Services We Provide to Manufacturers with
Supply Chains in China

• Coach suppliers as they establish more flexible, reliable supply chains


• Bridge communications barriers with Chinese suppliers, making relationships more productive


• Local review of supplier manufacturing and delivery performance measurements on an ongoing basis


• Navigate the China IT vendor landscape during system selections


• ERP systems project oversight and audits


• Educate supplier teams on state-of-the-arts supply chain principles

Case Study: A Lesson in Getting to Know Your China Supply Partners

Our client, a major global manufacturer, had been buying products from Chinese suppliers for eight years.  At the time the engagement began, the company had seven suppliers in China; two provided 10% of demand each, the others provided 1% or less. The remaining 75% was provided by other traditional home market based suppliers, but one of those was failing and the company needed to shift more volume to its Chinese suppliers. Unfortunately, at that very same time, on-time delivery from the Chinese suppliers had fallen below 40% and the company was spending $150,000 each month on expedited air shipments.

To prevent additional margin erosion and customer fulfillment issues, we were asked to assess the top four Chinese suppliers and recommend remedial actions for each.  We focused on the effectiveness of their internal operations and relationships between each supplier and the company.  Our onsite assessment exposed several critical findings:

Supplier A – A Potential Black Hole

Supplier A, proven to deliver quality product reliably, had been rewarded with more business, which ultimately overwhelmed the supplier.  Desperate to sell products in overseas markets, the supplier felt compelled to say yes to any request from a loyal customer, even though they knew they were overcommitted and did not have the financial wherewithal to meet the higher demand. 

• Re-source the incremental demand (shift some demand to other suppliers)
• Shorten the payment cycle to put cash into Supplier A’s hands so they can buy the raw material needed to ramp up production.
• Modify demand (volume and mix) to match Supplier A’s capacity better. Don’t over do it, but don’t under order either, since either extreme would put Supplier A out of business. 
• Address forecast/demand/scheduling process flaws found at the company and at Supplier A.  Specific work included:

• Analysis of the company’s demand patterns and the impact on Supplier A’s operations linearity.
• Identification of communication gaps that led to double counts of demand, and made the situation look worse than it was.  Helped client develop new communication protocols and performance measurements.
• Recommended specific process changes that prioritized critical materials early on, eliminating the need for expensive airfreight delivery.

Supplier B – A Cost Reduction Opportunity

• A detailed implementation plan that let Supplier B know the company was aware of the overcharging, and willing to work out new pricing.
• A plan for ongoing relationship building to rebuild trust in Supplier B.

Supplier C – An Untapped Resource

• Specific relationship-building steps to take to establish Supplier C as a viable vendor.
• A specific plan for feeding orders to Supplier C to show seriousness of intent.

Supplier D – A Questionable Partner

Supplier D is a large supplier of the products the company needs.  Analysis showed that nearly all Supplier D’s large customers are located in a different geographical region, so the company would not get the leverage of distribution efficiencies. As a result, since our client’s volume would only be 10%-30% of Supplier D’s business, it risked being a low priority.  Finally, in discussions with other companies in the industry we learned that Supplier D used questionable business practices.  The recommendation was to avoid Supplier D.  

• Companies Must Make Contracts Explicit
  In many cases, western management expectations are unfamiliar to Chinese managers.  Rather than making assumptions, companies must understand the real relationships between customer scheduling, supplier sales order processing, and manufacturing planning, and then document those relationships and the rights and responsibilities of all parties in the contract.



• Companies Must Look Beyond a Supplier’s “Yes”
  Chinese suppliers hate to say no.  Companies must research the detailed capacity of the supplier before awarding any business. This can be difficult in China, but as a rule of thumb, company managers should determine what level of business increase the company could cope with without huge disruption, and then ensure that they never put them in an unachievable position.



• Chinese Suppliers May Not Consider Supply Chain Risks
  Companies must ensure that the products make it to their ultimate destination.  Doing so can mean interacting with as many as 12 different third parties across the supply chain. Make sure you calculate Total Landed Costs and assess supply disruption risk.



• Companies Must Use Guanxi Wisely
  Western companies may have trouble understanding how to build up guanxi (deep relationship) ties, which are the key to doing business in China. In some cases, building up guanxi can seem—or actually be—disconcertingly like corruption, though that certainly does not have to be the case. If a Western company finds itself spending significant amount of money on one or two suppliers, that may be the signal that the guanxi it’s building isn’t the best sort.