LESSONS IN CHINA LOGISTICS

If a foreign firm wants to succeed in China, it must cultivate relationships with Chinese partners. And, as John Kelly can attest, that's doubly true where supply-chain efficiency is concerned. Kelly is vice president of operations for Maxwell Shoe Co., a Massachusetts-based company with about $150 million in sales last year. The company designs and markets shoes for women and children under the Mootsies brand name and for private labels. The company has had licensing agreements with Jones New York, Anne Klein and Levis, for which it produces Docker brand footwear.

Most of Maxwell's shoes are made in China. Kelly said the key to Maxwell's success in China is its strong relationships with Chinese buying agents and manufacturers that can meet the company's demands for price, quality and ability to meet production deadlines.Maxwell's Chinese agents do more than place orders with factories. They screen manufacturers, source materials, monitor the production process and ensure that everything bound for the U.S. is properly bar-coded.

To make sure that the buying agents understand Maxwell's system -- and therefore interpret it for the factories -- the agents were invited to the U.S. to study it. 'At first they thought all bar codes were alike,' Kelly said. 'But we repeatedly walked them through our facilities until we broke through the communications barrier.'

Good communications also ensures that shipping documents are filled out properly for both customs clearance and inventory control purposes. Maxwell's inventory system uses automated warehouses and must know the exact dimensions of shipments well in advance of their arrival in the U.S.

'We are relying on documents prepared by the factory to make decisions on whether to delay the shipment en route or not,' Kelly said. 'We may hold the container up at the intermodal facility for a week or a month to maximize our warehouse space.'

In the past seven years there has been only one instance in which faulty documentation caused a shipment to be delayed at customs. 'It was an issue with an item that was under quota and the factory supplied the wrong documents,' Kelly said. 'Mistakes happen. As long as it is not an ongoing occurrence we can accept it.'

Once, when a container arrived in the U.S. with cases of footwear missing, the Chinese buying agents and factory personnel investigated and determined that the cases had been removed -- and not replaced -- by Chinese customs officials. Maxwell's Chinese agents advised the company before the containers reached the U.S. and replaced the goods for free. 'Because of the relationship that we have built, they wanted to make good,' Kelly said.

Because of the fluid nature of trade relations between the U.S. and China, and the recent gyrations of Asian economies, flexibility is something that Maxwell needs, especially in light of the company's dependence on Asian manufacturers.

Working with buying agents gives Maxwell far more flexibility than owning its own production facilities in China, Kelly said. 'With the changing picture over there, we don't want to be locked in,' Kelly said. 'If Vietnam suddenly becomes a better option for producing footwear, we want to have that option.'

Maxwell works with as many as four different buying agents in China, said Kelly. Orders are relayed to the factories though the agents; when the goods are ready to be shipped, the agents notify Consolidated Distribution Services, Maxwell's U.S.-based forwarder.

Consolidated then provides Maxwell with the dimensions of the shipment, and Maxwell authorizes the forwarder to send a container to the factory to be loaded or to let the factory load and ship. The latter option is preferable. 'We try to do as much factory loading as possible to keep costs down,' Kelly said.

If it is a less-than-containerload, the factory will deliver the goods to a consolidator. The factories and Consolidated work together to ensure that the containers are packed as tightly as possible. Ordinarily, the factories and the forwarder exchange shipment data by fax and e-mail. But if the shipment is time-sensitive, Tower Group International, which serves as Maxwell's non-vessel-operating common carrier, gets involved and the parties work around the clock until everything is right.

When the shipment arrives at the Consolidated facility in Hong Kong, Tower Group books space on a vessel or plane. 'Tower contracts out with any number of carriers, making sure they have space when we need it,' he said. 'We rely on them to get us space on an airline at a favorable price if it is a time-sensitive shipment.'

Kelly said that the company is big enough to negotiate its own carrier rates but that Tower Group and Consolidated Distribution provides the company with a level of service that they have come to rely on. 'We end up paying a little more but they work for what we pay them,' he said.

David A. Biederman covers logistics and regulatory aspects

of global trade that affect your bottom line. Please forward

questions, suggestions and concerns to the author at inexdb@crocker.com.

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