As we wind down 2008 we reflect on our successes and failures, and what we will do differently in 2009. We are blessed with a truly outstanding team and excellent customers. Some of our customers are struggling right now and we're working through how best to support them.
The general economy and how it's affecting our current customers is our biggest challenge. Opportunities abound as more companies need to reduce costs to stay viable and competitive. Raw material and oil prices are down dramatically reducing both production and transportation costs. More and more companies are considering outsourcing production processes that are not close to their core competencies.
We are considering new projects that will expand our business model and bring new directions to the company. I look forward to sharing these developments with you.
Merry Christmas to all.
Tuesday, December 23, 2008
Thursday, December 18, 2008
100th OPSA Blog Post
This is the 100th post for the OPSA blog. I started this blog on January 1, 2008 with the first post about my polar bear swim that day and announcing how I intended to post to the blog.
I've mainly stayed true to that plan by posting a combination of manufacturing news from China, OPSA news, and advice on sourcing from China. Since I will end up just over 100 posts for the year I have posted about once every 2.5 working days. I had planned to post 2-3 times per week so I am on the low-end of that scale, but within the range. I plan to increase the pace of postings in 2009.
I need to make the blog more visible now on the recently re-designed OPSA website and plan to do that soon.
Any suggestions for the blog are welcome and appreciated. I look forward to hearing from you.
I'll also state here that I intend to do the polar bear swim again this year. I may try the Jacksonport event in Door County this year. Since the temperature right now is -3F and we are expecting another 6 inches of snow tonight, this is not an insignificant announcement. Watch for the posting on Jan. 1 if your interested.
I've mainly stayed true to that plan by posting a combination of manufacturing news from China, OPSA news, and advice on sourcing from China. Since I will end up just over 100 posts for the year I have posted about once every 2.5 working days. I had planned to post 2-3 times per week so I am on the low-end of that scale, but within the range. I plan to increase the pace of postings in 2009.
I need to make the blog more visible now on the recently re-designed OPSA website and plan to do that soon.
Any suggestions for the blog are welcome and appreciated. I look forward to hearing from you.
I'll also state here that I intend to do the polar bear swim again this year. I may try the Jacksonport event in Door County this year. Since the temperature right now is -3F and we are expecting another 6 inches of snow tonight, this is not an insignificant announcement. Watch for the posting on Jan. 1 if your interested.
Tuesday, December 16, 2008
10+2 Import Security Filing Requirements Take Effect on Jan. 26
The long awaited 10+2 requirements are now in the US Federal Register to take effect on Jan. 26, 2009. 10+2/ISF is an additional electronic document that will be required to be presented to U.S. Customs 24 hours prior to Laden on Board of the Vessel for ocean import. The new filing requires bonding. Importers with current Continuous Bonds will not need to purchase a new bond. Importers without a Continuous Bond should contact their forwarder for information on how to proceed.
Here's the "why do I care"...the penalty for a bad ISF filing will be $5000 per filing. These penalties will not be accessed in the first year (whew...).
The ten data elements for the new filing are:
• Manufacturer (or supplier) name & address
• Seller name & address
• Buyer name & address
• Ship to name & address
• Container stuffing location
• Consolidator name & address
• Importer of record identification number (IRS, EIN, SSN, or CBP assigned number)
• Consignee number (IRS, EIN, SSN, or CBP assigned number)
• Country of origin
• Commodity HTSUS number – will accept 6 instead of 10 digits
Complete and accurate data is important in this regard. Importers - you are required to know your supplier!!!
Know what you are purchasing, from whom and at what time. Know where it is coming from and who is involved in your transaction. This is your responsibility.
You should have a signed purchase order contract where you hold them responsible for correct information, on time documents, and itemized invoices. Importers are responsible for all ISF information.
Contact me at janderson@opsamerica.com if you have questions about 10+2. It's going to be even more important now to know whom you are buying from and that you have representation in Asia to confirm supplier information.
