Top Downfalls in Product Development that Delay Project Launches

Project delays result in lost revenues and higher costs. Managed proactively potentially big disasters can be avoided.  As projects reach final stages of completion, it’s important to understand that an error or lack of necessary product modifications in the early phases of development can become detrimental to a company’s bottom line.

 

Here are the Top Four oversights that lead to delays in project launches.

 

1.  Not Understanding Customer Requirements

The importance of understanding the customer’s goals cannot be overstated.  Too often companies’ clear and well-defined objectives or critical milestones and timelines are left undocumented. Without understanding a customer’s goals or what they value the most in regards to timing and quality gets lost in translation.  Defining these factors on the front end provides a mutually agreed upon roadmap for building and executing a workable gameplan.  Collaborating on all details, with particular focus on product design, fit and function and timing builds customer confidence and loyalty.

2. Lack of Strong Project Management

Product development ideas are not valuable unless properly implemented. Successful product launches require a strong project management focus on the disciplines of managing time and costs, benefits and risks, team members, contractors and vendors, issues and requirements, tasks and milestones. Product development requires heavy involvement across departments and stakeholders.

3. Product Changes

Identifying and addressing potential gaps early in the design phase exponentially improves product launch timelines. .  Initial designs are influenced by optimal performance and not usually for manufacturing efficiency and cost. As design requirements evolve throughout the product development process this can throw a wrench to the project timeline.  It is therefore important to work with a manufacturer who has experience with similar products and has been exposed to what works and what doesn’t. Another crucial consideration is working with a factory that has existing equipment and know-how with a specific category of products.

As you meet with potential manufacturing partners  you may learn the cost involved in producing the product is actually less than expected. Conversely a feature initially assumed to be low-cost and important to the consumer may turn out to be more expensive and less important to the ultimate product performance.

4. Miscommunication

Engineering in particular, requires technical proficiency and precise communication. Product development teams should consist of experts with training and certification in their respective fields.  It’s common for jargon in one language to get lost in translation. What is common vernacular of technical professionals in the U.S. may not necessarily jive with engineers in China. Only with hands on, “feet on the street” management can you mitigate these risks.

 

Michelle Scheblein is China Business Analyst at BaySource Global. She has a B.A. in international business from the University of South Florida and has studied abroad, worked, and traveled throughout China between 2011-2014. She can be reached at mscheblein@gmail.com

How to Launch a New Product in Half the Time While Doubling Sales in the First Year

As the internet and technology continue to disrupt and consolidate global supply chains, an increasing amount of small business owners take a ‘factory-direct’ strategy, meeting and working with overseas suppliers to curb third-party overhead costs. On the surface, this strategy may appear to present a cost savings advantage, but closer inspection reveals another story. More often than not, a ‘factory-direct’ approach creates a greater financial business risk rather than a cost savings advantage. These financial risks are often blanketed through opportunity costs such as lost time invested towards developing core business strengths, lost sales from the absence of a full-time commitment towards acquiring sales and developing marketing efforts, and increased risk of late market entry. Full Service project management firms serve to offset these costs by affording small business owners the opportunity to focus on growing their business without the risks and distractions of managing complex manufacturing and logistical networks.

 

Here are some tips to remaining cost competitive while ensuring your new product hits the market on time

 

Do What You Do Best – Operating Your Core Business

Most entrepreneurs and business owners can tell people a thing or two about not having enough time in one day. But what if the pressure of time management was compounded by having to lead an entire line of business outside your core operations? If it doesn’t sound practical, then it’s because it probably isn’t. Yet small business owners often unknowingly take on managing two businesses; selling and market development and the complexities and challenges of outsource manufacturing for their new product launch. There’s nothing wrong with searching for new ways to cut costs, but the unintended consequence of managing a product’s entire outsource manufacturing process often creates unforeseen and unnecessary financial risks.

Full service project management firms provide value by assisting with product design, identifying and verifying qualified suppliers, providing technical engineering, manufacturing, and a global logistics network.  This leaves you, the business owner, with more time to do what you do best – growing your core business.

