ISSUE tEN jUNE 2011

ONLINE pdf EdItION

Column Strategic Sourcing

with Greg Hutchins P. 7

Donts with Stephen Chow P. 8 of Quality Control 1/3 : The Inspection Levels P.9
logIsTICs Getting Answers P.11 QuAlITY ConTRol The basics

Column Sourcing Dos and

Getting Answers

Manufacturing - Turning the Tide of China Sourcing Cost Increases P.13 Legal Risk Control P.18
lEgAl Transnational Trade FInAnCE China Business Basics: TERms oF ThE TRAdE P. 24 TRAdEshow CAlEndAR P.25 Tools oF ThE TRAdE iPhone Apps P.27 ChInEsE CITY InFo Tianjin P.29 ThE lAsT PAgE 90% Delicious P.30

PRoJECT mAnAgEmEnT Lean

Financing your company P.21

CHINASOURCINGINfO.ORG

Letter from the Editor

By David A. Dayton, Silk Road International
Last month a business associate explained to me that they were hiring but couldnt find what they were looking for. He asked me if I could refer anyone to them with some sourcing experience since everyone theyve tried to hire has turned them downmost honestly saying some version of, I dont see a future in this industry so I dont think Ill work for you.

About the Editor

founder of Silk Road International david dayton is the owner and manager of SRI. david has nearly twenty years experience working in and with Asia and he leads SRI from Shenzhen, China. Besides Shenzhen, david has lived, worked and/or studied in thailand, taiwan, and Chongqing, China. david is a regular presenter for Global Sources New Buyer training seminars in Shanghai and in Hong Kong. He has also spoken for Global Sources Supplier Education program and the Metering China Xian Sourcing Show. david has been published in Euro Biz magazine, Right Sight Asia, Garden International and other trade publications and on numerous sites online including the China Economic Review, the New Zealand governments international trade information website and China Success Stories. He has been interviewed by the BBC, CBS 60 Minutes, the CBS Evening News, the Hong Kong trade and development Council and by NpR on china-related issues. His blog postings have been on the WSj China blog best of lists. david has a Masters degree in Southeast Asian Cultural Anthropology, focusing on Comparative Chinese and thai Corporate Cultures and a BA in International Relations and East Asian History. david has worked as a consultant, manager, trainer and translator on both sides of the pacific and he is fluent in both thai and Mandarin.

Wow. In a labor market where Chinese college graduates are very much unemployed or at least under-employed, some young 20-somethings would rather remain without a decent job than start working with a company that they think has a limited future. Not sure if that decision is a brilliant forecast of the current change in sourcing or a just a spoiled attitude. But either way, it illustrates a very salient point: Sourcing just isnt what it used to be. (I could also expose my age and make a second point about the youth in question, something like, Young whippersnappers these days dont know how to work! Why, when I was a kid) But while sourcing is indeed changing quickly, this magazine is chock full of people and companies with fantastic experience in sourcing, project management, logistics, quality control, etc. and all of them are in business and making money primarily in China. So is reality as dire as kids passing up jobs to remain unemployed make it seem? fortunately no; but it is different, more difficult and more diverse. today with the amazing advances in both technology and education there are more and more companies coming to China directly, and yes, doing well tooand there are also more and more suppliers leaving Eastern China for the greener pastures of Central China or Southeast Asia. More buyers and fewer suppliers spread out over more of China and South/Southeast Asia means that sourcing is changing as well. Sourcing professionals have to be a jack-of-many trades (logistics, languages, manufacturing, to name a few) just to be able to find the same suppliers that before were all located in Guangdong province. It requires more on-the-ground management and more involvement deeper into your supply chain than may have been required before. And when you combine these changes in sourcing with a vision of the West in decline and China on the rise (both financially and politically) its not hard to see why Chinese college grads are looking else where for opportunities. Is sourcing in China over? Not by a long shot. Mostly because there still isnt the next China, and there probably never will be. But also because, except for a few select industries China still has the deepest and most developed supply chains. It boasts better infrastructure and a more developed professional services industry than anything else in South or Southeast Asia. Yes, its changing. Yes, people are looking at other options. But for the next decade at least, China isnt getting replaced as the workshop for the world. despite what unemployed 20-somethings think. Happy Hunting. david A. dayton

The China Sourcer Magazine

Magazine of the China Sourcing Information Center (C.S.I.C.) www.ChinaSourcingInfo.org

Questions to the Editor

feel free to ask any questions via email at questions@ChinaSourcingInfo.org or on our website www.ChinaSourcingInfo.org Questions answered by Mike Bellamy, of CSIC Q: I am traveling to the Canton Fair in search of suppliers. How can you tell who is a middleman and who is an actual factory? A: Your question may be the most asked question in Guangzhou every April and October. And it is very much worth asking! Id like to offer some comments for your consideration in regards to middlemen. first, there are good and bad ones. the good ones add legit value, the bad ones cause problems. to determine who is legit, the single most powerful question you can ask is Can I speak to a few references? If they cant give you a handful of legit clients, run away. Having an intermediary is not always a bad thing, but lets assume you want to go factory direct for whatever reason, then here are some red flags that you may be dealing with a middleman: Avoid factories that refuse to list the name or location of the production facility. focus on those factories that can clearly show production experience with your particular product or production method. they should have samples and quality documents readily available if they are a real factory. If you are able to arrange a factory visit: 1. do your contacts business cards match the factory staffs information? If the cards dont match in name, color and address, then your contact is probably a middleman. 2. do the people at the factory clearly know your contact or does he give out business cards to factory staff when giving you the tour of his factory? At worst case this may be his first time working with the factory and you may as well build your own relationship without him. Look for clear information about operation size, equipment and staffing on the website. Most intermediaries dont offer the same level of detail that real factories present. Be wary if they supply a very large range of products. If they say they make toothbrushes and tV sets, most likely one or both are outsourced! Be aware that polished English skills do not reflect production skills. Often the most polished websites are set up by trading companies. Ask for ownership papers of the factory. By law, the business license should be hanging from a wall in an easy to see location. Granted, it is often in Chinese, but get a copy (and make sure the copy you are given matches the one on the wall) and later you can translate the Chinese to show valuable information like ownership, years in business, scope of business and so on. Other tips: Be explicit that the production location may be audited by you or a 3rd party, and that this location cannot be changed without approval from the buyer. You will be surprised at the number of middlemen who will take the buyer on a visit of a factory only to change the loca-

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tion to a less expensive and poor quality option after the buyer leaves. Hope your Canton trade show was a profitable one! pS: I like the HK trade shows, especially those sponsored by www. GlobalSources.com, as they dont have as many trading companies like Canton fair. Keep in mind that decades ago the Canton fair only allowed companies with import-export licenses to exhibit and even today not every manufacturer has an im-ex license. So it is natural that Canton is ripe with trading companies. Q: In regards to engineering services (i.e., design, testing, analysis, etc.), what are common pain points that should be addressed (i.e., work for hire, ownership, IP)? A: My friend paul is a dutch engineer based in China, at www.Venturetech.net he outlines two common pain points in China dealing with Intellectual property and design Bias. So as you draft your terms and conditions, you may want to keep the following in mind. Unfortunately, leaving the engineering to the Chinese manufacturer is not the best option for the following reasons: a) Intellectual property Concerns! Non-disclosure/ Non-Compete Agreements are very hard to monitor and enforce with Chinese companies. Even if the supplier has paid for their engineering, they will feel a sense of ownership. that is very dangerous if you decide to change suppliers or stop production unilaterally. Some manufactures will even leverage the engineering work done for your project to land other clients who may be your competitors. b) Biased designs! the manufacturer will engineer the product as they see fit in a way that benefits them, rather than you, the most. that means engineering to Chinese standards rather than international standards. the engineering will also be tailored to the production methods of that particular factory, which may or may not be the design that leverages the best production efficiencies and technologies available in China at a national level. furthermore, the engineering may be tailored for the Minimum Order Quantity that the factory desires, rather than the expected order size of the customer. Hope this warning helps some of the readers avoid the problems I have run into above when contracting engineering in China!

