at the same factory with different engineering teams. If you can talk to people you know, try to find out what team is the best and see if you can get assigned there. This is incredibly important.

Are these factories interested in doing business with someone offering volumes of 500 or less?

Regarding low quantity orders, I make low-cost products in medium volumes (100k-1 million). None of the people I work with would do an order under 5k pieces and they would expect the total for a year to be at least 20-50k. Low volumes probably mean a small factory and that opens up a whole new world of difficulty.

A recent development due to the financial downturn, and a further reason to seek a bigger, more stable factory, is the potential for bankruptcy. In the past couple of years, thousands of factories in my industry have shut down in Southern China. Most are little guys but a few have been big enough to surprise the people in my industry. I have no idea how you could completely safeguard against this other than look at who their customers are and how busy they seem to be. Keep your ear to to ground for rumors and make sure that you've given them the least amount of money you can.

If you're lost and feel out of your depth in picking a factory, you can go to a manufacturing agent in Hong Kong. They will add something like 10 or 15% to the price and handle a lot of the stuff like finding a factory and logistics. They don't make a difficult process into an easy one but they can help you sleep at night. Many of them are run by western expats so, at a minimum, the communication will be better and the culture shock will be reduced. They usually don't hide the other companies that they are working with so you should be able to get some references to check up on them.

If they don’t have good processes, do contract manufacturing factories exist that have decent processes?

Just so I'm not painting too rosy a picture- a good factory will make manufacturing in China difficult at best. A mediocre or bad one will make it almost impossible.

A friend of mine who's lived in Hong Kong and China for the last 30 years recommended a book to me called "One Billion Customers." It's about companies that have tried to move into China to capitalize on the local market. It gives a really good overview of how guys from the west go there planning to get rich and find it "difficult." You see the same themes repeated in small scale when you do the kind of work we're discussing.

Thanks for sharing a bit of your experience and insight.

Let me know if I can fill anything else in for you.


Thanks again, Robert. You have given a very thorough response, which covers well the major issues. I look forward to bouncing more ideas off of you in the future. I also welcome learning about any topics which you might wish to discuss or post as a guest author.

I invite readers to comment below. Hopefully Robert will join in on the discussion.

Friday, April 16, 2010

Concise Guide to Sourcing in China. Robert G's Little Handbook.


Robert G has been sourcing in China for over a decade. He works on products manufactured in quantities of 100k, and often up to 1 million or more, and usually works with factories that have at least 7000 workers. Robert posted a response to CrunchGear's 'Going It Alone' series written by guest author, Adam Hocherman. Because I think Robert's response reads like a concise handbook on China sourcing, I asked him for permission to quote his comments. “Sure,” he wrote, “grab whatever you want.” I have taken the liberty to make him a guest author. Here follow his words.

I’ll be curious to see article three when you start to do the real work. I’ve been doing this type of work for over 10 years and I would find it difficult to write a series of articles in such a cheery tone. It’s a challenge, and I like the work but the newness has worn off by now. I cringe when I read stories that make it sound easy or straight forward.

My experience may be very different than people who work in a different industries (toys and low-end consumer electronics) or quantities. (Although I have not found that to be the case when I talk to people I meet.)

