Wrap-up and ship out

As I write this, I’m sitting in an apartment in Atlanta, Georgia enjoying the first sunshine I’ve seen in days.  I’ve been back for some time now but in the rush of finishing up my thesis, enjoying the holidays and trips back and fourth between Atlanta, Greenville and Columbus I have failed to write a summary post of my last few weeks in China.  It went a little like this.

After sending out our first full container we had only a few precious weeks before the second shipment was set to go out.  So we worked feverishly to move production along.  However, this was not nearly as difficult to achieve as it had been when I first arrived.  In fact, Ryan and I were able to devote significant amounts of time focusing on the companies finances, developing better production processes and devising a marketing strategy.  Soon after the first shipment went out, our accountant left the company to take care of a family member.  It was only after hiring a new accountant that it was brought to our attention that much of the work our accountant was supposed to be doing, had been left undone.  So much so, that the new accountant was not willing to stay and deal with the mess that had been made.  Solid accounting is crucial to any business on any continent.  Without good accounting not only does a company not know if they are profitable but the company could also be violating multiple laws of the country subjecting the business to significant legal cost.  The challenges left by the accountant were so extensive that no one was willing to tackle them on a full time basis.  It was only after a part time accountant agreed to take on the challenge that the problems have begun to be resolved.

Production continued at a greatly improved pace and we were able to meet our shipment deadline for the next order.  However, the day the order was set to go out Ryan and I realized there had been some products packed that did not meet the customers standards, so we stopped production completely and created an assembly line to unpack every single box which that product had been packed in, inspect the products and repack those that were acceptable.  In doing this we pulled out around three hundred items that were not acceptable.  We finished this impromptu inspection only minutes before the truck arrived to be packed for shipment.  As a result of this emergency Ryan let go one of the managers, due to both his inability to see the problem with the defective product, and because of his unwillingness to take responsibility for his actions.  This was a tough decision but one that led to stark improvement in operations (as I will discuss later).

Personally, the majority of my time away from the factory was spent working on my thesis.  This culminated with nearly fourteen straight hours of thesis writing on my flight from Shanghai to Los Angeles.  I arrived back in the states two days before Thanksgiving and continued to work on my thesis until its due date of December 1.  In its complete form, my thesis comprised sixty five pages discussing the most salient aspects and challenges of manufacturing in China.  My work did pay off though, earning me a grade of ninety six for both the thesis itself as well as its defense presentation.  I was quite please with the results.  If anyone would like to read this paper please let me know and I will be happy to supply you with a copy.

All told, my experience was one of very hard work but rewarded me with a great deal of experience and knowledge.  It enriched my cultural and business understanding of China and expanded my world view by a great degree.  Looking back over the past four months I have gained real-world experience in production process planing, strategy development, marketing planning, problem solving, employee management, employee training, financial analysis and interpretation, supply chain management, inventory planning and much more.  Whatever challenges may lie ahead this experience has equipped me to meet them head on.  A fun fact:  all told the production rate at the time I left China had improved by over five hundred precent from what it was upon my arrival.

After a little over a month of being back in the U.S. I was able to meet with Ryan for lunch while he was in town for the holidays.  We had a good discussion and he caught me up on how the business was doing since my departure.  Only since I had left had he been able to find an accountant willing to take on the challenge of fixing his companies records and only on a part time basis.  Since the departure of the lead manager (the one let go) the other manager had really stepped up in his role and begun to really manage the employees under him.  Ryan had also found a replacement manager who could mix paint.  This was a most welcome relief because it freed Ryan from the task of mixing and matching paint everyday.  Production rates had continued to improve and the factory is currently able to produce around one thousand units per day.  This means capacity has exceeded demand and hopefully our marketing strategy will come into play bringing in new customers, increasing demand and driving down overhead costs.  I’m excited for where the company is going, and I’m thankful to have been an integral part of its success.

Send off

The light is dim inside of the forty foot container.  I climb on top of one box to get in a better position to hoist the next thirty pound box over my head and on to the stack of other boxes.  At long last we are loading the container to be shipped to America.  We again had a last minute surge to finish all of the products but our team came through and everything was ready for shipment.  All things considered, sending the container off went much more smoothly than I would have anticipated.

In addition to working long hours to get the order ready, I have been working hard to finalize the first version of my thesis.  As part of my internship I must pick a topic related to the role that I am working in and develop a thesis about it.  Originally I chose to focus on system development for new companies in China, but after experiencing so many challenges that went beyond Virtus’ systems I decided to broaden it.  It now focuses on the what the best way for a manufacturing company to come to China.  I will still utilize the insights I’ve gained on systems development, but will now include some of the non-system elements that I believe are imperative to understand as a company looking at doing business in China.

