BUSINESS BOOK REVIEW & AUTHOR INTERVIEW
13 Steps to Manufacturing in China:
The Definitive Guide to Opening a Plant,
From Site Location to Plant Start-up
Author: Bruce W. Mitchell
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- review by Chris Runckel, President of Runckel & Associates www.Business-in-Asia.com
Mr. Mitchell has gone through the due diligence that experts and entrepreneurs have performed for years, the difference here is that he has pursued a much more rigorous due diligence process than most and written a self-help book that really documents the process and that can help even the experienced better navigate the process and inform their decision making. "13 Steps to Manufacturing in China" is available through Amazon and other book retailers. Question: Can you tell us a little of your background and how you came to write the book? Mr. Mitchell: My work experience, since completing my engineering education some 32 years ago (BSME, MSME and later MBA), has been in manufacturing operations with management responsibilities in reliability and project engineering, environmental, purchasing, maintenance, and tool-and-die design and fabrication. As it turns out, all these areas came into play in the implementation of a manufacturing plant in China. After returning from my second trip to China in December of 2003 after we ruled out a joint-venture option, it occurred to me that I should write a book on how to establish a manufacturing plant in China. Two and a half years later, and a year after signing the lease agreement for a new green-field building with a local developer, we celebrated the grand opening of this facility in China. I have read several books on doing business in China, including the important issues of understanding the impact of the Chinese culture. Some were quite helpful, so I have included them in the book , but none could be considered how-to books that identify for the reader the many hurdles to be overcome in implementing manufacturing in China. Believe me, if I had been able to locate such a book, it would have made this process much easier! Question: Do you still work in Engineering for a Fortune 500 company and do you still deal with China? Mr. Mitchell: The book was written based on my experiences as the project manager for the China project working for a private company. My first employer was a Fortune 500 company. I continue to work in China making 3-4 visits a year as we have added more equipment to the original greenfield plant and recently have established a second manufacturing location which involved the establishmint of a new company. These recent experiences working with a private investor and a spec building will likely result in my adding a chapter in the next addition describing the challenges and delays we have experienced that we didn't experience working with the local developer who worked for the government. I continue to enjoy my visits to China as I like the people and enjoy the food. I particularly like when we are going to visit a new equipment supplier in a city I have never visited. I think it is just the adventure involved. Question: You describe in your book a process to utilize to due your due diligence in finding a site. How did you come to develop this process and do you feel that the process is applicable outside China? Mr. Mitchell: The due diligence described in the book was developed based on our actual experiences and is a combination of what seemed to be a logical approach, our recognition that we knew nothing about how to establish manufacturing in China and so we tried to cover every detail and last but not least the input we received in our early visits with other companies. I just took our experinces and documented them into a formal approach. I believe strongly that the due diligence we employed would be applicable to other foreign countries and I would strongly encourage others to consider using this as a template for their due diligence. Question: You note in the book that most of your experiences were based on your dealings in 2004. Obviously China has changed much in the last eight years. Do you still feel that China is a good place to invest and Why? Mr. Mitchell: Actually the book represents my experiences both during the establishment of the Pilot and Greenfield operations from 2004 to August 2006 (the grand opening of the Greenfield) and augmented by recent experiences establishing a new company which just occurred in 2011 at the new location. The changes I have seen in China since my first visit in the fall of 2003 are more specifically the slow increase in the value of the Chinese currency. My first trips the exchange rate was around 8 rmb per US dollar and this year it is around 6.3 rmb per US dollar. There have been increases in the wages of the employees and this has been ballyhooed by some Western authors suggesting that labor costs are becoming less and less of an advantage as they talk about percentage increases. What they don't tell you how very little the workers are making and even if you doubled their pay their wages are still insignificant when compared with wages in the West. I still believe China is a good place to invest based on several items noted in my book. Besides the low cost wages we continue to locate equipment suppliers that can build comparable equipment for 1/3 or less that what we would pay in the U.S. or Europe. If you want to save more on wages companies could also consider looking for sites inland as most of the development in China has been on the seacoast and a few major cities including Beijing, Nanjing, etc. You will need to be careful however as the government still has a long way to go in getting the type of infrastructure built that we are accustomed too here in the U.S. like power, natural gas, process gases, etc. How can you not want to make and sell product in China with its large market? Question: In the end of your book you reflect on U.S. manufacturing. Do you feel that manufacturing that was largely exported oversees in the 1990s and early 200s will return to the U.S. and if so, what will labor, states and the federal government have to do to achieve this change? Mr. Mitchell: As I note in my book I don't ever see the type of manufacturing that left oversees in the 1990's to return to the U.S. until every current under developed and/or 3rd world country is as fully developed as the U.S. We as consumers may complain about that what we purchase is made in China but we could never purchase the same items if they were made in the U.S. based on union wages and benefits. We have lost these manufacturing jobs to China but the positive is it has enabled those in the U.S. with lower incomes to afford items that they would normally not have been able to enjoy. Even the poorest of people in the U.S. likely have televisons, microwaves, cell phones, etc. raising their standard of living. As consumers I could never see our saying that we want manufacturing back in the U.S. in exchange for having to pay for items at 8 to 10 times the cost we are paying now. I think there are some things that labor, states and the federal government could do to help keep some of our manufacturing here and to encourage foreign companies to invest in the U.S. These include the same types of incentives we learned about that were offered in China including tax forgiveness for a certain period of time, lower tax rates, lower real estate costs, cost justified environmental regulations, special investment loans with low interest rates, etc. About the Interviewer: Christopher W. Runckel, a former senior US diplomat who served in many counties in Asia, is a graduate of the University of Oregon and Lewis and Clark Law School. He served as Deputy General Counsel of President Gerald Ford’s Presidential Clemency Board. Mr. Runckel is the principal and founder of Runckel & Associates, a Portland, Oregon based consulting company that assists businesses expand business opportunities in Asia. (www.business-in-asia.com) Until April of 1999, Mr. Runckel was Minister-Counselor of the US Embassy in Beijing, China. Mr. Runckel lived and worked in Thailand for over six years. He was the first permanently assigned U.S. diplomat to return to Vietnam after the Vietnam War. In 1997, he was awarded the U.S. Department of States highest award for service, the Distinguished Honor Award, for his contribution to improving U.S.-Vietnam relations. |
