Small furniture companies can take advantage of the opportunities to source products and parts in Asia. It is not a strategy reserved solely for the largest companies. In fact, it is a strategy that tends to level the playing field.
I made my first sourcing expedition to China and Indonesia when I managed a very small company. We were looking for woven products in China and teak parts in Indonesia. I received some advice and assistance from an experienced international purchasing manager, including a most valuable introduction to an agent and two factories, but I was on my own when I left Los Angeles for Kowloon.
I started out for China in January 2000, traveling alone with a set of directions on how to navigate the Hong Kong airport and rail system, instructions on where to stay and arrangements to meet an experienced import/export manager. Hong Kong and Kowloon were decorated for the beginning of the Chinese New Year and the new millennium. Buildings blazed with enormous, brightly lit symbols of the coming year, The Year of The Dragon. It was an exciting time, full of hope.
Language is a problem for most American travelers, as it was for me. Few Chinese speak English and it is almost impossible to learn Mandarin or Cantonese Chinese without extensive tutoring. The phrasebook I carried was pretty useless because there are so many regional dialects and subtleties of inflection that can distort the meaning of a word as simple as "hello." Once across the border into mainland China, it is a good idea to have a host or a guide, at least for the first trip. I have traveled by train and taxi alone, but I am still much more comfortable with a Chinese host. I have taken a few very long cab rides with non-English speaking drivers where I felt very vulnerable. I couldn't ask, "How much farther?", could not read the road signs and I could not even ask where I might find a bathroom. Those were uncomfortable trips.
Road to China
I learned to plan my trips so that I would arrive in the afternoon or evening before my first business appointment, which provides time in Kowloon for a physical and psychological buffer before entering mainland China. I often stay in the Grand Stanford on the waterfront.
Just a short walk from the hotel across Salisbury Road to the wharf, there is a ferry that shuttles back and forth across the bay to downtown Hong Kong. The ferry ride is faster, less expensive and a more pleasant ride than the same trip by taxi or bus.
A few blocks away from the hotel in the other direction is the terminal for a fast catamaran ferry that provides a smooth and scenic passage into mainland China. There is also a train station close by with service to Dongguan.
The border with China is a bit of a hurdle, with lots of serious-looking uniformed guards and bureaucrats. I try not to carry a lot of luggage because there are usually long lines and crowded passageways to navigate. I prefer to arrange for a visa at a Chinese embassy in the United States before departing, even though there are options for acquiring short-term visas through agents in Kowloon and Hong Kong. Visa applications require two small head-and-shoulders photos, like the one on a driver's license. The Chinese seem to fluctuate on their policies regarding entry, from somewhat lax to very tight, so it is best to be carefully prepared.
The Chinese visa completely covers one full page of a passport book. After leaving on a recent trip to China, I discovered that the bulky Chinese visas had completely filled all the remaining pages in my passport. A Kowloon travel agent said I couldn't get a visa for my trip unless I went to the U.S. embassy for more passport pages, but the embassy turned out to be closed for a U.S. holiday.
At this point, it began to seem that my carefully planned travel itinerary would collapse and I would end up spending extra money on changes to my super-saver airline tickets, more nights in the hotel, plus at least two days of unproductive time. I returned to the business offices of the "Brilliant Shining Travel Broker," but these official travel agents were no help. Slouching home to my hotel, I mentioned my problem to the desk clerk who suggested I talk to the tour guide in their lobby. I told my story without much optimism that this young lady could succeed where the "officials" failed. But she had an optimistic attitude, and she said she would call a friend in the government passport and visa department. A few hours later she had arranged for my new passport pages and visa. I was back on schedule, thankful for the resourceful staff at the Grand Stanford.
On my first trip to China I was completely naive about the processes and procedures for importing. When I arrived at the first and most important factory on my schedule, I found that the production samples I had traveled so far to inspect did not correspond to the professional scale drawings I had sent to the factory owner two months earlier. These lounge-seating designs, drawn by a respected architect and furniture designer, involved subtle nuances of scale and form. It was difficult to explain why the samples were not satisfactory. The factory owner was mystified by my dissatisfaction. I decided to have foam half-models made in the United States. These full-scale half models turned out to be the key for development of our new product. The second set of production samples was excellent. Nine months later the furniture collection won an ASFD Pinnacle Award.
Taking an import/export class
After a couple of other trips and frustrations, I decided I should take a class in import/export. I was fortunate to live near the University of California Irvine campus where they offered an evening course in "Offshore Operations." The instructor was an official with the U.S. Customs Department. He used his contacts with local business managers to bring in speakers from leading international banks, transportation companies and other specialists who provided many insights into the major sub-specialties of international trade. Here are a few of the subjects covered in this course that need to be understood to properly administer an import program:
The three phases of a Letter of Credit and L/C risks
Commercial Invoice document
Packing list document
Ocean Bill of Lading document
Organization of U.S. Customs Service, getting through the customs maze
Harmonized Tariff Schedules
NAFTA certificates of origin (if appropriate)
Correct etiquette in international business travel and meetings
International Patent Rights
Safety alerts and the relative risk of traveling and doing business in various countries.
I hope that some readers of this column will find a useful and invigorating course in international trade within their own communities.
The one specialized subject, which could not be covered in any depth within this general course, was Quality Control. QC in offshore furniture manufacturing is the fulcrum for long-term offshore manufacturing success. Established companies with professional QC managers can extend their program overseas, even when working through independent contract manufacturing operations. Smaller importers need to have an independent inspector on the ground in Asia checking production quality with written QC checkpoints and measurements, even if they work with a dependable factory management team. Often, shop floor managers do not speak or read English.
After covering administration basics, construct a cash flow plan with a good financial planner. As factories in Asia become more heavily booked with orders, they are demanding larger commitments. Most Asian manufacturers expect payment before shipment or upon arrival at the receiver's dock. A few may even ask for an Irrevocable Letter-of-Credit at the time they begin production, months before delivery of the finished product. For a leveraged company with thin cash reserves, an ILC has the same financial effect as writing a company check. It's a good idea to have all of the terms clearly understood. These little misunderstandings can easily doom an otherwise successful sourcing arrangement. s
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