Here's the "why do I care"...the penalty for a bad ISF filing will be $5000 per filing. These penalties will not be accessed in the first year (whew...).
The ten data elements for the new filing are:
• Manufacturer (or supplier) name & address
• Seller name & address
• Buyer name & address
• Ship to name & address
• Container stuffing location
• Consolidator name & address
• Importer of record identification number (IRS, EIN, SSN, or CBP assigned number)
• Consignee number (IRS, EIN, SSN, or CBP assigned number)
• Country of origin
• Commodity HTSUS number – will accept 6 instead of 10 digits
Complete and accurate data is important in this regard. Importers - you are required to know your supplier!!!
Know what you are purchasing, from whom and at what time. Know where it is coming from and who is involved in your transaction. This is your responsibility.
You should have a signed purchase order contract where you hold them responsible for correct information, on time documents, and itemized invoices. Importers are responsible for all ISF information.
Contact me at janderson@opsamerica.com if you have questions about 10+2. It's going to be even more important now to know whom you are buying from and that you have representation in Asia to confirm supplier information.
Friday, December 12, 2008
Comment on The Other Side of the Wall
Einar Tangen is a former Milwaukee business executive who now lives in Beijing, China, where he advises the Heilongjiang Province on its technology valuations and acquisitions. Tangen previously served as the chairman of Wisconsin’s International Trade Council and is a former advisor to KOTRA (the Korean Government’s Direct Foreign Investment Recruitment Agency). I've never met him, but I enjoy reading his columns in the BizTimes.com - the web site of a very good business periodical covering Milwaukee and Southeastern Wisconsin.
His advice below is very valuable, although a bit overly negative I think. Maybe it's my optimism, but I don't sense as much distrust of other business people and disdain for rules as he describes. However, he has much more experience in this regard. Overall it's a very good article and highlights why it's important to have someone on your side that has experience in China.
A view from the other side of the Wall
By Einar Tangen , for SBT
Published December 12, 2008
Dispatch from China
The Chinese domestic market is brutal. Your average Chinese SME is locked in a hand-to-hand, day-by-day battle for survival. Any successes they create risk being copied by their competitors within months, and from there, the number of competitors will grow exponentially until a once lucrative innovation is nothing more than a commodity.
The local competition will do anything and everything to get ahead, reverse engineer products, bribe and/or steal employees, interfere with your credit and government relations.
They will go after their competitors’ IP, suppliers, customers and distribution systems. Or, in other words, it’s just like everywhere else in the world but, due to the number of competitors, a little more so.
The irony is that many Westerners like to point to Chinese business attitudes as flawed, immature and immoral without recognizing the impact that the West has had on Chinese attitudes toward business.
In the West, as our markets matured we created systems which were designed for efficiency. They required more transparency and cooperation between businesses, which were part of the same supply stream, predicated on the idea that “I take care of you and you take care of me.” That philosophy went out the window as companies pursued cheaper sources overseas as a way of adding to the bottom line.
However, what was once a competitive advantage becomes a competitive necessity when a critical mass of your competitors starts using the same sourcing strategy. This process has touched off an ongoing race to develop cheaper sourcing which has jumpstarted economies like China and India.
Still, the consequences for companies who were part of this process in China and India have not been universally beneficial. Initial profit lines for Chinese companies were eroded by stiff competition from other local companies, and those who were not able to see the sourcing tide moving away became casualties.
These companies have learned the hard way that the magical, long-term, mutually beneficial relationship is often a myth. In Shenzhen, more than 10,000 businesses have gone bankrupt this year as lower labor costs and lax environmental enforcement has drawn business elsewhere. Even when these firms were running full tilt, they were pitted against each other in merciless cost wars instigated by foreign corporations. So, while the United States has preached a “win/win” ideology, both at home and abroad, the truth has been that it was always all about the Benjamins.
In addition, in China, due to the rapid political, social and economic changes of the last 60 years, the individual’s sense of stability and faith in the system is still developing, and the future is not certain. At this point, in the midst of an economic meltdown, the only thing that is clear is that the ideological practices of capitalist and socialist systems have blurred and that a clearly defined ideological path has not emerged.
