Written by Bruce Mitchell, Senior Advisor of Lombard Global, Inc.
Edited by William Billeaud, President of Lombard Global, Inc.
Step 1: Establish Project Teams
The Executive Team
Consider utilizing two teams to implement manufacturing in China. The initial team should be the Executive Team including the Company President and Chief Executive Officer, Division President, Corporate Council, Chief Financial Officer, Vice President of Marketing, the Vice President of Manufacturing and the Vice President of Engineering. They will review potential sites for the manufacturing operation and then decide which to choose from.
Contract with well-known and established consultants that operate in China to make sure you are receiving the correct advice.
Identify and hire a Chinese ex-pat as your General Manager. Because they were raised in China, they will understand the Chinese culture and people. Ours was born and grew up in China, was there during the Cultural Revolution but later immigrated to the U.S. and became a U.S. citizen. Have them spend time in existing manufacturing plants in the United States to understand the equipment and manufacturing processes. He or she will participate in the process of locating equipment suppliers.
Top Management Involvement
Don’t underestimate the benefits of having your Company Chairman and Division President involved in all of the initial stages of the investigation so that they can make the right decisions rather than having a team report the results of their findings to executive management.
The Implementation Team
This team should consist of the Vice President of Engineering, the Vice President of Manufacturing, the Division Engineering Manager and his/her department personnel. This team will consult with key personnel from existing manufacturing facilities in the United States. Members may include the Maintenance Manager, the General Manager and the Plant Engineer. They will provide support associated with both the relocation and the purchase of new equipment in China. They also will provide key training to the Chinese labor force in learning how to operate and maintain the equipment.
Step 2: Identify Potential Locations
You may want to have your operations close to a large port or located close to a raw material supplier. Alternatively, you might even have ambitions of venturing into Toll Manufacturing. As always, remember to do as much research into the market as possible before committing to any big decisions. Work with a china sourcing company to create a list of your requirements so that you can identify potential locations and send the team to visit and evaluate industrial zones.
Step 3: Identify Desired Industrial Park Incentives Meet with the local and regional government marketing and economic development groups. Some are better than others and you will be able to put together a more complete picture by talking to many groups. They will also be a valuable resource in helping through the various steps required to establish your company. From these meetings you will learn of the various incentives, the types of industries in the parks and general background on the area. Prior to establishing your company you should meet with and discuss your plans with the city mayor. He or she can be of great assistance in helping you obtain the items you want in the negotiations.
Step 4: Meet with Other Companies You can learn a lot from discussions with other companies that have been through the process. These discussions can greatly facilitate the process and allow you to implement the entire project much more quickly than if you had to do it on our own.
Step 5: Learn the Environmental Regulations There is extensive environmental documentation to be developed and approvals to be received from the local environmental bureau before you can establish your company, let alone begin manufacturing. You are required to hire a consultant to develop the environmental assessment.
Step 6: Select Desired Location/Negotiate the Memorandum of Understanding You are now ready to choose the location and negotiate the memorandum of understanding or MOU which identifies your requirements and the “enticements” that the zone can provide. It is not a legally binding document but both parties will try to meet the agreed upon items included in the MOU.
Step 7: Establish Your Company To establish your company, you will prepare the Application for the Register Name of Foreign Investment Enterprise, the Project Establishment Approval Form, Feasibility Study and Energy Consumption Review, the Articles of Association, the Appointment Letter for Directors of FIE, the Application Form and lastly the Environmental Assessment.
Step 8: Import Used Manufacturing Equipment Importing used equipment into China is an involved process. It is important to make sure that you follow the procedures strictly. So if you decide that you want to get industrial keyboards from somewhere like http://www.cksglobal.net/product-category/industrial-keyboards/, you should first make sure that you can.
Step 9: Source Chinese Equipment Start by establishing contacts and develop relationships with Chinese who may be very willing to assist you. There can be savings attained by purchasing equipment manufactured in China. It can be less expensive than importing new equipment.
Step 10: Select a Design Institute You will need to identify a design institute (DI) to handle the design of your facility. You can also choose to do the design yourself and have the DI sign off on the drawings insuring that they met the Chinese codes. Design institutes are rated in China. Make sure that the companies you consider are certified to do the design for you in your location.
Step 11: Evaluate/Select Construction Company The construction companies like the design institutes are rated in China with “A” being the highest rating.
Step 12: Constructing the Manufacturing Plant You will need to obtain a building permit. You will also need to hire a Supervision Company, Design Institute, Construction Company, etc. The construction of the building takes approximately ten months from initial groundbreaking.
Step 13: Hire Plant Staff The General Manager’s first hire may be the Plant Engineer. You will want an HR person at the start to work with local agencies to identify the candidates. You should also hire an accountant because you will need to maintain dual accounting books. Your accountant will also be able to file your taxes for each country too. If you already use a Melbourne Accountant tax return service, it’s likely that they will be able to manage your new accounts too even though they’re from a different country. The next hire should be a purchasing manager. This person should be a carefully screened candidate that you can trust. Decide in advance as a company policy that there will be no “under the table” payments or “red envelope” payments, the terminology used in China for payments made to someone to “reward” them for giving them your business. In many cases, this is now against the law in China. After the equipment is installed, the next hires would include mechanical, electrical and instrument technicians and the equipment operators who will begin training on the equipment. The equipment operator should have the potential for management as he/she is promoted to Manufacturing Manager and the plant expands.
As Vice President, Engineering in the Magnetics Division at Spang and Company for 13 years, Bruce Mitchell’s responsibilities included overseeing strategic business growth, production capacity maximization, plant expansions, maintenance, engineering and environmental initiatives. He managed department managers, a staff of buyers, project managers, designers, and electrical, mechanical, civil, and environmental engineers. He oversaw the Division’s global facilities and manufacturing equipment installations. Through his department equipment was identified and purchased. He was also responsible for the design and fabrication of in-house testing and automation equipment. From 2003 to 2012 he had overall responsibility for the relocation of all manufacturing to China. Potential locations were identified and selected, Chinese equipment was sourced and purchased and installed in a pilot operation in parallel with the design and construction of a new Greenfield plant and later expansion into a second facility. The Asian expansions required the creation of two wholly-owned foreign enterprise. From his experiences he wrote and had published by Palgrave MacMillan in 2012, “13 Steps to Manufacturing in China, The Definitive Guide to Opening a Plant, From Site Location to Plant Start-Up”. Purchase from Amazon. Bruce held numerous engineering supervisory and managerial roles at Honeywell Corporation from 1974-1989. Mr. Mitchell received his Bachelor and Master of Science degrees in Mechanical Engineering from Virginia Polytechnic Institute & State University (Virginia Tech), Blacksburg, Virginia and a Master of Business Administration from Virginia Commonwealth University, Richmond, Virginia.