​There are 50 million people trapped in Modern Slavery worldwide and the numbers are increasing. Modern slavery is evident in a number of practices including trafficking in persons, slavery, servitude, forced marriage, forced labour, forced marriage, debt bondage, and deceptive recruiting for labour or service. Modern Slavery is not limited to any single country and is a risk in every supply chain. 

Regulators, shareholders and the community increasingly require that brand owners & retailers have effective due diligence systems that minimise the risk of Modern Slavery in their supply chain. Half measures and empty promises are no longer acceptable. 

Decades ago, retail private label buyers would travel to the Canton Fair several times a year, do all their buying from trading companies and deliver significant winning offers to their customers. 

Those days are gone. Buying from China is not a retail competitive point of difference, rather it is a competitive requirement.

Because of this, it has become increasingly more important for retailers to establish sourcing teams on-the-ground in China ensuring they are buying at the best price so they can put best offer forward to customers.

Here are the top 5 benefits of sourcing team on-the-ground in China. 

1. Representation / relationship building. 
In China, relationship is (almost) everything. Maintaining a face-to-face relationship with suppliers is more important than in western countries. Time spent building supplier relationships is like investing in "money in the bank" that can be withdrawn when you really need the support of the supplier for improved price, quicker production or an exclusive offer. Local people at origin who build a relationship with key suppliers on your behalf, will deliver a lasting benefit to your supply chain.

2. Setting expectations 
Building relationships is not all about long lunches and happy talks together. It is also about setting clear expectations about the company requirements (as well as understanding factory capability). Often, we when are called in to resolve a supplier issue for a new client, we find that the company requirements have not been clearly communicated to the supplier. It is important that clear expectations are set to ensure the supplier can be held to account to meet agreed expectations. Local people representing the company continually reinforce company requirements.

3. Better understanding of what is really happening.
It is vital to know what is happening on the factory floor and upstream with raw material suppliers. It is impossible to get the required visibility when your interaction is limited to email communication and several half day visits per year. Having your own trusted sourcing team on-the-ground means 365 days overview of your China suppliers.

4. Coordinating Local Functions
China based sourcing team enables on-the-ground local coordination and inspection of critical processes.

• New supplier qualification.
  
• Verification on production capability, quality control and social compliance.
• Searching for suppliers, coordinating quotations and samples, supporting critical path for first order once business is awarded.
• Purchase order coordination. Following up suppliers for confirmation of PO details and due date. Holding them to account to deliver on time as promised.
• Quality control. People will do what you inspect, not what you expect. Local people on the ground, inspecting supplier processes and goods to ensure appropriate specification and acceptable level before shipment.

5. Resolution of Issues
When everything is going to plan, it is easy to manage remotely. However, in international supply chain, it is rare for everything to go to plan without intervention and control. This is where having local people on-the-ground managing supply becomes invaluable. At short notice they can travel to the factory, assess the situation and report back to the company about the root cause and options to resolve. After consultation with the company, they can communicate required solution and follow up with the factory to ensure resolution. Therefore, a potentially massive problem can be resolved quickly, and repercussions can be avoided. We find that a person engaged locally can deliver savings to the company far in excess of their annual salary through effective resolution of a single supply issue. This is why many companies consider it a sensible investment to have people on-the-ground supporting supply management in China.

Conclusion
Well-managed, local people engaged to represent, coordinate and resolve issues enable international retailers achieve breakthrough improvement in China supply. Moving to engaging local supply management resources could be the pathway towards achieving a supply led, sustainable competitive advantage.
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Because of resulting the disruption and cost arising from lack of control at origin, we wondered why so many companies were prepared to buy from China without implementing sufficient control.

We came up with the following reasons:

• They had always managed their supply chain remotely and did not know that there was a better way.
• They were often sales/customer driven companies (which is a good thing) that were not strong on process.
• They had no appetite for establishing a company-owned operation in another country.
• There was a reluctance to delegate tasks offshore without adequate leadership.
• The requirement for control was high but it was not always a full-time need.

As a result of the above, we realized there was a need for an outsourced platform to allow effective on-the-ground control of China supply in a targeted and cost-effective way. We established In Asia Advantage to meet this need with following objectives:

1. To educate overseas enterprises of the benefits of managing supply locally.
2. To provide a platform for flexible and agile local management without the need to establish a local entity.
3. To provide leadership ensuring 100% alignment with the requirement of overseas clients.

Since establishing back in 2012, we have stayed true to these objectives and have steadily increased our capability and our value-add. We now have operations in multiple Asia jurisdictions and are expanding further as we meet the evolving needs of our clients.

Please reach out to our team for further info. We would be please to explain to benefits of effective management at origin and how we can help deliver effective supply improvement solutions.

Over the decades we have witnessed time and time again the benefits of engaging local people on-the-ground, managing supply in China.

The following benefits can be realised when local people are engaged with appropriate alignment and control.

