Webinar Executive Summary | How To Approach China Alternatives

WEBINAR EXECUTIVE SUMMARY:

How to Approach China Alternatives: Mexico, Southeast Asia & Central Eastern Europe

East West experts Mark Plum and Dan McLeod discuss how companies can approach finding alternatives to China for their manufacturing and supply chains, providing examples of companies they assisted diversifying from China while answering questions from the audience.

As manufacturing for export and sourcing in China is becoming more difficult for Western companies due to cost of inflation going up, increasing labor costs, high production expenses, volatile tariffs, political tensions, not to mention new and challenging rules and regulations that continue to evolve – companies are looking for other locations.

These trends are applicable to companies who are operating on the ground in China facilities and relocating them outside or sourcing them out of China for components or raw materials.

The questions to ask when looking to relocate are these:

- Where is your market?
- Where are your components and finished goods?
- Where are they to be consumed?

These three questions will help determine the best solution for your operations.

Attractive alternatives exist for relocating China supply chain & operations, including Mexico, Southeast Asia, and Central/Eastern Europe.

Client Case Study #1

Moving Operations to Mexico, Client is in US and North America

The first example was a very successful US-based manufacturer of electronic equipment selling into industrial markets and was established in China since the early 2000s. In addition to manufacturing, they had developed a sourcing office there, and they were sourcing components for their US factories. They had a strong operation with a strong domestic market, growing steadily, and were satisfied with the performance of their operations.

We were engaged a few years ago to initiate a search for suppliers in Mexico after the introduction of the tariffs in China. They also experienced logistics challenges, increased cost and transit times, problems with container availability, along with becoming increasingly concerned about the political situation between China and the US.

The company was looking forward into the future and had some concerns, particularly where their marketplace was somewhat of a high-tech product, were concerned about China’s 2025 policies and the potential for the loss of intellectual property and the loss of control of production.

We provided the company with options for suppliers Mexico to be closer to their clients in the US and North America and visited the top candidates.

Currently, in Mexico, we are finding:

- Suppliers are fielding more requests than the previous 5-10 years. This is stressing capacity and their ability to respond. Having good relationships with suppliers in Mexico is key to getting their attention, and having local people able to facilitate these relationships is critical.
- Finding local individuals who can support your negotiations, particularly around freight and logistics, standard terms and conditions, and trade compliance issues is important.
- For companies that move to Mexico, they can reduce the number of distribution centers they operate in North America since they’ve shortened their supply times by getting closer to the market and have a quicker response time. This also can reduce their inventory holdings.
- Incentives are not as transparent as other parts of the world – and more time and investment can be required. There is much more raw, undeveloped land on the market that requires more investment in time and capital to get set up as a manufacturing site.
- Many more small-to-medium sized suppliers, where capital is tight and when faced with the need to expand to supply a significant customer, there are discussions about financing the expansion, unlike you would with a supplier in China for example.
- When transferring technology to Mexico, it requires more work to develop the specifications and techniques than expected, which can slow the transition process down. This creates a requirement for technical skills within your company to help the transition.

Client Case Study #2

Moving Operations to Poland and Czech Republic, Clients are in Western Europe

Our next example was US global HVAC business, with manufacturing in the Guangzhou province in the 90s. Back then they were able to reduce their bill material cost and total cost between 25-30%. They could have long shipping lead times of 9-11 weeks to get to their different global distribution centers.

We were engaged to look at a new facility to help move it closer to their European markets to ease the shipping times to those markets. We determined the best area was along the Polish and Czech Republic boarder to get their goods into Western Europe, bringing the shipping times down to 10 hours by highway with a strong labor force in place.

Currently, in Eastern Europe, we find:

- Excellent suppliers for metal fabrication – bending metals, heavy construction, is extremely good, with a strong, skilled workforce.
- A good source of electronic components relating to automobiles, such as PCB boards, basic chips, etc.
- A high quality of labor, with a strong work ethic, skilled in industrial, appliances, and automotives. Only difficulty can be with availability, and this is where having someone local who can help sourcing can assist.

