What I Learned from Football (Seriously)

Another year is behind us, and for many, it's time for resolutions (which means my gym will be really crowded and annoying for the next six weeks or so). While I don't go for the normal resolution game, it is a good time to reflect on the year, review successes and failures, and plan for the year ahead.

Reflecting on failures is always difficult. It's so important to review failures so we can learn from them. It's equally important to let them go and move on (more important?).

It's in American Football that I really understand letting go. How does a quarterback throw an interception, and then the next set of downs, play like a champion? How about those field-goal kickers? It's so amazing that a person could have a terrible experience, and then rebound in a matter of minutes.

I admit, I'm not so good at rebounding. I like to punish myself. I expect high performance from myself, and when I don't deliver, I'm not very forgiving. During the next year, I'm going to think more like a football player. When I screw up, and I know I will (I'll still act surprised), I'm going to dust myself off and figure out what went wrong. During the next set of downs, I'll execute a hard-fought drive to score.

Happy New Year Everyone!! My wish for each of you is to learn from your mistakes, and learn how to forgive yourself. Xian Nian Kuai Le.

China's Indifference to Quality

This piece from the online San Fransisco Chronicle just caught my eye, "Cars, bad air, slipshod quality trouble China." In general, the tone of the article is negative, but unfortunately, I have to agree with most of it, in particular:

"Last, and perhaps most dispiriting, China remains a nation with an
astonishing indifference to quality - a problem that's hardly improved since I first went there in 1994."

I wish it weren't so, but for many industries, it's true. There have been only the smallest changes in general attitude about quality. One of my oldest clients was just complaining to me about the difficulties with finding vendors that seem to care, especially in his industry.

Should you consider China for sourcing opportunities? Of course, but do it in a systematic way. I've written numerous posts about developing a process, and managing your supply chain. I won't repeat them here, but if you plan to source product in China, the rules have NOT changed. You must be vigilant, and you must have a systematic way to run your sourcing projects which includes proper vendor and quality oversight.

China's Plug-In Hybrid!

BYD Auto in ShenZhen is now selling the world's first mass-produced plug-in hybrid. Read more about it here. The quality remains to be seen, but kudos to BYD for beating GM and even Toyota to the market. I posted about this before on October 14.

For some more EV fun, and a look at a very cool American-made, fully-electric car (unfortunately no longer made), check out these earlier posts (here, and here) on the Corbin Sparrow. My friend owns this one. It's nice to drive, and certainly attracts attention!

Getting to 'No'

I just came across a blog piece by Bill Conerly entitled "The End of Chinese Quality Products?" Bill speculates that in addition to increasing costs in China, we may also be seeing a general decline in the quality of products from China. He refers to some general posts from my friends at the China Law Blog, I believe this one is likely one he's referring to.

While I don't agree that we will see a general decline, I do believe that economic pressures may cause your suppliers to seek new ways to reduce cost. The result will certainly be a change in your product, and maybe a change that causes the product to fall outside your specification limits. This is a good time to review your practices in general. Do you have supplier agreements in place? Are you managing your supply chain?

Now, more than ever, it's important to understand getting to "no." I've stated before that "yes" in China means only "I hear you." You'll be delighted to hear that you'll almost never hear the word "no." Suppliers will often agree to your target price (please keep in mind that I'm usually dealing with smaller suppliers), and try to figure out how to meet it later, often with disastrous results. You need to understand your cost structure before entering into negotiations. If the price you are offered is lower than you think practical, you'd better dig into the details to make sure the product meets specification.

In these hard economic times, it's more important than ever to get to "no," if that's really the answer. If your supplier can no longer meet your required cost, it's possible that they will seek to reduce cost without informing you. Now's a good time to reach out to them and see what you can do together to keep your supply of product stable and in specification.

Craft Beer in China!

After living in Ningbo for over a year, in craft-beer poverty, I was walking down the aisle of the Metro Grocery store, and saw a young female clerk with a case of Samual Adams Boston Lager. She thought she was under attack as I rushed her inquiring as to where I could find more. For the next several months, I enjoyed my "Sammies," but then Metro stopped carrying them. Perhaps I was the only person in Ningbo drinking them! (Those of you in ShangHai and Beijing, I know, have a huge variety of beer to choose from. Enjoy it, and please do ask your friends living in smaller cities if you can bring them some when you visit!).

All is not lost, according to this piece. China may see a craft-beer craze after all!!

What is American?

As the US auto industry collapses, I've heard an increasing number of calls to local radio stations claiming that to drive a foreign auto is anti-American. Some callers even claim that not buying American is treasonous! Is there even a hint of truth to these claims?

If you limit your understanding of America to a set of lines on a map, then maybe so. If you believe that the actions of government and large corporations are to be left unquestioned, then again, maybe you have a claim.

Our Founding Fathers described a condition to which all men are born and should strive to -- a condition of liberty and self-reliance. The American attitude of rewarding hard-won success, encouraging risk-taking and experimentation, and accepting failure as another tough lesson is what has made us the great nation we are. To reward failure and not demand success is the truly anti-American act.

Several years ago, wanting to buy American, I traded my two imports for American-made cars. The experiment was a disaster. Both cars failed prematurely and catastrophically. They were replaced by Toyotas, one of which was made in the US. I would claim that the truly American thing to do is to buy good value. Reward companies that offer superior product at good prices, and punish those that don't. To be American is to do more than study lines on a map. If all things are equal, then certainly chose the American product, even if it costs a little more. In the case of the automobile industry, I believe the evidence is all too clear. I feel bad for any good people that may lose their jobs as a result of near-criminal mismanagement, but to reward these terrible companies with my money is the real un-American act.

No Chery-Chrysler Deal

This piece from Forbes.com announces the end of negotiations between China's Chery Automotive and Chrysler. I'm disappointed with this news, as I was excited to see what might come of a privately held Chrysler combining forces directly with a Chinese auto maker (despite the fact that I owned Geely stock!).

Note at the end of the article that Ford may be shopping Volvo to Chinese state-owned Changan Automobile Group. Make up your own mind about that one, but it just feels wrong!!

The Tesla Founders Blog recently speculated about the DongFeng Corvette and the Tata Mustang. It seems they were right on the mark.

What's Your Leadership Style?

Lately, I'm more interested in writing on topics that are universally applicable, and not related only to China. Please bear with me, and comment if you find it interesting. In addition, as Fortuna would have it, I have recently been offered opportunity in other parts of the world. I'll keep you posted on that as well in later posts.

As I moved into management, I read widely. I also studied my managers, making note of those I thought were effective, and those that I didn't like. I often tried to copy what I read in books, or tried to duplicate the style of one of my managers that I found particularly skilled. As you may imagine, those experiments were not as successful as I had hoped. Why not? The simple answer is that I have my own particular style, and attempting to manage outside of that style just doesn't work. I'm not saying that you can't develop new techniques. You certainly can, but you'll only be truly effective (and happy) if you work to your strengths.

I'm a teacher, and a coach. There have been times when I've had to be hard and discipline or even fire people. I've done so, but it has been hard on me. When I build organizations, I make every effort to populate them with people that will respond to my style. That's not always possible, but as I'm aware of my weaker points, I can compensate, either by myself or by hiring someone who is stronger than I am in certain areas.

What is your management style? Are you a command figure who likes to know every detail? Do you prefer to teach? Understanding your particular style and inclinations will help you build and lead more effective organizations.

