WoW #1: Talking China Sourcing with Johannes Landström

Summary

Alex Trup interviews Johannes Landström, founder and Purchase Manager of Yourlink2asia, an outsourced production management company with a presence in Sweden and across Greater China. They discuss the importance of socially responsible product sourcing as well as some of the things to look out for when getting your products produced in Asia.

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Transcript

Alex Trup: Hello and welcome to WoW: Words of Wisdom on Asian Business Radio. I'm your host Alex Trup and today I'll be talking with Johannes Landström, who is the co-founder and Purchase Manager for Yourlink2asia, a company specialising in outsourced production management.

Hello Johannes and welcome to the show.

Johannes Landström: Hello Alex, and nice to be here.

Alex Trup: So in my introduction I described Yourlink2asia as an outsourceed production management company, could you go into some detail as to what that actually covers and the extent of the services which Yourlink2asia offers?

Johannes Landström: Basically Yourlink2asia is a Swedish trading company that help our clients with two needs:

One need is if a client comes with a product they know they want and they already have that specification, maybe they buy it from somewhere else today but need to lower the price or do some modification. Then we with our sourcing team help them to purchase here in Asia itstead, for maybe Germany or some other place.

The other thing is, for example if you have an idea of a product, we can help the client to make the product a reality, and that means we start from the basics. We start with their idea, we make sketch, maybe we need a 3D design or a 2D design, and then after that we produce a sample to check if the product is fulfilling the client's needs and basically we follow them through every step after the sample: for production and we do the quality control, we help the client to ship the products to them, and take care of their custom details, all the delivery details. So basically we help them all the way to their doorstep.

Alex Trup: So its basically the full supply chain for virtually any product you want to produce right?

Johannes Landström: Yes, our limits are based on legal reasons, we never do any copies or anything like that, and we also have high demands for quality and ethical standards from the suppliers.

Alex Trup: So the benefit of going through Yourlink2asia is that you're on the ground there in China or in Asia checking out the factories, checking they meet certain quality standards they need for European certification, that kind of thing?

Johannes Landström: Yes, exactly, we are here and normally it's hard for the client to be in two places at the same time, so basically we control every step and help them with those things that they cannot do themselves. We have a team that helps us with everything concerning the design. I handle the purchasing and we have the sourcing team, our assistants so we help them through this chain.

Alex Trup: While Yourlink2asia has a presence in your native Stockholm, Hong Kong and Taipei, you yourself are based in Guangzhou, the capital of Southern China's Guangdong Province. What made you choose this location?

Johannes Landström: Basically, it was for us an easy choice because we started working from Sweden and went to China to do quality inspections and then we built up a network of producers and suppliers, especially in this area and when we felt it was time to expand, we knew that the purchasing office needed to be in Guangzhou and Guangdong Province because we already had many suppliers there, so we already had founded a base.

Alex Trup: So have you been to many of the other regions of China and do you see any potential for expansion in those areas or are you able to do everything you need to from Guangzhou base?

Johannes Landström: No, of course, not everything because some areas are more suitable for other products. Basically it's a good base for overall products but sometimes when we have specialised products, we need to go to other places. For example, we went to the north-east of China to a city called Weihai to produce wool blankets because they were specialised in this and had the best quality to the best price. So we need to move around in China but we start from Guangdong and work our way outward.

Alex Trup: That's really good to know because you have to visit all these little towns that probably the majority of our listeners may not have heard of Weihai, and may not even think to check there for that kind of supplier, I guess having the local knowledge and being actually based in the country helps you to make those decisions, not just from a strategic point of view, but also from a cost standpoint?

Johannes Landström: Yes, in the end, its the first thing a client wants. Of course they want their product to have the right quality, but if we cannot meet their price demands, we will never be able to continue with the project. So that means always that the quality is number one and then we need to find the right price for the right quality. So that means, we have to move around to find the target price for the client. So it's a good base to be here but of course we are forced to go to other areas to see more suppliers.

Alex Trup: So right now you are primarily based in the Greater China area, but for a long time now people have been talking about the "China Price" and that that actual China Price is increasing with salaries and the economic growth of China. Now people are looking at "China Plus" strategy where by they not only look at the Mainland but also look at, for example, smaller neighbouring countries like Vietnam and Cambodia and Thailand, are you seeing any of this in your sourcing strategy or any of your plans for the future for particular products?

Johannes Landström: We have noticed that many suppliers are closing down factories and moving them to those areas, but at this point is hasn’t affected us that much, because China is not any more a low price country as it was before, its still low price but has a higher demand for quality. That means the old pictures of China where something you could buy would break the next day, its not there anymore - China is doing high-tech products now, so basically it's the low price, low quality products that are moving out of China because of the labour costs. Its the quality products and for example our clients (our European clients) are usually not interested in those kind of products, its mainly for other markets that the factories have been moving. But for the future, when these countries can reach our demand for quality and also working conditions, of course it will be interesting and we will look into it. But at this point and for this year, we have no plans to start up any sourcing offices outside of China.

