Information

The Cost of Mr. Zhu

By: James Clayton
Submitted: 2008-03-07 16:13:13
Print this article | Tell a friend | For publisher | Social Bookmarking
Rating:
 

Locating quality suppliers is always the challenge when doing business in China. While visiting with several suppliers in Dalian, I went to one of my favorite suppliers - Mr. Lu. Mr. Lu was capable of quoting from engineered drawings, and providing quality prototypes and samples, but not capable of sustaining product quality during production runs. These inefficiencies required Mr. Lu to invest in his infrastructure in order to establish operating systems that would produce sustainable quality during production runs. The new operating systems would earn Mr. Lu the privilege of quoting on long term purchase orders (3 to 5 years) from several American companies. In general, the commitment required to establish the new operating systems will take Mr. Lu about 6 to 12 months of tutoring, auditing, and persistent sampling. If successful, Mr. Lu would become a great quality low cost supplier, creating long term revenues and relationships with several American companies.

The downside to Mr. Lu's successful transition is his lack of capacity and scalability. Most Chinese suppliers, like Mr. Lu, end up failing in their second and third year because their American customers get greedy for gain and assume that 6 months of success with Mr. Lu gives them a green light to unload a wagon load of purchase orders. This wave of purchase orders is generated from an over zealous American executive who loves to reduce the annualized PPV (price part variance) regardless of the suppliers capacity and scalability. And, why not? The over zealous executive just received a whopper bonus for realized annual savings of 60 - 70% after freight cost for buying product direct from China. The only way to prevent the failure described above is to provide the American companies with a clear understanding of the supplier's capacity and scalability and teach the Chinese supplier how to do forward planning.

Part of Mr. Lu's forward planning was quantifying his machinist labor content. By that time, Mr. Zhu had grown to 16 machinist and 2 inspectors. Before I tell the per hour labor cost of Mr. Zhu's machinist, I should explain the following: The employees were 16 years of age or older (80% grown men and women), uniformed, housed, and fed three squares a day. Although I could never convince Mr. Zhu to provide safety glasses to his employees, he did compromise by providing fatigue pads at every work station. Employees could not work more than a 12 hour shift, but could work a six day work week. Every employee was required to take off one day a week. Employees were given appropriate breaks, could eat at their work station, and smoke anywhere they preferred. Outside the PPE (personal protection equipment), the shop resembled and operated like several manufacturers I had audited or consulted in the states.

Mr. Zhu's Hourly Labor Rate - (16) Machinists:

Machinist Hourly Rate

$0.35

Total Machinist Hourly Rate

$5.60

Mr. Zhu's Labor

Breakdown Per Machinists:

 

Machinist Hourly Rate

$0.35

(72) Hour Work Week

$25.20

Monthly Net

$100.80

Annual Net

$1,209.60

Don't be shocked! The annual rural income of $1,209.60 is double the Chinese national average of $480.00. This is the equivalent of an American employee who doubles their income with one job change! Learn more on China suppliers by going to www.chinabizsuccess.com.

http://www.chinabizsuccess.com

Article source: Expert Articles

Most Recent Articles in Partnerships category

  • Why your joint venture was unsuccessful - By: Mukeshh Kumarr
    Joint ventures is the most favored and easiest way of increasing sales and cash flows. Nowadays, almost everybody knows that finding a good joint venture is the answer to getting online success. But why is it that some people are not using this strategy for their online business? Why were they not able to make their joint ventures work?
  • A Joint Venture Agreement Is Like Partnership Business. - By: Kamal Aggarwal
    A Joint Venture Agreement is a document that sets out a type of partnership agreement put together for some specific purpose. The agreement spreads the risk attached to the project among the various parties to the agreement as well as details the sharing in any of its success and profits.
  • Set Up a Joint Venture so that Everyone Wins - By: Shobha Narwal
    Setting up a Joint Venture is relatively easy - but there are some key elements that will either "make" or "break" your partnership. The most important aspect of setting up your joint venture - in every case - will be the quality of your research before you start "setting up" anything...
  • ATM Access with Savings Accounts - By: Parmod Bansal
    If your comparing online saving accounts you'll find there are different types of accounts on the market with varying amounts of flexibility and features. The most common account types are high interest savings, term deposits and instant access saving accounts
  • Money Raising to JV (Joint Venture) - By: Parmod Bansal
    Joint venture is a form of partnership where businesses come together to bring in the knowledge, marketing, and profits. They can take various forms to complete the two companies together. Continue below. Big company's can form alliances with quicker results. In addition, small companies have an opportunity to merge and form strategic alliances with big name companies for expanding and making the small company larger with the big company. According to Commonwealth Alliance Program (CAP), businesses anticipate strategic alliances to their account for 25% for all the revenue by 2005, and a total of 40 million dollars.
  • How to Make Your Stiffest Competitor Your Best Joint Venture Partner - By: Navneet Kaur
    When someone threatens us, we instinctively look for ways to avoid, evade or protect ourselves from the perceived threat. In business, where money, security, and even our family's future rides on our every move, anyone or anything we perceive as a "threat" usually causes us to go into "protection" mode.
  • The Cost of Mr. Zhu - By: James Clayton
    The Cost of Mr. Zhu is an introduction to the many aspects of finding quality suppliers in China.
  • How To Build A Procurement Process With Chinese Manufacturers and Suppliers? - By: James Clayton
    This article is an introduction to the procurement process in dealing with Chinese manufacturers and suppliers.
  • Government Partnerships; Can They Help with BioFuel Initiatives? - By: Lance Winslow
    Is the government up to the task of helping America break her addiction to foreign oil? What can government agencies do to work together to help us grow our own fuel and get it to market? Can the government or will the government streamline the over regulation which is hampering innovation in the marketplace, which is probably the only way we will break our addiction to foreign oil?
  • Public Private Partnerships: Partnerships Begin at Home - By: Kevin Dwyer
    Private Public Partnerships are popular as a means of building infrastructure around the world. Governments globally have been afraid of sending budgets into deficit or borrowing to pay for capital works and are seeking partnerships with private equity to fund a growing infrastructure gap.Private Public Partnerships, or PPPs to those in the know or P3s to those even further in the know, are a topic of great interest to lovers of acronyms.