Euan Pallister: “Welcome and good day everybody.We’re excited to have you here for this exclusive event with Michael Wallace on “Escaping the Dragon: Diversifying Your Supply Chain Out of China”. We’ve got attendees from all around the world tuning in today. So a very warm welcome to you all, whatever the time of the day or night it might be, wherever you are.
My name is Euan Pallister and I’ll be your host for this event. Joining us live from Kansas USA is Michael Wallace, the renowned global executive business coach, an instructor at the University of Kansas, and CEO of Summit Leadership Team. Also joining us today is Bradley Pallister who is the Operations Director of Innovolo. It’s good to see you both and a warm welcome. ”
Michael Wallace: ”Thank you! Glad to be here. ”
Euan: ”Thank you. So today’s agenda: After this introduction, I’m going to be handing you over to Michael, who will be delivering the main body of the presentation. And then Bradley is going to follow with a short presentation on how innovation can help you diversify your supply chain. Then we’ll have 15 minutes for questions and answers before we wrap up. So if you have any questions you would like us to address, please put them in the Q&A box. If you have any other comments or observations or feedback, please make use of the chatbox.
So while everyone gets locked in, I can see that the number of people attending this event, live, is still going up. So while that happens, I’m just going to give you a bit of background on kind of who we are and what we do.Now all smart business people know they need to innovate. But research and development can be very distracting and a massive time drain. So what we do at Innovolo is kind of lift that whole burden of innovating off your shoulders, letting you concentrate on what you do best.
We have a whole team of experts from mechanical and electrical engineers, to chemists, to 3D designers; and a proven system: the Innovolation Framework. This has been designed to massively speed up and expedite every element of your research and development projects. So here are my three key points for you.
- Innovation is what gives you the edge over your competition, that’s a fact.
- Using our services is a way that you can make sure innovation happens in your company.
- And we can help you turn ideas into reality, and fast.
So if you’re fed up of projects kind of stuck, or ideas that never seem to leave that drawing board, just let us know in the comment section now, and the team will follow up with you right after this event. Just think, in a few months, you could have your whole, your own fully patented new product, ready to ship out the door, generating revenue for your company.
Now on to today’s subject, the importance of diversifying your supply chain out of China.
We’ve all seen the headlines, we’re all hearing the increasing drumbeat of concern about China, and perhaps the most worrying development is that China itself is hardly trying to calm those concerns, or even act in a way that you would expect of an economy that represents almost 19% of global GDP.
In fact, just this week, there have been clashes along their two-and-a-half thousand-mile border with India; they’re ramping up their activities in the contested waters of the South China Sea, and they’re even pushing for a vast increase in control over the city of Hong Kong. In response to this, there’s even a new international panel of lawmakers that has been formed called IPAC, (the Inter˗Parliamentary Alliance on China), whose mission is to reform how democratic countries deal with China.
Now, every business is going to have to react to this in their own way. Going by history, it’s probably fair to say that most businesses will probably only diversify when they have no other option left on the table. But you’re on this call today because you’re different. You’ve already identified the concern and you’re looking for ways to make your supply chain more sustainable.
So I’d like to introduce you now to a man who has been consistently warning about the dangers of over-reliance on China for 10 years now ˗ Michael Wallace, CEO of the Summit Leadership Team and highly experienced international business executive coach. Mike is going to share with us his unique insights on the current situation, and open up a range of possibilities on how to properly assess, and address the situation in your business˗, Mike, over to you, Sir. ”
Michael: “Thank you very much, Euan, and welcome everyone. It is my pleasure to be able to work with you today.
When we start talking about an issue like this or anything else, a big part is˗ Do we understand the problem? And one person has said that “understanding the problem is 80% of the way to solving them”.So let’s take a look, and let’s look at the problem out there, and let’s see what’s going on and what we can do.So, the problem we have now is this, in my opinion, over-dependence on China. If we look at it from a variety of angles, and we’ll get into these in a little bit more detail, China is essentially way more powerful than what we realize; they really do have too much power. And with many of us, there’s a fairly vast cultural difference; the legal aspect, how they do certain things are different than what we do; there’s a language differential; there are all these things we need to consider.
Secondly, there are very costly logistic issues.
Now, the interesting part with that is, what I find is, most of the companies that I work with, actually do not know the true cost of what it’s costing them to deal with China. There are problems with their accounting systems and how they track it; there are problems in how they know what they’re spending and alternatives˗ what they could be doing with that cash, we will address that also.
And then being someone who’s been involved in production and manufacturing for many decades now, I’m a strong believer in LEAN, and LEAN is the concept of the elimination of waste. And when we deal with China, we find many times there’s large amounts of waste. So we’re going to cover these areas for you today and get into it a little bit.