The task at Virtus now is to avoid the dip in product that we experienced the last time we sent a shipment out.  We are one third of the way through production of our next order, and despite some smaller challenges, things are going remarkably smooth.  This implies significant development on the part of our managers and their ability to do their jobs.  In an earlier blog I mentioned that our staff who was responsible for mixing paint was leaving.  The result of this has been that Ryan and I have spent more time in the paint room than anywhere else.  Largely this is due to the fact that not only do colors have to be mixed for production but most of the time they must also be matched.  The matching process can take upwards of five hours for one color.  This may sound absurd, but when you experience the fickleness of colored paint, it does not sound nearly as far fetched.   Needless to say we are anxiously searching for a new paint master who can do this job.

One of the most challenging parts of starting a company is to extract yourself from the day to day operations in order to do the higher level operations planning, strategy setting and financial management.  If left unattended to these  can lead to the detriment of an otherwise stable company.  Hopefully we can soon find a paint master so we can attend to Virtus’ other needs.

End of the beginning

The water in the tea pot is steaming has our host dumps in a bag of tea leaves.  I’m fairly certain that if I have one more sip of tea my kidneys are going to explode.  Our host grabs my tea cup and fills it to the brim.  ”Shey-shey”, I say as I eye the building to figure out where the nearest restroom is.  Ryan and I are researching materials for our new product order.  With each materials supplier we visit, we are served tea as Ryan ask questions about price, quality, delivery, etc.  Such is the way business is done here in China.  Negotiations are nearly always over tea as terms are discussed and ganxie is built.

We ended up visiting two different factories in the course of our search.  The first was uneventful but the second is worth sharing a few lines about.  The factory itself looked like a building that began with good intentions but lost its funding right after the structure went up.  There were vacant gaps where windows and doors belonged, and the floor on the inside was half concrete and half dirt.  There was no sensible production line, but rather equipment was strewn about randomly, most of it looking like it had been junked.  Lighting was dim on the inside except a few bright spots where a desk or entertainment center was being built.  There were few people in the factory, most were working on various tasks outside of the building.  The second and third floors of the building did not present much to speak of save the paint room.  The factory, like most others in China, used oil based paint.  This was apparent by the thick layers of oil paint which covered the stand on which units were sprayed making the stand itself look like a stalagmite.  Finally, on the floor below the stand was a clear cut path where oil paint could drain, which led out of a hole in the wall and onto the ground below.

A factory of this kind is impossible for any factory in the developed nations to compete with.  Undoubtedly there is not a single type of U.S. factory inspection that this place could have even hoped to pass.  In addition to lower labor costs, it is the absence of the costs associated with safety, environmental, structural, and waste disposal standards (as well as many others), that help factories in developing nations like China keep their production costs so low.

This past week was relatively unremarkable.  Production was finally brought back up to speed and we have, at long last, completed our first order.  Now we are in the process of producing the first 1800 units of the next order so that we can fill a forty foot container before sending it to the U.S.  This poses a new learning curve, but one we will gladly face since it means getting product out of the country and into the hands of our customer.

The trick now is the balancing act of keeping everything going on the production line while throwing in components that have been tabled over the past few weeks.  The final portion of our capital investment has come in and we must now plan out how we need to use it.  Already we have purchased a new routing table.  This has allowed us to redesign the first phase of the production process into a lean system.  This particular phase of the process was a particularly slow and cumbersome during the course of the first order.  At that time they were fortunate to produce two hundred completed units a day.  Now we can produce over 3,500 per day.  Clearly this represents a vast improvement in process design.  Now, if we can extend that kind of efficiency to all of our other divisions we will be able to produce not only a higher quality product than any factory Ryan has worked with in the past, but also considerably faster.

Potholes in the road

The music piped through the Burger King speakers is both irritatingly loud and eerily redundant, making one feel as if they are in a time vortex every time they sit here for more than ten minutes.  It’s another late night of work, and the Burger King at the SM mall has become the office away from the office, thanks to the allure of free Wifi.   For someone who never eats much of any fast food in the states, it’s a bit depressing to realize that Burger King and McDonalds constitute more than thirty percent of my meals in China.

This week marked a slowdown in our production rate.  Some of this is due to unforeseen problems, such as when the compressor on our paint machine broke leaving it to sit idle for three hours while a replacement part was sought.  Others were preventable, such as our current shortage of a pigment required to make a particular paint color, which is needed to paint units that are ready to run through the paint machine.  Consequently we must do a quick shuffle (challenging when working with two left feet) and change to another product with a color we do have the capacity to make.