Client Case Study #3

Moving Operations to Thailand, Clients in Southeast Asia

Our last example was a very large iconic manufacturer of electronic equipment selling into industrial markets and was established in China since the early 2000s in Guangdong Province, with growth of their markets in ASEAN.

We were asked to do a study to find a larger facility close to their current one so they would be able to keep their labor force. We demonstrated to them it would be better for their market base if we broadened it to ASEAN to keep their facilities on the cutting-edge, looking at Vietnam, Thailand, and Malaysia.

After negotiating with Thailand’s Board of Investment, we brought our client’s second design center which included their R&D first tier products and the internet of things connected products to Thailand, and the Thai government gave them a 10-year corporate tax holiday and 5 more years at a 50% tax. This saved the company an enormous amount of money compared to if they built a new facility in China.

Currently, in Southeast Asia, we find:

- Their productivity levels and R&D are equal to those you would find in China with half the labor rates for manufacturing.
- Your IP is much more protected, and you don’t have to worry about the government of where you are dealing with to try to compete with you.
- There is still the Treaty of Amity that goes back 150 years where there are no duties, so if your content is over 60% coming back to the US is zero duties from Vietnam.

Helpful Tips

For Closing a Plant or Operation Center

When you are going to close a production center in China, you need to anticipate the time involved and put together a solid, upfront plan.

Set aside a two-month period working with corporate management and local leadership to develop solid plans around:

Understanding required severance
Understanding market practices around severance
Communication plans
Inventory disposition
Whether you need to build up or draw down inventory.

The need for a multifunctional or cross-functional planning is key for a successful plant closing.

For assistance with a plant closing or if you have additional questions, please call or contact us at 704.807.9531 or abryant@eastwestassoc.com.

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2023 Headwinds to Manufacturing In-China/For-China

Webinar:

2023 Headwinds to Manufacturing In-China/For-China

Headwinds to Manufacturing In-China/For-China

About The Webinar

East West Associates Roundtable with Senior Executives

Who Should Watch?
Executives whose US-owned companies are committed to manufacturing in China and selling into in-China markets.

Why Should They Watch?
For ideas and guidance to help navigate new business restrictions and other headwinds to your In-China/For China manufacturing operations.

The Past: How Things Were, in China/for China

For decades, manufacturing in China for the China market was a happy time. US multinational companies (MNC) took their tried-and-true designs there to address a huge untapped China demand. There were relatively few local competitors. The cost of labor in China was a fraction of anywhere else. The Chinese government provided a friendly regulatory environment and offered attractive incentives.

Then tailwinds became headwinds.

Today: Where We Are Now, in China/for China

Chinese competitors have emerged. US market share in China has eroded. Labor costs have ballooned. Nationalism is on the rise in both US and China. Political tensions and tariffs. New Business Park limitations. Buy-China attitudes, unpredictable laws and new environmental regs make it tougher and tougher for US-owned companies in China.

But there you are, in China, for the China market. What do you do now?

Our seasoned executives have real-life manufacturing experience in China and addressed four scenarios during the webinar.
Are you experiencing one, some, or all of these scenarios?

Manufacturing operations in China Business Parks are facing growing pressures, including limitations on expanding manufacturing capabilities, and increased environmental restrictions.
The Chinese government is imposing an array of“no-fly list” restrictions on imports of sensitive products or components or raw materials you need to manufacture in China.
Implications of “Made in China 2025” indicate you might need to stay below the radar to survive there.
You might be concerned that your operations in China could be under-performing.

Our speakers also answered audience questions, such as:

- Are there industrial parks or developing regions within China where we might find lower manufacturing costs and/or growing market potential?
- What opportunities are emerging in the western regions of China? Is it easier to do business there?
- China has recently spoken about welcoming foreign investment again. What can we realistically expect?
- Should we re-evaluate our ownership model and move to a minority position (< 50%) to address Chinese concerns? How do we deal with cash flow, profit repatriation, corruption, IP/TS concerns?
- Should we consider a move to a SE Asia regional headquarters? Like in Singapore or Hong Kong or even South Korea?
- How do we deal with declining operational performance? How can we monitor & motivate & compensate ex-pats and local staff, given new circumstances in China for US citizens and US-owned operations?
- Can you share a real-life example of how a certain In-China, For-China company is re-shaping its operations to reflect a changing China?

