Home Office Balance

I hope readers of this blog enjoy some of the more personal input about our growing company and my place in it.

Our US Headquarters is in Loretto, MN just outside of Minneapolis. I work out of my home office in Green Bay, WI. At first I really disliked working from home. I was used to working in a large office where I could interact with many people. Over time I've gotten used to working alone. I reach out by phone to contacts often and have joined several business and community groups to stay connected to others. It's a challenge though.

We have three children. When they are home in the summer they sometimes can impact my productivity. That is balanced by the times I work at night and early in the AM.

At times I've thought about getting a small office nearby. However, I'm not sure it would be any more productive as I'd have more trouble working at night with all my files and information in another location. Also, it wouldn't help the isolation issue and involves significant cost that doesn't help us serve our customer.

The kids head back to school Tuesday and I'm looking forward to the quiet. In looking back over the last three years I've gotten very good and working from home and rarely think about making a change anymore. There are still times I need to work hard to focus on tasks at hand when distractions are prevalent, but I've improved my organization over the years and am pretty well set now.

Have a great holiday weekend!

Education News for Migrant Workers

An article in today's China Daily has big implications. As I think I've mentioned before, I am the school board president for our local school district. It's a great way to give back to the community in an area, education, that I am passionate about. I also love to learn more about the Chinese education system.

The Chinese government announced that the children of migrant workers can now receive free education where their parents work. Previously the children had to be in their registered home town to take advantage of free elementary education. This kept many families apart most of the year. With this new rule it may make life for migrant families much easier and better. Here's the article:


Free schooling for migrant kids
(China Daily)
Updated: 2008-08-27 08:06

Children of migrant workers will have the same education opportunities as their urban counterparts before the end of this year, the Ministry of Education (MOE) said Tuesday.

"The central government will allocate funds to local education departments sufficient to cover extra education expenses in accordance with the number of migrant children they accept," the ministry said on its website.

The ministry is now drafting policies that provide special bonuses to local education departments that accept non-local children.

"The ministry intends to extend the free education umbrella to cover children from migrant worker families," the ministry spokesperson Xu Mei said. As from the new semester in next month, urban residents nationwide will be exempted from incidental expenses, making compulsory education totally free in these areas, according to a policy launched earlier this month by the MOE.

Shijiazhuang was the first in the country to provide in 2004 equal education opportunities to children of both local residents and migrant workers through introduction of a unified system of education charges. Consequently, almost all classes are seriously overcrowded, as 50 or 60 children are generally crammed into classrooms designed for 40 students, Zang Dajian, an education bureau official of Qiaodong district, Shijiazhuang, Hebei province, said.

China provides a nine-year compulsory education system for children aged 6-15, comprising six-year free pfrimary education and three-year secondary education. The system has long subsisted on government funds and been the privilege of children with local residential certification or hukou, and excluded children living with parents working in cities away from their registered home.

Peng Shengzuo, 40, a construction worker in Beijing, is one example. His 11-year old daughter had to return to his hometown in Shangrao, Jiangxi province because schools in the capital do not accept pupils without a hukou. As Peng's wife also works in Beijing the family can only be together once a year during the Spring Festival.

In 2007 a total 7.66 million children of migrant workers reached the age at which to start compulsory education, according to statistics. Most were concentrated in developed areas such as Beijing, Shanghai, Zhejiang and Guangdong provinces.

"Made In China" Brand Bolstered by Olympics

An article in China Daily today joined several others I've read in the last few days on how the excellent organization and world class facilities of the Beijing Olympics will bolster the perception "Made In China". I totally agree with this conclusion. From the hoards of volunteers projecting a friendly and welcoming posture to the flawless organization and the extravagant ceremonies, it all was awesome and will pay long-term dividends for China.

This is all good news for OPSA and for proponents of free trade. Here is the article:

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'Made in China' brand reaps Olympic dividend

The Olympics had a negligible direct impact on China's economy, but analysts say the near flawless organisation of the Games was a priceless 17-day advertisement for the "Made in China" brand.


Fireworks explode at the opening ceremony of the Beijing 2008 Olympic Games at the National Stadium, August 8, 2008. [Agencies]

Billions of television viewers saw athletes performing in gleaming high-tech stadiums in a city rebuilt by some of the world's most renowned architects, projecting the image of a modern and cutting edge economy.