The current mini-crisis sheds light onto the other areas in which we lack by way of systems.  Inventory has been the neglected child of our factory, leaving us with a very hazy picture of what we posses and what we lack.  Therefore, my next undertaking will be to design an inventory tracking system by which we can stay informed of our materials, and thus avoid time lost due to shortages.

Despite the minor (and temporary) slowdown our focus has been gradually shifting away from the actual production line to the systems that enable the business to run smoothly.  This planning and development of more systems can be time consuming thanks to a flurry of meetings in order to spend time with different staff, but it will be a wise investment of our time.  Once developed, the real challenge will be implementing the different systems and helping the staff to understand the value of them.  These new systems should make everyone’s life a little easier, but it might be akin to pulling teeth to get them implemented.

Rays of light

The sun beats down on me as I strive by sheer force of will to pedal the bicycle further uphill.  The slightest pause in my forward momentum would cause an immediate reversal of direction sending me careening backwards down the steep hills I’ve just climbed.  I have come to the island of Kinmen for the long weekend.  It is a Taiwanese controlled island located just three short miles off the coast of Xiamen.  It’s a holiday weekend in China so we only worked a four-day week this past week.

However, it was an exceptionally productive and smooth four days.  Over the past week we have continued our consistent packing pace, increasing the number of finished product by over two thousand five hundred units.  What is most encouraging is that it seems to be a sustained level of production; unlike the big product push we experienced a few weeks back, which fizzled out as soon as the product left the building.

I continue to work at improving our systems.  As wonderful as it is that our production rate has increased to a level that allows us to meet our orders on time, the efficiency level can still be greatly improved.  This in turn will allow us to increase our capacity, taking larger orders and delivering them in shorter periods of time.  In fact, we have just received our second order from our customer in the U.S., and though slightly smaller than the current order, the delivery time is much closer.  This should not be a problem though considering the fact that what took so long to produce the current order was the treacherous climb up the learning curves faced by Virtus.

Our current success is not without its hiccups though.  Two of our office (and English speaking) employees are departing this week to move to other cities.  It remains to be seen what kind of impact their absence will bring, and while it certainly won’t be anything we can’t cope with it could still have its difficulties.

Moving the chains

It’s a cool hazy evening as the sun sets behind the mildly obscured mountains here in Xiamen.  It’s been a busy and productive week here and I for one am glad of it.  The week started off with a monsoon hitting the city.  This in turn meant I was on my own running the factory on Monday and Tuesday because Ryan was in Chengdu and there were no flights available until Wednesday.  However, there was a stark contrast between being on my own now versus three weeks ago.  The factory is running at a better pace with a falling percent of rejected products, despite having a smaller workforce.  This is a very welcome change.

Having now been here for just over six weeks I can reflect a little on how our systems have been developing.  As I will be discussing in my thesis, there are a number of ways to develop systems.  The method by which ours seems to have developed resembles that of a plate spinner.  Someone takes eight separate plates and sticks on which to spin them and faces a choice of how to get them started.  They can either contribute a longer amount of time to each plate in order to get it balanced and up to speed where it will continue spinning without assistance for some time, or one can rapidly go from one plate to another giving each just enough momentum to keep going until the spinner cycle through all the plates and comes back around and hits each again.  The second method is the one by which our systems have been developing. This is largely because of the speed with which we have been required to bring our operations up to speed.

Now both methods have their advantages and disadvantages (the first is slower but cleaner, the second is faster and messier) but both have the same goal; to get all the plates going fast enough that they only require the occasional outside influence to keep them going.  The breakthrough we seem to have made this past week is that all of the parts of the process seem to have enough momentum to produce in some sync with each other without Ryan or I directly intervening to speed things up.

In my opinion, what has contributed the most to this change is that the two floor managers seem to have finally grasped how to manage the departments by placing themselves in the two areas that run the slowest and making sure things continue moving forward.  As a result of this improved process we have finished and packed three out of the twenty parts of the order, and by Monday will have raised that number to seven.  Given the pace of production previously experienced, the change is nothing short of phenomenal.

This looks even better in light of the fact that Ryan and I both have been required to spend a large amount of time away from the factory this week.  A good friend who is also a journalist is doing a series of stories on China and was in town for a couple of days.  Friends visiting when you’re abroad is always a welcome experience and I’m glad he could stop by.