So, what’s happening right now?Well, right now we’ve got a crisis going on. And this crisis going on is one of those things that is upon us. Now, Winston Churchill said, “Never let a good crisis go to waste”. Well, we’ve got a crisis here. Let’s not let it go to waste.
It’s forcing us to think about the status quo. It’s forcing us to think about how we do the things that we do, what kind of things we need to do, and how we look at the future. If you always do what you’ve always done, you will always get what you’re always getting. Likewise, how do we define insanity? Do the same thing over and over and over and expect different results. So my comment now is that now is the time to improve.
We all went into this “pandemic, ” essentially, without warning, depending upon when we started, but it was thrust upon us. There’s nothing you can do about making it go away, per se, so let’s use this time to reevaluate our processes. Let’s use this time to look at how we do business. Let’s use this time to say, “Fine, we are where we are now, but let’s come out of this better than where we were when we came in.” Now is the time to improve. Back to Churchill again, “Never let a good crisis go to waste”. So let’s jump right in on it and let’s talk about what’s going on over in China.
Now, I see a coming backlash here. If we could back up one slide, please, yeah. I see a coming backlash here about what’s going on with China.Also, when we’re talking about the finance, it’s all about the Benjamins, and then like I said, we are going to have LEAN here and it’s more than just cutting to the bone. So we’ll take that a little bit further.All right, next slide. Thanks.
Okay, so what’s the coming backlash? How many people are going to say out there, I don’t want to buy from China? We’re seeing this possibility of things happening; “Made in North America”, “Made in Europe”, “Made in Australia”, “Made in New Zealand”, “Made in your country”, wherever that is, may have great value. And it’s not only what you buy from China, but what your suppliers buy from China. So let’s take a look at that a little bit.China has had, essentially, the fastest growing economy in history. They’ve been growing at about 9. 5% GDP for almost 15 to 20 years now. That means they have quadrupled in what they’re doing. The number varies, we see it from about 15 to 20% of worldwide global GDP˗ that has an enormous control.In 2020, some economists are predicting that China’s economy will exceed that of the United States. China will become the number one economy in the world. So is that going to make them easier to work with? Is that going to make them harder to work with? Their per capita income has quadrupled. So they look at what they had. When all of this started, they were about 80% agriculture. Now, they’re more than 50% manufacturing. The agriculture has gone down, the manufacturing has gone down, and they’ve got to keep the workforce employed. They’re really fighting to keep that workforce employed. The rate of increase of 9.5 is now down to as low as 6, depending upon some economists, on their percent growth internally. And they have to look at it what they’ve seen.
They’ve seen a large growth in manufacturing, large growth in other areas, forcing people to come in and produce goods in their country for their people. As a retiree of Boeing, we were building Boeing parts in China. With that. They have an airplane manufacturing company there ˗ Comac that is now building airplanes and competing in that same market.So as we look at these things, we look at what goes in there? What are we going to do and how are we going to deal with it? Now, there are problems with this. We’ve had the trade wars.
In 2018, President Trump, here in the United States, imposed tariffs on Chinese goods; and they imposed the tariffs on these Chinese goods because of what they said were unfair trade practices. These unfair trade practices went from anywhere from the trade deficit, and we’ll show a graph on that here in a little bit, to the theft of intellectual capital, to forcing people to produce there to be able to have people buy their goods here, if you’re going to import into China, then you have to do certain kinds of things.So one tariff begets another tariff, begets another tariff, begets another tariff, and we’ve seen that here in the United States with, now goods that you had been buying for x now can dramatically go up in price, because of all the political infighting that’s going on between the different countries, and internally, within the different countries that we see and we see moving forward.
Recently, we’ve seen some really interesting things with Australia in that Australia said, let’s go and do a real inquiry on what started this pandemic, like the COVID-19. Where did it start? How did it start? And Australia was really kind of leading the surge in doing an inquiry with that.
China immediately threw tariffs on Australian goods. They put tariffs on the importation of Australian beef. They put tariffs on the importation of barley; they almost killed the barley market in Australia by bringing that in. They’ve got tariffs on wine. They’re threatening tariffs on other things if they don’t back away. So now we start seeing China using tariffs as punishment to countries. And if there’s any kind of a backlash from that, then that trade war could escalate; a) you may not be able to get a product that you think you’re going to be able to get at a price because your country imposes a tariff on China, or b) China could just completely cut off what was happening.We saw that in England with some of my clients there. When this first started, some of my clients in England had large amounts of PPE (personal protective equipment), ordered from China, coming over on the boat, that the Chinese government called the people who were selling and said, “Cancel the order. Bring it back. ” So containers were already loaded, already on the boats headed towards the United Kingdom, they were told to either “Don’t unload them” or as they got unloaded “Take them back”. I even heard of one case where they were on the dock, they took them off the dock, put it back on the ship, and took it back to China.