Any other Q?
Feel free to ask by email at questions@ChinaSourcingInfo.org or on our website

Answered by the staff of CSIC

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Contract Inspection, Assembly, & Packaging services to protect Intellectual Property and ensure quality Supplier Research & Vendor Coordination Facilities include an ISO 13485-compliant medical grade clean room "Tool and Die Steward" to look after client's assets to protect Intellectual Property and avoid theft & damage Outsource your China sourcing office

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GLOBAL SOURCING RULES: THEY ARE ACHANGING

By Greg Hutchins, CSIC Columnist. todays business model for many global manufacturers is fairly straight forward: 1. design the product; 2. Outsource up to 85% of manufacturing to trusted suppliers; 3. Assemble the final product in house; 4. test and quality assure the final product; and 5. Manage the overall brand. An example may illustrate this: One wellknown company that will remain anonymous plans to sell its non-core factories and focus on its strengths, specifically developing new products. It will only retain highly proprietary processes. In other words, it plans to focus on what it does best. this makes business sense if the processes are stable and also capable of meeting requirements. But, what does a company do if processes become unstable, such as- a tsunami disrupts supply chains. this is now whats occurring throughout the world. Stable and capable are changing to volatile and uncertain. Risk and ambiguity are the new normal. just look at these recent magazine headlines: Quake disrupts Key Supply Chains that will adversely affect or disrupt the supply chain. So, the solution is supplier risk management, which implies reducing supply chain vulnerabilities. And if an event or uncertainty occurs, there is a contingency plan in place to ensure business continuity. What does this mean for all of us? this means revisiting and re-evaluating many of our conventional wisdoms of supply management. Well discuss a few: From Just in Time to Just in Case. the horrific japanese earthquake and tsunami disrupted supply chain. In todays lean supply chain, there are no or few buffer inventories so that any disruption kills the supply chain. the solution is what we call just in case management or supply risk management. just in case supply management means that every critical link in the supply chain is evaluated for risk and the need for buffers and potential mitigations. From single source to multiple sources. Weve been advocating single source partnering with suppliers for more than 20 years. this makes a lot of sense and adds value to all parties in terms of knowing each others requirements and resolving quality, cost, or delivery disputes. the challenge is that if theres a disruption, all eggs are in one basket. Again, there is no diversification of supplier risk. the solution may be having single supplier for specific types of products; for highly critical items, have a prime supplier and an acceptable alternate. From Cost (price) to risk based supplier selection. price or total cost of ownership is and has been the critical attribute for selecting suppliers along with technology, delivery, service, and quality. Based on the selection criteria, strategic business decisions were made including make or buy, domestic or offshore sourcing, and risk tolerance. the critical driver for offshore sourcing was often cost or price. Now, the weak dollar, increasing offshoring costs, and risks of supply chain disruptions are making all companies re-evaluate sourcing decisions. Our recommendation to many companies is now to integrate risk in sourcing decisions. this means asking simple questions like what if a supplier cant deliver. From quality audits to risk audits. Supplier quality audits are usually ISO 9000 based. these are steady state (what is) audits auditing against ISO 9000 requirements or a hand full of checklists. We now recommend to our clients that they take a risk based approach to supplier auditing. the audits look at what if and possible contingencies. they look at white space gaps and risks in the supply chain and the best remediation. So, what does this mean to you? I believe that were living in a world of accelerating volatility, uncertainty, complexity, and ambiguity. Many of our cherished assumptions are changing. We need to revisit our conventional business wisdoms and evaluate our supply decisions through the prism of risk management.

trategic ourcing

Stress test for the Global Supply Chain Long pause for japanese Industry Raises Concerns About Supply Chain japan Quake Likely to Affect Business Globally As you can see from the above stories, we believe that supplier sourcing will evolve into 1. Risk based supply problem-solving and 2. Risk based supply decision-making. the new normal has also changed some of the sourcing rules. What does this mean? Supplier risk is the possibility that uncertainty or an event will occur

About the Author

Greg Hutchins
Chief engineer at Quality+Engineering Greg Hutchins is the principal engineer with Quality+Engineering. He can be reached at GregH@QualityplusEngineering.com.

Sourcing
By Stephen Chow, CSIC Columnist. On the English blogs in China, there are many sourcing experts writing articles discussing the methods they use on how to screen Chinese suppliers. However, I think it is also important to understand the perspective of the Chinese Supplier(s) on how they evaluate and distinguish buyers. As buyers, we can benefit from understanding what it takes to develop and maintain a pleasant relationship with Chinese suppliers.

Dos & Donts

with Stephen Chow Needless to say, this situation at the hotel made the manager and I feel unimportant and upset. While Im sure there are differences in our cultures, conducting business based on mutual respect is beneficial to both the supplier and the buyer. While it may have been a normal business practice for this buyer to shuffle as many suppliers in and out of his hotel as possible, it was difficult for me to explain this situation to the general manager. nature, we wont take it very seriously. Some suppliers may even think that emails without a signature might be coming from a competitor, trying to get trade secrets such as pricing. do you use please, thank you in the email? I have one client who never use please, make me feel like he is trying to order me to do this or that, very uncomfortable.

ImpROvING BUYER/SELLER RELATIONSHIpS pART 1

Be polite, be professional
Last month, a US buyer contacted me through Alibaba. He said he was big importer in US and that he was very interested in buying products from a factory that I had worked with and invited us (myself and the factory) to meet him in Shanghai during the domotex 2011 period. I had noticed that in the email exchanges he had never addressed my name or title. While this made me a bit uncomfortable, I chose to view it as a difference in business style. the general manager of the factory and I drove 4 hours to Shanghai, carrying a heavy carton filled with samples to show the client. He asked us to go to his hotel room. When the door opened, I noted that the client ignored the introduction of myself and my general manager, instead just simply saying, Come on in, (non chalantly) so we went in. He didnt ask us to sit instead we found a seat for ourselves. Ignoring my small talk such as How was the journey?, or How long did your flight take? he just simply asked to see the sample(s). five minutes later, he signaled we should leave indicating that another supplier was coming for an appointment to show off their samples.

write your inquiry letter properly

Chinese suppliers, (especially quality ones), get somewhere between 20 to 40 email inquiries every day, so your email inquiry can easily be lost or categorized as unimportant if you didnt write the email properly. So what emails more likely to be NOt taken seriously: 1. Using a public email address such as yahoo, aol, Gmail etc. can be viewed not only as a bit unprofessional, but also (more importantly to you) but more likely to be seen as a small buyer with less money to spend. purchasing a business email account is not too expensive and can make you be viewed as a bigger fish 2. Address the name and/or title of your Chinese counterparts. those who wanted to be treated with respect should give respect. this is a common business practice anywhere 3. Use a proper email signature at the end of the email with your name, title, company name, address, telephone number, email address and company website. to be honest, when we get an email inquiry without a proper sig-

About the Author

Stephen Chow
Owner of Chinawhy

Steven Chow has more than 10 years experience working in factories, trading companies and sourcing companies. He is the owner of Chinawhy, which offers sourcing, supplier verification and QC service to overseas small and medium sized buyers.