So a light seems to be appearing at the distant end of the proverbial tunnel.  By our managers estimates we should finish the current order within a few weeks.  If that is achieved it may be cause for a celebratory weekend trip to Hong Kong.  Let’s hope so.

Molasses

The acrid smoke hangs still in the air.  Illuminated by the street lights it makes one feel as if time has ceased to move, that all things are momentarily held still.  Every evening around five the factory across the street begins burning off the days trash, which smells like a campfire as it wafts through our factory windows.  Consequently as we drive away each evening, I am intrigued by the stillness of this smoke.

It’s been a tough week in terms of motivating our employees.  We began with the sigh of relief that came from getting our first shipment out the door; however, that success led to a significant decline in our workers production speed.  So to get things going we laid out all of the quality control rejected product on our factory floor.  This served to give our workers a clear picture of the level of rejections they are producing; as well as to help us determine which products needed to go to which department for repairs.  After this I spent some time devising a system in one of our departments that was functioning in chaos.  In doing this I realized how essential it is to be specific in training people in the best way to do something rather than leaving it to them to figure out.  This is especially true if you don’t have employees who are invested in the quality of their work.

We also let go some of the employees who were consistently giving unsatisfactory work.  This is always tough when there aren not enough people as it is, but as Ryan said, we would prefer to have ten workers who do quality work, than fifty employees who give out mediocre work that constantly has to be fixed.  This should also help with training our remaining workers as well as new workers in new systems because we won’t have the push back from people who are more concerned with what is easy rather than what is best.

So things are moving along, and each day we get a little better.  Though it is tough when the leaps and bounds of improvement evade you forcing you to content yourself with small improvements.  Hopefully in time those big improvements will come we just have to keep pushing things along in an effort to gain the necessary momentum.

Friday evening post

The clouds hang low, obscuring some of the mountains behind the factory as we head into early evening.  I’m exhausted after working one of the busiest weeks of my life.  Thankfully, its business has been matched (and possibly exceeded) by its productivity.  In my first post on this blog I mentioned working 9-10 hour days and how tiring was.  From where I’m sitting now, that’s a short day.  Yesterday, was a 16 hour day (there’s nothing like coming back from a lunch break knowing you still have twelve hours of hard work ahead of you).

Sunday was a nice day off.  After working so hard last week I did next to nothing on Sunday, just rested.  Which turned out to be more of a rest of brief respite rather than a rest of completion.  Monday Ryan was back, as was a representative from our customer.  The rep had spent six weeks here earlier in the summer (prior to my arrival) and is familiar with the challenges faced by one doing business in China.  So we wasted no time in getting down to business.  The department that should be moving quite swiftly, and yet has limped along like a man with a broken femur, has been silk screening.  So Ryan and I and the customer went to work.  We took over one of the three silkscreen tables and began pouring out silk screened product.  It has been in this department that we have worked nearly exclusively for the past four days.  Silk screening close to two thousand units of product.  I’m loading jigs with new product in my sleep I’ve done it so many times.  But it’s been a successful run.  The airfreight date was pushed back until Friday and we have everything ready to go.

This level of production is both encouraging and disappointing.  Encouraging because we know for sure it can be done, discouraging because for two and a half months it hasn’t been.  It was interesting to see that despite telling those who work in this department what we wanted to see in production numbers, it wasn’t until we actually went in and began producing (quite literally) a hundred times as much product as they were that their methods began to change.  Some of them quickly caught on to our methods of speeding up production and began matching us.

Now, after an extremely intense week, the shipment has finally left the factory, which is cause for celebration followed by getting back to work to finish the other twelve thousand pieces.

The final hiccup before the shipment left was with the shipping company.  Our customer had arranged for the product to be picked up on Friday between 4pm and 5pm so it could be in the States by Monday.  One of our employees talked to the shipping company multiple times throughout the day on Friday, and yet it was not until 4pm on Friday afternoon when they called us and said there was a problem with the pricing of the order.  We were able to scramble (calling our customer in the states at four in the morning) and get a commitment on the new price so the product would actually go out.

So after such a stressful week, we will head into Monday morning with a slight reprieve.  This is much need so we can address the kinks in the production process where we believe we can improve the efficiency.  Hopefully this week will lead to some real headway in that arena.

Opening a closed loop

I must preface these next two posts with an apology.  The following post were written as one post and then split in two.  This was done due to the intensity of work for the past two weeks leaving me no time to update the blog.