Alex Trup: So being the Purchase Manager means you actually go on site a lot to the factories, to check conditions, production lines and sample quality, that kind of thing, which is obviously of great benefit to your clients as that's something they can't do themselves. What are the main things you look for when you visit these factories and what have your experiences been like in this area?

Johannes Landström: The first thing when we go to a new factory is that we look at the general condition of the factory, that means is this factory a safe factory? Is this a factory we can feel confident using? And not only for production, it means we actually have to go there, our staff have to be there and we have to see that the workers have decent working conditions that follow the legal regulations.

So basically we want to see that this facility is an approved facility. The next step after that is to check out the production lines - We need to know that the machines and the tooling and the expertise of the staff is according to what we need. Because many times the factories say "We can do this", "We can do that", but when it comes to reality and when you go there, you can see a lack of many things and immediately you can see this will not work. Then you have to visit the next factory and continue like that.

Alex Trup: So have there been many factories that you've visited that didn't meet your expectations and what areas do you find they most often fall down in?

Johannes Landström: Yeah it has been many factories. That's why we need to go to many factories, because they actually don't pass. I would say the first thing is that the working conditions are not OK in many places, and when we put the demands and we say "We cannot accept this", it is up to the factory to change it or we choose another one.

Alex Trup: What sort of things are you talking about when you say working conditions. What have you seen that you have found unacceptable for example.

Johannes Landström: We have found underage workers or maybe, we haven't found them, we cannot say that, but when we have seen workers that look very young to be workers and we have asked for ID and documentation, when factories say they don’t have it or they lost it, that means basically they are not a legal worker or maybe they are not even allowed to be in that province to work and that means if they cannot provide the paperwork, then we cannot deal with them. That's one thing.

The second thing is for example, most factories need to paint the product or use some chemicals to make the surface look nice and if they don't have the right safety equipment, for example, if you do some kind of painting job but you don have any mask, its quite easy to know its not a good place to working at. So it's those fundamental things that we found very very fundamental, that are not fundamental down here.

Alex Trup: Its good corporate social responsibility obviously to be checking these things and I guess if someone works with your company then they know they are socially responsible. If everyone can slowly stop using these kind of factories, then either they can improve their working conditions or production lines or go out of business if they don't intend to do that, and that's their problem ultimately.

Johannes Landström:Yeah, I agree. We have the right to put our demands on the facility, and then it's up to the factory to do something about it. I think more and more of the companies doing this kind of job as I am are asking for better working conditions. Even if they are legal, if you look at the rules here in China, we have higher demands because our clients have higher demands in Europe. That's basically because their clients have higher demands on them, so it's basically the end consumer in for example Sweden, England that says "We don't accept thi" and then it follows all the way through.

Alex Trup: And obviously being from Sweden you are aware of some of the highest green demands, Sweden being one of the greenest country of the world.

Johannes Landström: I would say so. Generally speaking, Swedish consumers have high demands for the working conditions, environmental and also the quality.

Alex Trup: But it's not just Swedish consumers you are targeting, there are some other countries.

Johannes Landström:
Yes, of course, but we still keep the highest demands when we do such kind of sourcing. We have the demands from our home county.

Alex Trup: And also within yourselves I guess. Probably most clients don't even think to ask about these working conditions, that kind of thing. I guess it's a sort of corporate rigor within your own company, that's how you want to do business.

Johannes Landström:Yeah, exactly and also we are down her, we see these things and we can make a change. So its basically up to us many time because as you said, the client maybe doesn't want to ask any questions sometimes, but in the end it's our company name that stands for something and we don’t accept any kind of things.

Alex Trup: Anything less than the best.

Johannes Landström: Yes I would say that.

Alex Trup: I know that Yourlink2asia sources a lot of branded corporate gifts, the kind of thing either a company sends out to its best clients or gives out at trade shows with their name on it, that kind of thing. What kind of interesting gifts are European companies giving?

Johannes Landström: There are two categories, I would say. One is when you have these mass advertising gifts, that means you need something with a lower price to give out to a bigger mass and usually companies send something that is custom made with their logo type and things like this are rubber key chains, reflector pins. A pen is always a good product because everyone will use the pen, they won't throw it away. So its still the cheaper products that are what I would say are the normal products. They are not very new. It's different variations of old products I would say. For the more exclusive products, for example we are working on a custom-made metal USB for Volkswagen. It will be a VIP gift given to the people who buy a new car that will receive a USB shaped like their car, but with a special touch.

Alex Trup: So quite unique gift in itself and quite specialised.

Johannes Landström: Yes, very specialised, we are the only one in the world who is doing this at the moment because we are working directly towards them. So that will be us working with them on a very unique design. So these exclusive products can have more variety and be more specific but for the cheaper ones it's the things you have seen before but new styles maybe.

Alex Trup: I know you are out at trade shows quite a lot and you are looking for new and interesting gifts which you can suggest to current future clients. What kind of interesting or weird things have you seen in the market lately?

