June 26, 2007. Today, Etienne Charlier gave a presentation to a group of business people participating to the Belgian Economic Mission to the PRC and let by His Royal Highness Prince Philippe. Several speakers addressed the audience and reviewed the main aspects relevant to sourcing in China.

The key points were:

• Good companies source to win, not to shrink. Sourcing projects must be part of an overall business strategy to be fully effective.
• The level of preparation of a sourcing project has a critical influence on the outcome. Preparation includes the evaluation of the level or resources that can be allocated to the project, the analysis of what needs to be taken into account in the total cost of ownership, the formalization and adaptation of existing specification documentation to the reality of Chinese suppliers (such as reference to European standards).
• The selection of possible suppliers and their short listing is a time and resource consuming activity but it is necessary to start from a extensive "long list" to end up with a good "short list".
• Quality certificates such as ISO 9000 certificates are not enough to guarantee sustainable quality. The buyer must actively evaluate the capabilities of the supplier, the products itself (samples, prototype), the production process stability, the level of the supplier's suppliers and subcontractors. In particular, it is important to evaluate the capabilities of the potential supplier's management team.
• From a cultural point of view, it is important to understand the value of building good relationship with the decision makers and other levels employees of the suppliers, and therefore, to try to not to constantly change the people facing Chinese suppliers. It is also important to identify who are the real decision makers and to avoid wasting time trying to negotiate with lower level people not mandated to do so. In addition, Chinese employees tend to bring up bad news when they have no other choice, therefore, it is a good investment to closely monitor the supplier and get early warning of possible operational issues.
• Finally, the success story of AF Compressor was presented. A 150-people company in the high pressure compressor, successfully initiated sourcing of parts from China. The key success factors were: the commitment of the company's top management, a good awareness of what it is facing combined with a god preparation, the availability of financial and HR resources to pursue the project, and the clear understanding that things do not get started instantly.

Etienne C. June 26, 2007

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