The Best Interview I Ever Had

I'm a pretty good interviewer. I've built several successful teams over my career, and I've learned pretty well how to quickly separate the BS from reality. In fact, my HR folks used to joke that if an interview went over 10 minutes with me it was likely we were going to make an offer. I attribute most of my interview skills to a gentleman who interviewed me about 10 years ago. This one interview shaped my understanding of the process more than any b-school or management workshop ever could.

Let me set the scene. I'm interviewing for a position with a small R&D company. This company is an amazing example of hiring smart folks and letting them run. I consider it an honor to have worked for them, and I was very interested in getting hired. I was interviewing with the VP of the company, sitting in his office, one wall of which was covered with a large blackboard. After some basic introduction, his first question:

"You and I are scuba divers. We descend to some depth, and now we stop. We're facing each other. I reach out and capture a bubble between my fingers, hold it between us, and let go. What happens?"

We ended up developing some relationships between depth and various other attributes, including velocity. That question allowed him to see my ability to think through problems, tested my basic knowledge of the world (much more essential for an engineer than all the software tools in the world), and allowed him to gauge my presentation and communication skills. In short, in about 20 minutes, he had a really good idea who I was. I aced the interview, was hired, and the VP of the company became one of my closest mentors.

So there you have it -- the basics of my interview technique. I read the resume in advance, of course, but generally don't even look at it during the first half of the interview. Instead, I allow the candidate to tell me about a project he's worked on, and we explore in depth. We work together on the whiteboard to lay out a fairly complex problem and simplify it. It takes about 10 minutes to figure out whether or not they have the ability to reason. If they can think and communicate, the rest can be taught fairly quickly.

With some imagination, you can see how to apply this technique to any class of employee, technical or otherwise. The point is to tease out those essential skills that take more time to develop (in my opinion, too much time, and these skills are essentially part of someone's life experience and personality. Can they even be taught?).

What techniques do you use? Of course, the same techniques apply wherever in the world you are, and in whatever language. Working together on a white board removes much of the language barrier, and sets a comfortable, conversational atmosphere.

Chinese Democracy

I have various alerts set up to receive information about China. Since Guns N' Roses finally released the long awaited "Chinese Democracy" album, those alerts have included information about China's cool-reception to Axl and company's latest work. Check out one report from the AP here. To make up your own mind, visit G n' R's myspace page where you can listen to some streaming MP3.

Ok, I'm a fan of G n' R. Not a crazy fan, I haven't bought the album yet, but as a young man, I did stay up late to watch Headbanger's Ball on MTV, and very clearly recall the release of "Appetite for Destruction." Remember Headbangers Ball!?!

What is your favorite Chinese beer?

Since it's Saturday, let's talk about something near and dear to my heart -- beer!

I'm a beer fan. I brew it, drink it, savor it, and am also a bit picky about what I drink. That also means I'm not really a fan of most Chinese beer. Very light, bodyless, strangely-flavored pilser is available in the US, so no reason to go to China to find it. That said, on a hot Chinese afternoon, an ice cold Tsingtao tastes awfully nice!!

Wherever I go, I try the beer. My favorite in China, so far, is Harbin Beer. It's not so different from the rest, and I'm not sure really why I like it. My impression was just that it was crisper an fresher, maybe a little maltier than others, but it's been awhile since I had it.

What's your favorite? Take the poll on the right sidebar! If I haven't listed your favorite, please comment. If you comment, feel free to tell me your favorite all time beer, regardless of the origin!

Do You Need a Supplier Contract?

No. If everything is going really well, and always will, then don't bother. You, my friend, are an enlightened master, but you don't need me to tell you that.

For the rest of us, likely you do. There are scores of articles about how to source product from low-cost countries. I've written several myself. I usually dance around the topic of contracts, and am even uncertain about what to tell my clients. I do have experienced legal advisors that I trust, and I count on them to help me figure these issues out.

Let me give you a couple of scenarios, one with a contract, one without. Please do seek legal advice before you finalize a sourcing project. As the old saying goes, an ounce of prevention is worth a pound of cure.

Scenario 1: I source a small stainless retaining clip. The value of the clip is a few pennies. The mould only cost me $200. My staff performs QC checks prior to each shipment, and I buy sufficient quantity to cover 90 days of supply. My relationship with this vendor is great, and I've used him for a couple of years. I also know that I could likely move this project to another vendor in less than 90 days, and that my mould cost will be less than $1000. I have no contract, but do issue detailed purchase orders with each order. I'm comfortable with this arrangement.

Scenario 2: I work with a partner to source a large aluminum casting for the automotive industry. The cost of the mould and tooling was over $30,000. The part is complicated and we ship monthly. Of course, relationship and VERY pro-active project controls are necessary. My risk, however, is tremendous if there is a problem. I certainly need a contract on this one!! If things go wrong, I will need to recover the tooling, which my partner and I own! I'll need to recover damages, as I would likely miss shipments if I needed to move the project. With the right team, legal remedy is possible in China.

The last contract that I worked on in China cost about $4,000. Expensive, yes, but if your tooling costs $30,000, it's worth it. If you don't include vendor disagreements as part of your failure mode and effects analysis, perhaps you should. The corresponding process control could be a well-written, enforceable contract.

Ready to Enter the Matrix?

Do you work in a matrix organization? If you work for a Western company, most likely you do. Matrix organizations are those that pool functional groups under a manager -- electrical engineers work for the EE Manager, salespeople work for the Sales Manager, etc. In addition to that, product or project managers take required people from each pool, and organize them around a goal or project. Matrix organizations allow for project teams to be tightly focused on a goal, but also allow like skills to be pooled together, which contributes to skill development and sharing of ideas. I think matrix organizations are the most effective structure, but they are also confusing to staff. As you may have noticed, each person may report to two different managers -- their functional manager, e.g. the Electrical Engineering Manager, and also to a Project Manager.

Most Chinese companies that I have worked with are organized around a more hierarchical structure, usually functional. Your Chinese employees may not be familiar with the matrix organization, something that you take for granted. Try dropping your new Chinese engineer into your matrix, without any orientation program, and you can be certain that he will feel confused by seemingly conflicting demands and a complicated reporting structure.

If you want to retain your best Chinese employees, take the time to make sure they understand how your global organization works. It's likely your company is a matrix of some kind, and your Chinese employees will need some time to understand the benefits of the matrix organization.

Help with China HR

Staffing issues are always among the top concerns for business leaders. Due to rapid growth and huge demographic changes, the problem is amplified in China. Several clients have asked me to interview their China-based staff for suitability as well as interview candidates for key positions. I believe that my interview techniques and style have allowed me to be very effective in identifying top performers for critical positions.

Today, I'm also going to let you in on one of my other secrets -- Encourage (Ningbo) Management and Consulting Company. The owner's name is Helen, she's Ningbonese, and one savvy business woman. I've worked with her on several staffing projects, and have had good success. Visit her website and send her an e-mail, I'm sure she'll be happy to help. Of course, please do let her know that I sent you!!

CSA International Opens Lab in GuanZhou

From Marketwatch, CSA has officially opened a test lab in GuangZhou -- read more here. Most of the work I've done which required CSA certification was done in the US. This could be a more time- and cost-efficient option for any of you exporting to North America. There are several high-quality electrical power supply manufacturers in Guandong Province, and I can think of several nice scenarios utilizing the GuangZhou-based lab to achieve and maintain certifications on those products.