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souRCIng susTAInABIlITY

The basics of Quality Control 1/3 : The Inspection Levels

By Tanguy Boulanger - Customer Service Manager for Asia Quality Focus
you can decide to switch to the Level I. As the sampling size is reduced, the inspection may take less time as well and thus be cheaper. Switching levels is bit more complicated and requires more guidelines, and most importers rely on their feeling. However, If you want to strictly respect these guidelines, ask your QC manager or your external inspection provider what they recommend. quantity of these items would be long and obviously expensive. the solution is to randomly select samples for inspection. But how many samples have to be selected?

Theres more to QC inspection than meets the eye.

If the inspector is only checking a few pieces, it might not be representative enough for him to notice any quality issues, but at the same time the objective is to keep the inspection short by reducing the number of samples to check. the standards (AQL tables) propose a standard level of inspection, called level II, ,which was designed to balance time and quantity fairly. Level II is used for more than 90% of inspections. for example, for an order of 5,000 products, 200 the Military Standard 105 was creat- samples would be checked. ed by the US department of defense to more efficiently control their procurement process. the ANSI, ISO, and other related institutes also have their own standards, but fundamentally they are similar. Almost all third-party QC firms use the same standards and the same statistical tables, also known If you know that a factory is deliveras the AQL tables or Acceptable Qualing goods with a substandard quality, ity Level. you know that the risk of non-quality is also higher and the inspection must more thorough. In this case, you can make the inspection criteria stricter by choosing the Level III in order to inspect more samples.

In the following three articles, we will provide you the basics of the Quality Control inspections. perhaps you sometimes let your suppliers ship your goods without inspecting. perhaps you are using a third-party company to control your orders, perhaps you even have your own team. Are you taking unnecessary risks? Are you paying a way too much? the only way for you to make your opinion about those questions is to be familiar with the basics of the quality control.

What are special levels?

On site, QC Inspectors often have to perform special tests on products. In some cases, the tests can only be performed on few samples, why? - It might take a long time - It might lead to the destruction of the product.

The applicable standards

Why and when to switch inspection levels?

About the Author

Tanguy Boulanger
Customer Service Manager for Asia Quality focus tanguy is the Customer Service Manager for Asia Quality focus. tanguy handles client queries along with assisting in inspections and audits for AQf. Based in Shenzhen, tanguy speaks french, English, Spanish and Chinese

Why use a random sampling?

Shipments usually involve thousands of products. Checking 100% of the

Conversely, if your supplier has constantly delivered acceptable products,

QUALITY CONTROL

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Getting Answers
By Matt Kowalak , Southern Perspective SZ

Find the answers you need to satisfy your logistics.

for many westerners doing business in China, one of the most frustrating feelings is the sense that no matter how many times you ask, youre not getting a straight answer. Sometimes the answers you get bring more confusion than clarity. We recently dealt with just such a situation for a client. Our clients freight forwarder in his home country contacted us to figure out why his customers goods were had been held in China customs for the last 8 months. With 10K USd already paid (customers own money) to pay a fine and secure the release of the goods from customs, it still was not clear what caused this situation and how it could of been prevented. Our customers product is one that can be considered both as a dangerous and non-dangerous good, depending on how they are classified and assembled. Shipping these particular goods requires the supplier to have a certain certification in order to be loaded. these documents include non-dangerous goods and dangerous goods certificates. It is an unfortunate story of miscommunication, grey area shipping practices and lack of responsibility. In addition to fake and misrepresentative documents from a supplier, there are three Chinese forwarding companies to add to the confusion. We will call them forwarder #1, #2, and #3. It all started when COSCO, a fortune 500 company and Chinese State Owned Enterprise (SOE), received a booking from forwarder #3 as furniture. A week later as the container of furniture reached the port it was accompanied by a MSdS (Material Safety data Sheet) for our clients actual product, potentially dangerous goods. Raising only mild suspicion, as both are non-dangerous goods, a CE for non-dangerous goods was requested. forwarder #3 sent three sets of CE documents for non-dangerous goods, which all turned out to be fake or no longer relevant and were rejected by COSCO.

Upon further investigation, COSCO found that there was an additional similar product in the container, which the forwarder #3 mislabeled on the B/L (Bill of Lading). COSCO then classified the goods as dangerous goods and advised forwarder #3 to notify the customer that the shipping fee would double due to this classification. Once this fee increase was agreed, the shipment would have been allowed to continue on its merry way. forwarder #3 failed to notify forwarder #2, which in turn never notified forwarder #1, who was the original forwarder hired by our clients local forwarder to deal with the logistics on the China end of things. Since COSCO received an unacceptable CE from forwarder #3, the situation was reported to the head office in Shanghai, which then held the shipment and the local customs department imposed an additional fine. COSCO refused to move the goods until the fine was dealt with. for the next six months, email chains denying responsibility and passing blame to others was about all that was accomplished. Meanwhile the goods sat. All three forwarders claimed it was not their fault and the supplier had classified the goods incorrectly. the customer contended that the forwarder #1, the company initially hired, was responsible for verifying such issues and the supplier claimed the old standby this is how things are always done even though the container had several different types of products. All three forwarders and the supplier gave a variety of excuses of why it was not their fault. As these emails produced zero results, our customer paid the fine themselves to get the goods moving. When our customers local forwarder contacted us, it was clear to him that no answers would be found if we were not able to get all the parties together and discuss. We were able to arrange a meeting with representatives from all of the freight forwarders and

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COSCO. In the meeting, COSCO shed the most light to the situation. COSCO revealed that supplier had been black listed from COSCO shipping as they have misclassified their products repeatedly. COSCO also showed that forwarder #3 simply ignored their request about shipping the goods as dangerous goods, most likely because they thought they would be blamed and held liable for the fine. When forwarder #1 was pressed by our clients forwarder to find out answers, they claimed it was the suppliers fault for the misclassification. the supplier returned in kind with the claiming that the forwarders misclassification of furniture is where the problem began. We were most surprised at how many freight forwarders were involved on the Chinese side. forwarder #1 has a continuous relationship with our clients local freight forwarder and was originally hired to facilitate the shipment leaving China. forwarder #1 hired the less expensive forwarder #2 to handle the paperwork and manage the project. forwarder #2 hired forwarder #3, a co-loader that basically brokers space on ships on COSCOs vessels, to take possession of the goods. Basically, it ended up as an international game of telephone, when the directive was handed down from COSCO, the message got stuck going back to the original customer who would have gladly paid the extra shipping fee to not have his product sitting on a dock for 8 months. Because these freight forwarders are a dime a dozen in China and are each just taking a small slice of the profit pie, the idea of responsibility to the customer became nonexistent.

To sum up:
All of these forwarders were so frightened of being blamed for what had happened, they just closed their eyes hoping the problem would go away. Make sure that you do not treat logistics as simply paying a cashier. Build a relationship with a freight forwarder and keep in communication with them. the cheapest forwarder is likely to be someone who will parcel your order out to someone else as soon as possible. When working with technical items that may be subject to multiple classifications, it is best to verify all the certificates and documents before placing any orders. As seen above, the supplier claimed that it had always shipped this way, but this does not mean it was legal. Emails rarely solve complex issues; sitting down face to face with a midlevel manager will ALWAYS produce a quicker and more satisfactory result.

