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A Novel Approach to Flattening Entry to Asia Supply Chain PDF Print E-mail
Written by Rob Guerriere   
Apr 24, 2009 at 01:22 AM

Welcome to China!  The trend over the past 10 years in Supply Chain has seen an increasing amount of the outsourcing of manufacturing to OEM and contract manufacturers in Asia, and China specifically.  Over that period of time, and particularly in the last several years, as the world has flattened,

Asian sourcing has not just been a resource for the large multi-national but has also opened up and become available to the mid-market or Small-Medium Business (SMB). 

The primary theme during this period has been the elimination of entry barriers, allowing all players including the SMB, with the main focus on cost of goods reduction.   This is nothing new.  The world has sought out the cheap labor of China since the end of World War II.  With the growth of mass manufacturing and distribution, if one was not connected to the global supply chain, they no longer exist.  Wal-Mart’s motto is to ‘cut out the middle man’.  They worked with their suppliers and encouraged them to look to Asia to cut costs.  Wal-Mart has over 1,000 employees located in China procuring products for the North American consumer.  Entrepreneurs and business owners understand that their success lies in the most competitive supply chain process.  It’s not only about your business stupid; it’s about being a part of the most efficient supply chain network. 

The question is:  How can a SMB compete when they don’t have the economies of scale on their side?  You can with new novel approaches utilizing technology that allows shared services among small businesses.  You can compete as though you were Wal-Mart.  One of these services is a brand new approach in utilizing a Managed Buying Office (MBO) in Asia. 

A MBO is a simple idea.  It is your office. It’s your people.  It’s your management. The phone is answered by your people under your company name.  However, there are many small businesses utilizing neighboring space.  The key advantage to the SMB is that the MBO office shares top talent, by department, but pays for it ‘a la carte’, with a flexible contractual obligation and liabilities.  The conventional alternative of setting up your own overseas entity is expensive, cumbersome and very often ends in failure, or successive change management, which further weighs on costs and efficacy. 

The idea and approach is brand new to China sourcing.  It is being brought to market by an American-Chinese partnership, based out of Beijing China.  The Business Development Director of the venture, Dan Pakkala, an American, has worked in sourcing and supply chain in China for over a decade now.  He has seen many North American and European companies come to China with scarce understanding of how to do business in Asia, and large and medium sized enterprises alike often make the common mistakes of either spending significant sums of money on “experienced” expatriates, or they give away the keys to their business to a local representative where culture, ethics and business practices are often challenging to harmonize.  After watching too many companies waste and lose money on their novice adventures, he decided that the MBO approach was an innovation whose time had come.

SMB MBO clients have access to talented engineers to design products, raw materials and hazardous material sourcing agents, contacts that can leverage existing relationships, and HR professionals to handle labor disputes, networked individuals who know how to work with local officials, attorneys to protect IP, supply chain expects who understand customs, logistics, and international EDI standards.  And it is all managed by an American-Chinese company which has built its own multi-million dollar trading company.  MBO offices start at US $3,500/month.

“The next period of time will see increased focus on product development and management.  As the supply chain in Asia expands into increasingly complex and higher value goods, the need for better integration throughout the supply chain will emerge.

This will necessitate “strategic” relationships with partners that can support diversified and complex sourcing and supply chains, or direct investment by companies seeking to leverage the strengths of China’s
rich contract manufacturing resources.”  Dan Pakkala, Director, Bestol Group International.

Dan can be contacted by email  



User Comments

Comment by Abby on 2009-05-24 09:36:50
Yes, majority of multi-national companies have good relations with suppliers in China. Products made in China are price competitive and of good quality, not to mention that the nation has excessive labor everywhere thesedays. I think MBO would be helpful to work as a middleman for your business if you're not confident in dealing with Chinese manufactures. However, it is always good to understand Chinese factories and the manufacturing industrial. Governments offer incentives to businesses located in China's industrial zones, especially to these in the right areas or industries. If you want know more about China manufacturing and industrial parks, you can find articles on: http://www.rightsite.asia/community/industrialpropertyfeatureshomepage

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Last Updated ( May 05, 2009 at 10:50 PM )

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