Business with China

Prakash Kamat
Consultant & Faculty
Operations Manufacturing Supply Management
.
Contact: +91 976 444 5232 kamats.home@gmail.com

International Business Import & Export. Exchange of Trade Goods and Services. Purpose Exposure & change in life style Earn
Foreign Exchange by ethical means

Social Responsibility
Adhere to Law of the Land Offer reliable Goods / services Back up with after sales support
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International Business Import & Export Own consumption OR Trading

Capital & Capital spares Consumer Durables Consumables

Product Life & Serviceability Product Safety and Liability Sustain & Grow
Long term plans

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International Business - Requirements Communication channel.

Language Build Relationship.

Understand :
Geography, Culture, Tradition. Expertise & Needs of either end.

Laws Rule and Regulations.

Dos & Donts

Exchange rate parity.

Fluctuations and trends

Sustainability
Availability Accessibility - Accountability
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Cost of Manufacturing Infrastructure & Services Utilities Legal regulations Financing Raw material Skilled Human Resource Processing including Quality systems Packing & Logistics Taxation

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Approximate Cost Break up 55 % Raw material 25% Coat of value addition Labour Utility services Financing 12% Fixed Over Heads (Infrastructure)

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Cost of elements Labour Starting Wages 3,000 CNY / month Working 40 hours a week Power 0.75 CNY per unit Fuel (Petrol / Diesel) 5- 6 CNY per liter Land and building (basic structure) Owned by Government with nominal lease 60 years lease
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Cost of elements Hot air / steam during winter Supplied thro pipe network from Nov to Feb Nominal cost at 350 CNY per head Financing Average borrowing rate 8-10% Trade surplus US$ 1.7 Trillion FE reserves US$ artificially pegged at 7 CNY : 1 US$

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Cost considerations for sourcing Packing & Logistics Import tariffs Shelf life After sales service Serviceability Quality Sustainability and consistency Communication surveillance vigilance

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International Business - China Point of contact :

Clarity over Subject matter. Knowledge of Language - either way. Request for repeating the Understanding of communication. Ensure parallel written communication and reply there of for understanding and interpretation.

Understand China East to West :

Great Infra-structure Roads Port Movement Medical Transportation Business Participation and Finance , Foreign Exchange Government Control : efficiency & effectivity. Disciplined & constructive use of Human Resource Freedom to express mobility. People sensitivity & disparity.
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International Business - China Sustainability :

Quality Cost Changing EXIM Laws v/s controlled EF rate Delivery Attrition - Staff Continuity Shift of focus Accountability Leadership & decision Making

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Areas of Interest Steel Flat ( HR, CR and alloy steel)

Castings, Forgings & Machining

Sheet steel parts Electricals & Electronics Accessories

Tyres, Seats

Chemicals & Lubricants Food Items Toys Entertainment and decoration items
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Few Auto MNCs in China other than John Deere Auto Giants
General Motors, Ford , Chrysler, Honda, Toyota, Suzuki Volks Wagon ,Audi, Volvo , Benz, BMW

Electronics
Sony, Nokia, Nikon , HP, Toshiba, Panasonic, Samsung, LG

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Sourcing strategy of MNCs in China Use of

Low infrastructure cost Economical Labour cost Cost of running out dated polluting technology is high in developed countries.

Key people deputed in China

Process control and decision making by Ex-pats

Mass production automatic equipments

Restricted human skills used

Dedicated lines
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Sourcing strategy of MNCs in China Stricter control on Safety and performance related input parts.
Monitored Exports from China of these parts

Special benefits for US$ earnings

Favourable exchange rates.

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Recommended checkpoints & actions One man contact point. Language of communication. Evaluate facility age / automation / mechanization Organizational set up & People skills. Process controls. Quality systems and adherence mechanism. Problem resolution & follow up methods. Deputation of own personnel. Close watch dog actions.

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Machined casting supplier

Strength
Good casting & machining set up. Dessa-Matic automated vertical molding machine. All lab testing facilities avail. Cellular machining concept with lean manufacturing Good spoken, written & technical english

Opportunity
Free casting and machining capacity Combine requirement of other global factories with India, settle the best deal.& get into capacity booking agreement Can also paint

Weakness
Only make castings up-to 30 kg, prefer ductile iron parts Discipline in some areas

Threat

Recommendation: Coordinate with other global factories for consolidation of 31-Jul-11 requirement of small castings.

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Machined castings
Strength
Front support of more than 100 kg machined on conventional machining set up Both grey & ductile parts, can make all JD castings Machines are available to complete the machining in house

Opportunity
JD contributes lot to sales value Conventional Machining + CNC combination can be utilised.