 

Boost the Bottom Line by focusing on Sales – Not Manufacturing

Lost sales are one of the biggest hidden costs of managing a ‘direct’ outsource manufacturing operation. Potential lost sales are often difficult to calculate because they’re amassed in terms of missed opportunities, rather than explicit costs captured in a company’s financial statements. How many potential sales is your business losing out on? To find out first, calculate the number of sales forecasted for a new product launch that includes a full-time commitment from your sales staff team. This also includes a full-time commitment towards conducting market research analysis, building and enhancing your website, developing packaging and art, attending trade shows, generating new leads, traveling to meet buyers, and closing deals. After this, make a similar calculation, but this time with a part-time commitment towards all variables. The resulting variance is the true opportunity cost of lost sales from the absence of a full-time commitment towards acquiring sales and developing marketing efforts.

Outsourcing the manufacturing process and all supply chain related operations allows new product developers to focus on their biggest bottom line driver – lead generation.

 

The Early Bird Gets the Worm: Market Pioneers vs. Late Entrants

Everybody loves a good product success story, but nobody likes to hear about a product flop. There’s a mirage of new product success stories circulating on the internet of an entrepreneur or inventor that introduced a product on the market that was a huge success. There are probably even more product failures we never hear about because the product was simply late to market and a competitor had already captured sales in that category.

Full service project management firms have the resources to execute both small and large size manufacturing projects at a speed and scale in which individual players can’t achieve. This advantage allows small business owners to launch their product on the market faster than doing it themselves. China based firms are also able to leverage combined volumes at factories and thus achieving lower costs than individuals can independently obtain.

Even if one is able to successfully navigate the myriad of Chinese suppliers, cultural hurdles, and processes of manufacturing overseas, the challenge of maneuvering through a ‘do-it-yourself’ style outsourcing project jeopardizes the ability of products to hit the market on schedule. When it comes to new product launches, the only benefit a delay provides is the one your competitor receives from beating your product to the market.

 

Whether managing overseas manufacturers directly or utilizing a full-service project management firm, devising an outsource manufacturing strategy is an important decision where both upfront and hidden costs must be carefully weighed. While some may succeed in leading their own outsource operations, there a multitude of reasons why full service project management firms are reputed as some of the most trusted and reliable sources to bring new products to life on time and within budget.

 

Michelle Scheblein is China Business Analyst at BaySource Global. She has a B.A. in international business from the University of South Florida and has studied, worked, and traveled throughout China. She can be reached at mscheblein@gmail.com

Dramatic Bottom Line Reduction

Save Money by outsourcing to chinaThere is one reason and one reason only that decision makers elect to have products manufactured in China and that is cost savings.  Assuming that manufactured costs are lower in China due to labor savings, there are many other cost levers to consider when manufacturing offshore in China. Here are the top five:

1.  Freight costs—Freight and logistics should not exceed 10-12% of your total cost of goods.  In other words, if you ship a 40 foot container to the U.S. this will cost on average $5,000 including import fees, duties, tax and drayage (overland transportation to/from a shipping port).  So if you can’t move approximately $50,000 of product, that should already be 20-30% below existing manufactured cost, you need to re-evaluate whether it makes sense.

2. Carrying cost of capital—Cash is king in any business.  It is critical to produce inventory that will move once it gets to the U.S. otherwise each month that inventory is tying up capital and not producing top line sales revenue, you are eating into your cashflow.

3. Warehouse space—every square foot of a warehouse used to store products has a fixed cost.  Unless you have excess space available, you need to be certain you are allotting this valuable real-estate to products that are generating revenue.  Otherwise the savings will be offset by the additional cost of warehouse space.

4. For items #2 and #3 it is imperative that analysis be given to not only finished goods but also raw material and components.  Often overlooked is the advantage of using China to absorb the financial burden of not only managing but paying for commodity purchases, raw material, components and works in progress.  Every month of financial responsibility taken on by your China producer is a month of cashflow freed up for your business.

5. Start-up costs—your China factory will absorb many intangibles associated with start-up costs including learning curve, purchasing coordination, and in many cases tooling not to mention infrastructure such as plant, property and equipment.

Quality, consistency and timing should only be the “cost of admission” and no sacrifices should be made in these areas.

Interested in learning more? You can right here.

What a Great Idea!

As a company plugged into the ecosystem of New Product Development we are fortunate to see a new idea for a great product almost every week.  Admittedly some fall into the “Why didn’t I think of that” category while others seem more limited in potential.  In both cases there is one key element missing 95% of the time and that is research.  Research leads to a plan.  Sometimes this roadmap leads to an impasse like a mountain range on an expedition.  Other times it reveals a small but certain path to success if followed and measured by each step.

