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.

China’s edge: an efficient clerical labour force

I think no one would dispute that one of the competitive advantages of China in the business world is that it has an abundant supply of cheap labour force. This advantage is clearly shown in the manufacturing sector as China is now the largest manufacturing country in the world.

This advantage is also evident in the commercial sector. I am saying that from my personal experience.  In my business, I have been assisting my China clients to buy foreign made parts through my US principal, AMRO Supply Inc, a procurement agent.  I have advised my China clients umpteen times that one way to save costs is to have their orders from different suppliers consolidated in one shipment, in which way, among others things, they would save on administration costs. The concept is that instead of having the client’s administration staff handle ten sets of documents and ten shipments for purchases from ten suppliers, if they consolidate them in one order, they need only to handle one set of documents and one shipment, likewise for managers who supervise them. At the end of the day, less documents or works means less headaches. Further by consolidation, over the long run, the company could reduce its headcount, thereby improving its bottom line. I shall call this concept the said concept hereinbelow. However, a lot of my China clients are unconvinced of the said concept.

I have discussed the above issue with my US principal. I was told that our US company has no problem getting the said concept across to clients in developed countries like the US and those in Europe as their costs for clerical staff are understandably high. As for clients in developing countries, like in South East Asia, which related costs are low, their managers have no problem understanding the said concept as they realize that less works means less problems, as I said above.

Then the question is why Chinese managers do not buy the said concept. Often times, we received from our Chinese clients one order for one supplier, which I was told by my US principal, is uncommon for clients for the rest of the world. After much discussion, the only conclusion we can draw is that saving on the related administration costs apparently is a non factor to our Chinese clients and, with no disrespect to my fellow countrymen, the reason is that the costs for their clerical staff are cheap. Nonetheless, the China clerical staff, though making low salaries, they are highly efficient, which make them probably the most cost effective among their counterparts in the world, and that is what counts. In some parts of the world, one may hire similar staff at much lower cost, but if they are not productive it would not be meaningful.

From my personal experience, I vouch for that. I deal with client’s clerical staff day in and day out. Most of the clerks whom I deal with are freshly graduated from universities with an English degree or an international business degree (and English proficiency is a must), therefore, their English standard is high. Most of them make about USD600 a month (comparing to say USD3000 in the US or USD1500 in Hong Kong). Most of them are hardworking and have high aspirations. A lot of them take the entry level job as a stepping stone to bigger things. They are willing to go extra mile to get works done so as to impress on their managers. It is not unusual for them to start work at eight in the morning until six or seven in the evening and working on Saturdays and Sundays are not unacceptable to them. As a matter of fact a clerk of my client has a habit of sending me emails at 11 o’clock or even midnight from his home.

Further, almost all my China counterparts readily provide me with their cellular numbers, junior staff included. As a matter of fact, most of them have their cellular numbers printed on their business cards. In case of urgency I can always call them outside office hours. I think the same cannot be said for most employees, especially the clerical staff, for other countries, as once they leave the office they want nothing to do with business.

Further, it is common practice for a Chinese client to deal with more than one procurement agent. Again this could be handled efficiently thanks to those high caliber clerical staff. As a result of this, because of competition, these clients are getting very competitive prices, which I hate to say is not to my liking. Often times, they could pick the agent whoever provides the best price to them for one particular item. This is also one of the reasons that my Chinese clients are not enthusiastic about the said concept as the price advantages they gain from dealing with more than one agent outweigh the costs they could save on consolidation.

Finally, I have a lot of respect for my compatriot counterparts, who are so dedicated to their jobs. I think their dedications have given China an edge, which makes the country so competitive in the commercial world.

Canneed’s list of customers

  • Coca-Cola Beverages (China)
  • Snow Breweries (China)
  • Pepsi Cola Beverage (China)
  • Yeo Hiap Seng (Guangzhou)
  • Budweiser (Wuhan) International
  • Rexam Beverage Can
  • Shantou oriental Technology
  • Hangzhou Wahaha Group
  • Jianlibao
  • Fute Container Jiaduobao Drink & Food
  • Carlsberg Brewery (Guangdong)
  • Shanghai Maling Aquarius Guangdong
  • YASHILI Group
  • Baosteel Can Making
  • Mead Johnson Nutrition (China)
  • Zhujiang Brewery
  • Tongfa Group
  • Red Bull
  • COFCO Packing
  • Tsingtao Brewery
  • Jianlibao Beverage
  • ORG Can Making
  • Yanjing Beer Group
  • LEE KUM KEE
  • Tibet Lhasa Brewery Company Limited
  • Nestlé Qingdao Limited
  • Wuzhou Zhizhonghe Health Food Co., Ltd.
  • Guangzhou Watson’s Food & Beverage Co. Ltd.
  • Inbev (China) Zhedong Brewery Company
  • Canpac Vietnam Pte Ltd
  • Saudi Arabian Packaging Industry
  • Impress USA
  • Kian Joo can Envases Comeca Alfa Interfood
  • Asko-Vogel & noot
  • PT. Indonesia Multi-Colour Printing
  • PT. Ancol Terang MPI Hindustan Tin Works
  • PT. Balihai Brewery Indonesia
  • Modern Co. for Food Products Fabrica de Envases del Pacifico Vinayak Industries
  • Picopack ZRT.
  • Beverage House
  • Bickfords Australia Pty Ltd
  • Evergreen Drums & Cans Pvt. Ltd.
  • Envases Layta
  • MetalPren
  • Owens-Illinois Peru S.A
  • Emarati Foodstuff & Plastic Packing co.
  • Tech Pro Packing S.L
  • Rheem South Africa (PTY) LTD
  • Witec GmbH
  • Egyptian Canning Best

Per information provided by Canneed

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.

China, one tough market to crack

I had a tough day yesterday. A potential China client which I have attended to since April asked me to revise my revised revised quote.  I will call this potential client “the client” just for the sake of convenience, though  it is unlikely that I am going to get it. There were a lot of toings and froings with this client since April. I can’t remember how many times I have revised the quotes.  Finally the  client gave me the impression that the deal were to be closed imminently.

I spent the last couple of days liaising with my principals in the US and a freight forwarder in Hong Kong trying to give the client the best deal. Due to the time difference, I had to stay up late just to talk to my US office. There are so many rules and regulations for doing business in China.  Sometimes one has to be creative in structuring deals for making shipments into China. Finally, I thought I had come up with an excellent deal for the client and e-mailed the final quote to the client. Within 10 minutes I got a reply from the client claiming that my quote was not competitive and it decided to stay with the company which it had been dealing with for 10 years. Essentially he was asking me to substantially cut my prices which made us not making any money at all. Needless to say, my US company refused to budge. There goes the deal and the efforts my company and I had put into were “wasted”.

I think the Chinese buyers are really spoiled nowadays. There are so many overseas suppliers and manufacturers knocking on their doors.  It is a survival game out there.  For me to survive I just have to hang in there. It is two o’clock in the morning.  I will hit the sack and wake up tomorrow and go on with another deal.