Here is some gratuitous advice if you choose to do business in China:
Trust
When Chinese SMEs deals with other Chinese SMEs, it can be like a cobra approaching a porcupine. Each side endeavors to learn as much about the other’s strengths and weakness without disclosing their own. In the initial conversation between the companies the bosses will hint/brag about powerful connections and performance capabilities. If things progress, the employees take the field and shape the deal points as directed. Like playing Mahjong, each player is out for themselves, even if everyone is smiling while they play. Do not expect to be treated any differently just because you are a foreigner. In fact, you should be aware that they have even less reason to trust you. So do not be surprised that most Chinese businesses and people are highly secretive and distrustful. It’s not you, it’s just standard operating procedure.
Values
In China, to be caught and disgraced is unlucky, stupid or both. Under our Judaea Christian values, right and wrong are based on collective ideals which are enforced though the individual’s sense of guilt and (if religious) ultimate punishment. In China, 5,000 years of culture and philosophy has resulted in a more pragmatic view of human nature which, while it emphasizes family values and obligation, views war and business as competitions with no rules.
Truth
For the Chinese, truth is knowledge, knowledge is power and you do not give power to a stranger who could be a potential enemy nor do you expect them to give it to you. It is an outlook on life right out of Sun Tzu’s the Art of War. Rather than trying to figure out the “truth,” plan on verifying everything every time. You may never know the truth, but you will at least have a good chance of getting what you bargained for.
The law
China’s legal system has been developed over the last 30 years. Marrying capitalist mechanics to socialist controls has been difficult. There are many grey areas, and the legal infrastructure is immature. In addition, Chinese companies lack experience using legal means to solve disputes. In the past, the outcomes of a legal dispute were more about connections than right and wrong, but as judges are faced with stiff penalties for misconduct and the dockets fill up, a judicial economic model is evolving that puts more emphasis on the contracts and documents and a little less on who is involved.
Cooperation
Given the history and the current circumstances, Chinese businesses will probably only embrace those practices that create competitive advantages for them.
Ideology
Western companies should keep in mind that a missionary sense of ideological zeal is less useful than a hard look at the local conditions and norms when developing opportunities.
Conclusion
The difference is less about how we compete than the cultural outlook we espouse and the systems we have developed. The truth is that human nature – good, bad and indifferent – is fairly universal. The difference is how it plays out in different sociopolitical economic situations.
His advice below is very valuable, although a bit overly negative I think. Maybe it's my optimism, but I don't sense as much distrust of other business people and disdain for rules as he describes. However, he has much more experience in this regard. Overall it's a very good article and highlights why it's important to have someone on your side that has experience in China.
A view from the other side of the Wall
By Einar Tangen , for SBT
Published December 12, 2008
Dispatch from China
The Chinese domestic market is brutal. Your average Chinese SME is locked in a hand-to-hand, day-by-day battle for survival. Any successes they create risk being copied by their competitors within months, and from there, the number of competitors will grow exponentially until a once lucrative innovation is nothing more than a commodity.
The local competition will do anything and everything to get ahead, reverse engineer products, bribe and/or steal employees, interfere with your credit and government relations.
They will go after their competitors’ IP, suppliers, customers and distribution systems. Or, in other words, it’s just like everywhere else in the world but, due to the number of competitors, a little more so.
The irony is that many Westerners like to point to Chinese business attitudes as flawed, immature and immoral without recognizing the impact that the West has had on Chinese attitudes toward business.
In the West, as our markets matured we created systems which were designed for efficiency. They required more transparency and cooperation between businesses, which were part of the same supply stream, predicated on the idea that “I take care of you and you take care of me.” That philosophy went out the window as companies pursued cheaper sources overseas as a way of adding to the bottom line.
However, what was once a competitive advantage becomes a competitive necessity when a critical mass of your competitors starts using the same sourcing strategy. This process has touched off an ongoing race to develop cheaper sourcing which has jumpstarted economies like China and India.