Speed
Having local people on the ground in China enables faster resolution of issues because:

1. There is no time zone difference. Issues can be resolved quickly, sometimes while the home office team is sleeping!
2. Local teams are closer to the action. They often discover and resolve issues much earlier than teams that are managing supply remotely.

Better Communication
Face to face communication is very important in Chinese culture. The power of engaging local people who share the same first language, time zone and culture as suppliers should not be underestimated. Better communication and understanding, when utilised effectively, delivers outstanding results.

People Cost Saving
Because of the lower cost of labour in China and the productivity of local engagement, managing selected supply functions at origin commonly delivers better results at a lower cost. That is, "more bang for buck".

Product Cost Savings
On-the-ground local teams are able to understand all the cost drivers of key suppliers and pull all levers towards achieving product cost reductions.

Logistic Cost Savings
Having the ability to consolidate and warehouse in China can achieve substantial logistic cost savings. Local teams can provide 365-day oversight to ensure that third party logistic providers are operating effectively.

Delivery on Time
Local people communicating with local factories is more effective than long distance management of delivery performance. Management of the critical path for every purchase order will ensure a considerable improvement in delivery on time, in full.

Quality Improvement
​Suppliers will do what you inspect, not what you expect. On-the-ground follow up is more effective than long distance instruction. We recommend using third party inspectors for low risk, pre shipment inspections and using company team members for new product quality engineering, high risk inspections, corrective action management and ongoing quality improvement. Quality control team members on the ground, enables a more proactive approach to quality assurance. Quality control team members can closely monitor factory quality control process and monitor quality during production to ensure that corrective action is taken early to avoid shipment delay.

To succeed, the right foundations must be in place such as: 

1. Local people must be employed in compliance with local regulations. Illegal arrangements are not sustainable.
2. There must be strong collaboration & trust between the home office and the overseas team. 
3. Effective, on-the-ground control to assure that local people are working according to requirements of the client. 

In Asia Advantage can build the foundations you need to realise significant supply improvement in China. For more info, please contact our Team.

The best supply chain in the world cannot consistently deliver on time if suppliers do not manufacture on time. In other words, it’s harder to win if you start from behind.

We have managed multiple projects that shifted order management from a home office to China. In all cases, great care was taken to ensure there was no disruption to supply. The transition was managed carefully with emphasis on establishing detailed systems and processes as well as recruitment, training and supervision of new China team members. 

Before implementation, there is often concern that supply performance will decrease without the direct involvement of the home office team at every step. However, all projects were successfully implemented with no disruption to supply and, rather, immediate and lasting improvement in supplier delivery performance was achieved as shown below. 

For example:
Project #1: 
Large USA consumer goods company.
Order Management moved from USA to China.
Increased supplier delivery on time from 94% to 97%

Project #2
Australian Retailer with 100+ stores
Order Management moved from USA to China.
Increased supplier delivery on time from 70% to 92%.

Based on this experience, we know that order management at origin in China is a proven and cost-effective means to dramatically improve supplier delivery performance. 

The below table shows an order management process with tasks marked in red that were moved to the China order management team.

​​Why does order management at origin get results?

1. Communication! Communication! Communication! The China team were able to communicate more effectively with Chinese factories than the home office team. Improved communication led to better results.
2. Diligence. Order management team members followed-up each order to the brink of obsession. Any outstanding issue was chased down and resolved as a matter of urgency. Suppliers felt the pressure.
3. Removal of Time Zone Delay: This was particularly relevant for USA & European clients. Removal of delays in response caused by difference in time zone enabled issues to be resolved days (sometimes weeks) earlier.
4. Improved Productivity. Wages in China are lower than western countries. For a lower cost, China order management teams can be established with people who (because of location) are more effective.

Key Success Factors

1. Team selection: As with everywhere else in the world, it is important to ensure that the team has the right aptitude and attitude. In all projects, the team was led by an awesome team leader who led by example and ensured high performance. 
2. Clarity. Make sure the process (who does what when how) is crystal clear. Ensure team are accountable to meet deadlines and achieve KPI's.
3. Discipline. Expect a high standard of discipline from the order management team and ensure they expect the same from suppliers.
4. Systems. Ensure the home office team and the China team are able to share information easily.
5. Platform for (Legally) Employing Team in China. To establish a team in China you need a Chinese business platform for employment and management of team in compliance with Chinese law. This is a service offered by In Asia Advantage.

Conclusion
Order management at origin is an effective way to achieve immediate and lasting China supply improvement. Is supplier late delivery pulling down your supply performance? If yes, it may be worth considering setting up an order management team in China.

Below are some typical supply improvements we have achieved.

​Consolidation of agents as part of competitive tendering process:
US$930,000 saving per year

Closure of local warehouse and shift to distribution via China 3PL warehouse:
Reduction in logistics costs from 10.4% to 7.4% of sales.

Moved long term agent to a cost-plus agreement.
US$600,000 savings per year

Improved process flow and communication between China sourcing team and head office buyers:
20% increase in direct sourcing achieved in one year.