If any of you have visited, or used the new lab, please let us know!

China's Human Rights Action Plan

China Economic Review just pointed me to this Financial Times article, "Beijing promises human rights initiative." According to the article, human rights groups are skeptical that the plan is anything more than hollow talk. Still, we have to be hopeful that the economic prosperity now enjoyed by many Chinese will be followed by expanding individual liberties, and an end to the government censorship of media.

I'm not a fan of the Communist Party, but President Hu has done an admirable job of guiding China during these tumultuous years of rapid growth. The National People's Congress, during the last session, expanded property rights laws and strengthened the judiciary.

On that note, I'm ever thankful to have been born in the good old USA, where my liberties were long ago guaranteed by a group of very wise men. We've elected a new President, and it is my sincere desire that our expression of liberty is an inspiration to the Chinese people, whatever form their government eventually takes.

Mei Wenti!

Those of us who have worked in China are used to the familiar response to just about any request -- "mei wenti (no problem)." Most often, it really means the problem is huge, but I'm not telling you about it. It's important to be aware of different common sayings, especially when the language and cultural barrier is wide. My western co-workers and I used to say that 'yes,' 'uh huh,' and 'ok' from our Chinese suppliers meant only "I hear you" not "I understand and agree."

While reading Mechanical Engineering this month I came across an article by Mia Doucet called "What Part of Yes Don't you Understand?" Mia is right on the mark, and nicely describes how "yes" is most often used as a neutral constant, and almost never signifies agreement. I've added Mia's website to my "links" list. From it, you can access many of her articles, though at this time, the article I described is not yet in the list. I expect it will be shortly, as another article published in Mechanical Engineering earlier this year is available.

It's Just Your Imagination...

I make data-driven decisions, or at least most of the time. As an engineer, I love data. I love to collect it, analyze it, and tease useful information out of it. I like to present the data in compelling ways that allow my clients to make sound decisions. In my love for data, I often fail to see that perceptions are just as important as reality. In fact, none of us really knows what's real, only our perception of it. We make decisions based on our perception of reality, whether that perception is backed by verifiable science or not.

Why do I mention this today? Why should you care? I'm currently planning a project with a long-time client. This is a client that has done a wonderful job of meeting the challenges of being a manufacturer in the global economy -- a manufacturer that's very profitable and located in the US! I realized that some actions that are being taken are based more on perception than data.

So which is more important? Data or perception? They are both equally important as factors in making decisions. If you are attempting to improve a process or a system, you must be aware of the factors driving decisions, and you must always bear in mind the impact of the filter through which each of us views our reality.

China Supply Chain Management -- What's Old is New.

When people find out I work in China, they often want to know my opinion on the most recent China-related quality issue. My first thought is always "when did companies stop managing their supply chains?"

I know that each event is different, and there's usually plenty of blame to go around; however, according to ISO 9001:2000, section 4.1

"Where an organization chooses to outsource any process that effects product conformity with requirements, the organization shall ensure control over such processes. Control of such outsourced processes shall be identified within the quality management system."

ISO 9001:2008 will clarify that "the type and extent of control to be applied to these outsourced processes shall be defined within the quality management system."

Also, ISO 9001:2000 section 7.4.3 Verification of purchased product:

"The organization shall establish and implement the inspection or other activities necessary for ensuring that purchased product meets specified purchase requirements.

Where the organization or its customer intents to perform verification at the supplier's premises, the organization shall state the intended verification arrangements and method of product release in the purchasing information."

I'm not claiming that purchasing product in Ningbo is the same as purchasing product in Flint, MI. Nor am I claiming that ISO 9001 is universally applied in China (I'll post on that at a later date). Many of my clients are small companies that don't have ISO 9001 certification.

I'm also one of those China experts that likes to write articles about my fail-proof techniques for insuring success with your sourcing operation. But let's be very clear, ISO 9001 has long required companies to manage their supply chains, no matter where they are. In short, the challenges for managing your supply chain are different in China and the US, but the requirements are exactly the same.

Critical Steps in a Sourcing Project

It's always good to refresh some basics. Let me point you to a short article that I wrote some time ago about sourcing basics. I've seen a couple similar lately on China-related sites, so now's a good time to bring this up again.

Critical Steps in a Global Sourcing Project

Time for an US-PAC

My family and I have always been mindful of our expenses. Like most people, we've occasionally splurged on a vacation or other expensive toy/ pastime, but on average, we've been pretty good. We live below our means.

A recent flight to Houston gave me a couple of hours to ponder business and family expenses, and look for ways to save some more money. I looked at that list again this morning, and was appalled!! You see, my biggest expense is taxes! Next to the tax line in my calculations, I had placed a little 'x', meaning ignore it. Ignore it!! There's nothing I can do about it anyway!!

In a year that has seen many businesses fail, my own business has also been running very lean. In a year that I will barely pay myself, my biggest expense is taxes!! Now I know that some of you will say, "That's why you should vote for McCain (or Obama)." But the taxes I'm talking about are from the State of New York!! Specifically, my property taxes, but there are so many other taxes here they must have hired a whole consultancy of creative accountants to come up with these. In a year that the New York state budget is hemorrhaging money, there is still a state employee handing me a toll-ticket for the Throughway instead of a handy, automated ticket dispenser.

The truth is, it doesn't matter who we send to Albany or Washington, DC. I hate to be apathetic, but the reality is, the spending is so ingrained into the system, that nothing but a wholesale reboot will change things.

So if voting won't do it, how about we form an US-PAC. Let's form a political action committee and buy our own slate of talking heads. Let's start a website, post questions, vote for a consensus, gather small contributions from many, and then buy a candidate to represent us. (Ok, so I also mourn the loss of the Republic, and this is something of a pure numbers/ pure democracy format, but it will get things started.)

Let's start with something we can all agree on such as "simplify the tax code to allow all income tax filings to be done on 2 pages or less. Eliminate tax loopholes and set a tax rate which will be published and easily known to all." It doesn't matter if it's progressive, flat, whatever, just that it's known and understandable. That's a first step -- we can argue the form of it later.

What do you think? (Obviously, I'm being cynical about "buying" a candidate, but you know what I mean. If PACs didn't work, they wouldn't exist, or be so well funded.)

China's Electric Car

China Economic Review pointed me to this article in the WSJ: "China's BYD to Begin Selling Electric Car Next Month." It's not likely that such a vehicle would pass US safety tests, and certainly US consumers have a much higher expectation for quality and service than their Chinese counterparts, but you have to be seriously impressed by the amazingly fast time to market. I hope this little car is a resounding success! Apparently, a company largely owned by Warren Buffett, MidAmerica Energy Holdings, has made a significant investment, so it seems there's some real promise here.

Eyes on the Future 2008

I had the good pleasure this morning of attending Eyes on the Future 2008, a greater Rochester region economic summit. Overall, it was a good event, made better for me by the company of my 16-year old daughter, who didn't seem too terribly bored.

The timing of this event couldn't have been better. Folks in New York need some hope. The credit crisis and ensuing market devastation is just the beginning. I learned today that 20% of New York's government revenue is dependent on Wall Street, meaning that New York is facing a $1.2 Billion budget deficit. In addition, this recent report from the Tax Foundation places New York near the bottom of business friendly states, based on tax policy. New York was 49 out of 50 -- only New Jersey was worse.

