The Challenges of Overseas Manufacturing, Part I of III

ChinaIn light of the recent toy recall, the special challenges faced by companies when working with overseas contract manufacturers is coming to light again. Earlier this summer, I had several conversations about this topic with Ashton Udall, partner at Global Sourcing Specialists and blogger at Product Global.

Ashton and GSS specialize in helping companies succeed when using offshore manufacturing. There can be lots of benefits: like cost and speed. There are also potential pitfalls: mis-communications, lack of proper expectation setting, and others can easily make you throw up your hands asking “where are all these magical cost savings I heard about?” You have to go into these relationships with your eyes wide open. As a Product Manager who is Pragmatic trained, you already know what to communicate in your requirements. What you may not know is how to communicate them to someone not used to receiving formal requirements and where the common pitfalls can be.

My current company is a startup that makes heavy use of overseas contract manufacturing. We have suffered the pain of all the problems above and reaped many of the benefits. Take Ashton’s and my experiences for yourself so that you can have a faster learning curve when you go through the same transition.

Part I: Communications

When I worked at NetSolve, and later Cisco, every year HR would perform an employee satisfaction survey. It would ask questions like “What are you most/least satisfied about in your current position” and “How can the management team improve?” Every year, like clockwork, the results would come out and be the same. The #1 area that employees singled out for improvement year-over-year? …Communications. If communications is such a problem inside a company, can you imagine between 2 companies? Across 3000 miles? With 2 or more languages?

Product Managers overcome the internal communications problem by writing formal requirements in a well-understood format using a template such as an MRD. MRDs, depending on the structure of the company and the skillsets in place, are drilled into PRDs and/or functional specifications by business analysts or development architects. A PM with a good support structure doesn’t need to be involved in the fine grained details of how a product will be built, and a good development lead will know when there is a red flag or decision point when they should involve the PM.

Manufacturing plant floor

At most offshore manufacturers, they don’t have any of those functions. They will have no idea how to digest a MRD. Hopefully, you have someone in Operations or Development that is tasked with interfacing with the offshore team (if you don’t, get one – fast!). Your first communications will be by trial and error as you find out what works. Ashton points out that a lot of (Americans?) could eat some humble pie with regards to how they interact with their overseas peers:

I always chuckle at those guys who have spent a couple weeks in a country and like to act as if they are now ‘one’ with the culture. Horse puckey. This takes years, perhaps decades, if even possible. And most people who have spent that kind of time, would be too humble about the challenge to ever claim something like that.

It’s also important to understand the concept of speed. In America, we have bought into the myth that you can “get things done faster” overseas. Why?! There is nothing different about getting part produced over there than it is over here. What people really mean is that you can apply more resources to a problem overseas at the same cost as domestically, resulting in a faster turnaround. In fact, you must do this overseas because of their concept of speed.

We want things done now, in fact we want them done yesterday. In China or Taiwan, the culture doesn’t work that way. If you ask them “Is this going to be ready tomorrow?” You will get the answer “Yes!” Even if they know it will not be ready. Their culture does not allow for negative answers in many cases. Ashton explains:

Many countries do not move as quickly into business matters the way Americans do. They like to get to know each other and get a feel for the person and company they are dealing with. Business is much more relationship driven, so you better put some effort into driving relationships with the people you need help from to get things done.

At Product Global, Ashton has posted Part I of his take on the same topic. You may also want to review his post for additional color commentary.

Parts II of this post will explore tactics to overcome the communications barrier, and setting the right expectations (internally and externally). Part III will explore strategies for success when using overseas design and manufacturing.

Product Beautiful

Product Global

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