About the Author

Matt Kowalak
Southern perspective SZ

Matt Kowalak has worked in manufacturing related positions in Shenzhen for the last 6 years. He studied Chinese at Shenzhen University and is currently an LLM student at the Chinese University of Hong Kong. Matt and his team at Southern perspective SZ are focused on staying on the cutting edge of Chinese Business Law. they help their clients to understand potential problems that may arise in the course of doing business in China. Whether youre manufacturing, sourcing from existing suppliers, or looking to sell into the Chinese market, Southern perspective SZ can help. for further business questions or consulting, Matt can be reached at matt@ southernperspectivesz.com or through www.southernperspectivesz.com

the China Sourcing Information Center is a buyers support network. As such, the CSIC is seeking new writers for our publication. Help support our growing network of buyers helping buyers by sharing your experiences (successful or not) with our readership. to learn more about writing for the China Sourcing Information Center and its online magazine the China Sourcer please e-mail
exd@ChinaSourcingInfo.org.

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Lean Manufacturing - Turning the Tide of China Sourcing Cost Increases

By Tim McLean, Founder and Managing Director of TXM

Efficiency leads to better sustainability.

It has almost been a sourcing certainty over the past 10 years that, whatever it is, you can make it cheaper in China. While there have been exceptions and problems (Intellectual property protection, Quality etc.), overall the past decade has seen a huge transfer of the worlds production in to China. However, if you have been watching closely over the past two years things have changed. the next two decades looks like the ones where we will see a change in Chinas position from the low cost factory to the world to a developed country and major market in its own right. this process is not new, we have seen it on a smaller scale in japan, South Korea and taiwan. However this change has profound implications for buyers across the world. Based on our management of buying projects in China, tXM has done some analysis of a typical engineered product sourced in China. We assumed that the ex-works cost of the China product was 40% below the cost of the western-sourced product. Beyond the ex-works unit cost of the item the buyer needs to consider below the line costs including: Shipping cost. Working capital costs including interest and risk of obsolescence. Inventory storage and handling costs the cost of poor quality Supplier support costs (the China purchasing office, travel etc.)

In our analysis we assumed that the quality for local and Chinese supply sources were the same, however the cost of quality for China is greater due to the greater amount of inventory likely to be affected by any quality problem. the table below shows the break up of costs in this theoretical product.

for this product, the decision to source in China still seems vindicated, because even on a total cost basis, the Chinese product is still around 20% cheaper. We then researched likely cost trends over the next two years and predicted the likely future costs of this item. Much of the information about Chinese cost increases is well known. We made the following assumptions: Chinese general inflation rate of 4% (currently 5%) Western inflation rate of 2% (currently 0-2%) Chinese annual wage increases 10% (currently 20%+)

Chinese currency to appreciate 5% per year against all western currencies.

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the impact of these relatively conservative changes is startling as the graph below shows.

high levels of internal defects (the quality you receive often relies on 100% inspection), long lead times and high levels of inventory and obsolescence. In addition, poorly designed supply chains to the west with dramatic demand fluctuation, variable ordering patterns and quantities and frequent expediting mean that the Western buyer often contributes further to the problem and, eventually, to their own purchase cost. fortunately the solution to these problems is well established, tried and tested. When toyota realised in the 1970s and 1980s that its famous just in time system of production could not function correctly with the poor levels of service and quality that suppliers were providing, it sent teams of specialists to these suppliers to teach them the toyota production System. the spread of the toyota production System (or Lean Manufacturing as it is commonly known) across all sectors of manufacturing in the past 30 years has been one of the major drivers of productivity improvement in developedworld manufacturing. Low labour costs have meant that there has been little focus on rolling these proven methods out in China and other low cost economies. tXM is now working with major companies in China to change this and to bring Chinese manufacturing thinking in to the 21st Century.

With 5 years our cost advantage in China has disappeared and the total cost of sourcing from China is actually HIGHER than the Western sourced product. Considering that the actual current rate of cost increase is higher than the assumptions I have used, then the risks facing any buyer with a heavy investment in China are obvious and considerable. the first reaction of many buyers is to look beyond China, to South East Asia or India. However the challenges and risks in these other economies are considerable, including poor infrastructure, rampant corruption (worse than China), bureaucracy, unfavourable labour laws and political instability (especially in thailand). there is also the issue of the one off cost of changing, which can be considerable, particularly if manufacturing plants or assets in China are owned by the buyer. finally relocation out of China right now risks your business dealing itself out of what will be the largest market in the 21st Century, China. So the answer is to try and reduce costs in China. fortunately, as many of our customers have told us, the opportunity to do this is obvious from the moment they step in to their Chinese Suppliers factory.

Get Your House in Order First

the first step to reducing cost for your China sourced product is to look at the things your business may do to increase those costs. Start by looking at your own ordering and forecasting process so that your demand on your supplier can be as stable and predictable as possible. develop a regular ordering cycle. this should be as frequent as possible. We find that a weekly order cycle works very well. Order on a regular day to meet a regular shipment out of the Chinese port. By building your supply chain around these shipping schedules you minimise unnecessary port and shipping delays. Apply an every part every order approach to your highest volume Items (A items). filling up a container with one part number is an incredibly risky approach as the loss or delay of this container will leads to a certain stock out. By ensuring that every common part number is included in every (weekly) shipment then the risk of shortages are minimised since deliveries are only a week apart. this approach also means that inventory at your end can be dramatically reduced because you are only looking to cover weekly demand variation rather than monthly. We have helped suppliers establish pull systems so that weekly usage out of the warehouse in the destination drives replenishment orders on the Chinese supplier the following week eliminating the issue with inaccurate short forecasting (since you are replenishing to actual usage). finally you need to provide suppliers with the best forecasts that you can. On a recent project we found that a major buyer was routinely over-forecasting by between 50% and 300%. this approach inevitably leads to the suppliers resources being tied up making stock you dont need (to meet the

Primitive and Inefficient Factory Conditions such as these are Common Across China and provide a huge improvement opportunity. As the photograph above shows, the focus in China over the past 10 years has been on growth, not efficiency. As a result many (but certainly not all) Chinese factories are highly inefficient, with poor usage of labour, high levels of material waste,

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overstated forecast) rather than the stock you need. focus on giving the supplier a good monthly forecast to enable him to plan his capacity, long lead-time materials and resources to meet your demand. from the suppliers perspective what this change will mean is that he is now receiving regular orders every week for a regular mix of products. He will have clear expectations as to when he receives an order, when he has to ship and will be working to a lead time that he can achieve. He will also have an accurate view of the medium term outlook so that he can plan to make sure that he has sufficient capacity and material to meet seasonal demand peaks and promotions. In short, you have made his life easier and more predictable and typically that will lead to an immediate cost saving in inventory and expediting.