The event featured a panel of business and community leaders from Rochester as well as a business leader from Cincinnati, OH and an educator from Columbus, OH. Most of the discussion was upbeat, and all agreed that Western New York and the greater Rochester area have many assets that should be marketed, among them fantastic institutions of higher learning, a climate of innovation, a skilled and relatively low-cost work force, a good inventory of affordable homes, and abundant water. There was also agreement that the biggest problem we face is high taxation. (I will state from experience that this is the highest taxes I've ever paid, for services that are not world class, and a crime rate in the inner city that's appalling.)

The star of the event, if there can be such a thing, was clearly Richard Kaplan, President and CEO of Pictometry International Corporation. Mr. Kaplan was open in his criticism of government, and its ever expanding role, but also agreed that we need to take care of our neighbors who may need our help. I plan to learn more about him, and I'll let you know what I find out.

The event closed with a speech by Governor Paterson. He was honest about the current economic crisis, and was clear that services must be cut. On a positive note, he also stated that we will use this crisis as an opportunity to break the habit of spending that we've grown into. I was glad to hear him speak so directly about what we must do to restore our economy. If I may be a bit critical about one issue, he stated that manufacturing jobs are returning to the U.S. (did he say Western New York specifically? I don't recall.) due to rising costs in Asia. Rising costs in Asia, China in particular, are no surprise to you, I'm sure, and there are plenty of examples of parts found cheaper in the U.S. Governor Paterson gave two examples of a timber company moving from Nepal to Virginia, and a cement company moving back to Ohio. With due respect, neither of those places is New York, and if we're waiting for the manufacturing jobs to come flowing back to Western New York, we've got a long wait. He did mention other ideas, fortunately, including investments in technology and clean energy.

I like Rochester and the surrounding area, and I agree that we do have many blessings to be thankful for. I also think that there is great potential here, and that someday, this potential will be harnessed. Until then, events like Eyes on the Future keep us challenged to do our part, and keep the conversation alive.

Bailout! They Just Can't Help Themselves!!

Maybe you agree with the bailout, maybe you don't. Whatever your feelings, you've got to be stunned at the number of earmarks in this piece of legislation. While our elected officials worked into the wee hours to save us from certain disaster, they found time to spend another $100B+ of our hard earned money!! This is almost criminal, and if I can find a list of names associated with this I'll certainly link to it.

I've extracted a couple of my favorite parts -- from text I located on the New York Times site. Which ones do you like? These are just great!! I don't see how we'll surive without this!! Alright, anything that helps rum production, I'm for...

TITLE III—EXTENSION OF BUSINESS TAX

Sec. 308. Increase in limit on cover over of rum excise tax to Puerto Rico andthe Virgin Islands.
Sec. 309. Extension of economic development credit for American Samoa.
Sec. 310. Extension of mine rescue team training credit.
Sec. 311. Extension of election to expense advanced mine safety equipment.
Sec. 312. Deduction allowable with respect to income attributable to domesticproduction activities in Puerto Rico.
Sec. 313. Qualified zone academy bonds.
Sec. 314. Indian employment credit.
Sec. 315. Accelerated depreciation for business property on Indian reservations.
Sec. 316. Railroad track maintenance.
Sec. 317. Seven-year cost recovery period for motorsports racing track facility.
Sec. 325. Extension and modification of duty suspension on wool products; woolresearch fund; wool duty refunds.

Lean Six Sigma

I stopped collecting initials many years ago. You know the ones I mean, the certified this or bonafide that. There's nothing wrong with those initials. In fact, it's helpful for organizations to standardize a body of knowledge. It certainly simplifies training and communication in general. I just realized that at some point, it was getting silly. For instance, I have a Master's Degree from an Ivy League school in Engineering Management. Do I really need to go through the process to become a certified engineering manager? I don't think so.

I confess that I am an ASQ Certifed Quality Auditor (CQA). I needed to learn more about how to perform effective audits, so I did. I took a course offered by ASQ, and stuck around to take the exam as well. I'm proud of that certification, but it was just an extension of the learning.

I have decided to expand my skillset more, and so will be collecting a couple more initials. I recently enrolled in a Lean Six Sigma Black Belt program. I've used the tools for years, but think it's time that I formalize that knowledge and expand my skills even more. I'm really looking forward to it!

There have been some recent criticisms of Six Sigma. I recall a Business Week article claiming that Six Sigma stifles innovation. There is some truth to that, and in response, there have been several new initiatives such as Design for Six Sigma. In addition, Six Sigma practitioners have been bringing forth many new, and some old, innovation tools, such as TRIZ.

I'm excited about the program. I'll keep you posted as I move through the program, which starts in November. If you're a Six Sigma practitioner, will you please share a brief synopsis of your project(s)?

Tale of Destroyed Laptop and Financial Bailout!

A week ago, my one-year-old laptop suffered a catastrophic failure. Of course, this happened only a few months out of warranty. Like a responsible person, I did have all of my data backed up, and so was quickly back at work. I didn't realize, however, how disruptive it would be to lose all of my applications for the 7+ days it took to get a new computer online and fully personalized. Imagine, suddenly being without Adobe Acrobat, or without your Outlook add-in that helps you manage projects and action items (GTD for me).

Thanks to the good folks at LyteSpeed Computers, I'm back!! The repair techs at LyteSpeed went out of their way to provide me fantastic customer service. I'm going back to them for all my computing needs, and if you need computer help in Rochester, I recommend you do the same.

On an unrelated but much more important point, there is something I don't understand about the financial bailout. What happens to the money when (if?) the government gets paid back? There is much concern about oversight of the funds when they are given to the good folks on Wall Street, but what about oversight of the funds when they are returned to the folks in Washington? Is it mandatory that any funds returned to Washington as a result of repayment by the Wall St. firms or through sale of the assests are used to pay down the $700B in additional debt we just incurred? More likely, our trusty representatives are already planning constructive ways to spend it. Anyone know?

China: Cheap No More

I just came across this piece from Fortune Small Business, the online edition. The story is similar to others we've all read recently -- China's costs are rising. For you China veterans, there's nothing in there that will surprise you. Costs are rising due to new employment and environmental laws, coupled with increases in commodity prices and a weak US dollar. The interesting part of the article is that it approaches the issue from the standpoint of small business.

I often read small business journals, as much for inspiration as for actual information, and I'll likely add this site to my list of regular scans. It looks like there's some good stuff here, including several profiles of very small businesses operating internationally.

9/11 -- Always Remember

Where were you on this day seven years ago? I think all Americans can tell you with vivid clarity exactly where they were, and the cascade of emotions they went through as the events unfolded.

I was working at a wonderful R&D company in Hanover, NH. As lab manager, I was making my normal morning rounds, and peered into the electronics lab to see our HVAC contractor standing on a chair adjusting a speaker as the e-techs huddled around. I walked in to see what the fuss was about, and learned of the first attack on the World Trade Center.

I'll admit that things since then have been a mixture of good and bad. Some policies have worked, others haven't, but I believe in America. My family has been in this great country since before the Revolution, and we celebrate generations of veterans, my wife and I included. I know that over time, we'll evaluate our actions (sometimes reluctantly), we'll air our dirty laundry for all the world to see (and criticize), and we'll move forward as the great nation we are.

Don't forget how you felt that day. Always remember!