Headwinds to Manufacturing In-China/For-China

Speakers

Mark Plum | Director, East West Associates

Former President of Briggs & Stratton Asia (NYSE: BGG)
VP Sales & Marketing, American Standard Thailand & American Standard China

Dan McLeod | Director, East West Associates

Former Director Asia Pacific Operations- Ashland Specialty Ingredients
General Manager-Eaton Corporation (SE Asia)
Director of Asia Pacific Manufacturing and Supply Chain-Hercules

Headwinds to Manufacturing In-China/For-China

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Headwinds to Manufacturing In-China/For-China

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Hiring the Right Senior Executives & Conducting Individual Due Diligence and Integrity Training

Webinar:

Hiring the Right Senior Executives & Conducting Individual Due Diligence and Integrity Training

Hiring the Right Senior Executives

About The Webinar

Human Resource Success in Post-Covid China

Human Resources (HR) management has always been very important in China. However, with Covid travel restrictions just now lifting for western executives to travel to China, companies are reminded that success in China is heavily dependent on having the right personnel and ensuring the China operation has the right ethical corporate culture.

As western executives are gradually returning, companies are evaluating the quality of their executives in China who are currently managing their operations. During Covid, many US executives did not make significant HR decisions because travel restrictions prevented them from interviewing candidates and the increased difficulty of identifying and qualifying candidates.

To ensure success, companies must identify the right potential candidates and take the necessary preventative risk management steps of conducting individual due diligence to ensure the candidate’s character, ethics, and management style do not alienate customers, other corporate employees or vendors.

Additionally, these senior executives will shape the company’s corporate operating culture, which significantly impacts the company’s business reputation and employee morale. Based on EWA’s many years of running China-based manufacturing operations, most employees are aware of existing theft, kickbacks and bribery occurring at the company. Unless these illegal actions are shut down quickly, they infect the business like a cancer. Instances of theft and corruption include payments from vendors, kickbacks from customers, selection of family-related vendors, etc.

HR success in China is no longer just hiring the right executives – in the current environment, companies need to implement risk management practices of Individual Due Diligence and Integrity Training to minimize the risk of hiring the wrong senior executives.

The webinar addresses topics such as:

Executive Searches for Senior Executives

- How has Covid affected the ability to identify and qualify senior management candidates in China?
- What are the current challenges US companies face hiring senior level Chinese executives?
- Has the geopolitical tension between the US and China affected Chinese executives’ interest in working for US companies?

Individual Due Diligence of Senior Executive Candidates

- How Individual Due Diligence is different from a normal “Background Check”?
- Which positions require this level of Due Diligence on the candidates?
- Are there positions which do not require this level of Due Diligence?
- What are the key risk factors to rejecting a candidate?

Integrity Awareness Training

- For those companies who have not experienced any unethical behavior at their China operations, why should they consider Integrity Training?
- How does Integrity Training improve the company’s position if a terminated employee files a claim with the Labor Bureau?
- How does this training impact ALL the employees – both blue collar and white collar?
- How does this Awareness training deputize all employees to report unethical behavior?

Hiring the Right Senior Executives

Speakers

Vicky Shao | Director, East West Associates- China

Vice President of Human Resources, Flexco Conveying Equipment Manufacturing Company
Human Resource Manager, Lombard Risk International Ltd.
Executive Department Human Resources & Administration, Nitto Denko Corp.

Jay Hoenig | Director, East West Associates

Chief Operating Officer Asia Pacific, Hill & Associates Group
Asia Pacific Vice President & General Manager, Bechtel Corporation
Chairman of the American Chamber of Commerce in Shanghai

Hiring the Right Senior Executives

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Hiring the Right Senior Executives

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OUR CLIENTS

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Adler Pelzer Group

Accuride

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amercable

americhem

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corning

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curtiss-wright

federal-signal

greenheck

flexco

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micromeritics

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rudolf-group

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How to Approach China Alternatives: Mexico, Southeast Asia & Central Eastern Europe

Webinar:

How to Approach China Alternatives: Mexico, Southeast Asia & Central Eastern Europe

How to Approach China Alternatives

About The Webinar

Your Global Supply Chain & Manufacturing Footprint Strategy

East West Associates Manufacturing and Supply Chain Roundtable with Senior Executives

Manufacturing for export and sourcing in China is becoming more difficult due to increasing labor costs, high production expenses, volatile tariffs, political tensions, as well as challenging and changing rules & regulations.