Let me say that I really like the people I work with in China and Hong Kong. In general I find them to be much more likable than the people I meet here in California. That being said:
  • If you don’t work with reputable factories you will have a high probability of getting ripped off in one way or another.
  • You cannot go it alone and just be a mechanical or electrical engineer or industrial designer. You must be able to work in all fields or you are in trouble.
  • The factory workers, or other suppliers, will find ways to shock you every time in ... new and exciting ways they find to do exactly the wrong thing. Some of it because the people are junior and don’t know better, some times because they don’t understand what is acceptable in a product that is meant for a western market, and sometimes because they don’t care. There is almost no way to predict the things that will happen. People who do this for a living can tell you story after story that would leave you speechless.
  • If you are not there, things will move slowly because other customers are there demanding work on their product. If you are there you will spend a great deal of time just sitting and waiting for them to work. Contrary to popular belief, things do not move very quickly in China.
  • Don’t be an arrogant westerner. If you treat the people poorly, they will not like you. They are good at hiding the fact that they don’t like you but it will come back to bite you later. This shouldn’t need to be said but you’d be surprised at the behavior of westerners.
  • If you stay in first class hotels or overtly show wealth or status they will notice. For the factory owners, this may not be a problem. For the workers that you will have to form a relationship with, this will be a problem and they will think less of you.
  • They say they understand what you mean but they don’t. Until you see the code run, or hold the model in your hand, you don’t really know if they understand.
  • There are very few people who actually do work, the level of delegation is incredible. Customers pawn work off to the factories. Factories pawn work off to agents. Agents pawn work off to component manufacturers. For anything non-trivial, you may not have the ability to sit down with the guy doing the work.
  • In general, they will never tell you the truth about a problem. There is a wall between the locals and the foreigners that will rarely be broken down. You must make friends with a couple of people and hope that they tell you the truth when the meeting is over and you are alone. For me, I pick my own IC vendors that I have worked with for years. I can count on them to give me the inside scoop.
  • Random factory engineers will point out potential problems and throw up roadblocks. Most of the time they are nonissues or, in the worst cases, imaginary problems. If you don’t satisfy the person who raises it then you will have to deal with it later- possibly when they refuse to begin production until you fix it. I’ve had to OK the addition of tens of thousands of dollars in totally unnecessary components because some engineer invented a problem in his head. There is nothing you can do about this.
  • You will have the feeling that decisions are being made to help someone get a kickback. In some cases they are and there is nothing you can do about it.
  • If you bring in your own suppliers, they will believe you are getting a kickback.
  • You have to constantly remind yourself that this is a different culture and you cannot judge their behavior from a western point-of-view. Things that would be totally unacceptable here are the norm there. You will be shocked as you come to understand this.
  • The locals talk A LOT and it’s a small world. As you get to know more people there, you will be surprised at how much information is shared.
  • The regulatory requirements to get a product back into the US are staggering. Make sure you know what you’re doing and that the factory has worked in your exact field so that they know how to get it approved.
  • It is almost impossible to get around China alone. Anything more than short rides to well-known places will require a guide or factory-arranged transportation.
  • You are not in control. Don’t fight it, just do your best to guide the process where you can. Enjoy the adrenaline rush of not knowing if everything will work out fine or if it will crash and burn.
  • Finally, when people at home find out that you know how to get products made they will pitch you the worst product ideas ever. Learn to tell them about the costs of injection molds, product testing, chip masking, shipping, minimum order quantities, etc. and wait for their eyes to glaze over. This is much easier than telling them that the idea if awful.

Congratulations on going it alone- few people really understand the difficulty involved.

-Robert

In a more recent post I interview Robert on how he chooses a contract manufacturer.

For my perspective on the CrunchGear's “Going It Alone” series, read my two previous posts, here and here.

Thursday, April 15, 2010

Going it alone – not just about execution


Read my previous post on “Doing it yourself”.

The massive number of steps needed to source your product from China requires the talents and detail-oriented demeanor of a project manager. But if sourcing a product from China were just about executing a lot of steps, it would be a lot easier than it actually is.

In his first two blog posts on Crunch Gear (Part 1 and Part 2, here and here, respectively), Hocherman provides a reasonable, yet by no means comprehensive, four step process for arriving at a short list of factories in China capable of producing your design.

In response to a comment, however, he admits that the actual process of finding a capable factory is much more difficult than it sounds. Build quality is “a function of combining a good design with a factory that has good processes in place,” he writes. Locating viable candidate factories and ensuring that they have “good processes in place” is essentially the key to sourcing. While Hocherman shares some good insights and experiences, he has not yet addressed the most critical concerns in his series, namely what makes a good process and how do you guarantee that your contract manufacturer has one.

Here is how he suggests you arrive at your short list.
  1. Examine your concept and design critically and carefully, and perform “a detailed prior art search”.
  2. Identify factories that have experience making similar items - these will make the long list. While there are other ways to source a manufacturer in China he offers only one alternative: using a manufacturing directory such as GlobalSources.com (his preference) or AliBaba.com, and searching for items similar to your design.
  3. Spend money on having drawings made – a “napkin sketch” won't do if you plan to “go it alone”. In addition a good external design will ensure a final product closer to your vision and will lead potential manufacturing partners to take you more seriously. He suggests a 3D Alias model, which can feed the mechanical design stage, if required.
  4. Review your product specification and transform the long list into a short list. Since most factories will fail to meet many of your requirements, your list will shrink quickly.
Step 4 is reduced into 3 substeps.
  1. Send an RFQ to the members of your long list. You should mention that you have an OEM project that you would like to discuss. You will most likely hear from one of the company’s marketing or project managers, an individual that has a good command of the English language and a decent grasp of the technical process behind developing a custom product.
  2. Request that the factory sign an NDA (Non-Disclosure Agreement) before you send over your product spec. The NDA is basically non-enforceable, in practice, but you should send it anyway. Sending the NDA (a) makes you appear serious about your idea and the protection of your IP – which you are and (b) is a handy way to take a first pass at eliminating factories that are not serious about working with you. Requesting the signed NDA will probably reduce the number of factories under consideration by fifty percent.
  3. Send the remaining factories your product spec attached to an e-mail describing your interest in working with them. You should reasonably expect two to four legitimate quotations to result from the dialog that remains with the factories that signed your NDA. Some will determine that they’re not a good technical fit for what you’re after, others will simply lose interest.
(Dan Harris of the widely respected China Law Blog loves NDA's: “they are cheap, easy, telling and effective.” I recommend that you read his most recent post on NDA's here.)

