Sourcing from China: Part-1: Testing your fishing skills: stages of your sourcing maturity
Sourcing is growing as the main highest growing profession in China. Even though the volumes are low but the growth factor of these professionals at above 20% is the highest among all professionals in China. But for companies to start sourcing from China, they need to go through a 3 stage journey to finally fully integrate China as an integral part of their sourcing decisions. Check out the stage where your company fits in, and you will know how much road is required to me covered to reach the final destination. But many would agree that sourcing from China is not a destination but a journey, as new challenges emerge as the progress continues. Sourcing from China is like fishing.... If you don't agree read on
Stage-1: Buying the fishing Rod
In Fishing parlance this is the stage when you go ahead; gather info about fishing techniques, locations of fish availability, fishing rods, the fly-line, the fly-reel, the guide, the ferrule, the bait etc. You would read books and would surely consult experts and discuss in the family to take a collective unanimous decision. The decision is taken about what fishing rod to buy, where to start fishing, whom to take along and what fish to catch. Needless to mention you would start with small pond fish as usual.
In sourcing stage-1, the process is similar. Before an organization forays into China, the Top management is involved throughout in all activities of planning to implementation. First a thorough study of the attractiveness of China as a sourcing location is conducted and debated. Then the decision is taken on the parts to source. The organization here starts with standard catalogue items or Class-C items, which has abundance of incumbent local suppliers. A small team is set-up with a small office, with small targets, but a huge amount of internal organizational focus.
Stage-2: Fishing on the banks
After you have done the initial preparations, you start with fishing on the banks. You select a lonely quiet spot on the banks of the location with abundance of fishes and sit there for hours to "fish". This stage requires a lot of patience. Also it is here that you start developing some of the skills.... Sensing instincts, speed of retraction. This stage is much unstructured and you would falter on a number of days. Patience and perseverance is required to develop the "fishing acumen" to clear this stage. Each day's results are enthusiastically discussed over long hours and critically analyzed.
In an organizational activity of China sourcing in Stage-2, the organization starts mobilizing the small team to start sourcing. They begin by preparing directory of possible potential suppliers and supplier evaluation procedures. Since the sourcing team has a "small" target, they look for niche locations with large collection of potential suppliers in this locality. Many a times their expectation about suppliers is "dashed" and they would return "empty handed" without getting a supplier of choice. But each attempt of getting a supplier is analyzed thread-bare, both by the small sourcing office as well as by the Organizational headquarter, to define future strategies and tactics. For any selected suppliers, small pilots are also planned and executed. These sourced parts are again thoroughly scrutinized and inspected/ tested before being put to use. All types of comparisons are made in terms of quality, reliability, cost advantage, delivery stability, investments etc. Though there is less action on the ground in China, but a lot of analysis of these actions takes place in the sourcing offices and headquarters, under direct vigil of Top management.
Stage-3: Foray into waters
As the "budding fisherman" gets the pulse of the waters, and the initial successes urges him to start adopting different advanced techniques of fishing.
· Some adopt combat fishing, where they would foray into water with their fishing rods with many other fishermen and attempt at catching the highest load among them
· Some adopt pole fishing, where they would be perched on one of the poles in the water and fish
· Some adopt net fishing, where they would foray into waters with their fishing nets and catch fish
· Some, who are more adventurous would deploy under-water fishing, where they would dive with SCUBA equipments to catch fish
· Some would take boats or trawlers to catch the "big fish"
This nature of foraying into water is very competitive and fishing is done either as individuals or in groups, manually with rods or nets or in boats or trawlers, and they would either catch river, deep sea or underwater fish.
Sourcing from China in stage-3 also is a very competitive show. This stage happens after the success of pilots and the skills developed during that stage. The office team expands into separate purchase and development teams. In some cases the development teams would outnumber the purchase teams. Organizations start integrating their suppliers into the product development stages, to get the added benefits of material substitutes and alternate production stages customized to China. Some organizations would be more aggressive to set up R&D centers and even shift their Purchasing headquarters to China, as their volumes of purchase increase leaps and bound. Each organization adopts their most convenient method in this stage of sourcing to extract the maximum benefits. This is the stage where organizations even start developing cut-throat competition with other "buying organizations" to push them out of business. But many others would come into some alliance or partnership to leverage and tap the maximum potential. Some would make their China office a key part of their Global Supply Chain. The products being sourced would be more complex and customized products, instead of the standard catalog products with which they started.
As mentioned earlier, sourcing from China is a destination for some organizations, when they reach stage-3 of their sourcing journey. For some the sourcing is only a journey, where they continue to accept and overcome higher and stiffer challenges of sourcing and continue in their effort to integrate China in their global sourcing strategy and business plan. Do you also see yourself in one of these stages of the sourcing journey in your attempts in China sourcing? Is there any stage which I may have missed which is of primary importance to you? Do write back and let me know about where you see yourself in China sourcing. Part-2 of the blog sequence will be dealing at challenges in these stages and how we have seen organizations adopt simple and complex ways to overcome them.