Hong Kong Democracy

I admit, I don't know as much about Hong Kong as I should. I've visited several times, and have been fascinated by the energy and diversity of people. I've wondered how the transition to Chinese control has effected the people, and have had several conversations with Hong Kong residents. I've also talked to several people who relocated to Canada prior to the Chinese takeover. As with all things Chinese, I guess we'll just have to wait and watch as things develop. The world has never seen a development of this magnitude, nor a time in modern history when the existing power structure has shifted so dramatically. In short, it's going to be interesting.

I came across this piece in the WSJ today about democracy in Hong Kong. I hope you find it interesting.

Another Quick Note on Fitness

This has nothing to do with China, but I just checked the Crossfit page to get the workout of the day and watch a couple of quick videos. I love this program, and if you really care about fitness, you'll learn to love it as well. Check it out!!

http://www.crossfit.com/

China's Fitness Craze

This AP piece on China's recently-developed fitness craze made me fondly recall the great gyms I worked out at in Ningbo. I work out pretty much daily, and did during the years I lived in China as well. The gyms in Ningbo were really great! They were well equipped, well lit, and for the most part, well staffed. There was a bit of frustration with gym etiquette (ever driven in China?), but in general, the atmosphere was conducive to working out.

There is a scene in many gyms, however, that I believe must be common across China. I'm almost certain that any expat you ask will describe a similar scene, and that is the group of confused, middle-aged Chinese gentlemen huddled in the locker room, wrapped in towels (or not), smoking. I'm sure it's getting better now, but it definitely prevented me from spending much time in the locker room!

Sarah Palin and China

Whichever way you lean politically, I think you have to acknowledge that Sarah Palin gave a fantastic performance yesterday evening. I, personally, am impressed. I know the speech was very conservative, and likely had most liberals knotting their fists and cursing, while most conservatives were yelling like they were at the Super Bowl. Love her or hate her, she definitely did what she needed to. (On another personal note, I'll trade my governor for either Gov. Palin or Hawaii's Linda Lingle.)

I visited the Alaska government web site at http://gov.state.ak.us/ to see what I could find about Gov. Palin and China. I found this piece describing the growth of Alaska's exports to China, mostly seafood, minerals, and forest products. In any event, she does have some experience dealing with China, and I look forward to learning more about her position on international trade.

Investing in China

Over the long weekend, I thought about my personal investments, and how to structure my portfolio for the future. Through a stroke of amazing luck (believe me, no skill involved in this one), I was largely in cash in the summer of last year. I essentially sold all at the peak. I've had a good time researching US and some European companies, and getting some great deals on some quality companies that were unfairly caught up in the market turmoil.

As I think about the broad market, however, I just can't get extremely excited. I'm no economist, but it seems to me that there's still lots of bad news out there with respect to the financial sector, there are still many houses on the market, commodity prices are still high. My read -- a long, slow recovery that begins I know not when.

Ah, but the developing world with the blazing growth rates!! How to participate in that?!? I'm troubled by that. I'd like to get more involved with investing in China, India, and maybe some of the oil-producing countries. I'm not sure, however, that tossing money at an index fund that tracks a broad market index is the way to go. I'm not certain that the ShangHai index in general is a great investment right now. Still, there are many quality Chinese companies that I'm sure will be listed over the coming year -- many fantastic investments. The problem is, can you trust Chinese financial data? Even those companies listed on foreign exchanges? Anyone have any ideas here? I'd love to be able to run valuations on Chinese companies the way I do on US companies. Is the data out there?

Vendor Management

Those of you who have done business in China for any length of time know that the marketplace is fluid, to say the least. Companies rise and fall, reinvent themselves, destroy themselves, and exchange key staff at a dizzying rate. If you're dealing with a tier one automotive supplier, you will probably disagree with my observation, but if your volumes are smaller, like mine, then you've dealt with these small, rapidly morphing companies.

Most of my experience has been in and around Ningbo. In such a rapidly developing area, company changes are accelerated. There are many great companies in Ningbo, but a technique is needed that will help make sure the company you're doing business with today is the same one you started doing business with yesterday.

Most of you are familiar with vendor management programs. Larger companies have formal vendor management systems that rank all vendors on such things as delivery accuracy, on-time delivery, number of identified defects, number of outstanding non-conformances, etc. For smaller companies, it's still important to have a program. In fact, it's so important, that you should take the time to develop a procedure, just to remind yourself on occasion to spend a few minutes thinking about your vendors. For the purpose of this discussion, let's assume that you have already performed an initial audit and vendor qualification.

Here are some ideas to get started, and to use as the basis for a procedure:

1. For every shipment from a vendor, it's likely you perform some sort of source or receiving inspection. Put a copy of the results in a vendor file. Make note of any non-conformances.

2. In the vendor file, maintain a copy of any non-conformances. Be sure to pay special attention to any non-conformaces for which the vendor hasn't completed corrective action.

3. For every shipment from the vendor, make a note about requested delivery dates and quantities.

4. Make sure you capture any price changes throughout the year.

5. Dust off your initial audit form. Take the time to do a quick survey of the company, paying special attention to any findings made during the initial audit.

6. Set an appointment on your calendar to take a quick look through your vendor files at least annually. Take corrective action on any areas of concern you uncover.

7. If you haven't personally visited that vendor in several months, take the time to swing by. Now is a great time to bring along your audit form and do a quick survey. Have lunch with the owner, and remind him how much you value his company.

In a market changing as quickly as China, especially in second and third-tier cities, it pays to have a vendor management program. Do you have one? What else do you measure?

As a quick aside, when I audit companies, I always see what kind of vendor management program they have in place for their suppliers. This helps reduce sourcing risk, by making sure your vendor is dealing with the best possible suppliers.

Iraq Oil to China

From the China Economic Review, take a look at this piece on Iraq's first major oil contract with a foreign firm since the fall of Saddam Hussein, with China National Petroleum Corp (CNPC)!

There are those who predict a conflict between China and the US over energy, and this isn't going to do anything to assuage their fears.

Feeding China

I just saw an interesting report from Reuters titled "China Became Net Food Importer in First Half." That in turn got me thinking about a book I had once called Who Will Feed China? by Lester R. Brown.

As I watched the amazing economic growth in China, I thought less and less about the poorest in China. Even though I travel often to rural areas, and was aware of the demographics, I was so caught up in the economic movement forward that I stopped thinking about issues of basic survival. Amazingly, as I was faced with soaring metals prices (and even watched the soy bean crops near my house mature) I thought very little about food prices and availability. I even tossed out Who Will Feed China in one of my recent moves.

I suppose that rising commodity prices are hastening the end of subsistence farmers in the developing world. Good or bad (and my knowledge of agricultural economics is far too limited to know), the day is soon coming when a water buffalo is a rare sight in rural China, replaced by heavy equipment owned by some massive ag company.

The Best Cost Might Be Right Next Door

China Success Stories just published this piece by Terri Morgan of Wudang Research Association -- http://www.chinasuccessstories.com/2008/08/14/china-sourcing-quantity-price/

I certainly agree with the point of the story -- when the total costs are considered, China may not be your best option. In fact, you may find the best price locally.

In my business, I consider myself something of a teacher whenever a new client calls. (I need to think of a way to get paid for this! Oh well, when the time is right, they will call me again) I certainly don't want to make promises I can't deliver on, or find myself losing money on parts I source!