Let us assume for a moment that we know what makes a good manufacturing process. What is the likelihood that the best contract manufacturers with the best processes have listed themselves on GlobalSources.com and Alibaba.com?

I don't know the answer definitively. But having recently visited one of the best contract manufacturers in the footwear industry, I doubt the best advertise their services in a manufacturing directory. Why? Because the best usually have only a few large multinational customers, who collaborated closely with them over the course of several years. So if the best contract factories have not listed themselves on a directory, then Hocherman's prescribed method will not find them. But then again maybe you are not interested in the best, maybe "good" is good enough.

Nevertheless methods other than using a manufacturing directory might be required to find your partner. Weeboy of TheWee.com, who manufacturers goods outside of Shanghai, comments, “the key to the operation is going down there and a finding a sourcing agent that you are comfortable working with and trust. Although it will cost you about 15% it is well worth it to have eyes and ears on the ground when (and trust me they will) problems arise.” A sourcing agent familiar with a particular region or your industry might be a wise way to find your ideal manufacturing partner. The agent may also be capable of overseeing your production in China for you.

In an upcoming post I will examine how to find a factory that has good processes, but more importantly a company that has a good manufacturing culture.

In the meantime you can read my earlier post describing how Nike worked closely with its primary Korean contract manufacturer to develop a culture of sustainability, efficiency and constant improvement.

You may also want to read my earlier post on the common attributes of successful China-based manufacturers, as well as an earlier post on who makes an ideal candidate for sourcing in China.

Doing it yourself – how to make your stuff in China


In “Going It Alone: How to Make Your Stuff In China, Part 1” and “...., Part 2” Adam Hocherman, Guest Author on CrunchGear, has begun to recount how he sources his products in China.

It's not easy to make a product in China and sell it in the U.S. You can't just “dial up AliBaba.com, find a factory in Asia, throw a napkin sketch at them and wait for your container of packaged corporate job freedom to arrive in America,” observes Hocherman.

In a series of upcoming blog posts on CrunchGear he promises to share some of the “secret sauce” that makes his company, and others like his, possible today.

“The best way to source a factory in China is to go there,” he writes. He travels regularly to China for factory site visits. In the post he writes of meeting with factory owners, project managers and engineers, some of whom he has worked with for almost seven years – all happy to see him.

Perhaps in part due to the global economic crisis, the boom times for sourcing in China appear to have peaked. Foreign companies with business units in China are increasingly focused on penetrating the nascent domestic market, and less on sourcing in China. Every year the large multinationals produce a greater percentage of their output for either domestic and/or Asian-Pacific consumption. While welcoming factory owners are typical for China, good treatment is to be expected with export orders down in his field of consumer electronics.

If you cannot go to China yourself and/or if communicating efficiently with the staff of your China-based contract manufacturer poses a challenge to you, the next best way to source a factory in China (and to conduct follow-up site visits) is to have a trusted expert or team of consultants based in China visit facilities on your behalf. After all wouldn't you rather forego the long flights to and from China, and the costs they incur on both your body and your budget? These consultants should have experience working in manufacturing environments in China, and fluency with both Mandarin and the local culture.

At a minimum Mandarin is absolutely essential for communicating with production line personnel, if not in many cases engineers, and more often than not, project managers and senior management. While most managers are able to communicate in English via email, a large percentage of them will likely have varying degrees of deficiencies in oral English. Communicating directly with line personnel is highly valuable, because sometimes management, for a variety of reasons, will offer a rosier picture to you than what is actually occurring on the production line.