The bells hanging from the rear view mirror clink lightly as we narrowly avoid the back end of a semi.  I’m in the back of a cab that’s racing down the road, weaving between cars that appear to be standing still as we pass them.  I’d love to buckle my seatbelt but for unknown reasons Chinese cab drivers like to put a seat cover on the back seat that covers the seat belt buckles.  So instead I just have the shoulder belt wrapped around my torso with the faint hope that if we slam into the back of the slow moving car in front of us perhaps it will keep me from launching over Pavel’s head and into the back seat of the other car.  Pavel is my Russian roommate who has been here for about two months helping out at Virtus.  However, he’s headed back to America to go home to his wife and family, leaving me to enjoy these cab ride death races alone.  My favorite so far has been the cab driver that spent the entire ride leaning forward in his seat, perhaps in the vain hope that his forward shifted weight would help with the acceleration of the car.

It’s been a very busy week at the factory.  Our client decided to airfreight a small portion of the order.  And by small I mean about four thousand pieces.  The most exciting part of the week has been since Wednesday because Ryan had to leave for Chengdu to iron things out with shutting down ACL.  This means for the rest of the week, it was up to Pavel and I to keep things running.  Wednesday turned out to be not all that productive; meaning by days end there was nothing new in boxes.  However, every day since then has seen the steady addition of more and more boxes of finished product.  This is the second time we have put products in boxes.  The first time we had to unpack all of them because the shrink-wrap was leaving impressions on the paint that were unacceptable.  Production has been slow in gaining momentum because the learning curve has been incredibly steep.

From the outside it’s easy to look at a new operation and criticize that there must be some problem because it can’t be that hard to get a business up and running.  I mean, people do it all the time right?  Sure, but there is a reason the stories of instant success and easy set-up are the ones we are familiar with.  We’re gluttons for entertainment, and we love to hear the success stories that fuel our imaginations of how we could start our own businesses and become overnight success, garnering millions with little work and less time, and then retire to our dream homes.   Stories of hard won success, slow growth and frustrating learning curves have no place in our minds because we don’t want our positive thinking hampered by oft encountered reality.

Compound the difficulty of starting a business with the setting being in a foreign country where the cultural mindset is so completely different than your own and you have a recipe for frustration.  So, as I was saying, it’s been a bit difficult, but we are making progress.  Any success I experienced in the latter portion of the week sits atop the foundation of experiences and attempts at getting products made in the past two and a half months.  It’s nice to see some semblance of a process with just the slightest bit of momentum.  Now, if we can just get it to pick up some speed.

School of redundancy school…

It has been quite an eventful second week here at the factory.  The painting machine is finally up and running, producing an excellent paint job on our products.  This is exactly what we had been waiting for so we could seriously ramp up production.  Yet it seems any success is met by the proverbial case of two steps forward one step back.  After getting the machine running and teaching our workers how to clean it, we came in the next day to find dried paint all over the machine.  It took us the better part of the morning to clean it up and resulted in a lost day of painting.  Beyond that we continually run into problems with maintaining quality in the work, though I have observed some improvements in the latter part of the week.  The trouble comes from the mindset of some of our workers, that if they can just get the bad product out of their department (and ultimately China) then they don’t have to deal with the problem.  In this case there is little consideration for the customers problems that will arise from this.  It is invariably short sighted.  Unfortunately, going beyond the doors of our factory will bring you to an untold number of other factories that function in this very way.

Therefore, our task has been to figure out ways to get our workers invested in the products they create.  We have discussed a number of options, but the first one we are testing (since my arrival anyway) is to give a few workers who have shown a true interest in their work a small raise.  However, they are also made directly responsible for a specific department (or machine in one case) and if their department begins to suffer in quality they will lose the raise.

Understandably mistakes do happen.  I myself committed one just yesterday when, in a lapse in judgement, I replaced a component of our new paint machine while some of the paint wheels were still running.  The piece I replaced then lodged itself into the wheel putting a nice slice into the side of the wheel.  Thankfully the operating performance of the machine is unhampered, it just doesn’t look as clean as it once did.  It is not without consideration for the opportunity for human error that Virtus is run.  The difference is, when the errors happen, we take responsibility for them and fix them rather than passing them along.

Another challenge we are facing is to get a clear picture of our financial position.  Because the company had to take on its first order prior to the factory being set up, there have been a number of transactions that originated from Ryan’s consulting company rather than Virtus that we need to identify and separate.  Add to this the fact that Chinese businesses don’t like giving receipts because receipts determine how much they pay in taxes, and it makes for an accounts worst nightmare.  However, as of today we are very close to getting our books balanced and every expense accounted for.

So its been a busy and challenging week, and the next one promises to be equally as challenging.  Though as to what those challenges will be, who knows.  In this (as any) business environment, it could be anything.