For a country traditionally seen as a low-cost manufacturing hub, the Olympics was a timely re-branding exercise.

"If you go back 12 months, 'brand China' was in tremendous difficulties with toxic toys and a number of other issues," said Beijing-based Greg Paull, who runs market research firm R3.

"They've come a long way in a year," he said.

A virtually glitch-free Games in terms of organisation could bring profound changes in the way China is seen by the rest of the world.

"China's amazing haul of gold medals has mirrored its spectacular economic growth to signal to the world that China has truly arrived," said Seth Grossman, a Shanghai executive with media communications agency Carat China.

"From the grandeur of the opening ceremony to the self-assured way Chinese athletes expected to win in so many events, China exceeded every expectation."

Paull said many Chinese companies would be able to use the Olympic dividend to expand outside their domestic market and make their mark on the global stage.

He cited the example of sportswear maker Li Ning, whose founder lit the flame at the Olympic opening ceremony on August 8 after a spectacular skywalk around the top of the "Bird's Nest" stadium.

"Companies like Li Ning that are looking to expand globally are going to use the Olympics as a chance to do that," said Paull.

China is the world's fourth-biggest economy, and the concrete impact on the economy was always going to be minimal.

"It won't do much to lift growth as the Chinese economy is so huge," said Qiu Qingdong, an economist with Guodu Securities.

Even for the city of Beijing, the economic impact of tourism and other spending has been limited.

Beijing hotels have received fewer visitors than they expected, with the occupancy rates for three-star hotels and lower lingering under 40 percent, according to the Beijing Statistical Bureau.

"Before the Games, people were anticipating a business boom in tourism, benefiting hotels, airlines and local restaurants," said Li Wei, an analyst with Standard Chartered.

"Now it's becoming clear that the impact wasn't all that big. I don't think industries like that are likely to benefit greatly from one month of Olympics and Paralympics," he said.

But to many analysts measuring the impact of the Olympic Games, it was never going to be a simple question of, say, August tourism revenue.

Instead they focused on the big picture, the profound changes taking place in China and their effect on the rest of the world.

"Analysing the one-off macroeconomic impact, or the 'economics of the Games', is not really an issue of such great importance," Daniel Chui, head of investor communications at JF Asset Management said.

Focusing on the little figures might even distract attention from the fact that we are witnessing an epoch-defining event, he argued.

"The Beijing Olympics are another milepost in China's transformation into an efficient, market-oriented and financially sophisticated economy and a more open society," he said.

Growth and Optimism Continue

I continue reading much about how costs in China have made manufacturing there too expensive. A few different blogs that I read this week had posts on the subject. Both concluded that for some things China was not the right place before and really isn't now. Low-end and commodity items are having the most trouble. As I've said before, OPSA hasn't ever done commodities or low-end items. We do have some component-level projects that have lost their advantage. As I've also mentioned in other posts, OPSA is shifting even more strongly to sub-assembly work and finished goods.

I can say that our business is growing nicely and that we are working on new projects every day. We are becoming more selective on what we spend our time on, but that's been a good thing. It's brought some more discipline to our sales efforts.

So, the old saying about not believing everything you read in the media is certainly valid in this situation. China and Asia continue to be a great option for the right projects.

Olympic Lessons for OPSA and Me

I love the Olympics. Watching the Beijing Olympics is even better because of how much I respect and like the Chinese people. Here are a few lessons I've been reminded of while watching the games:

1. Family is what it's all about - Most athletes look for their families after they compete. Although competing for god and country are important, it's the people closest to each of us that makes life wonderful. The people of OPSA are what make it fun and interesting for me.

2. Success takes time - When I hear the stories of all the training and work these athletes undertake I am reminded that hard work over time, based on a plan, leads to success. Our business has a very long selling cycle. From the time we meet a potential new customer it typically takes nine months to a year until we realize our first sale. I often get impatient with this. I need to keep a focus on the long-term, while balancing the short-term, but we as a company need to get better at long-term planning.

3. Mistakes are learning opportunities - There are so many stories of athletes who failed in some way and built on that experience to find great success. I read a biography of Lincoln this year and that also reminded me about the value of perseverance and optimism in the face of adversity. Mistakes are problems are part of life, how one deals with them is the important thing.