So now they can say, “You need it? Well, we need it more. We’re going to be able to keep that. ”We hear about legal issues. We hear about financial penalties. Manufacturing may not have charged you for tools. You decide to pull your product out, now they start charging you for tooling. And we’ve got international disagreements on what’s going to happen and how we do that, so, lots of headaches.So for one reason, mine, for years, has been it’s just inconvenient dealing with China. It’s a long way away. It’s logistically a nightmare in certain kinds of things. And other than for very specific things, there may be better options to look at.Now, one of the other things that we might want to look at here, and let’s take a quick look at the next slide, where we can see there is this trade deficit that’s out there. You can see the imports coming in on the orange line, the exports from China going out on the external on the blue line there. And the difference between the two: as much as $679 Billion a year in the trade balance, as you see there in 2015. It’s going down a little bit, and it’s gone down, even more, pardon me, since 2018. So we still see this happening, but the trade balance is still to the advantage of China. They’re getting enormous amounts of cash. They are investing in the United States and other countries; treasury bonds and treasury bills.So a lot of the cash that’s controlled outside of the United States, outside of other countries, is now controlled by China.So we need to look at that and we need to think about how we’re going to do that and how we’re going to build up. So let’s look at the money and what we can do here. Let’s reduce cash outlay. If we can buy cheaper, let’s buy cheaper.Now, how do you know what your true costs are? Are you really doing a good job of controlling your cost, on what’s out there? Can we reduce storage costs? Can we increase agility? And can we increase customer satisfaction? Now, true cost? How much money do you have on the water, when you order from China?
Typically from China, what I am hearing with my customers, is 50% down on the order and then the balance is due when the boat leaves China; before it leaves the dock the balance is due, or in some cases, upon arrival in your country. But again, large amounts of cash that are sitting out there, if we order an amount that we think we need and on the way over, we’ve already sold everything that’s in that container, we may order another container. And now we get that container coming over before the other container has maybe arrived. And then we maybe order another, we think, we think we’re going to get more, we think we’re going to get more, so there’s that balance of “When it shows up, are we going to have the right amount?”
So what we find is, on the storage cost, the things we look at there, the things we build up on storage costs, how do you store it? If you look at a warehouse when you bring a whole container load of goods in, it fills up an area. Now, as you start drawing down from that area, that empties that, but you have another container or two coming over, are you going to get that all the way down or to a legitimate before the other one comes in? Are you going to get it down to low? Do we have to save space?So how much of your warehouse space is dedicated to goods that aren’t there but are on their way there?
So we’ve got storage costs that hit us and build up in that direction there. The cash outlay; if we look at the cash outlay, what kind of things are happening there? We pay for the stock. We pay for storage. We may hold additional amounts because we think we might be able to sell them. So now we have too much stock. We may have too little stocks and now we’re missing sales on what we do, how we build up on all of these things.
And if we can buy smaller amounts, if we can buy closer, we dramatically increase our agility.So let’s imagine, we buy large quantities and we save a little bit per unit. If we can spend even a little bit more, slightly more per unit locally, we buy smaller amounts, we have them shipped to us in a shorter time, we have left space dedicated in our warehouse for those goods, we hold on to them a much shorter period; everything operates a lot more smoothly. If we’re in Europe, you know, can we buy locally in the United Kingdom and have things shipped from within England or within the United Kingdom? Can we buy it in Poland? Can we buy it in Romania? Can we buy from Portugal; other countries that might be able to do it cheaper, or at a comparable cost from that?
Let me kind of give you an example of this.
At Boeing one time, I was responsible for some stuff. And we had a lot of concrete, a lot of cement; bags of cement. And we bought bags of cement by the semi-truckload, the Arctic. We would buy huge amounts of it when we commit, and we had this giant part of the warehouse with all these bags of cement that were stacked up. Now, Boeing in Wichita, Kansas was the largest aerospace manufacturing facility in the world. We were always pouring concrete. We were building something. We were putting in new sidewalks. We were repairing something out on the shop floor. We were installing new machines. We’re always pouring concrete. So we had large amounts of concrete that we needed. So we’re buying this, the bags are relatively less expensive than if we’d bought them locally. They were shipped in. We’d buy it from the vendor. Large amounts fill up a big area of a warehouse. Now when somebody comes in to buy something, or not, sorry, to buy but to take one of those bags of cement, they take it from the front; they take the next one, they take the next one, they take the next one. When that next load of semi comes in, they fill up right in there.