I once worked with a company that had moved some brass machined components to China. The volumes were VERY high, so it seemed a good idea; however, there were some fairly complex features that resulted in high scrap rates, even at good Chinese machine shops. It turns out that their US operation had developed some very specialized machine tools over the course of 30+ years, and these machines had evolved to the point that very little operator interation was required. The short story -- moved the production back to the US. (The other option would have been to move the machine tools to China. Of course, that could mean that suddenly your competitors now have access to the same source of product as you!)

I believe in doing the work up front, to improve the odds of a successful sourcing project later. Part of that work must involve a business case. Is the project justified? Take a look at the total cost of the product from China, including shipping, insurance, and verification by a third party. Consider the non-recurring costs associated with the project such as tooling, engineering support, factory audits, etc. Is the NPV still positive? Sourcing projects involve risk. When the opportunity is right, the returns can be impressive, but all too often, companies run headlong to China hoping for huge savings, only to be disappointed and frustrated. Do your work up front, and look at sourcing projects as you would any other investment in your business.

Outsourcing Quality Body of Knowledge Part I

I just finished reading a very nice article in the August edition of Quality Progress called "In the Know." Govindarajan Ramu nicely lays out a Body of Knowledge (BoK) for managing outsourcing projects. I plan to research this further, as I have been developing my own sourcing BoK which I plan to publish at some point in the future. Look for more about this article future posts-- lot's of good stuff here.

One point I'd like to talk about now is the use of the subject matter expert (sme). I've seen countless examples of a well-meaning company sending a SME to a local manufacturer, only to have the quality fall apart soon after he leaves. Having a subject matter expert participate in knowledge transfer is necessary, but won't guarantee a quality product unless their knowledge is properly documented. Manufacturing and quality managers must take the knowledge from the SME, and convert it to useable processes and procedures. Most importantly, the local managers must be able to train new staff in the transferred knowledge.

We've all heard the term "tribal knowledge" when describing local processes that are known to work well, but are not documented. "Tribal knowledge" can be trained, but is impossible to maintain when the manufacturer is on the other side of the planet from the subject matter experts.

Go Kunming

One of my favorite places in China is Yunnan Province. My family and I took a short vacation there in 2006 and traveled to Lijiang and Kunming. Yunnan borders Tibet in the northwest, and Burma, Laos, and Vietnam in the south. What a wonderful place, full of natural scenic beauty, interesting and friendly people, and fascinating history. That history includes the famous WWII Flying Tigers.

Today, I found a nice English-language blog about Kunming. Right now, it's all stories of the Olympics, but it looks interesting. Check it out!

http://www.gokunming.com/en/

Audit Tips -- Feed the Auditor!

In the July edition of Quality Progress, Joe Kausek wrote a very informative piece called "10 Auditing Rules." Here they are:

1. Make auditees feel like members of the audit team.

2. Start the evaluation by asking general, open-ended questions, then use clarifying questions to fill in the gaps.

3. Be an active listener.

4. Never let the auditee pick the samples.

5. Always try to identify any real effects of your findings, using dollar values when available.

6. Always confirm your findings with the auditee.

7. Don't go looking for nits (administrative finding that has no real impact on the performance of the management system).

8. Provide sufficient background information in your write-ups to allow the auditee to understand both waht was found and what the requirement is.

9. When citing areas of strength, be specific.

10. Feed the auditor.

This is a great list! Let me expand on #10 just a bit. Joe is reminding us not to forget to plan lunch. If the audit is offsite, will you have a working lunch? Will the auditee take you out? Do you have time? Seems simple, I know, but often forgotten. Strangely, this point is more important than ever in China!!

Often, when auditing a Chinese company, the auditee will plan for an elaborate and lengthy lunch. I won't comment on the motivation -- hospitality, stalling the auditor, getting the auditor drunk? During my time in China as Director of Engineering, I was often supervising audits, not on the actual audit team (though I have done plenty of work on audit teams as well). I would often play the role of decoy -- or designated drinker. I would convince the company owner that he and I (and maybe some other members of the management team) should go to lunch, but that we should leave the audit team in the capable hands of his quality manager, or engineering manager. This would often satisfy two requirements -- satisfying the owners desire (requirement) to demonstrate his hospitality, while allowing the audit team to maintain the audit schedule. Let me add a subrule:

10b. When auditing in China, consider the use of a designated drinker to have lunch with the factory owner!

Memory Eternal

I waited, wondering whether or not to post about the recent falling asleep of Aleksandr Solzhenitsyn. I think it's appropriate, even in a blog theoretically aimed at China sourcing. Solzhenitsyn is a shining example of how one man can change the world. May his memory be eternal! http://www.nationalpost.com/news/world/story.html?id=707120

Proudly Made in China?

Just came across this in the China Sourcing Blog: http://www.chinasourcingblog.org/2008/07/chinas-no-longer-cheap-from-lo.html

This article covers what we all have been facing, rising costs in China, and makes particular reference to Foxconn's recent announcement to move factories from ShenZhen to northern China in search of lower costs. I know we're all looking elsewhere, and the jury is out as to where the next hot, low-cost manufacturing country will be -- in Eastern Europe, Vietnam, Phillipines? Will the supporting infrastructure in these countries develop quickly enough to really challenge China's manufacturing sector?

Of course, there has also been much talk about China's attempts to move up the technology ladder by rejecting lower cost, less value added product, in favor of more advanced, high technology manufacturing. Those of us sourcing in China have seen the VAT rebate changes that favor more value-added manufacturing.

To me, it seems that the biggest challenge for China is not manufacturing, but breaking the negative emotions associated with "Made in China." I guess I'm not old enough to remember when made in Japan was a bad thing. I think the Japanese make some of the world's greatest products (certainly cars), and don't remember ever thinking any differently. How long did it take for Japan to change the stigma?

China and Renewable Energy

In today's daily brief from the China Economic Review, http://www.chinaeconomicreview.com/dailybriefing/2008_08_04/China_leads_world_in_installed_renewable_energy.html

China leads world in installed renewable
energy
Energy
4 August 2008
China now leads the world in installed renewable energy, the Christian Science Monitor reported, citing a report by the London-based nonprofit organization the Climate Group. China has now reached 152 gigawatts (GW) of renewable energy capacity. This compares to around 101GW of capacity in the US in 2006, according to data from the US Department of Energy. China also plans to double its renewable energy output to 15% by 2020. The country has the world's
largest hydroelectric capacity and the fifth-largest wind-power capacity. China is also a major exporter of renewable-energy technologies. Output of solar-voltaic
technology has doubled for each of the past four years and China will be
the world’s largest exporter of wind turbines by 2009.

I'll confess now to a conservative view on things. In fact, I was so pleased with President George W. Bush's acceptance speech at the 2000 Republican Convention that I hung a copy on my office wall. I especially remember the line,

"This administration had its moment. They had their chance. They have not led. We will."

I don't want to enter into a general debate on the accomplishments and failures of Presidential administrations, but I think it's pretty clear to all that on the issue of energy -- foreign energy reliance, renewable energy, energy research -- that the US has failed to lead.

China's leadership has acted with foresight and commitment to build a renewable energy infrastructure. The progress is nothing short of amazing, and the world should take note.

Of course, it also helps when you don't have to listen so much to local opinion. (Try building the Glen Canyon Dam today. The majority of Chinese renewable energy is hydro.) There is a considerable amount of "not in my backyard" syndrome going on in the US. I have to agree with much of it --not sure I want a nuclear reactor in my backyard, and I'm an engineer, for the most part capable of understanding the technology and its impressive safety record. A great example is the attempt to put a wind farm on Cape Cod, and the strong resistance by so-called environmentalist Robert Kennedy Jr.