ment specialists, however most will rely on external lean specialists such as tXM. Many lean consultants in China are actually just trainers who run standardised lean workshops. In our experience this approach leads to little or no sustainable improvement. the tXM approach focuses on coaching where our consultant works alongside the client to develop and implement improvements. Most buyers will want the supplier to pay fully for the lean support. It is important to remember in this model that the consultant will then have an obligation of confidentiality towards the supplier, and the supplier would be justified in expecting to hold on to any cost savings rather than pass them through to the buyer. the toyota model is to provide the assistance free of charge, but to expect that 100% of any savings made will be passed back to toyota (the supplier can then benefit if the savings translate to other customers). We think that a middle ground of sharing the cost may be beneficial where benefits are shared and there is a free flow of information between the parties. Needless to say, given the poor state of many factories, the payback period on an investment process improvement is usually measured in weeks. the start point of any improvement effort at your supplier will usually be a value stream map. this is a map of the end to end process of manufacturing your product including both the flow of product from raw materials to the shipping dock. this process map initially highlights the key areas of waste in your suppliers process. the next step is then to develop a future state map in order to identify and quantify the level of improvement that can be achieved and the key steps needed to achieve this. In our experience, development of the future state map in order to get maximum value is a complex process and one where the skills of a highly experienced lean coach is essential. the tXM approach will then be to support the supplier over an extended period (usually 6-9 months) while they implement the future state for their business. this will involve practical coaching on some of the lean tools needed to reduce waste and improve flow such as kanban systems for materials, improvement of plant layout and design and implementation of work cells for key products and subassemblies. In parallel to this we will coach the supplier to put in the foundations of a sustainable lean production system. this includes: Improving workplace organisation and housekeeping using a technique called 5S, Establishing shop floor and plant level metrics to track the improvement process, Implementing simple problem solving techniques to overcome day to day issues in quality, machine performance or material supply. Coaching front line production leaders in basic techniques to manage their teams in the new processes. While some companies will feel comfortable using a western consultant or in-house specialist to do this work, we believe that for cost and cultural reasons it is better if the majority, if not all of the support is provided by local Chinese consul-

Value Stream Map for Supply of Sheetmetal Components from China to Australia for a TXM Customer. the figure above shows a supply chain that we established for an Australian high technology manufacturer. In this case we negotiated that the Chinese supplier would own the inventory until it was delivered to the door of the plant in Melbourne. We also used a single third party logistics provider to manage the supply chain from the suppliers door to the factory in Melbourne. this supply chain has operated for almost four years with minimal issues and a six week lead time from order to delivery. Inventory in the supply chain is limited to around four weeks in store plus a further 3 weeks in transit.

Next Step Improve the Suppliers Factory.

Starting out by listening to your supplier and assisting him with a more predictable and straightforward supply chain will hopefully make the next, somewhat more confrontational step easier. Starting a conversation about the need for a supplier to improve efficiency is always going to be challenging, particularly in China where maintaining face is an important issue. It is best to present it positively as an opportunity or a shared problem (of cost increases) rather than directly telling the supplier that his factory is inefficient In terms of resources, various approaches are used. Some very large companies have their own in-house supplier improve-

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tants, such as those employed by tXM, working in their own language.

About TXM: TXM is a leading Australian-owned Asia Pacifc manufacturing consulting company with offices in Melbourne and Shanghai. TXM can help you take action on the operational issues facing your business using proven Lean Enterprise techniques and by managing major change projects. At TXM we are passionate about manufacturing. Our team are experienced and successful manufacturing professionals first, consultants second. We understand what is like to try to grow returns in an environment of ferocious global competition, because we have all experienced it first hand. This means we have a practical and realistic approach. We will bring to your business considerable manufacturing experience from a wide range of industries as well as deep understanding of lean enterprise. You can find out more about TXM, including case studies at our website, www.txm.com.au or contact us at info@txm.com.au.

TXM Senior Consultant Tim Zhang (right) coaching a major electronics industry supplier in running daily shop floor process improvement meetings.

About the Author

Tim McLean
Business development founder and Managing director of tXM tim McLean is the founder and Managing director of tXM. tim has a 20+ year experience in manufacturing, first learned Lean and Six Sigma principles as process Improvement Engineer in the late 1980s. tim went on to manage operations in a range of industries as an Operations Manager and General Manager before establishing tXM in 2004.

What are the Benefits?

Implemented the right way, with coaching support, the lean approach can have spectacular benefits. Working with suppliers to the electronics, automotive and high technology industries in Australia, Malaysia and China, tXM has seen sustainable improvements including: Lead time reductions of over 50%, Supply chain inventory reductions of 50% productivity increases of 15%-30% Capacity increases of 30% Reduction in internal defects of 75% Reduced supplier support costs the result of these improvements is to tip the competitive balance back in favour of the China supplier, enabling us to build our operations in China as a gateway in to the most exciting market in the world as well as a competitive supplier of products to our home markets.

Comparison of forecast total cost of supply in 2020

The China Sourcing Information Center (CSIC) is a publisher, not a producer, of content. The views and opinions of the writers are their own. The CSIC is not responsible for any views expressed by our writers.

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TRAnsPoRTATIon oF goods

Transnational Trade Legal Risk Control

By Phoebe Yanxia Zhou, International Business Lawyer for Yingke Law Firm

Efficiency leads to better sustainability.

With transnational trade becoming more and more frequent, parties tend to conclude contracts less frequently. Written documents are either based on long-term cooperation and practice between the parties, or email correspondence between the parties. Without a formal and complete written contract, this brings about a lot of problems and uncertainty when it comes to settling disputes regarding performance. In order to guarantee the rights and obligations of the parties in transnational trade, it is necessary to carry out a detailed analysis.

Goods Transport Entrust and Sub-entrust

Before the shipper/seller sends goods to the warehouse designated by the forwarder the shipper/seller will send a shipping order to the nominated forwarder. In practice, the shipping order is a simplified description of shipment details, when it fails to list exactly what rights are entrusted to the forwarder, some forwarders may give feedback by email or other written form by specifying details of the entrust, such as inland transportation, booking, commercial inspections, customs, but excludes obligations after the goods are delivered to the shipping company/carrier. However, medium and small-sized forwarders cannot get bookings from the named shipping company by consignee/buyer, the forwarder failed to have contract with the shipping company. the forwarder will sub-contract other qualified forwarders (maybe an agent of the shipping company) at their own discretion. parties should understand industry practice(s), and clearly specify that the risks shall be borne by the direct delegated forwarder, to avoid freight loss leading to endless litigation.

Price
the price term shall specify whether it includes goods VAt or sales tax (if any), and parties should still clearly specify which party shall bear freight and insurance costs to avoid any risk of changes caused during the transportation of goods such as a change of forwarder and/or shipping company, amendment of a bill of lading (B/L), loss of goods, or any other event, even if there is a term specified in the contract already.

In addition, the first carrier may deliver goods to another shipper along the way. Buyer and seller shall trace the shipping route up to where the consignee accepts the goods. However, some enterprises who have not obtained a bill of lading have lost control of goods not receiving any payments. due to a breakdown in communication with buyers/forwarders, are unable to know the goods flow direction. Some other are even worse, bringing an action/claim lawsuit against the forwarder after many years, which increases the trade risks, and is an unfavorable way of seeking damages that should have been claimed in due course.