So it was definitely last in first out, a problem; too much stuff, a problem; way too much storage, a problem, infrequent deliveries, so it had to have large amounts. We bought large amounts and we used those. I contacted one of the local companies that provided cement. I said, “Okay, how much is it going to cost us to buy a bag of cement? And give us a price?” and I said, “What’s the minimum amount that I can order and have it delivered at this price?” And the guy said, “A Pickup, a Ute load” so I said, “Well, what kind of notice are you going to need?” He said, “If you call us anytime between six in the morning and three in the afternoon, we’ll have a pickup load of cement at your facility in two hours. ” It’s all I need. So now we go and look and we say, Okay, how much of this do we want? How much of this stuff do we need? How much are we going to, I’m sorry, I pushed the wrong button there if we could back up, please? How much are we going to need? How much are we going to build up, and where we are going to go there with that? So we found out how many bags we needed for a day was, you know, about a couple of pickup loads; to one to two, maybe. We can’t get deliveries on Saturday, we can’t get deliveries on Sunday, so on Friday, we had to have enough to last through the weekend and possibly Monday. So if we can keep on there, about four to six pickup loads, we were pretty safe on that one. Now, we had an RD close to these. The semi was filled to the brim; the room was filled to the brim. We start using all of these. Okay, let’s just use them up; use everything up, and then we’re going to buy locally.But what happens when we get to the back of the room?
Those bags of cement are now, called under a different vernacular, rocks. They were solid. They’d absorbed moisture for sitting there for months and years, and they didn’t work.So we were buying too much. We were buying it cheaper, but we were buying too much. We were paying way too much for storage. And we were bringing all of that in. And we were having a problem bringing all that in. And so now we get rid of it, we eliminate all those. We start bringing a small amount. We need much less storage cost. Our cash outlay of idle is lower. I mean yeah, it’s much lower because what we’re buying we are using, and we’re using, we’re getting that through; reduce storage costs, ease of handling, now we can store something else there and we saved the money about have to build another warehouse to store something else. If we can do that with this product, we can do that with this product, we can do that with this product, we can do that with all these different products, then what’s going to happen is we need less warehouse space. Your storage costs go down. Your accuracy of what you got increases. Your turn rate increases. Your loss of goods decreases. We know where everything is. We know the right amount and we can manage it. Large amounts are nothing more than a buffer and we’re going to talk about that in a minute with a link.
So now, we’ve increased our agility, we’re now increasing our customer responsiveness.What they need is what we can provide in a very short period of time, if not almost immediately, we don’t have to wait for three to six to eight weeks of a ship to come across the water, let alone the order time within China and build that up.So from an economic standpoint, we start looking at the true cost there; we reduce waste, we have fewer lost items, we have a more usable inventory, we’re not in a situation where we have too little or we have too much, as we have in the past, and we get this balance, We can now buy less, we have more deliveries, we’re quicker, and we’re more accurate. Everything builds up from that.
Now, customer response? We get what they need. They get what they need, they get it quicker, and we start looking at the old concept of economic order quantity, which is false by the way because of the way that we’re doing it on this Chinese thing it’s used wrongly many times, so we look at economic order quantity, we wouldn’t have to worry about it if we had absolute, we’d only need one. The perfect order quantity is one. And to have one, we need zero delivery time and no setup, to be able to make that part for that issue. So once we’ve balanced that out, we get that number, we make it smaller, it works forward, and we work from there.Now the other problem that comes in on this one is accounting, managerial accounting versus tax accounting. Almost everything you do is tax accounting. Tax accounting is “How do we reduce our taxes? And let’s make it easier for the account. ” Fair. Now, do you really have the above the line cost on your goods, above the line? Are we holding costs below the line? Are you getting a really true picture of what your gross profit is? Or are you inflating your gross profit by having too many buckets of things below the line in your expenses? Most companies, what I look at, their expenses are too high, the cost of goods is too low. So now fix that? Get that under control?
We now have facts and data, we can move forward, and we can get a better answer and now we can start moving to being LEAN here.So as we’re LEAN, what we find out, in my opinion, is that LEAN is really essential to success. It’s the elimination of waste. A part of the problem that we’ve done, particularly in things like China when we went for that, is we plan more for the valley. Everything’s LEAN so that when things are slow, we don’t have too much waste.But what happens when we start getting the peaks? If we have the peaks, then we have to use heroic effort to be able to solve those. We have to expedite the delivery of goods. We have to think about where things come from.Now, you may have a vendor, you’ve only got one vendor. If that vendor is not providing your goods then you’re not going to be able to provide goods for your customer.