Inventors and new product developers usually fall into two categories—those with the Eureka moment of inspiration and those with pragmatic vision and instinct to see what next great opportunity exists.  Both are blessed with creativity but only a few are successful in taking their idea to marketable concept.  Why?  Most inventors spend a disproportionate amount of time, resource and capital on product development, manufacturing and cost without first doing the necessary research and analysis on the product’s market potential.  Furthermore they lack a business plan and budget for getting their product into appropriate retail channels.  Following are four overlooked steps to success in launching a new product.

Understanding Patent & IP Protection vs. First to Market

An entire book could be written on the merits of weighing protection of intellectual property vs. being first to market.  The time and expense of applying for a patent are daunting.  Many become paralyzed when they believe their product launch is hostage to receiving a patent.  In 2013 the first to file provision morphed into the First to Invent under the 2011 America Invents Act which provides a grace period by which products are reduced from an “application” to practice.  If an inventor can demonstrate due diligence such as showing a product at trade shows, preparing prototypes and sending out sales samples he/she will have dominion over the invention.

What this means for everyone is that they need to be taking steps toward getting feet on the street and being first to market.  The innovation that intersects with opportunity, demonstrates value and provides a new and better mousetrap is the one whose brand equity gets the head start.  The single greatest omission we see frequently is inventors not adequately budgeting for selling activities which means planes, trains and automobiles.  There is expense and time involved with creating collateral material, a web site, participating in tradeshows, traveling to buyers’ offices, meeting with distributors (an entire topic on its own) and creating and executing a sales & marketing calendar.

Retail Landscape

Products fall into hundreds of categories such as health and fitness, hardware, DIY, home improvement, etc. The marketplace is a vast, ever expanding and complex territory to navigate.  In addition to Big Box or brick and mortar, the internet will be involved in more than 60% of retail sales by 2017 and will climb with the use of mobile such as smartphones and tablets.  While this may seem to open up even greater opportunities to sell products, an internet strategy requires an entirely new set of disciplines and skills for selling and fulfillment.

Furthermore, inventors who have a new weed killer device or pooper scooper may have never worked with or sold to lawn & garden or pet buyers.  Consider also that depending on the retailer, responsibility for multiple categories may fall under one manager.  Does your contacts list include retail buyers?  You might consider using brokers who have relationships at retail and can combine your single line item SKU with others they represent.

Reality vs. The Universe

Here is yet another breakdown in analysis and planning occurs.  Some inventors invest their life savings—up to six figures attempting to see their product come to life.  The reality is it is difficult to capture a substantial percentage of the potential category or market for a product in the first year of sales.  A break even analysis can serve as a forecast or budget which will tell you how many widgets you will need to sell on an annual basis to recover your outlay and total investment.

Baysource blog

This isn’t true just for inventors.  Product managers are expected to create pro-formas based on empirical data rooted in research and facts.  The first thing they analyze is suggested retail price (SRP) what the market will bear.  Working backward they deduce what their wholesale cost needs to be which then leads to manufacturing and landed cost targets.  Included also are startup costs such as tooling, prototypes and samples.

China, Inventory and MOQs

Many turn to China to have their products produced.  When approaching suppliers the better you can demonstrate a well thought out plan the more credibility you will have.  A documented Request for Proposal (RFP) is the first step toward building this credibility with potential factories.  Engineering drawings, material specifications and guidelines for “fit and function” should be clear. They may in turn ask questions about how you plan to be successful with your product and want to better understand your game plan.  China is inundated with requests for quotations.  Unless you are an established entity it may be difficult to be taken seriously or with a sense of urgency.  Sometimes it makes sense to hire an agent who already has established relationships in place, can monitor the project and be on hand for product changes and quality control concerns.

Another example of putting the cart ahead of the horse is predicting the capital requirements for that first order.  Surprisingly we see many who have put months of work into their projects without yet having their finances in place for initial orders.  Minimum order quantities (MOQs) can begin around $25K on the low side and up to $100K for the first purchase order.  The last thing you want is capital tied up in slow moving inventory.

Preparation, homework and analysis is key.  Done properly and well ahead of time will reveal the “Go-No Go” decision providing a framework for success.