4. Respect is to be given freely and earned consistently - I noticed the differences between two Olympic stars - Michael Phelps and Usain Bolt. Phelps seems to have genuine respect for his team mates and competitors. Bolt acts arrogantly and disrespectfully. I predict over time Bolt will mature and improve his behavior, but that Phelps will be more admired for this Olympics.

5. Working together is better than working individually - Seeing players that individually aren't that strong compete so well as part of a team reminds me again about the principle of synergy. This is a tough one for me as much of my work in OPSA is individual effort and I'm sometimes a little detached from the team working here in Green Bay. I need to keep looking for opportunities to collaborate with the OPSA team and the OPSHK team.

6. People want to be around and work with others whom are fun and create fun - It's interesting to me that Shawn Johnson seems to get more attention than Nastia Liukin even though Nastia won the individual all-around gold. I believe the main reason is Shawn seems to easily smile and to be truly enjoying her experience while Nastia looks more serious and stressed even after she wins.

Enjoy the rest of the Beijing games!

Supplier Audits and Product Inspection Reports

The documentation of these two things is a developing art for OPSA. As with most rapidly growing business we are more focused on doing the work that documenting it afterward. However, as we've gotten larger and more sophisticated I've realized we need more and better documentation in these two areas for our customers.

First in supplier audits we need to focus more attention on environmental and legal compliance issues that just product and process quality. This will be facilitated by having a standard form which our inspectors use at every factory audit. This form needs to be bi-lingual so we can share it directly with our customers. We also need to document audits of factories we work with on a continuing basis. Each should be audited at least annually.

While our internal documentation of product inspections is good, it is not in a format for easy understanding by our customers. We need to revise and refine these forms as well.

These types of administrative needs present a challenge for a growing company like ours. It is necessary, but the time required for implementation is a large investment and it's time that is taken away from customer service and new customer prospecting activities. As with most initiatives in business, balance is required. We are working to find the right balance as we move forward.

Surprise - Export Growth from China to US Slows in 2008

Ok, it's not a surprise. China Daily is reporting that in the first half of this year, exports from China to the US were up 8.9%, which is 9 percentage points lower than last year's growth. This is significant and caused both by the slow economy in the US and all the cost factors in China I've mentioned before.

At OPSA our growth in new customers has slowed, but our existing customers are rapidly increasing their business with us. The growth in existing customers impacts our ability to add new customers as we haven't added much new capacity in the US or Asia.

Here's the article:

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China's exports to the US in the first six months totaled $116.79 billion, up 8.9 percent from the same period last year. The growth rate was 9 percentage points lower than a year earlier.

China Customs said the slowdown was partly due to economic problems sparked by the US subprime mortgage crisis. A stronger Chinese currency, the renminbi, also contributed to the declining export volume.

The central parity rate of the renminbi was 6.86 yuan to one dollar Thursday. The renminbi had appreciated more than 20 percent against the greenback since its peg to the US dollar was removed in July 2005.

The appreciation raised the cost of the country's goods on the international market and impacted on Chinese products' competitiveness, China Customs said.

China's processing trade industry saw its US exports stand at $70.68 billion in the first half, up 5.7 percent over the same period last year. The growth rate was 3.2 percentage points lower year-on-year.

Exports of mechanical and electrical products, two of the country's major exports to the United States, hit $71.9 billion, up 8.6 percent over the same period last year. The growth rate declined 8.4 percentage points year-on-year.

China's export volume stood at $666.25 billion in the first half of this year, representing an increase of 21.8 percent over the same period last year.

According to government statistics, China has become a major export partner of the US, exceeding Japan and Canada to rank the third in export volume last year. Meanwhile, the US is China's largest export partner. In 2007, the total trade volume between China and the United States reached $300 billion.

The Chinese government is paying great attention to the expanding US subprime mortgage crisis and the falling dollar.

The Report on the Work of the Government, delivered to National People's Congress on March 5, said China must be fully prepared for changes in the international environment and become better able to tackle risks.

A Return To Prospecting

Over the last year I have greatly reduced the amount of good, old prospecting for new clients. Instead I've been busy servicing a large client in the middle of a large new project and gaining some new clients through referrals and networking. This approach coincided with some capacity constraints in our Asian offices. Although we are still somewhat constrained as we continue our strong growth, it's time for me to get back to sales 101.