So a couple of ideas here, Walmart buys 80% of its goods from one vendor, 20% from another vendor of that same good. They don’t buy 100%. They buy 80, because they’ve got a good partner there, and they buy 50. If 80 cannot deliver they can keep things going with the 20. If 80 starts getting unresponsive or too expensive, they can either promote up 20 or they can go out and bid and get another 80˗20 split.So, I don’t want my vendors competing against each other necessarily, I will let the 80 know they’re the 80, and the 20 know they’re the 20 and why. But I will go with a majority to the best vendor, and I want that partner to be able to do that.
But I’m planning in between the peaks and the valleys there, not just down at the valleys because we want to be efficient and effective.And what would happen with too many things with LEAN, is we get too efficient but we’re not effective at what we’re doing. Some of us saw this when we couldn’t get goods delivered, that we didn’t have enough access to goods, through suppliers that were halfway around the world; a long way away or unresponsive from it.
So think about LEAN, look at all the things that you’re doing, build all this up, continue to do the types of things that you’ve been doing in the past, but most importantly, know everything. Know your budget, know your supplier, know your schedules, know the quality of goods that you’re building all this through, make sure that they’re true partners in that working with you. It helps, in my opinion, to be more local, to increase your agility, to reduce your logistics problems; things that you can solve, we can usually solve the cash issues there. If we look at how to improve manufacturing, if we look at how to work with our suppliers to be better partners with us, we can usually cut costs.
And that boils up to the very important phrase of “How do we do all these things?” so it’s continuous improvement, value stream mapping, process capability analysis, and then our staff can move from reactive to proactive. What we’re doing on all these things, this is where we do the improvement right now, where we have continuous improvement. We have value stream mapping so that we know where we are adding value along our process, and that’s what we focus on. We eliminate the pieces that don’t add value; we strengthen the pieces that do. We do a good analysis of our process capabilities, so that we know how things are working, what things are doing, and we do it the same way all the time. If you can remove variation, you can remove waste, we’ll go from that. And your staff can then move from reactive to proactive.
We can focus on facts and data, and as many of you have heard from me in the past, facts and data set you free. So that’s where we’re going to go. Those are the things that we’re going to continue to build upon. Those are the things that we’re going to see, allow us to do this. As I said, I have been talking about this for many years now. Find better partners, find partners that are going to work with you, increase your flexibility, increase your agility.
But more importantly, gain complete control over the true costs, so you know, what you’re spending, where you’re spending and with whom you’re spending that money.From that, let’s turn this back to Mr. Pallister. Bradley.
Bradley Pallister: Thank you, Mike. Some excellent insights there. And yeah, I think the attendees are, just judging by the chat there. There are going to be some interesting questions at the end. So thanks for that. So I’ve just got three quick points to tell you about.
So number one, is that innovation is the key to unlock your supply chain problems. Especially, when it seems that you’ve just got to go down the price, price, price route. So innovation is the key to unlock that problem.
Number two, you need a process. You need a process to evaluate the needs of your customers. And to evaluate, and see how these align with the global megatrends that are happening around us.Thirdly, you need a network. You don’t just need one expert, you need a network of experts. Experts that can collaborate together, that can really help breathe some life into your ideas, bring them to life.So the good news is, we can help you with all three of those. Let’s look quickly at number one.
So I know that price is something that many people have mentioned on the registration forms to this event, as one of the biggest obstacles to getting out of China, is the price.Now, if there’s a product that you simply have to buy from the cheapest source, no matter what, there can only be one reason, is because that product that you’re selling is identical to what your competitors are selling.
So where’s your differentiation? Where’s your USP? These are real questions you need to ask yourselves. Now, no matter how basic the product is, or how many other innovations there have been around it already, we can confidently tell you that there’s still scope. there’s still scope to rethink that problem. There’s still scope to rethink the problem that that product solves for the customer.
If you don’t know where to start innovating your lowest GP products, then we can help you here at Innovolo. We’ve got a whole, I think Euan mentioned earlier, but we’ve got a whole ideation system that can breathe new life into anything. Pretty much anything, from a wood screw, right up to a wildlife zoo. Okay, that sounds a bit out there, but you get the drift. So, that brings me on to number two.