Johannes Landström: One thing that you have seen from the beginning was, even at the trade show you can see copies, that means famous brands with misspelled logotypes and similar designs and those thing I always found a bit funny that you try a Micky mouse with the logo spelled wrong or something like that - "Dafney" instead of "Disney" or something like that. But I feel a growing supply of green products, environmental friendly products have become a bigger and bigger. Also the Chineses suppliers are understanding the need for these kind of products now.

Alex Trup: What kinds of green products are you seeing?

Johannes Landström: It's mainly things made out of ecological products. That means they have not used any pesticides, for example if you do some garden products. Maybe you have heard they have banned all the plastic bags in China now.

So basically that means when you go to a shopping mail, you cannot have a plastic bag. You have to bring your own. Then you usually bring one environmental friendly custom bag, a bigger one, so that you can bring the groceries back home and these products are also sold a lot in Europe these days. For clothing we can see lot of green products, ecological cotton has been used. And people think more about these things now and also the suppliers understands this and are coming up with many new materials.

Alex Trup: So it sounds like the positive move generally in the right direction.

Johannes Landström: I would say so because it at least gives the people a choice. Before you could almost not find any environmental friendly products in a way that they really are environmental friendly. You can say something environmental friendly but when you look in to it you see its not but now you can actually have this kind of product and feel "I am doing something good".

Alex Trup: Right. So with all this positive energy going on, what kind of negative or horror stories have you either seen yourself or heard either from other Purchasing Managers or just through the grapevine that you think either people need to be wary of or be careful of, or something that you always look for just to make sure that you don't fall into some kind of trap?

Johannes Landström: Yes, I know what you mean. Of course there are lots of horror stories about things going wrong down here because there are so many people going here without actually having the controlled, they just buy one thing without controlling it well enough. I can talk about a colleague of mine. He has a German company and its established in Shenzhen close to Hong Kong. He deals with door handles and for some reason when he made one door handle he needed a certain quality of steel this means so that when you twist the door handle it is long lasting, it doesn't break basically.

Alex Trup: Yep, you don’t want to get locked into a room and you can't open it.

Johannes Landström: Exactly, so the thing that happened there was that they made the sample, everything was good, they tested it, no problem there, and he had to be away, he couldn't attend to the quality control and he sent his Chinese staff to do the quality control and for some reason they did not notice that the factory had changed the material for the door handle. This is maybe not so easy to find out but you can, if you are careful. Basically what happened was they paid for everything, they were shipped to Germany, it was installed in new building that was brand new and after six to seven weeks the door handle started to break in the whole building.

Alex Trup: That's not good obviously.

Johannes Landström: No, its really terrible and this things keep on happening. If you're not there yourself or don’t have the right controller,you will end up with these kind of problems sooner or later.

Alex Trup: You said obviously this is partly because his Chinese staff had to take over because he wasn't there. Do you think this a failing on the Chinese staff's side or do you think that European countries need to be doing more to educate them on quality control, so it's more of a failing of say European managers.

Johannes Landström: It's both ways I would say. Of course you can always be more careful when you do quality control but when you do quality control you must know what to look for. For example, just because make a sample like they made and then they went to production and we obviously can see that it did not work out.

So a word of advice is not to do one quality control after the production, continue to do it during the production, you know you have the skill steps in the process that you know this is hard for the factory, this is a very important moment in the production. So then you have to be there before they start the process so that you see "This is OK, now we can continue". You have some check points and that basically is what I think failed.

Alex Trup: And obviously you need to have your random spot checks when things are all packaged and ready to be shipped out before they've actually shipped out and not when they land in the country of destination.

Johannes Landström: Yes, exactly. Everything must be under control when it leaves, otherwise you end up with those kind of problems the he got.

Alex Trup: Yes, finally we'll end the show with your top 3 words or sentences of wisdom about sourcing in Asia.

Johannes Landström: I would say in Asia everything is possible. It's a very used word, but actually everything is possible down here. You just have to be careful who you do business with and always double check for references so you actually know you are talking to right person.

Number 2: You should never expect a "No" from a supplier, because that just means they don't understand what you are asking for or maybe they cannot do it exactly as you want. You should always asked for a option. Never accept "No", ask for an option how to continue.

Number 3: Falling back to the failing on quality control before - Keep control, you should always double check the quality, double check, double check, double check. Then you are quite safe I would say.

Alex Trup: Thank you for your time today Johannes. It's pleasure talking to you and I hope we can have you on one of our other shows in the future.

Johannes Landström: Yes, sounds good.

Alex Trup: To contact Yourlink2asia about your sourcing needs, visit Yourlink2asia.com or you can visit Johannes Landström's profile in our Hosts & Guests section at AsianBusinessRadio.com/People to find links to him on LinkedIn, Xing as well as email and Skype details.

I'm Alex Trup for Asian Business Radio at AsianBusinessRadio.com. You can also find my profile at AsianBusinessRadio.com/People or you can follow me on Twitter at Twitter.com/AlexTrup.

If you'd like to leave us a comment or a question about this or future topics you'd like us to discuss, you can also do so in a number of ways, but our favourite method is for you to leave us a voicemail over Skype by calling our Skype ID AsianBusinessRadio all one word.

This has been WoW: Words of Wisdom, thank you for listening.