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Why the Global Supply Chain is Dysfunctional

July 7, 2008 – A friend of mine had a profound realization today regarding sourcing in China and quality control. He has a company that produces prefabricated housing, and sources construction materials. Today, he was meeting with some potential clients with whom he had been in discussions for over one year. As he was going over the various items in the production process, he realized that his potential clients had no idea what he was talking about. This surprised him because the potential order size was large, and they had been working on this for quite some time.

Reflecting upon the meeting later, he had an epiphany. The internet has enabled an enormous amount of novice buyers to connect with Chinese suppliers (particularly through sites such as Alibaba and Global Sources). Many novice buyers do not become sufficiently educated before placing orders. This has two negative effects. First, capable Chinese factories may seek to take advantage of uneducated novices by producing substandard products. Second, the large amount of novice money flying around China has encouraged the birth of numerous incompetent suppliers.

As my friend put it, “The combination of novice buyers and subpar suppliers in China has in turn led to a dysfunctional global supply chain” that has recently manifested itself with the various well-publicized recalls. In other words, Western buyers are just as much at fault for sourcing poor quality control as are Chinese factories.

Sourcing Black Friday

July 4, 2008 – Today was “Black Friday” for us. We were expecting deliveries from six different suppliers for an event we are doing tomorrow. All six deliveries had issues. One delivery (from the States actually) did not come because although I FedEx’ed it, customs is holding it for inspection. Another delivery will apparently arrive at my apartment tomorrow morning between 3 am and 5 am. That will be fun. The root of the problem is that we requested most of our suppliers to rush the jobs. However, in one case, we ordered multiple samples from a single supplier that were incorrect. Their inability to match colors left limited time for the supplier to get the approved sample into production. It turns out that they are using a Pantone color book from 1998.

China Visa Restrictions Are Threatening Olympic Tourism and Business Travel to Beijing

June 24, 2008 – There was an interesting article yesterday in the New York Times about how the recent China visa restrictions have already had significant negative effects on tourism this summer in Beijing.

Some hotels have been seeing occupancy rates dropping to as low as 20-40% as they struggle to find guests. In addition, the visa restrictions have greatly affected business travel. Many small business owners have had to cancel meetings due to issues with getting a Chinese visa.

And the situation does not seem likely to improve anytime soon, as scores of other hotels are either still under construction or set to open in the next coming months. The number of four- and five-star hotels in Beijing jumped from 64 in 2001 to 161 as of end of April this year and many hotels are still under construction in a city that now has over 5000 hotels. In addition, hotel operators feel that the Sichuan earthquake and Olympic Torch relay protests also contributed to the low occupancy rates at a time that would usually be their busy season (May-June).

Back in April of this year, the Chinese government announced new policies on the issuance of entry visas to China, specifically Business (F) and Tourist (L) visas.

This set off a panic storm among large numbers of expatriates already living and working in China whose Visas were due to expire. Many are now suddenly left with the dilemma of how to get their Chinese visas renewed. Click here to read an article on the latest changes to China Visa policies.

On a related note, earlier this month, BOCOG released the foreigner’s guide to behavior, which outlines the do’s and don’ts for foreigners as they travel to Beijing during the Olympic games. This includes foreign athletes, journalists, officials and tourists. Some of the rules highlighted from the guide include:

• Weapons (real and imitation) ammunition, explosives, counterfeit currency notes, narcotics and poisons are among the items not allowed into China.


• Overseas visitors are warned against shouting insulting slogans or displaying them on banners. Also forbidden are displays of religious, political or racial banners at sports venues.


• Detailing some other activities forbidden at cultural and sport events, the guide also warns against attacking referees or players and lighting of fireworks.

Interestingly enough, the Behavior Guide has only been published in Chinese. The Chinese version is posted at the following site: http://www.beijing2008.cn/news/official/bulletin/official/n214387789.shtml

The English translation is expected to be released shortly. We look forward to reading how to act like good foreigners!

Multilevel Marketing Has Reached China

July 2, 2008 - The other day I was contacted by a Chinese woman that I recently met at a networking event in Shanghai. She asked to meet with me to “discuss business”. We agreed to meet at a Starbucks.

With my limited Chinese and her equally bad English, it took a while to get to the point of what she wanted to discuss. She kindly pulled out some paper print outs of her company’s description written in English. As I read on about the company being a reputable producer of Networking and Healthcare technologies, I noticed her pulling something else out of her bag and laying it on the table in front of me. I looked it for several minutes before realizing what it was. As it turns out, it was a pack of sanitary napkins. She was making a direct sales pitch for a revolutionary new sanitary napkin that she wanted to sell both to the local and expat female markets.

Now I was completely confused. When I first met her, she told me her company produced mobile phone components. How she moved from mobile phone components to feminine napkins is beyond me.

She continued to explain how this was a very lucrative business opportunity and the market for sanitary napkins was growing exponentially! She hoped to capitalize on my network of expat friends and business associates to help her distribute her product. I didn’t have the heart to tell her that most women (at least most expat women that I know) probably wouldn’t use the product and that in fact it would be extremely creepy for her to approach any one of them at a networking event.

I let her finish her pitch. However, when she mentioned that she would arrange for a special demonstration at her company’s office, I then decided this was a perfect time to end the meeting. I respectfully declined her offer and wished her the best of luck with her investment opportunity of a lifetime.