Still, the consequences for companies who were part of this process in China and India have not been universally beneficial. Initial profit lines for Chinese companies were eroded by stiff competition from other local companies, and those who were not able to see the sourcing tide moving away became casualties.
These companies have learned the hard way that the magical, long-term, mutually beneficial relationship is often a myth. In Shenzhen, more than 10,000 businesses have gone bankrupt this year as lower labor costs and lax environmental enforcement has drawn business elsewhere. Even when these firms were running full tilt, they were pitted against each other in merciless cost wars instigated by foreign corporations. So, while the United States has preached a “win/win” ideology, both at home and abroad, the truth has been that it was always all about the Benjamins.
In addition, in China, due to the rapid political, social and economic changes of the last 60 years, the individual’s sense of stability and faith in the system is still developing, and the future is not certain. At this point, in the midst of an economic meltdown, the only thing that is clear is that the ideological practices of capitalist and socialist systems have blurred and that a clearly defined ideological path has not emerged.
Here is some gratuitous advice if you choose to do business in China:
Trust
When Chinese SMEs deals with other Chinese SMEs, it can be like a cobra approaching a porcupine. Each side endeavors to learn as much about the other’s strengths and weakness without disclosing their own. In the initial conversation between the companies the bosses will hint/brag about powerful connections and performance capabilities. If things progress, the employees take the field and shape the deal points as directed. Like playing Mahjong, each player is out for themselves, even if everyone is smiling while they play. Do not expect to be treated any differently just because you are a foreigner. In fact, you should be aware that they have even less reason to trust you. So do not be surprised that most Chinese businesses and people are highly secretive and distrustful. It’s not you, it’s just standard operating procedure.
Values
In China, to be caught and disgraced is unlucky, stupid or both. Under our Judaea Christian values, right and wrong are based on collective ideals which are enforced though the individual’s sense of guilt and (if religious) ultimate punishment. In China, 5,000 years of culture and philosophy has resulted in a more pragmatic view of human nature which, while it emphasizes family values and obligation, views war and business as competitions with no rules.
Truth
For the Chinese, truth is knowledge, knowledge is power and you do not give power to a stranger who could be a potential enemy nor do you expect them to give it to you. It is an outlook on life right out of Sun Tzu’s the Art of War. Rather than trying to figure out the “truth,” plan on verifying everything every time. You may never know the truth, but you will at least have a good chance of getting what you bargained for.
The law
China’s legal system has been developed over the last 30 years. Marrying capitalist mechanics to socialist controls has been difficult. There are many grey areas, and the legal infrastructure is immature. In addition, Chinese companies lack experience using legal means to solve disputes. In the past, the outcomes of a legal dispute were more about connections than right and wrong, but as judges are faced with stiff penalties for misconduct and the dockets fill up, a judicial economic model is evolving that puts more emphasis on the contracts and documents and a little less on who is involved.
Cooperation
Given the history and the current circumstances, Chinese businesses will probably only embrace those practices that create competitive advantages for them.
Ideology
Western companies should keep in mind that a missionary sense of ideological zeal is less useful than a hard look at the local conditions and norms when developing opportunities.
Conclusion
The difference is less about how we compete than the cultural outlook we espouse and the systems we have developed. The truth is that human nature – good, bad and indifferent – is fairly universal. The difference is how it plays out in different sociopolitical economic situations.
Thursday, December 11, 2008
China Reports 2.2% Decline in November Exports
This is the first decrease in seven years and followed a 19% increase in October. This report shows a very abrupt slowdown in exports. Imports also declined 17.9% which may mean factories imported less raw material because future orders are weak. It also is partially caused by consumer demand in China decreasing as consumers there tighten their belts in the shaky economy.