There is No Next China

 

What is something you can think of that can’t successfully be outsourced in China?  Think long and hard about this. Resist the temptation to veer toward intangibles or time sensitive services with obvious geographical barriers such as a haircut or plumbing repair.  What product theoretically cannot be manufactured in China?  How about a portrait?  I have an acquaintance that has connected with amazingly talented artists who will take a family photo and reproduce a framed, hand painted, oil on canvas likeness taken from a photograph.  It will have the same level of detail and quality as those done by artists in the U.S. costing a minimum of $1200-$2500 just for the painting itself.  This does not include the frame which can be another $350-$500.  The exact quality portrait from China can be delivered to your doorsteps for $450 or about a quarter or less that which someone would expect to pay here.  Why is this?

 If you said labor cost you are only partly correct.  There are many more factors that play into “the China price” for which Westerners have had an insatiable appetite since the Wal Mart effect took hold in the early nineties.  Yet now writers, politicians and economists say the tide is turning.  Many assert that currency fluctuation, labor shortages near China’s coastlines, and a rising middle class, are quickly narrowing the cost gap between China and the West.  They might be forgetting one thing though according to Mike Bellamy, author of The Essential Guide to China Sourcing , “there is no Next China.”

Rising labor costs in China

In a Roya Wolverson interview published in Time, May 16, 2011, Pin Li, President of the Wanxiang America Corporation stated that “rising labor costs in China will only cause inflation and not necessarily jobs returning to the U.S.”  He further explained that what this means is “instead of paying $1 for latex gloves the price may rise to $2 and will still represent the lowest cost available in the world.” 

In other words, assuming material costs are consistent globally, even doubling or tripling the average monthly wage of Chinese factory employees still does not bring total cost of goods in line with U.S. workers.

In a recent conversation, Bellamy, Chairman of the Advisory Board for China Sourcing Information Center  begins to make the “No Next China” case with the notion that China’s economy is still vastly lopsided in its dependence on exporting.  The Chinese and its neveaux riche’ have created the world’s second largest economy that many predict will be bigger than the U.S. within the next decade.  The only fuel to keep this burning is the demand for cheap(er) exports.  A growing middle class also means bolstered domestic consumption, particularly as brands become more prevalent with Chinese consumers.  But to sustain economic growth, exports have to remain a big chunk of the equation.

A shift by coastal manufacturing regions

The question may not be so much about “Made in China” as it is “What will be Made in China?”  Sure there is great capacity and infrastructure in coastal regions but there may be a shift developing with the evolution of improved skill sets and wage increases.  Dr. Eric Thun , lecturer in Chinese Business Studies at the University of Oxford China Center, says “pushing manufacturing into high value-added activity is very much what the government wants.  This kind of cost pressure stimulates upgrading.”

Bellamy adds, “because China’s economy is still heavily export dependent at present, over the past years there have been concerns about the China government promoting the interior too fast at the expense of the coast.  This could have major side effects on the much needed revenue stream gained by supplying product to overseas buyers. But, as April data demonstrates to policy makers, the development of the interior is not having a major impact on exports. “ 

The role of appreciation in Chinese currency to U.S. job creation

 Since June, 2010 when currency truly began floating, the RMB has appreciated 6% against the US dollar.  Depending on whom you talk to however, the RMB is still undervalued by as much as 25%.  Add to this CPI inflation and productivity growth rates (Chinese worker productivity is growing faster than U.S.) and the RMB will continue to be undervalued for five years or more.

 

Pin Li argues that “currency can help but it also can hurt. Structural issues are more fundamental for the U.S. and China. This is more of a political question than any economist can even measure. Politically we have to pretend it’s an issue. But the reality is that jobs from China won’t come to the U.S. They’ll go to Mexico, Korea, and Indonesia. And that means the imports that came from China will now cost more which also doesn’t solve the deficit issue.”   

Bellamy claims “we can expect that the US government will probably use the April export record to put pressure on China to allow their currency to appreciate.  The China government has a plan in place for a slow but steady increase as opposed to a dramatic adjustment as desired by the US. Don’t expect China to change their plan just because of this April data and any related pressure from the USA.”

China as a market 

Li’s passive reference to the deficit is interesting and should not go unnoticed.  While many grip about jobs, only a small percentage of Western companies have invested in growing market share in China.

In an October 6, 2010 Bloomberg Press report it was estimated that China market was valued at $150 billion in potential goods and services or a top ten global opportunity for U.S. companies.  “U.S. companies have experienced tremendous commercial success in China’s market and the prospects for future growth are significant,” said Erin Ennis, vice president of the U.S.-China Business Council. 