You need a process to handle your ideas. So many ideas going around your heads, so, as someone else said before, ideas are like rabbits. You know, you might learn how to handle one or two, maybe three if you’re lucky. And what happens. they start jumping out all over the place, they disappear through the hedge, they disappear down the garden, they go all over the place. Very hard to control, and before you know it, like all good rabbits, you’ve got a whole herd of them. But just to really take those ideas, and filter them out, and prioritize the most likely ones that are going to succeed, and just separate them from the duds. To do that you need a system. Now luckily, we’ve already designed one, the Innovolation Framework, and you can tap into the power of it by using our services.
Now, finally, I’ll wrap up as quickly as I can on this. So finally, point number three.
You have to be able to draw in the talent and skills to bring, to really make your ideas come to life. You need to bring in a lot of talent to make that product, that idea to succeed.
Now, I’m not talking about your employees. I’m not talking about your salespeople, your accountants, your people in the warehouse, important as they may be, I’m talking about specialists like chemists, mechanical engineers, electrical engineers, biochemists and engineers, 3d designers, patent experts, and attorneys. You know, finding and hiring all this talent and then getting them all to work in harmony; it’s like an orchestra. It’s a huge undertaking for any company.
Now, that’s why more and more and more entrepreneurs and executives like you, are choosing to use Innovolo.
So there are just three reasons to use Innovolo:
- to elevate you from situations where you’re always fighting to make a viable and reasonable profit margin that you need, to make your business sustainable;
- to know which and what product development ideas to pick, so that you always back the winners; and then
- how to take those ideas and draw on the most appropriate skills and talent so that they can be transformed, from these little ideas right into patent-protected, profit-boosting, revenue generators for your business.
Now, we’re going to be following up with each of you after this event to find out how we might be able to help you but if you are watching live and want to jump to the front of the queue, put your request in the chatbox right now and our team will boost you to the top. Thank you.”
Euan: “That’s great. Thank you, Bradley. It has been a brilliant insight, very helpful.We’ve had lots of questions and messages flying in from all around the globe. So, if you don’t mind, I’m going to fire a couple across your bows, Mike and Bradley. And hopefully, it’ll generate just a few minutes of, kind of, a few questions and answers. We’ve got an interesting one, I think this is probably one for you, Mike actually.The question is EU companies could and should buy more from the UK, the US, and Canada, in addition to other EU countries, but Brexit and Mr. Trump’s policies are not very helpful. What’s your opinion and outlook on this?
Michael: “Well, I know that’ll change in January. We’ve got an election going on here and I think there’ll be a big difference with that. We’re not getting into politics from there. Yeah, I mean, that is part of it there. When you keep poking the hornet’s nest, they tend to get angry and they tend to react. A lot of what’s happening is exactly what we see. We’re seeing a “you put a tariff on us, we’ll put a tariff on you, ” and you know, “puffing their chest out and seeing who’s the most powerful on this?” and what kind of games they’re trying to do there. It’s just going to be very difficult here. I mean, if we’re adding in politics, you need to add in the politics of China getting much more repressive with the things you mentioned about, for example, in Hong Kong, things they do with regard to communication, using technology to track a lot of the things that are going on inside of their country, with that.
So yeah, it’s difficult but we just keep working with it. You work with your politicians. There are some things that you have to take into consideration, obviously, the laws, but maybe we don’t get so caught up in some of the loopholes. We do what’s right, and we let the laws change with it.
Euan: “That’s very helpful. Thank you, Mike. Bradley, what’s your take on that one?”
Bradley: “Yeah, it’s an interesting question and kind of as Michael was saying, it’s a very opinionated answer to that, really, and I think Mike has summed it up really. You know, you need to look at what’s coming. There’s an election coming up and it could all change. It could hit us like a wrecking ball as COVID-19 has, but we need to be prepared, I think. And I think experts like Mike would be able to assist with preparing for these challenges that are coming.
Michael: “Yeah, there are lots of things we can do, but you know, we heard about all the problems with Brexit, we heard about, you know, all the problems began with; it was Boris, it was Brexit and I can’t remember what the third one was. But before this happened, the United Kingdom had the best economy that it had ever had since post World War Two. So we can bemoan things, but it wasn’t that bad. Yeah, the British Pound that was the other one, the interest rate, or the conversion rate on demand.
Euan: “Now, that’s very helpful. Thank you. Brilliant!
I’ve got another question here, I’d like to fire in there: Keen to hear how we can find out from our existing UK supply chain, how much dependence they have on Chinese imports. For example, they buy products, which they know have Chinese components, but not enough of a component to be a major concern. What’s your take on that, Bradley?”
Bradley: “Yeah, that is very key. I think a lot of companies would be finding this as an issue now, that it may not have been an issue in the past. You know, you’re buying stuff from the UK or Europe and then you find that your supplier’s supplier, or even further down the supply chain; Lo and behold, there’s the reliance on China yet again. So I think there are certain things that we can do to help you with that. Supply chain audits and then ultimately creating your own product; which you personally have control over your supply chain. Do you have anything to add, Mike?”
