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42 Rules for Sourcing and Manufacturing in China (2nd Edition)

What’s it about?

Doing business in China is tougher than you think. Not only is the culture vastly different, but China’s experience in manufacturing is still developing. It will be a few years before the majority of manufacturers are up to world standards. In the meantime, quality, contract laws, schedules and logistics must be closely monitored. As a result, the things Westerners must do to be successful are far different from dealing with American or European manufacturers. The best way to quickly come up to speed on these differences and how to handle them is to learn from the experience of others. Through over 20 extraordinary executive interviews, Rosemary Coates captured the essence of sourcing and manufacturing in China. “42 Rules for Sourcing and Manufacturing in China (2nd Edition)” is a management book with a pragmatic approach that every businessperson headed to China must read.

For business people who are experienced in doing business in China, or for first-time visitors, this book will provide valuable insights from real executives and experts. These executives offer their personal experiences and recommendations about sourcing and manufacturing in China. Going beyond simple cultural do’s and don’ts, you will discover:

  • How business is really done
  • How you can make things happen in China
  • The mistakes westerners often make, and how to avoid them
  • What made these executives successful

Based on her 25 years of supply chain experience, much of it spent living and working across Asia, author Rosemary Coates has become an expert on doing business in China. Her own personal experiences in China are interwoven into this book.

What they’re saying

“Today I read ’42 Rules for Sourcing and Manufacturing in China (2nd Edition)’ by Rosemary Coates, a businesswoman with over 20 years experience in international trade in Asia. Why would I be interested in reading such a book? Two reasons:

1) Economic growth in China is exploding. It represents an abundant resource of cheap labor / materials and there is tremendous opportunity there.

2) I am currently working on manufacturing glow-in-the-dark key caps (marketed to women, so they can find their keys in their purse). After presenting RFQs to factories both in the US and abroad, it became clear that Chinese factories offer way cheaper prices, at least for injection molding-related stuff. But I also realized that there was a lot of stuff I didn’t know: and like I say, it’s worst to get screwed by not knowing what you don’t know. This book helped me realize a lot of what I don’t know.

Coates highlights the importance of understanding cultural differences between the Chinese and Americans. The Chinese culture is somewhat paradoxical, its heritage a mix of Communist and Confucianism.”

Although the government is socialist, the Chinese operate with a very capitalist mindset, valuing hard work to get ahead and extreme competitiveness. Indeed, Coates hints that many of the famous government monitoring may be for the purpose of gaining competitive advantage in market negotiations! Moreover, the socialist roots value crediting inventions to the entire populous, explaining the Chinese ethical stance towards copying and stealing ideas: why not? Coates recommends strategies for dealing with IP theft, such as having individual components assembled in different factories, and only manufacturing older product-models abroad.

Confucianism was the prevailing philosophy in China for a long time, and it helped ingrain certain values such as unequal relationships between elder/superiors and inferiors and the importance of saving face in social situations. Chinese labor management works very much like this: superiors tell the inferiors what to do, and then they do exactly that. To deviate from precise instructions would embarrass the superiors. And although China is graduating 800,000 engineers per year, they are not being taught critical thinking skills; Chinese education emphasizes rote memorization. If a young Chinese student were to challenge a teacher, then the teacher might lose face, so no asking questions.

Other implications of this culture of respect include advice to handle business cards with great respect, a recommendation to answer questions about your income, weight, and marital status, and understanding when a Chinese partner may be prevaricating: it’s likely that you will never be told “No” outright, out of concern for potential embarrassment. So if you get a lot of vague responses, be sure to politely address your concerns, without any direct accusations.

One other thing I found particularly interesting was the importance the author placed on guanxi, which roughly translates to “networking”, though I think “clout” might be more apt. Relationships in China are built on trust and business favors, and it can take a year or more before sufficient trust has been accumulated to proceed with business processes. Coates encourages consulting firms that understand guanxi well to assist you in your ventures overseas.

I also learned lots about safety and environmental regulations, acronyms for International Commerce Terms (“incoterms”), geography, relative population growth, what to screen for when evaluating a factory, and more. Really, if you are thinking of doing business in China, I recommend getting this book. Even if Coates’s perspective may be inaccurate at times (the book was published very recently, in November 2009, and even makes mention of Twitter), you will probably learn things you did not know. One last pearl: Chinese factories often have high turnover after the Chinese New Year (based on the lunar calendar), so defect rates are higher before and after the holiday; your QA process should account for potential problems there.”
- Zachary Burt

What’s in the book.

Rule 7 Expect the Unexpected—Betty’s Story
Rule 14 Find Multiple Suppliers
Rule 41 Do’s and Don’ts Are Helpful to Know

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