 

Beijing has a $145 billion trade surplus with the U.S., more than its deficit with the next seven- largest partners combined.  But is this solely due to undervalued currency and cheap labor?  Could it be more the apathetic or myopic strategies of only selling into North American and European markets and not breaking from traditional business models? 

Pin Li makes a bold statement when he asserts, “Firms’ access to Chinese should be their more of a concern than an unbalanced currency.”  

The next five years 

China remains a factory to the world.  Government subsidized infrastructure has ensured overcapacity of manufacturing availability.  One needs to simply travel from town to town; cranes as far as the eye can see.  Staggering development continues in all sectors such as transportation, industrial, housing, recreation, hospitals, shopping centers, and resorts.  Innovation and branding are now woven into the next generation’s mindset with Beijing’s full support.  There is no next China.  Whether as adversary, trading partner, or ally the future will depend on setting priorities and building mutual trust.

David Alexander is President of BaySource Global www.baysourceglobal.com

 

 

Can China Prove Itself to be a Leader in Product Innovation?

Throughout the scope of history Imperial China was known as a civilization of high culture and the world’s epicenter for scientific and technological advancement. Fast forward to a modern context, the Middle Kingdom has not reveled the reputation of being a technology driven leader fueled by innovation. Due to a series of foreign invasions followed by economic collapse, and closed door economic policies for most of the twentieth century China had lost its propensity to lead the world in these areas of development. More recently, China has been notoriously known as a culture of “copy cats,” possessing a mastery level of replicating existing ideas and inventions, but lacking the ingenuity to create and innovate into the future.

 

Today, we have witnessed another story unfold throughout the far-east. As the ink on the early pages of the twentieth-first century begin to dry the world has seen globalization and a series of gradual economic reforms transform China from an agrarian society to an industrial based super power. As the story of China continues to evolve its beginning to metamorphose from a low-cost and quality manufacturing center to an innovative, value-added provider in the global economy.

 

In the last couple years China has placed a greater emphasis on innovation, invested heavily in research and development, and drastically improved its technology. Although China has laid the foundation to be an ideal location for new product development, can it ultimately prove itself to be a global leader in product innovation? Let’s explore some key aspects of development that China has improved upon to become a stronger leader in innovation.

 

Manufacturing Capabilities Spreading into New Industries

As the world’s largest manufacturer, China possesses an array of factories whose manufacturing capabilities and product offerings span across a wide range of industries. In order to thrive amidst today’s global economic challenges, China has begun to embrace new sectors and strategies for growth in order to maintain its comparative advantage. China is in transition from a highly labor intensive, commoditized, and lower-skilled manufacturing base to a more innovation-driven economy that utilizes knowledge, innovation design, IT, software, and marketing. The sectors driving China’s “next wave” of growth are focusing on more specialized and innovative production in the following areas:

 

  • High-value machinery and components:China is likely to become a regional hub for machinery production. Similarly, a shift in electronics components has caused a rapid increase in trade of higher-tech products and components.
  • Mobile technology: Now the world’s largest consumer of mobile phones. Chinese innovation in mobile gaming, communications, e-commerce, and shopping software and services holds enormous potential to boost the nation’s competitiveness and spur new mobile-specific industries.
  • Logistics and other services:Shifting to innovative and specialized manufacturing creates opportunities for companies to capture new value in the aftermarket for goods after production. Adding cloud computing and data analytics to business practices has tremendous potential to propel the distribution sector to one of the fasting-growing industries over the next two decades.
  • Energy:China’s rapid growth and development has created a demand for more innovative and environmentally-friendly energy policies. Demand for China to become more environmentally conscientious is creating opportunities for China to address growing ambient air pollution and greenhouse gas emissions while fueling economic growth.

 

Better Product Solution Providers

The Chinese and project managers have been known to be quite literal when taking instructions, not veering “outside the box” or thinking creatively. Much of this is culturally engrained. The Chinese have always followed a clear hierarchical mindset in family, community and business.  Someone is always in charge whether the leader of the PRC, a family patriarch or factory boss and one wouldn’t dare challenge that authority or buck the system. The same goes for reading and following written direction. “Paint the train blue” means paint the train blue. It doesn’t infer teal, sky blue or aqua. It doesn’t say anything about parts per million in allowable lead content.