Particulars of B/L
According to the fOB trade terms, the buyer is in charge of the transportation of the goods; the buyer designates a forwarder and nominates a shipping company simultaneously. the seller therefore sends a shipping order to the named forwarder according the buyers shipping instruction. In this case, bear in mind, the seller shall receive the B/L from the shipping company instead of the forwarder, one should

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be aware of this because there might be a refusal of payment risk when the documents dont completely comply with the L/C. In the aforementioned case, the B/L shows freight collected (CC). Sometimes, the designated forwarder wants to have freight before dispatching the B/L to the shipper, the shipper will ask consignee to pay it directly to the forwarder, it doesnt mean there is any contractual relationship between forwarder and consignee. Some shippers dont understand that when the forwarder gets the freight, they ask the shipping company to sign the original B/L which shows prepaid freight (pp). In this case, a possible risk might arise for the shipper, when the forwarder refuses to pay the shipping company, or in the case of financial difficulty, the shipping company is obliged to claim freight directly from the shipper according to the particulars of B/L which shows prepaid freight.

by the seller before the subject goods are delivered, and by the buyer after the subject goods are delivered. taking the pRC Contract law as an example, it provides five exceptions: 1. when causes attributable to the buyer render delivery of the goods by the prescribed time impossible, the buyer shall bear the risk of damage or loss of the goods commencing from the date of the breach; 2. when the seller sells goods that have been delivered to a carrier and the goods are in transit, unless the parties have agreed otherwise, the risk of damage and loss shall be borne by the buyer commencing from the time of establishment of the contract; 3. when the parties have not designated or clearly designated a place of delivery, if the goods require transport as provided by Item (i) of paragraph 2 of Article 141 of this Law, the buyer shall bear the risk of damage or loss of the goods commencing from the time the seller delivers the goods to the first carrier; 4. When the seller [places] the goods at the place of delivery in accordance with the Contract or in accordance with Item (ii) of paragraph 2 of Article 141 , and the buyer fails to take delivery of the goods according to the provisions of the contract, the risk of damage or loss of the subject matter shall be borne by the buyer commencing from the date of the breach; 5. Where the purpose of the contract is frustrated because the goods dont meet the quality requirements, the buyer may reject the subject goods or terminate the contract. When the buyer rejects the subject matter or terminates the contract, the risk of damage or loss of the subject goods shall be borne by the seller.

Governing Law
In accordance with the Chinese judicial practice, the choice of law must be express and agreed to by both parties, the choice may only fall on the current substantive law of a Country or Region, not including their conflict law. If the parties have not made an express choice, then the Chinese courts or arbitration organizations will, on the basis the provisions of article 126 of the Contract Law, apply the law of the country the contract is most closely connected with . In addition, if the parties choose Chinese Law as the applicable law, parties shall know more about the applicable law or regulations that will affect their rights. for example, if its a contractual matter the limitation of action will be 2 years instead of 1 year as in maritime law, and this will certainly affect the claim.

Delivery
In the event that the Buyer fails to accept the Goods or fails to provide the Seller with reasonable instructions for the delivery of the Goods, the sales contract should specify that the seller shall have the right to take measures such as i) store the Goods until they are delivered or collected; or ii) Sell the Goods at the current best price; and use the proceeds to reimburse the amount the Buyer should have paid for the Goods, as well as storage charges, insurance premiums and any other costs of sale.

About the Author

Phoebe Yanxia Zhou
International Business Lawyer, Yingke Law firm

Allocation of Damage/ Rise and Title

the parties are entitled to stipulate the transfer of title and allocation of damage/risk during the transportation of goods. When the parties fail to stipulate in the contract, the risk of damage or loss of the goods is borne

Yingke Law firm is an international law firm which has 17 branches in China and more than 10 liaison oversea offices and branches. Wherever you have a legal problem, Yingke can help you. phoebe Yanxia Zhou serves as an International Business Lawyer for Yingke in Shanghai. phoebe can be reached at zhouyanxia@yingkelawyer.com

We get to the most remote places in China

With 3 decades of experience, 3 strategic offices located in Greater China, and over 80 dedicated consultants, we are the specialists to help you: Obtain research & advice Set up China & HK operations Trade products & services Visit us at www.fiducia-china.com Grow strategically Recruit talent Outsource accounting

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susTAInABlE EngInEERIng

China Business Basics: Financing your company

By Thaddaeus Mueller, Business Development Manager, Fiducia

Financing your operations may not be fast or simple, but it is necessary.

fINANCING YOUR OpERAtIONS IN CHINA IS A BASIC YEt StRAtEGICALLY IMpORtANt ENdEAVOUR. CHINA fOCUS pROVIdES A GUIdE tO MANAGING ANd GENERAtING fINANCE fOR YOUR BUSINESS. As early as the incorporation procedure, a foreign investor has to decide on the amount of investment for the new company. tying in with this, they have to submit a basic business plan to the Chinese authorities, who then assess if the funding is appropriate for the planned undertaking. Many investors try to commit as little registered capital as possible to limit potential losses, but this can lead to serious problems down the road when the company runs out of cash. Although, there are several ways of generating additional funds to the Wholly foreign Owned Enterprise (WfOE), they are neither fast nor simple.

Example: If a company estimates that it will need USd 1M to set up and to finance all expenses until it can operate from its own cash flow, it will have to inject 70% of this as equity and can only finance the remaining 30% through foreign debt. Generally, at least 20% of the registered capital has to be paid in within three months after the business license is issued, the rest can be paid within two years.

Filling the gap

the flow of capital in and out of China is still highly restricted and closely monitored by the State Administration of foreign Exchange (SAfE). SAfE also tightly monitors the amount of foreign debt a company has and all related transactions require approval. Shareholder loans are a popular method for investors to equip their subsidiaries with funds. Such transactions between a foreign parent and its Chinese WfOE are possible, but subject to approval by the State Administration of Industry in Commerce (SAIC). After this approval has been granted, the loan then needs to be registered with SAfE. the terms of the loan agreement (duration, interest rate etc.) are also subject to approval by SAfE. Note: Business tax and withholding tax apply to the interest payments the WfOE makes to its foreign parent. Shareholder loans can only be used for investment purposes and not for cash flow financing. the WfOE must open a special bank account for the loan and it has to prove that it used the money for the designated purpose after repayment. due to the extensive paperwork required, around two months should be reserved for the process alone before the money can actually be used.

Debt/Equity Ratios
When the registered capital is determined, investors need to be aware that there is also a limit to the amount of foreign debt available. the difference between the total investment and the registered capital is referred to as the borrowing gap. the permissible debt/equity ratios are shown here:

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Local financing
Inter-company loans are not allowed in China. this means that a foreign company with several WfOEs cannot move funds between those entities. to ensure efficient liquidity management between several subsidiaries in China, companies have to employ entrusted loan structures which major banks offer. In these structures the bank acts as an intermediary and allows subsidiaries of one group to pool their liquidity. Local loans in RMB normally do not count towards the debt restriction of a WfOE. However, in cases where a loan is hard to secure, the WfOE can produce A foreign guarantee, which is a guarantee of repayment issued by a foreign entity (in most cases the parent) or foreign financial institution. this guaranteed loan does have to be registered with SAfE and then counts towards the foreign debt restriction. Additionally, bank lending in China is regulated through quotas that can result in a shortage of credit supply. Leasing is another possibility for a WfOE to obtain financing. the Chinese market for financial leasing has evolved in the recent years and more and more companies (some of them foreign invested) offer leasing services. these companies are often trustworthy subsidiaries of large institutions as they require a large amount of registered capital to set up. due to its nature of being bound to the leased asset, leasing is a good alternative to classic bank loans to finance investments into fixed assets.

prepare a number of documents (e.g. updated feasibility Study and Articles of Association) and change existing certificates. the additional registered capital that is paid in can only be used after an independent auditor has done a capital verification audit. the whole process usually takes around two to three months to complete. Along with the added equity also comes new borrowing possibilities corresponding to the permissible debt/equity ratios laid out earlier.