Shifted order management from USA office to China office:
Improved delivery on time for US$150M of exports from 94% to 97%

Arranged for long term agent to hold safety stock in factories rather than company warehouse:
US$1,200,000 reduction in inventory

Established shipping booking team in China. Introduced purchase order critical path management:
Delivery on time improved from 70% to 92%

Negotiated raw material cost reduction with supplier's supplier:
Delivered annual finished goods cost reductions of US$250,000 per year.

Trading terms improvement negotiations:
​Achieved payment after delivery (30-90 days) with top 80% of suppliers.

For the last four years we managed a project to transform the supply chain of an Australian retail business. A critical part of this project was to shift warehousing from Australia to a new bonded warehouse in the Shanghai Free Trade Zone.

This project delivered three main benefits

1. Cost savings.
2. Speed to market improvement.
3. Inventory management advantages.

Reason for Making the Change
Long distance freight across Australia is expensive. A plan to open many new stores in remote locations would have resulted in a significant increase in road freight cost. Volumes were not high enough to justify port splitting or for establishment of multiple warehouses across Australia. Setting up a new warehouse in Shanghai was selected as the best option to avoid the additional freight cost.

Store ready consolidation
When suppliers send stock to a bonded logistics park warehouse in China, the goods are effectively exported from China when they pass customs/enter the park. This enables orders from multiple suppliers to be consolidated together onto store ready pallets and shipped in the same container(s) to the destination port. Upon arrival, the store ready pallets are removed from the containers, consigned and sent to stores. This significantly reduces warehousing costs and processing time at destination. Result: cost saving and speed to market.

Action Taken
In 2014 a bonded warehouse was established in WaiGaoQiao Bonded Logistics Park (BLP) in Shanghai. The majority of China orders were directed to this warehouse rather than to the Australian warehouse. Shipments from other countries such as USA and India were also shipped to the Shanghai Warehouse.

These pallets were built to a specified height in order to fully utilize container space. Strict packing guidelines were provided to minimize damage in transit.

The launch of the Shanghai warehouse was successful and the Australian warehouse was closed. 94% of store allocations are now delivered on store ready pallets.

Benefits of the Change
Cost Reduction
Initially, the project was designed to avoid the additional cost of freight to remote stores. Finally the project achieved a 38% reduction in freight cost and a 25% reduction in total logistics cost (as a percentage of sales). This allowed more competitive pricing in the store network. Previous to establishing the Shanghai warehouse, many shipments from suppliers were too small to send in full container loads (FCL) and had to be send by the pallet (LCL). Consolidation of these orders in the Shanghai warehouse enabled shipments to be sent to Australia as full container loads. This reduced sea freight costs, lead-time and damage in transit.

Speed to Market
The Australian warehouse experienced significant bottlenecks during peak periods. Establishing the Shanghai warehouse allowed 1 day cross dock/dispatch to stores.

Inventory management efficiencies
Establishment of the Shanghai warehouse allowed for safety stock to be held at origin and for exact store requirements to be sent to each destination port as needed. This helped optimize inventory and reduced the need for stock equalization between Australian locations.

Holding inventory at a single location at origin positioned the business to be able to distribute to multiple countries from a single location.

Challenges
There is no gain without pain. There were many challenges faced in the early stages of the project and many lessons learned.

Process Change
The change to offshore store ready consolidation required more complicated process and system controls than was originally anticipated.

Control
It was critically important to have team members on the ground in China to monitor and improve 3PL warehouse performance.

Longer Lead time from Warehouse to Stores
The significantly longer lead time from Shanghai warehouse to stores required appropriate safety stock and more sophisticated forecasting to protect availability.

Restrictions on Warehouse Activity
Warehousing within a Bonded Logistics Park is subject to many regulations. This can restrict what can be done within a bonded logistic park warehouse. Different bonded logistic parks have different regulations. This must be taken into account when selecting the warehouse location.

Supplier Education
Suppliers must take care to ensure that customs documents are completed correctly to avoid unnecessary delay into the warehouse. Many suppliers are not experienced in delivering to a bonded logistics park. It is important to have a commitment to on-the-ground supplier engagement to ensure compliance with requirements.

We established a small team in China to work with suppliers to ensure compliance with requirements. This was critical to the success of the project.

Conclusion
This project delivered significant benefits to the retail business. For anyone considering establishing store ready consolidation, it is recommended that the following is considered:

1. Take care in selection of a China 3PL warehouse provider. This is a long term commitment that should not be taken lightly. Look for a provider with a proven track record of successful store ready consolidation. Also, ensure they have a Warehouse Management System that can be fully integrated with your ERP. (You need end to end visibility).
2. All supply chains are different. The viability of store ready consolidation depends upon the nature of the products, logistics considerations at destination, and ability to manage the longer lead-times from warehouse to store. This will need to be fully considered.
3. Care must be taken to ensure that suppliers are well educated and that the China 3PL warehouse provider is performing accordingly to requirements.

​Store ready consolidation is a challenging and exciting tool. A solid strategy, good process, a great 3PL provider and strong on the ground control can deliver transformational supply improvements.