Look under the hood, the same applies to canmaking machines

Look under the hood

Occasionally some of our Chinese clients claimed that prices of our products that we deal with appeared to be uncompetitive. I know our prices are competitive, otherwise, we won’t be in business and doing so well for over 20 years.  China is a highly competitive market as there are a lot of suppliers and agents setting up offices there and are trying to undercut each other so as to survive.

“Look under the hood”. It is the message that I have been trying to convey to those clients in question. Buying parts for canmaking machines are no different from buying parts for a car. Often times, the clients in question approached us with parts involving Original Equipment Manufacturers (OEM), such as Stolle, Belvac etc. The serial numbers provided by them mostly are those of the OEM. Therefore, we have to go to such OEM for quoting the relevant parts. OEM prices are understandably more expensive. It is like going to a Toyota dealership to buy a carburetor, an air filter, or spark plugs or a set of tires when it comes to maintenance of a Toyota car.

However, if one looks into each of the OEM machines, i.e. look under the hood, one is likely to find that a lot of the parts are not manufactured by OEM. For instance, you may find a ABC Motor in an OEM machine. If a client could provide the serial number for such motor to us, we can go to ABC Motor and ask for a quote for that particular motor. I am sure we can provide the clients with very competitive prices for that motor, and likewise for other parts. At the end of the day it will mean tremendous savings to the clients.

AMRO’s edges

In this respect, AMRO’s competitive edges are:

1      We are able to obtain competitive prices for parts of some of the US small manufacturers. As we are a leading provider of US parts we are able to get bigger discounts than our competitors  from those manufacturers due to our long dealings and relationship with them.

2.     We  have our own warehouse in the US. We are able to consolidate orders of the various manufacturers into one shipment at our warehouse. Therefore, the clients can save freight charges and administration costs. Some of my Chinese clients incline to deal with the OEM or their agents because they do not want to deal with too many manufacturers. However, this problem can be solved by dealing with AMRO, one source for many manufacturers. Further. those clients by going to the OEM or their agents they are sometimes paying more for the parts then they realize, as explained above.

Advertisements

China banks are becoming world’s financial powerhouse

Readers of my blog, although not too many of them, know that I from time to time criticized my Chinese clients. In my last blog, I criticized the un- professionalism of a China bank. It seems that I am a China basher. However, as a matter of fact I am not. I am just using this blog to air my grievances. It is interesting to note that China bashing usually attracts more blog readers than otherwise. If it helps my blog, I don’t mind being seen as one of them. Further, I know the (Mainland) Chinese would not read my blog simply due to the fact all foreign social nets, such as WordPress, Twitter, Facebook, Google Blog and others, are blocked  in China. I can criticise my Chinese clients all I want and I won’t lose their businesses. The same cannot be said about my US principal. If I criticise them,  they may read it (although I doubt it) I may just as well kiss my job good-bye.

Talking about China Banks, I would like to bring up an interesting question. Recently, I came across a Chinese client who intended to pay for the goods ordered from us by a letter of credit (LC). The LC would be opened by one of the three largest state banks in China. When I mention “a China Bank” hereinbelow, I am referring to one of such banks.  My question is would you as a seller accept a LC opened by a China bank?. Personally, I would. A LC is essentially a bank guarantee. Therefore, the issue is whether a China bank is an acceptable risk. Do you know that currently the 3 largest banks in the world by market capitalisation are the 3 largest in China, namely Industrial and Commercial Bank of China (ICBC), China Construction Bank (CCB) and Bank of China (BOC), and in that order? It is the reason this blog is entitled “China Banks are becoming the world’s financial powerhouse”. I have so much confidence in them that over 7o% of my stock portfolio are invested in ICBC and BOC and I am sitting on very nice profits on these two stocks (see I am a China fan and not a basher).

Being one of the largest banks in the world and being a state bank, I can’t see how a China Bank could renege or default on a LC. Therefore my answer to the above question as to whether one could accept such LC is an undeniable YES.  What is your view?

The magic of the SWIFT Codes

I had a busy day today. I spent almost half a day trying to sort out a payment which a China client claimed to have made but was returned by the remitting Chinese bank. The client claimed that they had following the payment instructions appearing on our invoice to the letter. So if there were an error it could only be that the banking information provided by us was incorrect. Without checking,  I knew the client’s claim did not have a leg to stand on.  Personally, I think any company which got the instructions for making payments on its invoice wrong should not be in business at all.  I knew our company would not be one of them. Further, our bank, Citibank, is an international bank. I did not doubt for a minute their ability in handling such transaction.

The ball was clearly on the client’s court. I wrote an e-mail to the client asking them to sort out the matter with their bank. Apparently the client was not happy that I was pointing the finger at them or their bank. The client reiterated that it had done everything right and was trying to pass the ball to me.

Finally, the client sent me the note that Citibank sent to the remitting bank. When I looked at the note, lo and behold, I knew where the problem was.  Citibank was advising the remitting bank to comply with the SWIFT practice for remittance of such sort. Nevertheless I could not pin down what exactly went wrong. Thanks to my colleague’s  advice, the remitting bank apparently ommitted to put down the relevant SWIFT code. No wonder the remittance was rejected.

SWIFT codes are like branch codes but are applicable to banks when making overseas money transfers. The relevant SWIFT codes could easily be obtained through searching the SWIFT portal. I did that on the Citibank New York office by entering the name of the bank at the said portal. I was surprised why the China remitting bank, which should be familiar with international banking practices, could have overlooked such an important piece of information.

More on China banks tomorrow.