Chinese Manufacturing Solutions Blog

Complete Manufacturing and Distribution Blog

Moving operations to (or within) Asia? Do it right in three steps.

Jan 22, 2020

When finding the right manufacturing partner, there are always pitfalls to be aware of. We have survived many of them (as evidenced by our scrapes and scars). Anyone doing business in Asia for an extended period of time has plenty of war stories to share.

To mitigate risk, we created this article to share a process for quality assurance when moving operations to China or SE Asia. We trust you’ll learn from our experience, and welcome you to share any stories of your own.

Over the years, we have evolved with a “Find / Verify / Qualify” process and are constantly learning new ways of fine-tuning it.

 

FIND

First, we focus on finding the right manufacturing company/factory in Asia. Three questions get the process started:

  • Are you already producing in Asia or is this a new venture?
  • If the former, what has your been your experience? What are the challenges/pitfalls with supplier cooperation, raw materials, production, logistics, other (?) to date?
  • What does the “ideal source” look like?

This results in a list of “must haves” and “nice to haves” related to the type of company/factory we would like to find. The more information we have on the front-end, the more focused the search, and the better the outcome. High-quality information early improves efficiency and productivity of the sourcing team.

Important information includes:

  • The values of the company (value alignment is the first and most important thing to define success for the long term).
  • Management with gumption (can do attitude) is also high on our list.
  • Leadership with the right attitude is more valuable than a factory with all the “right equipment.”
  • Experience with the processes and tolerances is key. An example is finding a company which does aluminum casting and machining and their typical tolerance is high (e.g., medical) and their lot size (number of units they typically product in a production run) is 10s of thousands will not be a good match for a company which has lower tolerance requirements and small lot sizes. Precision manufacturers typically miss pricing targets as their asset burden is relatively high.
  • Size of the company (Goldilocks’ – not too large – not too small – just right – is critical – as we are not important enough with the factory if our buy is not a meaningful portion of their business. We want their attention when there are problems (and there will be problems). If the factory is too small – it is too risky for the factory – and up and down shifts in volume can inundate or starve a factory which is not the right size.
  • We also want to ensure that we have a list of “do not contact” companies. Could be a supplier to a competitor, a company which was engaged previously but did not have good value alignment or quality, etc. This can be tricky as many companies operate under a handful of trade names and legal entities. It pays to do a little homework.
  • And and and… the list goes on.

With the parameters defined, we start our search. Our search includes the internet, industry associations, material suppliers, and a variety of others in our “secret sauce” find the world of potentials. A great search goes will beyond the Internet, deep into professional networks with long histories of personal relationships. During the initial stages of the search often times we end up with too many or too few. If too few, we open up the search parameters which may include increasing the target area (eg. from Shanghai to “coastal China” or “China” to “China and SE Asia”) or we loosen the parameters related to the facilities or equipment.

Once we have found the world of potentials – typically 10 – 30 factories – we narrow down the list through conversations with the people at the factory.

 

VERIFY

Now that we’ve narrowed down to a list of top companies/factories, it is time to verify these findings.

During the VERIFY stage it is akin to peeling back the layers of an onion. We have the opportunity to see how responsive and professional the company is with communications (which is an important aspect of having a successful relationship). A detailed review of findings includes what we have learned about each factory, equipment base, factory size, capacity, export experience, certifications, etc. Those factories which make it through this round are awarded with an initial visit

A factory visit is not an audit. This critical step allows us to meet the management face-to-face, have a tour of the facilities, see equipment, and review their processes as well as have informal conversations with their workers (are you getting paid on time? Etc.)

As our teams move from factory to factory we develop a relative scale to compare factories in weighted matrix. The combination of hard data (equipment, capacity, location) combined with some of the intangibles (management’s level of interest in the business, product development capability, willingness to solve problems) gives us an indicator of which factory is most suitable.

Having these numbers is critical for having the health discussion/debate on how (and with whom) to proceed with RFQs. The approach of leaving the pricing as a part of the last stage ensures we are focusing on the relationship fundamentals (rather than the unit price – which is never the “total cost”). Finding a supplier with the lowest unit cost often ends up with substantial less tangible costs (additional resources to solve technical issues, expedite shipments or simply lost business). With pricing in hand we can all make an informed decision about getting something produced. Exciting!

 

QUALIFY

After the initial visit, we enter the qualify stage.

This involves a rigorous analysis of a supplier’s ability to meet quality and deliver manufacturing processes with competence. Every step of the way is data driven, and we look at over 200 criteria over 1-2 days.

Categories include:

  • Business/financial health
  • Manufacturing processes/assembly/finishing capabilities
  • Quality systems, testing, packaging, and much more.

We grade the facility from A to F, as well as identify concerns in a PDCA (Plan Do Check Act) document with Corrective Actions. The goal is to identify and mitigate risks. This improves the clarity, transparency, and (importantly) the negotiating position for our clients as we confirm details based on what we learned in the RFQs. Websites often tell a big story and what we see in person may be a very different reality. Social responsibility audits can also be included, depending on various corporate requirements.

Finally, the rubber hits the road… and in our experience a methodical approach in the initial stages of “mini-milestones” sets the tone for the relationship. It is important for both sides to achieve early and measurable successes. Molds, tools, fixtures are built on time and to specification. Samples produced, received, reviewed and constructive feedback provided. It takes time for the gears to start meshing in any new relationship.

You need to figure out:

  • Who is responsible for what?
  • How responsive is everyone?
  • How competent and timely are the replies?
  • Has the factory produced a good sample?
  • Has the customer (or their proxy) performed a meaningful review/inspection?
  • Is there a forecast for future orders (and is it being followed – or is there dialog if not)?

 

Additional Considerations

None of the above is rocket science. Here are some additional things to consider.

What does success look like?

Flipping the switch and having a team of seasoned/experienced people who can listen to your objectives, create a strategy, and execute – starting now - applies extreme focus and horsepower to a problem which will significantly change the trajectory for your company (and will likely pay dividends for decades to come).

Is time an important factor?

What is the monthly opportunity cost of NOT doing this right or having unforeseen delays? Month-on-month delays. Wasting resources trying (often again and again) to get alignment with the wrong partner.

Does your team have enough time to do their “day job”?

We are all stretched and distracted. Quality issues, employee challenges, customer requests – the list goes on. Is it better to have your team provide input and guidance at key milestones, or to take on a project in a new timezone, culture, language and overall business landscape? How long will it take for them to get up to speed, beyond “wow – this is so different” or “whoa – this is a lot of work” How much cost will be incurred in travel, hotel, running down blind alleys, loss of other business due to this new distraction? Alternatively, what would it look like if your team and our team melded together to create and execute together – each focusing on their strengths?

What is the difference between GOOD and GREAT?

If your approach is DIY or hiring someone with limited experience – that sounds at best “hopeful”. When you have a medical issue – you find a specialist. When you have a manufacturing issue – why would the approach be any different? My wife has a personal trainer to stay fit. I don’t. She is fit. I am not. Do you think I should take my own advice? Do not answer that question! 😊

Why CMD?

If you are considering moving operations to China or SE Asia, CMD is here to help. With over 30 years of experience doing business in Asia, you gain a trusted team to find the best manufacturing partner for decades. Our methodology is straightforward, are you ready to see it in action?

If so, get in touch today:

Let's Talk

 

Topics: Manufacturing, Quality Control, Risk Management, Operations