Attractive alternatives exist for relocating China supply chain & operations including Mexico, Southeast Asia, and Central/Eastern Europe.

But how do you create a coherent strategy for your global footprint?

Developing a global footprint strategy requires analyzing your goals, markets, manufacturing operations, and supply chain network. It includes identifying new manufacturing and supply venues that could maintain quality, increase efficiencies, decrease duplication, control costs, and reduce risk.

We provided 3 real-life examples of US companies diversifying their supply chain & manufacturing to Mexico, Poland and Thailand.

The webinar discussion focused on why corporate executives selected these 3 countries.

The webinar addressed key questions such as:

- What questions should executives be asking to determine whether to diversify their supply chain & manufacturing?
- What metrics does a company use to determine what is the best country and site location?
- What are the costs involved in diversifying supply chain & manufacturing?
- What are the unique challenges in Mexico, Southeast Asia & Poland?
- What type of industry sectors are diversifying into these 3 markets?
- What problems can we anticipate if we close our operations in China?

How to Approach China Alternatives

Speakers

Mark Plum | Director, East West Associates

Former President of Briggs & Stratton Asia (NYSE: BGG)
VP Sales & Marketing, American Standard Thailand & American Standard China

Dan McLeod | Director, East West Associates

Former Director Asia Pacific Operations-Ashland Specialty Ingredients (NYSE: ASH)
General Manager-Eaton Corporation (Philippines)
Director of Asia Pacific Manufacturing and Supply Chain-Hercules

Relocating or Expanding Operations & Supply Chain From China to Vietnam and Thailand

View Webinar

Relocating or Expanding Operations & Supply Chain From China to Vietnam and Thailand

Presentation

Timely Topics To Drive Growth.

Sign up for our webinars.

OUR CLIENTS

accessdata

Adler Pelzer Group

Accuride

aseptia

alliance

amercable

americhem

anisa

calient

corning

chemco

climate-master

curtiss-wright

federal-signal

greenheck

flexco

gore

hilite

HJ-Baker

Icee

mascoat

merichem

micromeritics

nanotex

oerlikon

plasticolors

rudolf-group

silfex

sweco

tile-shop

tedia

titeflex

weber

Closure, Near-Shoring, Relocation and Consolidation of Export-Oriented China Operations and Supply Chains

Webinar:

Closure, Near Shoring, Relocation & Consolidation of Export Oriented China Operations & Supply Chain

About The Webinar

East West Associates Manufacturing and Supply Chain Roundtable with Senior Executives

Many C-level executives are streamlining their China-based manufacturing operations or moving operations out of China.

Why? Because assessments of the viability of exporting out of China have exposed a number of negative factors:

- Long lead-time to US & European customers
- Increasing production costs
- Challenging regulatory environment in China
- Continuing issues with Covid infections within China
- Tariffs & geopolitical tensions between China and the US

Closing, consolidating, or relocating China operations stresses a company’s ability to serve its customers, and its global strategy, supplier relationships, and brand reputation in China and around the world.

But if carried out with expert insight, thorough planning, and a strong project team, taking the proper actions will have a positive, long-term impact on global operations and financial results.

This webinar featured seasoned speakers with real-life experience in China plant closures, improvements, consolidations, relocations and sourcing within China and in other countries.

Closure, Near Shoring, Relocation & Consolidation of Export Oriented China Operations & Supply Chain

Speakers

Warren Wisnewski | Eastman Kodak Company

Former Vice President of Operations, Asia Pacific Region, Eastman Kodak Company

Dan McLeod | Director, East West Associates

Director, East West Associates