Weakness
Controls on casting are poor Only one Cupola furnace, no back up English speaking ability

Threat
Discipline is problem. Need to depute quality engineer for initial lots to ensure consistency,

Need to provide gauges & fixtures & to supplier Recommendation: Start working with less critical castings like dead weights, gain experience & develop the supplier. Start more critical castings based on performance.
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Automobile Radiators
Strength
Automated aluminum brazing Vacuum test to ensure quality of brazing Good process controls Visual factory

Opportunity
RFQ floated for aluminum radiator

Weakness
Spoken english Performance testing for flow & endurance Tube leakage testing

Threat
No english speaking ability. Need some support to get things moving

Recommendation: Evaluate quote & negotiate to see cost reduction potential

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Low HP Engines
Strength
In house manufacturing New plant to start working wef July with excellent facility

Opportunity
Present supplier to China operations at competitive prices

Weakness
Set up is not up to the mark Lack of recording No traceability Poor Testing facility at Current Location

Threat
State owned company very rigid Very conservative in sharing data

Recommendation: No possibility of business with current facility. Need to audit new facility once operational, test the sample engine which is already on the way.

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Auto Pump
Strength
Global presence Design capability Supply similar pumps to China Operations

Opportunity
Prices of pumps supplied to China are competitive. Supply pumps to China operations.

Weakness
Set up is old No sequential assy concept Discipline Documentation

Threat
Consistency of products needs to be monitored till the supplier improves. Work on revamping the factory already begun.

Recommendation: Proposed drawings under engineering review. One sample each being ordered. Finalise design & start commercial discussion. Also explore cylinder & pump front axle applications.
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Auto Electric
Strength
Visual factory ISO TS 16949, ISO 14000 & OHSAS 18001 Global presence, support in India available Cellular concept, automisation & mostly in house manufacturing

Opportunity
Indicative price for alternator was competitive. Offer YoY cost reduction through process improvements, six sigma etc Combine volumes of other factories. Good PV&V capabilities in house

Weakness
Discipline Missing chart updation at some locations

Threat
Volumes are less compared to the auto industry, they lead the bus segment in China. Need to make global suppliers

Recommendation: Do not have ready product available in alternators. Need to offer volume & develop new alternator to suit our product. Pursuing with them further
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Auto Electric Battery & Cable harnessing

Strength
ISO TS 16949, ISO 9000 R&D capacity with Euro III emissions Dedicated boards per required circuits in cell mfg concept Automatic crimping machine, facility to check crimping quality Purchase connectors from Tyco

Opportunity
Explore battery cable & wiring harness

Weakness
Technical english

Threat
Response in accommodating design changes in wiring harnesses

Recommendation: Float RFQ for wiring harnesses & battery cable

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Hardware - fasteners
Strength
TS 16949 & ISO 9000 Good in process controls In house machining, thread rolling, testing set up Good heat treatment set up

Opportunity
11 parts out of the common list between India & China are competitive

Weakness
Magna flux not available Technical english

Threat

Recommendation: Vendor registration initiated, 500 pcs of 11 parts to be ordered. Need to work on internal metallurgy approval prior to clearance.
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Oil-less Bearing Co
Strength
ISO TS 16949, In process for ISO 14000 Excellent visual factory, discipline Product knowledge Equipped with R&D, PV&V set up

Opportunity
RFQ sent for 5 bushings, awaiting quotations

Weakness
NIL NIL

Threat

Recommendation: Good supplier, need to explore cost reduction opportunities

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Bearings
Strength
Case carburizing facility Good range of products, includes N series bearings - Not available in India. Internal PPM at assy is 127 Testing & inspection facility

Opportunity
Prices of through hardened bearings are 20-25% cheaper on landed basis Major competition imports 45k sets of 5 bearings type from them Second largest manufacturer of bearings in China

Weakness
Manual Assy Cage & ball are sub contracted

Threat

Recommendation: Get quotes for case carburized bearings, work with Engineering & PV&V for approval. Prices are lucrative
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Recommendations for sourcing Automated processing.

High precision High volume High precision Moderate volume

Part service life : Moderate to low. Part not concerned with safety. More aesthetic value than performance. Parts NOT requiring after sales service. Single point processing for accountability.

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Recommendations for sourcing Packing materials Fasteners & Hardware Wire harness Glass shields Seats Dashboards, Bumpers, Hoods Internal Mouldings.

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In Conclusion - Recommendations

Critical

Automation / Mass Production

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