I served for three years on a local Zoning Board of Adjustment. I can say from experience that any new project involving change in land use, "character of the area," or scenic vista is met with strong opposition. Certainly energy projects (and the ever problematic cell-phone towers) cause changes in all three.

I don't know what the answer is. Certainly, the Federal Government needs to take a strong role in promoting alternative fuels. I think the most effective way is through basic science research, in a way that allows the developing companies/agencies to commercialize the technology and realize the economic benefit. It's also important that local governments (strategic planning groups and zoning boards) recognize the importance of renewable energy and work with various other community groups to develop local policy that encourages the development of renewable energy.

Have any of you worked with local governments on zoning policy or other that encourages renewable energy development? Where?

Convergence

I had a fantastic evening! My wife and I spent the evening at a private club near Lake Ontario. The weather was perfect -- sunshine and a light breeze. The beer was cold, and the company friendly. I spent a few minutes talking to the owner of a machine tool manufacturer. Of course, the topic turned to China. He explained that his business is growing, and that he is selling more and more machine tools into China. With the abundance of very cheap (and worth every penny) machine tools in China, why would any Chinese company spend the money to import an American machine?

In The World is Flat , Thomas Friedman explains the triple convergence. Convergence two is the evolution of flanking technologies and business processes needed to make the most of new technology.

Friedman is spot on, and it couldn't be more obvious than in the machine shops of China. I'd often remarked that I could produce massive improvements in Chinese machining productivity and accuracy by opening a school for operations managers and CNC programmers and setup people. (This isn't universally true -- of course, there are some fantastic machine shops in China. They are rare.) I often joked that most shops ran CNC equipment like they were running old manual engine lathes. In short, they were spending the money, but not seeing the gains in accuracy and productivity simply because they were running the new technology the same way they ran the old technology.

Things are changing. A more competitive market has forced Chinese machine shops to get the most out of their equipment. They have invested in training, and the convergence of skill and technology is increasingly apparent. This was confirmed by my conversation this evening. The Chinese are seeking training, and his distributors are providing it, making his machine tools a real value in the Chinese market.

Freedom is hard?

The good folks at China Law Blog have published a debate about whether or not China will become a Superpower. I won't weigh in on that at the moment, but will save that for a future post. It did make me think a bit more about my own views and experiences in China -- especially those times when I was discussing freedom and the role of government with friends, both Chinese and Western.

This morning, I've been pulling together thoughts about individual freedom, and especially thinking about the balance of freedom and social harmony -- freedom with Chinese characteristics?

In any case, please accept my apologies for the repost from an earlier blog, but I believe that I need to get this out as a precurser to additional posts on the topics of freedom and government.


“Freedom isn’t free” goes a popular saying. I suppose the interpretation is that we have to fight to maintain our freedom. Freedom was hard earned through blood and toil of patriots, and we must be vigilant that our freedom isn’t taken away. My question is, taken away by whom? It is true that there is tyranny in the world, and tyrants that would enslave us if we allowed. A foreign threat is possible, and yet we are the most powerful nation on the planet, so that isn’t likely. It’s also true that most in elected office don’t have the interest of their constituents in mind. Most elected officials at the federal level are petty dictators who lust for power, and desire their own glorification (and reelection!). Our Founding Fathers knew this, and so purposefully limited the power of government.

Alan Keyes once observed that we can no longer bear the weight of our freedom. It’s true, the greatest threat to freedom is each one of us. Freedom isn’t free, but the greatest truth is that “freedom is hard – really hard.” Freedom forces us to accept the fact that we must make our own choices and live with them. Freedom requires that we encounter problems, and calling upon God and other free individuals, work to find solutions. The biggest threat to freedom is realized every time we look to Washington and wish the government would solve a problem for us. Forget that wish the moment you think it!! Freedom requires you to first think for yourself! As cleverly remarked by Pogo in the Walt Kelly comic strip of the same name, “We have met the enemy and he is us.”

Corbin Sparrow in Action

Allow me for a day to return to the topic of electric vehicles, especially the cute little Corbin Sparrow, which I blogged about on July 21. Recently, the Rochester Democrat and Chronicle online edition did a video of my friend's Sparrow in action. Check it out!!

http://www.democratandchronicle.com/apps/pbcs.dll/section?Category=rocearthvideo

Scroll to the botton of the page for the video on 'Electric Car.'

I drove this car after we put it back together, and it was fantastic!! I could definitely see commuting in this.

Decisions, Decisions

For the past week, I've been pondering the nature of decisions. I'm doing so mostly because I'm still recovering from a very bad one. It's a bit of an after-action review for me -- trying to understand why I did what I did, but also a chance to ponder the nature of professional work, and how we make our living.

At risk of damaging my professional reputation, I'll explain a bit what happened. It's really a simple story. I decided to act exclusively for one client. I turned down new work, eliminated some other clients, and went to work exclusively for one person. Why? Well, the economy is slowing, the rmb is appreciating, business is tough right now! Moving to secure anchorage in times of storm seems a good decision. It would be, if the anchorage were safe. Now, imagine if the anchorage is actually in the territory of a very hostile tribe, bent on your destruction, and caring nothing for human life!! Ah, this is the anchorage I pulled into. What's worse, I had met the chief of this tribe before. Once, he tried to eat my ear and shrink the heads of my landing party. The next time, he smiled and offered me some type of fermented beverage. I accepted it, I drank, I danced.....I woke up missing an ear.

This decision is not hard to analyze. I made a decision based exclusively on fear -- fear of the looming ecomonic hardships ahead. I acted from the most primative reaches of the reptile brain. In this case, I need only flog myself for cowardice.

Decisions in general (let's assume a higher level of thinking than I displayed) are the basis of our livelihoods. A corporate finance instructor in B'school told me once that grey was his favorite color -- the color of money. Easy decisions don't pay. The more grey, the more money to be made by those who operate in those uncharted waters.

Decisions always involve insufficient information. Good leaders gather all they can. They delay decisions until the last possible minute (not procrastinating, but gathering and analyzing). They analyze, they agonize, but they can't know everything. When the time is come, they decide, based on objective analysis, experience, and their "gut." They then step forward and accept the results of their decisions.

At some point, you have to fall back on "gut feeling" for part of a decision, nobody will dispute that. In my case, it wasn't "gut feeling," it was reptile-brain fear. It was the irrational dominating the rational. "Gut feeling" is not fear, it is listening to your heart (may I say that here?). After all the analysis is done, there should be a time of inner reflection (the situation will decide how much), but if you've got some experience, and some moral compass, one direction will be a brighter shade of grey.

Your papers are not in order!

...or I think that's what I recall the Russian-accented border guard saying in some 80's cold war movie. My first trip into China, I thought that's what I might encounter, only to be pleasantly surprised -- visa's were easy to get, easier to extend, and I was never asked for my passport.

Times are changing, as most of you already know! Over the weekend, I was asked by a potential customer about the current visa situation. I told him that I was certain that in the runnup to the Olympics, that visas were being restricted. My advice was to apply early, read the instructions carefully, and maybe even consider using a visa agent. I also know for certain that authorities are checking passports at hotels and apartment buildings.

Here are a couple of related stories:

http://www.chinalawblog.com/2008/07/take_that_funky_passport_with.html

http://www.caijing.com.cn/20080704/72951.shtml

I've never lived close enough to a Chinese embassy to apply for visas in person. My family and I have always used G3 Visas with very good result. Someone has always been available to answer questions, and I would recommend them to anyone who needs visa services.