Michael: “Yeah, I mean, the first question I, the first thing I would do is I would ask them. “What are you buying from China? How much do you buy from China? And can you find a different supplier? So that we can say this is 100% made in England; made in Europe, wherever we go with that. In England; in the United Kingdom, I noticed a lot of the fair trade concept. So you’re already doing that a lot with some goods saying, you know, “Is it fair trade? “Is it not fair trade?” so “Is it made in Europe?“Is it not made in Europe?” We ask the question, we make it happen. ”
Euan: “That’s very, very helpful. I think we’ve had certainly had a lot of feedback recently, that there’s a number of clients in the UK that are being asked that question proactively, from their customers right now. So there’s already…
Michael: “Right. ”
Euan: “…a bit of a backlash starting. So it’d be a good thing to really search out your supply chain in that way.
Michael: “It’s always good to know the facts. ”Euan: “Very helpful. Yeah. There’s a couple more, like to just cover up very quickly. Sorry Bradley, have you got another comment on that?”
Bradley: “I was just going to quote one of Mike’s famous quotes, “Facts and data set you free. ”
Euan: “Excellent. There’s a couple, just a couple more here: “We have stainless steel components designed by ourselves and are imported. How do we make sure our design is protected and not sold to anyone else using our dyes?” a very good question, Bradley, one for you. ”
Bradley: “Well, that kind of highlights the importance, particularly, of bringing your supply chain to a reputable source. And not only that, kind of, making sure that you are protected and there’s a number of ways you can do that. And it’s not necessarily always patents. There could be design rights. There could be trademarking. There are various, different, it’s too broad to actually explain fully on this webinar, but I’m sure we could go into that on a future one. But there are certainly ways we could do that; mean to make sure that your design is protected sufficiently. Obviously, as Mike said in his speech earlier, theft of intellectual property is rife in China, and we need to just be really aware of that. I don’t know if that answers the question. I think is, this is probably a bit of a big topic for this particular webinar. ”
Euan: “We will, we will…”
Michael: “The thing you know, the thing you can’t, they don’t recognize the copyright trademark type of laws from other countries. If you have to deal with China, then you have to go with the expense of going over there and registering your product there through a lawyer in that country. There’s still some question about how well that will work for you, but it’s the, pretty much, single option, you have to protect your product at that point. ”
Euan: ”That’s very good. There’s a simple, probably quite a simple answer to this question, I’m guessing. “I’ve heard that a number of Chinese deals, the product is very poor quality and costing a lot for rework, any suggestions on this?”
Michael: “Qualities and job one, you know, there are only three things that are involved when we’re doing projects, it’s cost, schedule, and performance quality. And any of your suppliers, if they do not provide top quality, you stop buying from them. Now, I’ve seen some very, very, very good quality from China. I’ve seen some very, very poor quality from the United States. So it’s not necessarily that, but with any supplier, if you are not getting good quality, in other words, if you’re getting what you’re paying for, you’re just going to have to find a different supplier˗period in the statement.
Euan: ”Right now, for you got any comments on that, Bradley?”
Bradley: “No, nothing. ”
Euan: “Excellent. There’s another question which we may need to follow up, following this webinar, but there’s someone asking whether there’s a way to search for products and eliminate China from the results. Is there a specific way, currently, that that can be done? That’s something you could cover off, Bradley?”
Bradley: “There are certainly ways to, not eliminate it from the results, but there are certainly ways we can help to minimize the, I’m assuming this is around a Google search, there are certainly ways we, you know, we can help do that. So I suggest we’ll probably follow this up with a bit of a help sheet, is how we can do that. So we can send it out to all attendees if that helps. ”
Euan: “That’s excellent. Thank you.And then just one other question, “How big does a business have to be in for in order for us to help them?” I think the answer to that is, it doesn’t matter what size the businesses. The smaller businesses are there for growth, they want to grow, now’s an excellent opportunity to grow. The opportunities in, pretty much, any market in the UK are rife right now; that there’s a huge amount of opportunity. And I’m guessing in other countries, too. The thing is, is to recognize them; to kind of sift through all the media rubbish and actually find out what’s going on out there. I think you’d be surprised what is available and what hasn’t yet been done that is just waiting to be done. Have you got any comments on that, Mike? Well, Bradley?