 

The last two decades have provided exposure to working in tandem with the West and through a little osmosis and collaboration, the Chinese are now seeing that creativity, initiative and assertiveness are traits that can be rewarded. One client of ours had us produce aluminum mailboxes as in the plain, arched U.S. Mail receptacles found across the land from sea to shining sea. They would easily fill a 40 foot container with 3,000 mailboxes at around $1.50 per piece in freight cost. One day our project manager was watching the boxes get loaded and had an idea. If the client could accept a slight smaller model as well as the existing one, they could fit 6,000 units on a container and cut the freight costs in half–something no one had ever suggested before.

 

Improved efficiency

As Chinese manufacturers face declining profit margins from rising labor costs, Factory owners are brainstorming ways to produce more with less. The result? Chinese factories are capping costs and improving efficiency by using automation to raise productivity. This allows manufacturing companies in China to maintain their market positon by remaining cost competitive. Just because wages are rising in China doesn’t mean that sourcing managers are ready to throw in the towel yet.

 

The robotics industry is on the cusp of revolutionizing the way business is conducted in China and the world. China is expected to have the most industrial robots operating in production plants worldwide within the next few years. The ratio of industrial robots to workers in China is still relatively low, but that is swiftly changing. Although China has been long known as a source of low-cost manual labor, as the cost of automation drops and wages increase, industrial automation is looking increasingly attractive. The growth in the robotics industry isn’t merely a tool to hedge against rising wages, but functions as a catalyst of putting China on the map as a world leader in advanced manufacturing innovation.

 

Creativity transferring into Improved Packaging

Asian packaging has always been easy to spot. Corrugate that almost cracks apart when opening a carton and packaging graphics famous for wildly colorful kittens, characters with only pupils for eyes and in all some pretty tacky artwork. Investment and sophistication have brought about an evolution in Chinese packaging capabilities.  Thanks to technology it is possible to get the same digital quality art illustrator (AI) files printed on a wide variety of media.

 

Harnessing the Technology Learning Curve

Over the past couple decades China has keenly observed, studied, and adopted the influx of technology that has poured into the country through years of licensing agreements, joint ventures, and FDI by western corporations. The Chinese government has also placed an enormous emphasis on scientific and technological advancement through funding and reform placing a heightened societal status on science and technology. China has made rapid advances in high-tech manufacturing, patents, and commercial applications and is now seen in some areas as a world leader.

China’s next move is to increasingly target indigenous innovation as it aims to target remaining weaknesses in technological development. Traditionally, when Chinese companies face severe competition they first look to purchase foreign technology rather than investing in developing technology. China’s hierarchical, top-down society where authority is greatly respected and feared has been argued to stifle creative development. China has been successful in making small, innovative improvements to existing designs. This may not create ground breaking products or make headlines but it does illustrate that the country is making a serious commitment to improving technology and innovation in its product development capabilities.

Michelle Scheblein is China Business Analyst at BaySource Global. She has a B.A. in international business from the University of South Florida and has studied abroad, interned, and worked in China between 2011-2014. She can be reached at mscheblein@gmail.com

US China Relations

 

US Ambassador Jon Huntsman’s speech at Tsinghua University reminds us about the positive aspects of US-China relations. An excerpt;

“So this year could be the most important in the history of our bilateral relationship. As an optimist, I believe the test will be how we take our relationship to a new level of cooperation and make real progress in resolving the pressing global issues that we face today.”

Steel Prices to Gain on Low Inventories, Costs, Baoshan Says Steelmakers will raise prices globally as they run down inventories and raw material costs gain, according to Baoshan Iron & Steel Co., China’s largest publicly traded mill.

“There’s momentum for prices to go up,” Yao Lili, an executive with the Shanghai-based company’s raw materials purchasing department, said in an interview in Hong Kong. “Inventories globally are generally quite low.”

Orders for Baoshan Steel, Posco and rivals are picking up as the global economic recovery accelerates, spurring a 55 percent gain in the costs of coal as steelmakers compete for supplies. Steel prices rose 9.1 percent in February int he U.S., and Chinese mills are charging 10 percent more since the start of this year.

“Demand growth from the home appliance makers may be stronger in 2010 than from automakers,” said Yao. “There’s a lot of potential from home appliance makers.”

