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Best Practices for Managing Operations in China


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2013-04-28 - Netherlands

Operational Excellence in China

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Best Practices for Managing Operations in China

  1. 1. Excellence in Management ™April 28, 2013Operational Excellence in ChinaArie Schreier - PTL
  2. 2. Survey: Operational Excellence in China• Objective: to draw attention of senior executives to the keyissues affecting operations in China".• 35% started the survey but never completed• Profile of individuals who answered:C-level managers managing manufacturing companiesmore than 5 years in China100 employees or morelocated in China 1st tier citiesEntity: mainly WFOE’s
  3. 3. • Managing operations in China is very differentthan any other place in the world.The Management Challenge in China• Effectiveness of management operation inChina should not be lower than any otherplace in the world.
  4. 4. Why checks and balances are so crucial now?• Technological gap is closing, competitive advantages is reduced• Wider spread of the China operation is crucial• Operational management excellence and investment ininfrastructure to sustain competitive advantage.The Management Challenge in China
  5. 5. • Who should be the China GM?• Control of work flows• Transparency and knowledge• Western management style vs. traditional Chinesemanagement styleChallenges of the new entity in China
  6. 6. Measures:• Level of transparency• Communication channels• Involvement of HQ• Report line• Internal and external controlsOrganizational structure for the China operation
  7. 7. HQIT Logistic Operation CEO HR SalesIT Logistic Operation Manuf. Finance HR SalesChina GMFinanceChinaForeignerOperational AuditorLoyal AssistantChinese
  8. 8. HQIT Logistic Operation CEO HR SalesIT Logistic Operation Sourcing Finance HR SalesChina GMFinanceChinaChineseOperational Auditor
  9. 9. HQIT Logistic Operation CEO HR SalesIT Logistic Operation Sourcing Finance HR SalesChinaGMFinanceChinaTaiwan/HKSingaporeOperational Auditor
  10. 10. HQIT Logistic Operation CEO HR SalesIT Logistic Operation SourcingFinanceChinese GMFinanceChinaForeign MDLoyal AssistantHR SalesWFOECHINAOperational Auditor
  11. 11. HQIT Logistic Operation CEO HR SalesIT Logistic Operation SourcingFinanceChinese GMFinanceChinaForeign GMLoyal AssistantHR SalesJVCHINAOperational Auditor
  12. 12. HQIT Logistic Operation CEO HR SalesIT Logistic Operation Manu. Finance HR SalesChinaGMFinanceOperational AuditorChina
  13. 13. Best Management structure in China
  14. 14. Operational audits• Multiple vs. single source of information• Trust/confidence issues between a GM and local staff• Financial audit• Legal/ Compliance audit• Operational audit: HR, Logistics, Manufacturing, operations• Auditor as a coachSelf improvement, training, improving inter departmentalcommunications, improving management confidence are allby products of a good repeating audit process.
  15. 15. Who generally initiates internal audit activates in you company?If HQ will not push for internal audit, no oneelse will!
  16. 16. Recruitment issues• For SME’s a loss of a manager during the first 2-3 years ofpenetration can be devastating.• Budget to match the required position• Background and moral instincts assessment• Professional history and references• Computerized credibility and integrity tests• Psychological assessment by experienced professional
  17. 17. What is the turnover rate in your company for the last 3 years?
  18. 18. Have you ever used an assessment company to test loyalty andintegrity of new hires? Would you consider using such service?Integrity and loyalty can be assessed
  19. 19. HR issues• Job description perception - manager/employee• CV vs. Job description• Job description vs. reality• Job description vs. CV vs. salary• Performance vs. salary• Bonus system and labor contract• KPI vs. results• Termination issues• Company structure vs. reality
  20. 20. How often do you revise your classified HS codes?Note: HS code stands for Harmonized System Code and isused for calculation of duty.
  21. 21. Logistics issues• Constant review of logistics suppliers: import agents,transportation, Insurance• Regular review: HS code, licenses, inspections, customsregulations• Review work flows regularly• Special attention to point of Entry/Exit
  22. 22. How often do you physically go to a warehouse and do stockcount sampling?
  23. 23. Production issues• Raw material issues• Defected items and production losses• Work processes• Second and third shifts• Selling through the back door• Relationship in the factory (“Who is the boss?”)• Selling price calculations
  24. 24. How often does middle management initiate a change inmanagement/internal processes?
  25. 25. Sales issues• Sales practice in each industry• The distributor dilemma• NDO - Non Dollars Objectives• Transparency of the sales chain• Commissions and “under the table money”• Distribution network• Management of sales people
  26. 26. How often are your clients being audited by your company?
  27. 27. Sourcing issues• Suppliers will always push purchasers for higher prices• Every purchasing person is under huge pressure andtemptation• Setting up a parallel team• Cross checking with other companies• Use online resources to check prices• Details of any deal: delivery time, QC, penalties, downpayments, credit, transportation etc.
  28. 28. Where do you see fraud risk initiating from?
  29. 29. Turnaround and risk management• Interim Management/ manager• Turnaround will require a group of supportingprofessional to audit, coach or replace existingmanagers during through out the process• Loose management leaves the best employeesexposed to such corruptive pressures in the fieldand within time something will happen.
  30. 30. ``Industrial turnkey projectmanagement in China:industrial incubator, Productlocalization projectsIndustrialProjectsOperational audits,transformationand turnaround ofunderachievingsubsidiaries in chinaBusinessRecoveryEquityPartnershipsJoint investments withinternational companies.What PTL Group Does?Operations managementfor international companiesdeveloping their Sales andDistribution in China:logistics, warehousing, HR,marketingManagement SolutionsOutsourcing
  31. 31. www.PTL-Group.comShanghai Head OfficeRoom 301, 798 ZhaoJiaBang Rd.Shanghai, 200030, P. R. ChinaPhone: +86 21 64453190, Fax: +86 21 64453191Arie SchreierEmail: arie@ptl-group.comCell: +86 13817825201Skype: ariesherContact Us:www. PTL-Group.comChina • Israel • The Netherlands • Italy