Lastly, here is the link to the Chinese embassy in the US:

http://www.china-embassy.org/eng/

OEM Agreements

Please take a look at this post from the excellent China Law Blog:

http://www.chinalawblog.com/2008/05/why_you_must_have_a_china_oem.html

I've been involved in this type of situation before, and have had the good fortune of working with Steve Dickinson myself. I won't repeat what has already been said -- please think about this sort of thing before it's too late!!

Some Great Books on China

My family and I lived in Ningbo for 2 1/2 years. While I still read books about China, during the months leading up to our move, my wife and I both read about China every chance we could get. There are so many great books about China, it would be impossible to list them all, but I'd like to mention a couple of them.

While reading the excellent blog http://www.danwei.org/, I came across another book I can't wait to read. "Socialism Is Great!": A Worker's Memoir of the New China. This book has definitely moved up my reading list.

Of course, many of the books I read focused on abuses during the Cultural Revolution. These stories must be told, but they often made me angry, or depressed. There were two books by Da Chen, however, that made me feel differently. While Da Chen and his family suffered mightily during the Cultural Revolution, these books to me seemed more stories of hope, and triumph over adversity. He even made me laugh! Check 'em out!

Vendor Evaluation (or You Can't Know Everything)

I'm currently in the middle of a crisis. The lessons learned during this bit of trouble will certainly make me smarter, and hopefully, will help you avoid a similar situation in the future.

I've done business with a company for about three years. Let's call them SH -- it's representative of their company name, and also reminds me of a certain phrase, as in "went to SH*#!" I've done several projects with SH, and have been quite happy.

So why the trouble? I have a good process which I follow. I know much about SH. I've audited them, I've studied them, I know the owner and the key staff. How could it have gone wrong?

I don't know all the reasons why it went wrong. I do know that the technical director left, and not on great terms. That didn't seem like an immediate problem, as I knew the other department heads, and they seemed sound. I do know that some family members were being placed in key positions, but heck, I knew the owner, and he's a great guy, so no problem. Several other staff members left, but that's ok, SH is a good company, they can find new people. So my castings are running a bit late. Well, this is likely just a temporary problem.

Now I'm not claiming that this rapid company disintegration is a problem unique to China. With smaller US companies, changes in the upper echelon can have immediate and disastrous effect. In fact, one of my former employers went bankrupt soon after junior took the reigns from daddy. This can happen anywhere, but I've seen it happen twice in China, and it has happened both times with the departure of senior staff and replacement by family members who were completely incapable of performing the required job. Is that a sign to find a new vendor? It could be, but it's certainly a sign to pay more attention.

So what was my mistake? I certainly followed my process, and still things went bad! Here are my takeaways from this:

1. Have a vendor management program and follow it. Even if informal, you should periodically re-audit, and track vendor performance.
2. Dual source when possible. Due to complexity and volume, I couldn't practically dual source this part.
3. Keep a list of qualified alternates in case you need to move quickly, and never stop hunting for new and better vendors. Does this mean don't build relationships with vendors? Absolutely not!! Just be prepared to move if things get bad -- I have a good relationship with this vendor, but not so good he's going to repay me for the money I'm going to lose!
4. Don't be lazy!! If things start to smell bad, they're bad! I knew this company was starting to have troubles, it's just that it took so long to get this part qualified, and....
5. Know who owns your moulds, if applicable, and don't be afraid to move them. Fortunately, I do own these moulds, and can move them to a new vendor.

Chevy Volt, Tesla, EV Controversy?

Allow me one more day to muse about electric vehicles, please, before I turn my attention back to China sourcing. There's been much written lately about electric vehicles (EVs), particularly the Chevrolet Volt and the Tesla roadster. For more information, check them out here:

http://www.chevy-volt.net/chevrolet-volt-specs.htm

http://www.teslamotors.com/

The heart of the story is the assertion by Elon Musk that the bridge to full electric vehicles will be short, given the inherent flaws of hybrids (neither good with electricity or with gas). Read more here: http://www.blog.speculist.com/archives/001788.html

The other side (well, not really a controversy, or the other side, just a slightly different read on a great topic, but hey, words like controversy are so lame-stream media, one has to use them) is more in favor of continuing a hybrid-type drive train -- essentially full battery operation with internal combustion range-extender, or battery chargers. Nice article here: http://www.autobloggreen.com/tag/chevrolet+volt/

For another fun read, check out this interview with Elon Musk: http://www.pbs.org/newshour/bb/science/jan-june08/musk_06-25.html

Enjoy, and tomorrow, we talk about China!

Corbin Sparrow

I've always been interested in alternative energy. In fact, my first job was as a research engineer, and many of the projects I worked on involved using hydrogen and hydrogen blends in internal combustion engines. It was very interesting stuff!!

Anyway, I had a great weekend, because one of my good friends invited me over to help get his Corbin Sparrow back on the road. We installed a new set of batteries and a newly rebuild motor! What a great little vehicle! Check out the pictures below, and to learn more, visit http://corbinsparrow.com/index.html

Which is your factory?

First of all, let me say that the below picture is not meant in any way to degrade Chinese factories. I want to illustrate the vast differences that one may encounter in China. This picture is of a fairly typical, high-pressure aluminum die-casting plant. There is no central melt system, machines are fed with hand ladles, and more importantly, mould maintenance is sometimes minimal.


The next picture is a fairly new automated heat treating line.

The pictures are of very different technologies, but I want to illustrate the difference in cleanliness, organization, and quality of equipment. And yes, the air really is that bad in the first factory!!

So which one makes the best parts? Well, both. You have to know the capabilities of the factory that is making your parts, and how those capabilities match up to the specifications of your parts. If your definition of good is parts that meet your requirements, and you know that the plant's processes are capable of making parts inside your specifications, then either plant will do nicely!

This returns us to the point I am always driving at, that you must do your homework before you begin. First, you must have a clear specification, and it must be clear to your Chinese partner. Second, you must audit the factory you are working with. Third, you must have a systematic process to qualify both the factory you will use and the parts they will make.

Random Guidelines

China sourcing can be done successfully. I know there are times when you don't believe that. There are times I don't believe that. I know that your chances of success are greatly improved by following a systematic process. Does that mean it's slow? It doesn't have to be slow, but you must do your homework first, before you start contacting vendors. I'll go through more detail in future posts, but for now, let's start with some random little nuggets that you'll find helpful:

http://www.go-qss.com/Some%20Random%20Guidelines.pdf

I welcome questions and comments! We'll dig deeper into actual process in the future, including specifications, vendor audits, and inspections! This is a repost from some of my earlier blogs, but it's such good general information, I think it's appropriate.

The Latest

This is an attempt to combine blogging efforts into something meaningful. Previous attempts have limited content to only China, only small business, or only political rants and beer reviews. I hope, in this blog, to cover a wider range of topics, but eventually, and usually, stick with issues of business in China, especially issues effecting small businesses in China. Topics may vary, however, to include some ranting, helpful product or book reviews, and leisure travel. Eventually though, I will return to the business of China. Likely I will repeat some material from previous blogs, because I'd like to capture some of the articles that I've written, and some of the helpful processes that I've developed to make your efforts in China more successful.

Comments, questions, and suggestions are, of course, welcomed and encouraged.