Manage your money

Here are some key checks you should be doing: determine a realistic financial plan first to prevent major headaches later on; Consider all startup costs, deposits and fees you have to pay; Account for time lags, such as receiving refunds on import duties and VAt paid; Carefully monitor your cash flow to detect possible shortages early on. In short, there are numerous ways to fund your WfOE; they just cannot be realized overnight.

About the Author

Thaddaeus Mueller
Business development Manager, fiducia

Increasing your total investment

At a certain point a WfOE might find itself in a position where it requires additional investments, perhaps to support further growth or to restructure. When existing funds and borrowing possibilities run out, the WfOE has to increase its total investment and this requires a substantial amount of administrative effort and time. the WfOE has to

thaddaeus Mueller holds a master degree in Economics and Business Administration from the Catholic University of Eichstaett, Germany and has also studied in South Africa and Italy. Before joining fiducia Management Consultants in 2004, he worked in the automotive industry and in the fabrics and fibres division of a large US technology company. thaddaeus is the Business development Manager at fiducia, and oversees client relationships as well as marketing activities for Hong Kong and China. He has gained substantial experience in advising international clients on trading and sourcing structures in Hong Kong and China from industries as diverse as toys, machinery, packaging, textiles, lighting and

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www.cbiconsulting.com.cn

Mitigating unforeseen risk in the Chinese market.

BUSINESS INTELLIGENCE COMPETITIVE INTELLIGENCE INVESTIGATIONS BRAND PROTECTION

Terms
Fronting Loans
A loan between a parent company and a foreign subsidiary that is channeled through a financial intermediary.

of the

Trade
Lead strategy
Collecting foreign currency receivables early when a foreign currency is expected to depreciate, and paying foreign currency payables before they are due when a currency is expected to appreciate.

import Quota
A direct restriction on the quantity of a good that can be imported into a country.

internationaL strategy
trying to create value by transferring core competencies to foreign markets where indigenous competitors lack those competencies.

mercantiLism
An economic philosophy advocating that countries should simultaneously encourage exports and discourage imports.

muLtinationaL enterprise (mne)

A firm that owns business operations in more than one country.

poLycentric staFFing
A staffing policy in an MNE in which host-country nationals are recruited to manage subsidiaries in their own country, while parent-country nationals occupy key positions at corporate headquarters.

transnationaL corporation
A firm that tries to simultaneously realize gains from experience curve economies, location economies, and global learning, while remaining locally responsive.

turnkey project
A project in which a firm agrees to set up an operating plant for a foreign client and hand over the key when the plant is fully operational.

Tradeshow Calendar
for a complete list of all the tradeshows in the greater China region please visit Global Sources Calendar All Shows highlighted in Red will be attended by CSIC. Our booth location will be listed in the show guide under our corporate sponsor passageMaker Join CSICs Mike Bellamy as he hosts Global Sources New Buyers Conference: How to source from China Seminar Series

June 2011
Wed 1 Thu 2 Fri 3 Sat 4 Sun 5 Mon 6 Tue 7 Wed 8 Thu 9 Fri 10 Sat 11 Sun 12 Mon 13 Tue 14 Wed 15 Thu 16 Fri 17 Sat 18 Sun 19 Mon 20 Tue 21 Wed 22 Thu 23 Fri 24 Sat 25 Sun 26 Mon 27 Tue 28 Wed 29 Thu 30
China International Auto Aftermarket show 2011 (Zhengzhou International Convention and Exhibition Center) Hi China Show- Shanghai (Shanghai New International Expo Centre) Global Sources dubai (david dayton in attendance) Booth # 3B08

July 2011
Fri 1 Sat 2 Sun 3 Mon 4 Tue 5 Wed 6 Thu 7 Fri 8 Sat 9 Sun 10 Mon 11 Tue 12 Wed 13 Thu 14 Fri 15 Sat 16 Sun 17 Mon 18 Tue 19 Wed 20 Thu 21 Fri 22 Sat 23 Sun 24 Mon 25 Tue 26 Wed 27 Thu 28 Fri 29 Sat 30 Sun 31
Global Sources Miami (Mike Bellamy in attendance) Booth # 3L35

and
Teaming up to offer free conferences on China sourcing topics in Hong Kong, Shanghai, Dubai, Mumbai, Johannesburg, Miami, and Singapore in 2011

Next stops on the global seminar series:

July 11-13, 2011, Miami at Booth # 3L35 (CSICs Mike Bellamy in attendance)

Contact Exd@ChinaSourcingInfo.org to book seats for an individual or group.

CSIC advisory board members hosting recent conferences in Hong Kong

Buying from China: What new buyers need to know

this one-hour introductory level course on sourcing includes modules such as: Managing expectations: Sourcing opportunities and common pitfalls Quality Control Fundamentals Shipping & Logistics Overview Supplier Payments Whether youre a beginner or veteran buyer who wants a fresh perspective on the subject, these seminars will give you valuable tips on sourcing more productively and profitably. Gain information that will continue to pay off for years to come.

Negotiation tactics for successful purchase contracts/orders

this one-hour intermediate-level course will discuss common pitfalls and strategies in supplier evaluation and purchase order agreements. Outline 1. Conducting RfQ (Request for Quotation) 2. face-to-face Negotiations 3. Critical Contractual Items Price Quality Lead Times Payment terms Intellectual Property Valuable tools of the trade such as check lists and templates used by industry experts will be provided.

About the key note speakers: Mike Bellamy & David Dayton
Mike serves as the Chair of the CSIC advisory panel and is the founder of PassageMaker. Mike, in Asia since 1994, is recognized as expert on China sourcing. Mike has been a featured presenter for a number of high profile seminars and trade shows including Global Sources Asia Expo HK, Global Sources Dubai, & the US Chamber of Commerce. He lives in Shenzhen with his wife and daughter. David Dayton is the owner and manager of SRI in Shenzhen, China. david has nearly twenty years experience working in and with Asia and is a regular presenter for Global Sources New Buyer training seminars in Shanghai and in Hong Kong. david, fluent in both thai and Mandarin also heads the Silk Road International Blog- voted one of the top 10 China business blogs.

ToolsTrade
IPhonE APPs

of the

Sit or Squat & Wi-Fi Finder

Iphone applications are certainly all the rage these days, and indeed whether in Hong Kong, Shenzhen or the remote countryside, it seems hard to avoid seeing someone with an Iphone. While they are popular for many reasons, we at the CSIC have also tried to promote at least some of the useful concepts of the Iphone. Beyond costing very little money (if not free of charge), Iphone apps are now seemingly abundant. Beyond that, more and more are being created with the traveling businessman in mind. While our past issues have promoted applications relating to international business terms or HS Codes, no app should be deemed unworthy of discussion. In fact the first app discussed may be the most important app you buy when coming to China! Some features of the Sit or Squat include: the ability to view nearby restrooms on a map or in a list sorted by distance See which bathrooms are open now Read reviews, ratings & pictures of the toilets before you visit them Additionally one can see if there are changing tables, handicap accessible and other items within a given facility Anyone who has done any amount of traveling in China can attest to the importance of knowing where the bathrooms are (especially if youre not accustomed to the food or water here). this application is free to download at the itunes store

to those conducting business in China. Another app that is free to download via the Apples Istore, the Wi-fi finder can help buyers find all Wi-fi hotspots in your area and if budgets are of concern, one can choose to find free Wi-fi only. While many seasoned buyers may be perfectly in sync with the traveling challenges in China, there are tools that can be used to help make your trips more effective (and they dont have to be in the form of books which can weigh you down). Anything that can make your life a little easier will make your trip that much more effective.