Total vehicle sales in China jumped46 percent last year, fueled by the government’s stimulus spending and tax breaks. Sales may rise more than 10 percent this year, the Ministry of Commerce said Jan 29.

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EXPO 2010 – Shanghai

Throughout the history of world expositions, the themes have always exemplified global progress, the contemporary spirit of each epoch and the challenges facing the world as it moves toward the future. The World Expo brings the whole world together to look into the future. Although the various world expos have taken their themes from an array of issues, including industry, information, civilization, science, technology, culture, art, education, transport, sports, ecology, environment and resources, what has always remained common is a spotlight on mankind, cities and nature. This is also the origin of the theme of World Expo 2010 Shanghai, China – “Better City, Better Life” – which points to two essential aspects of our future. This theme involves the relationship between people and cities, mankind and nature. World Expo 2010 Shanghai China will showcase the challenges facing human societies in this age of urbanization.

Copy of Shanghai Holiday 059

Greek philosopher Aristotle once said: People come to cities for life, and live there for a better one.” His wisdom best interprets the theme of World Expo 2010 Shanghai China. If we want to make our lives better, we first have to make our cities better. Cities represent the essence of human civilization. It is no coincidence that the equivalent of “civilization” in many Western languages has its origin in the Latin word “civitas,” which means “city.” The pursuit of World Expo 2010 Shanghai China for the ideal city of the future is embodied in the concept of the “city of harmony.” The notion of “harmony” is an old one in Chinese culture, advocating peaceful coexistence between mankind and nature, between body and soul, between individual and individual. The United Nations Human Settlements Program stated in its 1996 Istanbul Declaration: “Our cities must be places where human beings lead fulfilling lives in dignity, good health, safety, happiness and hope.” That underscores the ideas behind the theme of World Expo 2010 Shanghai China.

 

Duration: May 1 to Oct 31, 2010

Expected Visitors: 70 Million

Expected Participants: 200

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China Manufacturing By Region (Infographic)

In today’s global economy, no country represents a bigger opportunity than China. As the world’s largest exporter and second-largest importer, China is modernizing rapidly. It’s home to 1.3 billion people with many cities of over 5 million that you probably haven’t heard of. While it’s known that many large corporations have done well in China, a lesser known fact is that many small- to medium-sized American enterprises are active there as well.

Larger than the United States, China is a vast country with an endless amount of product development opportunities. Each region has its own manufacturing hubs that specialize in a certain type of manufacturing. If your business is considering going the China route, it’s a good idea to become familiar with its regional manufacturing landscape.

 

 

Baysource_Global_China_Manufacturing_Infographic_OneLocation

Manufacturing Map of China Infographic

 

Michelle Scheblein is China Business Analyst at BaySource Global. She has a B.A. in international business from the University of South Florida and has studied abroad, worked, and traveled throughout China between 2011-2014. She can be reached at mscheblein@gmail.com

 

Top 8 Reasons to Use the Internet for Sourcing Products in China

In today’s global economy there’s a dizzying array of sourcing options available for manufacturing overseas. If speaking Chinese seems difficult, imagine the challenge of navigating through thousands of factories that exist all over China whose quality and capabilities span a wide range. Finding the right supplier is crucial, but most underestimate the time and resources required to establish a successful operation overseas. At first glance online product sourcing appears to be the easiest and most convenient solution. A closer look however reveals the reality of an internet only strategy.

As with utilizing sourcing agents, full-service project management firms or any other viable option, online sourcing also presents its fair share of pros and cons. So how does one decide which sourcing channel is best for their company’s product? In reality, there is no “one size fits all” solution to managing sourcing projects. Some endeavors require an on-ground presence with intensive factory oversight while other projects can easily be achieved through the convenience of the internet.

Let’s take a look at the top 8 reasons to source a product online.

1) Having a thorough understanding of the factory’s Quality Control processes and staffing is not important

Most online buyers naively believe that online suppliers enforce minimum quality requirements among the factories featured online. The issue with this is there’s no universal definition of “good quality.” The concept of good quality can mean different things in different countries, and even between individuals. It’s the importer’s responsibility to clearly communicate quality requirements, which are defined through product specifications (e.g. materials and design drafts). Without specifications the factory is forced to guess and fill in product gaps themselves – often leading to major issues.