This is not good news at all, but not surprising either. There certainly is a correction/recession going on in which US consumers are cutting back their consumption and Chinese factories will have to cut production. I believe most Americans bought too much (too much house, too much car, too many toys, etc.) in the past which is one of the causes of this correction. If Americans settle on a consumption rate that boosts their savings rate, long-term this correction will have been helpful. Having the Chinese increase their consumption in a rational way that matches their GDP growth will also help.
In China now it appears the marginal and low-quality factories are closing. This can also be a silver-lining of the correction.
At some point the recession needs to turn the other way or the global economy will sink into something worse. Hopefully the actions of global governments will help along with a reduction in factory closings and layoff notices so the nervousness of consumers subsides.
This is not good news at all, but not surprising either. There certainly is a correction/recession going on in which US consumers are cutting back their consumption and Chinese factories will have to cut production. I believe most Americans bought too much (too much house, too much car, too many toys, etc.) in the past which is one of the causes of this correction. If Americans settle on a consumption rate that boosts their savings rate, long-term this correction will have been helpful. Having the Chinese increase their consumption in a rational way that matches their GDP growth will also help.
In China now it appears the marginal and low-quality factories are closing. This can also be a silver-lining of the correction.
At some point the recession needs to turn the other way or the global economy will sink into something worse. Hopefully the actions of global governments will help along with a reduction in factory closings and layoff notices so the nervousness of consumers subsides.
Tuesday, December 9, 2008
RMB Weakening Causes Tension with US
An article in the December 5th USA Today describes the impact the weakening RMB is having on relations between Beijing and Washington. The RMB has fallen against the USD since my last posting on exchange rates. The article implies this change in direction from the fast rise earlier this year to the stabilization in the fall and now a slight downward trend against the dollar is due to intentional manipulation by the Chinese government. The reporter presents no evidence in this regard. It seems to me the change in direction could be caused by the market within the trading range set by Beijing, but I haven't investigated. The dollar has strengthened against most currencies since the fall I believe.
The exchange rate stabilization is good news for US consumers and OPSA customers. The strengthening dollar is bad news for all exporters in the US, but this is not unique to the situation with China.
Lots of snow here in Green Bay today. Here is the link to the article.
http://www.usatoday.com/money/world/2008-12-04-china-urges-washington-to-protect-investments_N.htm
The exchange rate stabilization is good news for US consumers and OPSA customers. The strengthening dollar is bad news for all exporters in the US, but this is not unique to the situation with China.
Lots of snow here in Green Bay today. Here is the link to the article.
http://www.usatoday.com/money/world/2008-12-04-china-urges-washington-to-protect-investments_N.htm
Tuesday, December 2, 2008
A Problem Solving Attitude
I understand we are in the problem solving business and that if manufacturing in Chines were easy, companies would not need our help. However, there are times when it seems every issue becomes complex and things don't move forward quickly enough. This business, like many small businesses, is quite a roller coaster ride. Many days are big highs. A few days are really tough. Despite a wonderful holiday weekend with my family, I'm in the middle of a tough stretch right now.
I even had a difficult school board meeting last night.
Now, I'm not talking "tough" like we're not doing a good job. I mean tough in the sense that everything seems to be complicated. Nothing is easy. I know that, "if it were easy anyone could do it", but it would be nice to have something sail right through sometime soon to offset all the tough projects.
I hope you'll indulge this bit of therapy blogging for me. I expect readers are OK knowing everything isn't wine and roses all the time. I feel like it's OK to express that I realize a small business is a roller coaster and I'm looking forward to the next big, fast and fun ride downhill. I'm off to solve some more problems now.
I even had a difficult school board meeting last night.
Now, I'm not talking "tough" like we're not doing a good job. I mean tough in the sense that everything seems to be complicated. Nothing is easy. I know that, "if it were easy anyone could do it", but it would be nice to have something sail right through sometime soon to offset all the tough projects.
I hope you'll indulge this bit of therapy blogging for me. I expect readers are OK knowing everything isn't wine and roses all the time. I feel like it's OK to express that I realize a small business is a roller coaster and I'm looking forward to the next big, fast and fun ride downhill. I'm off to solve some more problems now.
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