Bradley: “No, not really. We are working with a number of sole traders as well as larger, blue-chip companies on this. So I don’t think there are any limitations, exactly, on the size of the company. ”
Michael: “You know, there really shouldn’t be, and in fact, in many ways, you can be an advantage to a smaller company because you have access to skills they don’t have access to. ”
Bradley: “Yeah. 100%”
Euan: “Excellent. Another question, how would you balance a relationship with the vendor whilst fulfilling the opportunity? Bradley, could you answer that?”
Bradley: “I was just about to say you’d probably want Mike for that one, having a lot more experience with the vendors than I have. And I think you’re probably old enough to be my grandpa. Isn’t that right, Mike?”
Michael: “Well, thanks for bringing that up, but yeah, probably. I definitely have shoes that are older than you.
Bradley: “So, but you’ve had extensive inter…relationship…”
Michael: “Yes. You know, when we talk about this, we talk about partnerships. I don’t like to talk about suppliers or customers; I like to talk about partners, and we work with them. And when I’m dealing with a customer, I want to give them such great service that when a competitor comes in, they tell the competitor, “There’s no reason for me to talk to you. ”I would like to be able to do the same thing with my suppliers. I would like to have supplier partners out there that says “I can deal with what we’re doing with. ” and we can continue to look at that, we’re opening our minds, but we’re telling stuff, but when I’m looking for opportunities I’m also talking to my supplier that I’m doing that; on what kind of things I’m looking for, and “Can they step up? and “How can we help and build that up?”So for me, it’s really just open communication. It’s honest communication. You lose your customers by not supporting them. Your suppliers lose you by not supporting you. So it’s keeping it open; it’s keeping talking, if there are things that are attracting you to go somewhere else, then bring it forward; see what we can do; talk about it. ”
Bradley: “Yeah, there’s no such thing as over-communicating, is there? You can, always communicate a little bit more. It just helps that whole relationship. ”
Michael: “There are usually not very many secrets. ”
Bradley: “Yeah. ”
Michael: “Yeah. You think it’s a secret, but it’s not?”
Euan: “Absolutely. I think we’ve probably got time for one more question if that’s okay. And the question is, “As a smaller company, are we able to effectively subcontract sourcing to someone like yourself? Bradley, could you answer that one?
Bradley: “Yeah, absolutely. We can definitely assist with that, particularly, if there’s a certain element of product development involved. And if you’re looking for, perhaps going into a new market, or a new customer segment, we can really help you to identify unique opportunities.I think it’d be fair to say we’ve looked at working with a number of clients, and really helped them to identify completely new markets that they’ve never envisioned them being in before. It’s really, really powerful to get someone in that’s independent of your business; draw on their diverse experience, and potentially, you know, the network that they’ve got. You know, we can potentially help you look at your sourcing from India, for example, or any other European countries, but yeah, absolutely, to answer that question, yes.”
Euan: “Excellent. Have we got any other comments to wrap this up, Mike, on the question and answers?”
Michael: “The thing again, comes back to understanding the problem. If you’re having issues, break it down, understand the problem. If you need help from some people to help you put together your strategy and where you’re going, there are people out there who can do that: myself, Innovolo, and others that are there. Look for ways that you can build upon where you are. Look for how you strengthen the foundation. But first and foremost, make sure you understand the problem. Make sure you understand all of your accounting. Make sure you have all the facts and data because yes, facts and data will set you free.”
Euan: “That’s excellent. Thank you, Mike.
Well, that’s been quite a ride. I’ve certainly learned a lot of new things during this event. And so just to recap this, there are three key points that we’ve covered.
The time to diversify your supply chain from China is now. Things in that country could unravel very fast indeed, as Mike says, this is your alarm call. Take massive action to make this a reality. A day could be coming soon when you will be very glad that you did.
Secondly, your unit cost might not take the whole picture into account. Find from sources that are closer, allow you to make savings in other areas, and, kind of, react a lot more quickly to changing demand.And thirdly, of course, this is my favorite, innovation is the key to unlock the low-profit margin puzzle in your business. Innovate your way out of that issue, and it will give you the scope to diversify your supply chain as a bonus.
As Bradley said, we will follow up with you after this event. And the questions that haven’t been answered today will be answered and followed through. But if you’re burning to get something going right now then please do get in touch with myself or any of the Innovolo team today. We’re keen as mustard, to help you on your journey to success.
And finally, please don’t miss our next event with Roy Newey, on the third of July this year. The topic is very similar to today’s and the invites will be coming through shortly. So look out for these.
That brings us to the end of this event. Thank you for your time. Thank you for your participation. And a special thank you to our guest expert today, Michael Wallace. I hope you all enjoyed it as much as I did. Thank you and goodbye.”
Bradley: “Thank you.”
Michael: “Thank you.”