Beyond exercising strong fundamentals and best practices, I can only speculate what ingredients he thinks are essential to his “secret sauce”. In a more recent post I comment on his process.

In the meantime for a look at how those in the trend jewelry industry are faring in their China sourcing endeavors, see this post I did earlier this week.

Wednesday, April 14, 2010

China is hiring. Got the right stuff?


Forbes reports today that businesses are starting to hire in Asia. With China's economy clocking in at 11.7% growth in the first quarter of this year it should be of little surprise that the Asia-Pacific region has a strong demand for additional talent.

So what types of candidates do foreign firms with operations in China seek?

These foreign companies “need to make sure that they have the right person running their Chinese business. This does not merely mean a person who can speak Mandarin and English,” says Bob Otis, managing director of Atlantic Research Technologies, “but a person who is knowledgeable of the local customers and opportunities." Not surprisingly his firm is most often asked “to find China general managers who can mentor local managers and staff; great natural leaders whom people would want to work for.”

The following categories are most often considered for top-tier positions.
  • Asian-born workers, who were either educated abroad or who rose through the ranks in a multinational company.
  • Expatriates who have spent much of their career in Asia.
  • Recent graduates with specialized skills.

The article also adds that advisors in the Corporate Social Responsibility field, algorithm/quant traders in the Finance field, top positions in the Chinese banking sector, as well as leadership positions in the fields of marketing, retail and luxury goods are also in high demand.

If you happen to have the specialized set of talents, knowledge and experience required, here is a list of the 30 jobs you can get in Asia.
  1. Asia-Pacific Managing Director, Regional President or Vice President
  2. Accountant
  3. Equity Derivatives Trader
  4. Mortgage processor
  5. China CEO, General Manager, Managing Director
  6. Insurance Underwriter
  7. Lawyer
  8. Insurance Claims Processor
  9. E-Commerce Expert for investment banks
  10. Procurement Specialist
  11. Corporate Social Responsibility Expert
  12. Call Center Manager
  13. Human Resources Head
  14. ASEAN Sales Director, someone who knows Southeast Asia well
  15. Internal Auditor
  16. Computer Networking Specialist
  17. Greater China General Manager of Managing Director (Mainland and Taiwan)
  18. Systems Support Professional
  19. Vietnam General Manager or Managing Director
  20. Financial Product Control Professional
  21. Commodities Buyer
  22. Client Service Professional, Banking
  23. India Sales Manager
  24. Trade Support/Settlement Administrator
  25. South Korea Sales Manager, multilingual with ability to sell in China, Taiwan and Japan
  26. Banking-Industry Quantitative Software Developer
  27. Vietnam Chief Financial Officer or Finance Director
  28. Algorithmic/Quantitative Trader or Portfolio Manager
  29. Senior Supply Chain Manager
  30. India CEO, General Manager or Managing Director
The list is interesting because it supports the assertion that the Asian urban middle class is maturing, particularly in China. The demand for talent appears also be occurring largely outside the manufacturing sector.

Successful China-based manufacturers - what are their attributes?


Read my previous post on who makes an ideal candidate for sourcing in China.

Large foreign multinationals excel in China since they can best leverage the benefits of China manufacturing - labor arbitrage and economies of scale. Whether these are WFOE's (wholly foreign owned enterprises) or contract manufacturers serving a single large multinational account, the more scalable the operation the better. In general bigger companies have more resources to leverage China's advantages than smaller operations.

Economies of scale allow large foreign multinationals to build sustainable manufacturing facilities in China much more easily than the small guys. The market size allows them to install their own Operational Excellence and Quality Assurance programs in their China plant. Managing quality and constantly improving operational efficiency are major challenges for plants in China, both foreign and domestic. Those that do it well thrive.

Large multinational customers with large order volumes can form close collaborative partnerships with large China-based contract manufacturers, which empower employees, develop operational stability, enhance quality, improve delivery times, and increase customer satisfaction. One should not underestimate the value of a truly collaborative product development process between the designer and the China-based manufacturer. Such a mutually beneficial relationship has the potential to serve as the foundation of a lean manufacturing culture that spans from client to supplier.

It is notable that not only foreign multinationals with WFOE-facilities in China have the capability to institute the operational excellence programs they desire. As I discussed in a prior post, large international customers commanding massive order volumes, like Nike, have the resources to found training centers or corporate universities with their China-based suppliers to support mutual goals and strategies.