Sit or Squat
As the name suggests, the Sit or Squat app is useful for finding suitable restroom accommodations throughout your travels. While primarily focused on some of the larger international cities (Beijing, Shanghai, Guangzhou), finding a suitable bathroom during your travels is nothing to take lightly. Currently 65,097 toilets worldwide have been profiled, and as more and more people download the app, the more and more bathrooms around the world can be profiled.

Wi-Fi Finder
Anyone who has done any amount of traveling in China can ALSO attest to the importance of knowing where internet can be found! Beyond the obvious hotspots such as Starbucks (where lots of people are connecting) finding reliable places to get internet to conduct business can be a challenge to find. Unless you want to send e-mails or conduct business in a loud overcrowded internet caf (where privacy is unheard of), downloading the Wi-fi finder application may also be of use

Have any other apps that you feel would help those buyers coming to China? Let us know about them and we can profile them in upcoming issues!

**the China Sourcing Information Center has not been paid to promote the above applications. However in order to encourage a more environmentally friendly business world, the CSIC does promote those products that help reduce the amount of paper consumed (or any other mode of helping the environment beyond less paper usage).

City Info

Tianjin
Tianjin, China in the 1930s.

Continuing on with another SEZ (Special Economic Zone) this month, we move to northern China in order to discuss a neighbor of Beijing- tianjin. tianjin, a metropolis of northern China, is one of the five national central cities in China (the others being- Beijing, Shanghai, Chongqing & Guangzhou). the city is the sixth largest in terms of population, bordering Hebei province and the Beijing Municipality. tianjin also benefits from its vast coastline playing host to the worlds fifth largest port (in terms of throughput). Like other Chinese cities, tianjins history stretches hundreds of years. As a result of the Second Opium War, the city was opened to foreign trade with Britain and france in 1860. for over fifty years more, the city would be divided up among several foreign powers until japan declared war on the United States and England. for those countries seeking to do business with Beijing (known then as peking) tianjin served as a convenient port. the Hai River flows through tianjin and due to the Grand Canal the city is connected to both the Yellow River (flowing near Beijing) and the Yangtze River (flowing through Shanghai).

Binhai New Area

Binhai new area is called the new growth pole in China. this area of tianjin alone boasts an annual Gdp growth rate of 30 percent! two things have helped Binhai establish and maintain this type of growtha. Binhai is considered a Special Economic Zone (SEZ)-just as Shenzhen is also given this status b. Tianjin has the lowest tax rate in China. Within Binhai are nine functional zones, which all house certain specialties (such as the Advanced Manufacturing Zone or the Seaport-Based Industrial Zone to name a couple of them). Within these nine zones 285 fortune Global 500 companies have invested and established branch offices as of 2010.

System (MtR) is under massive expansion. It was the second city in China to operate a subway system (1970), and currently has four lines in operation. there are also over 400 bus lines operating throughout the city now. train travel is highly prevalent due to its proximity to Beijing (as well as the importance of its port). Hi speed trains from tianjin to Beijing now take only 30 minutes, cutting travel time by half. tianjins airport has become one of the major Air cargo hubs of China, while also serving as an international stop for flights from both Korea and japan.

City Data
Area total 11,760/sq km (4,540.6/sq mi) population total (2009) 12,281,600 (municipality) population density 1,044.4/sq km (2,704.9/sq mi)

Climate
Like most of Northern China, tianjin experiences four seasons throughout the year (though in stark contrast to the South, winters are the season that lasts the longest). Winters tend to be cold, windy and dry, while summers hot and humid. tianjin gets very little rain (an average of just 21 inches per year). While temperatures in other areas can be counted on to remain fairly consistent, tianjins temperature extremes range nearly one hundred degrees fahrenheit (-9-105)!

Useful links
Wikipedia: transport Wikipedia: Tianjin Metro & Binhai Mass transit Wikipedia: Binhai New Area

City Setup
tianjin itself is split into 2 main sectionsthe Old City and the Binhai new area. More specifically though tianjin consists of 16 county level divisions, 13 districts, 2 rural districts and 3 rural counties. the most important area of the city is the Binhai new area which is split into 9 zones.

Transportation
tianjin was the first city in China to develop a tram System back in 1904. Much like other Chinese cities, tianjins Mass transit

The Last Page *

true Stories and images of humor/horror from the front lines of China Sourcing
Many thanks to Casey in Shenzhen for sending us this !

Have any funny/scary stories to share with us? Any funny or scary pictures? Wed love to hear your stories or see your pictures! please feel free to send any stories/images to the Executive director and Editor of the China Sourcer at-exd@ChinaSourcingInfo.org

*the China Sourcing Information Center (CSIC) is an educational service designed to help both the experienced sourcer doing business in China, and a buyer who is just beginning to source their project from China for the first time. Most of us who have been in China long have seen or heard both harrowing and hillarious stories/instances while doing business here. the Last page was created for that purpose- to allow our readers to share their stories to fellow readers/sourcers. We here at CSIC hope to collect the very best (and worst) stories and images of triumps and failures, humor or horror for the world to see. We at CSIC have hundreds of stories to share ourselves, but we really look forward to contributions from fellow sourcers. Enjoy!

The Classifieds
Multimedia/Graphic Design
American Freelance Web, Video, and Graphics Designer in Shenzhen. Contact Curt at: Curt@Kirkhoff.com

Making a trip to China?

I can help with things like interpretation and trip planning. Based in Shenzhen but willing to travel. References available. ChinaHelp@yahoo.com

the China Sourcing Information Center (CSIC) is a not for profit organization providing the following services at no charge: China Sourcer eMagazine Library Ask the Experts Service Video tutorials Endorsed Service providers List www.ChinaSourcingInfo.org

Dispute Resolution/Arbitration
CSIC will help to resolve disputes that buyers may have . Contact David at: exd@ChinaSourcingInfo.org

The Essential Reference Guide to China Sourcing

a comprehensive guide to common pitfalls and best practices by CSIC advisory board member Mike Bellamy with a foreword by Global Sources COO, Peter Zapf
Would you like access to the operations manual of a successful sourcing agency? Almost 300 pages of strategies, templates, procedures and best practices are now available for purchase. for purchase details and more information, please visit: http://chinasourcinginfo.org/book/ (paid advertisement)

English Speaking Lawyers

- protect your IP - review contracts - take suppliers to court if they have done you wrong exd@chinasourcinginfo.org

Worried your products are being knocked off and on display at a China trade show?
Ill walk the show and look around, even gather evidence for you, saving you a flight to China. 2400 RMB a day plus travel expenses if out of town. Most shows can be walked in a day. Recommended by the China Sourcing Information Center. EyesAndEarsInChina@gmail.com

Educational Videos
the CSIC partners with Global Sources to host the New Buyers Conferences at various shows worldwide. the video on the left is of CSIC Advisory Board members Mike Bellamy and david dayton. their presentation guides new buyers through the various stages of China Sourcing. Click on the picture to view the videos.