I've now got the large client in a place where they require less daily interaction. There's still a lot to do for them, but the workload is down from the spring and early summer. Also, I just miss the excitement of pushing to get new clients from scratch. I will also be turning up my networking efforts and work to get new project from existing clients.

Although the exchange rate and other cost factors in Asia that I've previously discussed are working against us, the slow economy is in our favor. Companies need to reduce costs more aggressively when the economy is slower. OPSA needs to focus less on clients who only purchase components and more on companies that will purchase sub-assemblies and finished goods where our services are more valuable. Targeting the right companies will be the challenge this fall as I prospect aggressively. I'm looking forward to it and will keep you updated on my progress.

Let the Games Begin

The Olympics are a huge deal for China with long-term implications. If all goes well they take another step toward being a world super power. If negative perceptions reign for whatever reason, there will likely be political and business implications. Pollution control could become a big new industry in China. A war on terrorism could start if terrorists try to disrupt the games.

I believe the US and China will grow closer or further apart as a result of the games. President Bush did not get things off to a good start with his political comments this week. Face is an important concept in China, but his advisers do not seem to understand it.

I've read that "hot money" or money invested for large, short-term returns may stream out of China after the games causing economic problems. I don't believe this and expect the games to have very little short-term impact. Long-term however, I expect their impact to be important for the future of US and Chinese relations and for China's relations with the rest of the world.

I love the Olympics and can't wait to watch. Enjoy.

Change of Yuan Direction?

The Chinese central bank set the mid-point for the Yuan's trading range lower for a fifth consecutive day Tuesday according to China Daily. The Yuan has fallen slightly against the USD since it's peak on July 17, but overall the Yuan is up against the dollar 6.6% so far in 2008. Some analysts believe the Yuan will now trade up and down but not get higher than the 6.6% level.

It appears the Chinese government needs to slow the growth of the RMB versus the dollar to give exporters a break even though this might be harmful to the governments battle against inflation. It's a difficult balance to maintain. Also, the expectation of continued strengthening of the RMB has attracted "hot money" to China. Varying the exchange rate direction will keep speculators from causing problems like they have in the US real estate market.

It will be interesting to see where the RMB goes from here.

Top Ten Pitfalls to Avoid in Chinese Outsourcing - #1 Lack of a Plan / Strategy

#1 - Lack of a Plan / Strategy

This is what I call the "pitfall maker". It is the root of all the previous pitfalls. Starting with a plan for outsourcing is the number one action companies can take to avoid problems and realize the many benefits of Chinese outsourcing.

A plan should include objectives, time lines and evaluation points, progression of projects (which comes first or how will this be determined), contingency planning for key risks, and quality assurance plans.

Although OPSA is not a consulting firm, we do help our customers with their plans. It's in everyone's best interest to have a plan, follow it, and modify it as appropriate.

I hope the "pitfalls" series has been helpful. Feel free to contact me if I can expand on any of the points.

Buyer Beware (Or at least specific)

On a summer Friday I want to write about being specific about what is important when buying something or having something made overseas.

My mother-in-law is having a condo built near us here in Green Bay. She found a great location and worked out a very good deal. However, the model she looked at had high ceilings. She picked out a different plan and just expected it would have high ceilings as well. Now that the roof is on we can see the ceilings are a standard 8 feet. The builder's specification sheet said "ceiling height per plan". The plan only shows something about stud height being 92 5/8" high. We never asked about ceiling height, but realize now it is very important to my wife's Mom. We should have been specific about the key factors of the purchase.

Similar things happen with our customers. They forget to mention that some attribute of the material is important. After we've purchased some, they do testing and mention a problem. Then we have to work something out. We've gotten much better about asking many, many questions and drafting inspection criteria for all projects that has eliminated almost all of these issues, but we are still surprised sometimes.

So, today's suggestion for buyers (especially those building custom houses or products) is to TALK AS MUCH AS POSSIBLE WITH YOUR SUPPLIERS ABOUT WHAT IS IMPORTANT TO YOU AND TO ASK MANY, MANY QUESTIONS. We are certainly trying to help in that regard as well.