2) No need for bilingual staff to interact with factories

Without an acute understanding of the local language and culture it’s extremely challenging to communicate with factory representatives if there are concerns regarding quality, certification requirements, product design etc. Most factory representatives do not speak English. The people that can communicate are often not fluent English speakers and possess a low level of proficiency in reading and writing in English. Adding insult to injury, because communication is occurring over the internet with a 12 hour time zone difference replies are often not received, nor sent in a timely manner.

3) Conducting a thorough factory audit isn’t important

When sourcing online the true background of the factory remains unknown. Many importers falsely believe they’re safe as long as their dealings are limited to only “Gold Suppliers”, such as those featured on Alibaba.com. Keep in mind that being a premium supplier is a membership service and is the supplier directory’s primary source of revenue. The website may verify some critical information such as proof of the factory operating as a legally registered entity, amount of registered capital on hand, and possession of a business license. This provides a great start to selecting a supplier, but is only half the equation.  Online suppliers are not necessarily required to meet any standard of social responsibility compliance.  For example, inquiries pertaining to factory emissions, employee treatment, and sanitary work condition standards remain completely unknown. Uncertainty regarding these questions can pose a serious threat to the integrity of your brand (Refer to Managing Profits and Social Responsibility: Protecting Brand Integrity While Manufacturing Overseas).

4) Making changes to your product is not necessary

When sourcing a simple product that does not require a high degree of engineering or product design online sourcing is a viable option. Conversely, online sourcing offers the least amount of flexibility in making revisions or changes to an order once a purchase has been submitted. Chinese factories will not honor any requests for product alterations after making a purchase; whatever you get, you’re stuck with. Worse yet, It’s almost impossible to request a return from a Chinese factory.

 5) Subtle variances in your product are ok

With the absence of a third-party Quality Control inspection team it’s nearly impossible to guarantee that every product will be identical in size, shape, color, and material. Amongst the thousands of suppliers featured online there are several bad apples mixed within the good. Inferior manufacturing companies have low quality materials and outdated, sub-par facilities that are likely to produce products that are not uniform in design or quality. Knowledge and experience is crucial when sourcing online. The last thing you want to encounter is variances in your product due to the expensive mistake of selecting a non-qualified supplier.

 6) No strict defect rate requirement

Conducting proper due diligence on potential suppliers is pivotal in eliminating the risk of product defects. Without having on-ground representation from a company employee or agent this is often a tricky area to manage with online suppliers. A Quality Management System is critical in sourcing the vast majority of products. Without one, defective units are likely to pass unnoticed, ending up in the hands of customers.  Quality Management Systems are used to prevent this through a rigorous process that involves, at minimum, the inspection of incoming materials/components, product testing during production, and product testing after production. This system is also used to specify how a supplier manages defective units. No matter how big or great the factory, manufacturing is still subject to mechanical and human error; defects are bound to occur to a varying degree. Suppliers should be able to clearly communicate how their Quality Management Systems work and verify their responses with credible paperwork.

7) Having a personal representative meet with the factory is not necessary

To have a personal representative meet with Chinese factories is expensive and time consuming. Online sourcing is a great way to eliminate international travel costs and bypass the myriad task of visiting several Chinese factories. This convenience does come at a price though. With nobody on the ground representing the company on your behalf opens up the door for some potentially shady public relations. Does the factory operate in safe, humane working conditions? Do they have the necessary equipment to manufacture your product?  Does the factory meet minimal good housekeeping standards?  Are they currently manufacturing similar products?  Do they have a staff dedicated to Quality Control?

 8) The product has no testing certification requirements

The vast majority of online sourcing websites have no requirements when it comes to product quality and compliance with foreign product regulations.  You may ask yourself, shouldn’t an online sourcing company exclude suppliers that are unable to provide documents proving previous compliance with European and American product standards? This would make life a lot easier for business owners in the US and EU, but has no relevance for buyers in Thailand, Kenya, and Russia. These are also important markets, and often the primary countries for many Chinese manufacturers. It’s the buyer’s responsibility to confirm which product standard or directive is applicable to the products you intend to import. The buyer will also need to verify that the supplier is actually capable to manufacture compliant products – Suppliers will not do research for you. Using a third party testing and certification company is the only way to be sure that your items are compliant.

 

Michelle Scheblein is China Business Analyst at BaySource Global. She has a B.A. in international business from the University of South Florida and has resided in China from 2013-2014. She can be reached at Michelle.Scheblein@baysource.net