2013-04-28 - Netherlands 2012-06 Operational Excellence in China

1. Excellence in Management ™
April 28, 2013
Operational Excellence in China
Arie Schreier - PTL Groupwww.PTL-Group.com

2. Survey: Operational Excellence in China
• Objective: to draw attention of senior executives to the key
issues affecting operations in China".
• 35% started the survey but never completed
• Profile of individuals who answered:
C-level managers managing manufacturing companies
more than 5 years in China
100 employees or more
located in China 1st tier cities
Entity: mainly WFOE’s

3. • Managing operations in China is very different
than any other place in the world.
The Management Challenge in China
• Effectiveness of management operation in
China should not be lower than any other
place in the world.

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 in
infrastructure to sustain competitive advantage.
The Management Challenge in China

5. • Who should be the China GM?
• Control of work flows
• Transparency and knowledge
• Western management style vs. traditional Chinese
management style
Challenges of the new entity in China

6. Measures:
• Level of transparency
• Communication channels
• Involvement of HQ
• Report line
• Internal and external controls
Organizational structure for the China operation

7. HQ
IT Logistic Operation CEO HR Sales
IT Logistic Operation Manuf. Finance HR Sales
China GM
Finance
China
Foreigner
Operational Auditor
Loyal AssistantChinese

8. HQ
IT Logistic Operation CEO HR Sales
IT Logistic Operation Sourcing Finance HR Sales
China GM
Finance
China
Chinese
Operational Auditor

9. HQ
IT Logistic Operation CEO HR Sales
IT Logistic Operation Sourcing Finance HR Sales
China
GM
Finance
China
Taiwan/HK
Singapore
Operational Auditor

10. HQ
IT Logistic Operation CEO HR Sales
IT Logistic Operation Sourcing
Finance
Chinese GM
Finance
China
Foreign MD
Loyal Assistant
HR Sales
WFOE
CHINA
Operational Auditor

11. HQ
IT Logistic Operation CEO HR Sales
IT Logistic Operation Sourcing
Finance
Chinese GM
Finance
China
Foreign GM
Loyal Assistant
HR Sales
JV
CHINA
Operational Auditor

12. HQ
IT Logistic Operation CEO HR Sales
IT Logistic Operation Manu. Finance HR Sales
China
GM
Finance
Operational Auditor
China

13. Best Management structure in China

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 coach
Self improvement, training, improving inter departmental
communications, improving management confidence are all
by products of a good repeating audit process.

15. Who generally initiates internal audit activates in you company?
If HQ will not push for internal audit, no one
else will!

16. Recruitment issues
• For SME’s a loss of a manager during the first 2-3 years of
penetration 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. What is the turnover rate in your company for the last 3 years?

18. Have you ever used an assessment company to test loyalty and
integrity of new hires? Would you consider using such service?
Integrity and loyalty can be assessed

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. How often do you revise your classified HS codes?
Note: HS code stands for Harmonized System Code and is
used for calculation of duty.

21. Logistics issues
• Constant review of logistics suppliers: import agents,
transportation, Insurance
• Regular review: HS code, licenses, inspections, customs
regulations
• Review work flows regularly
• Special attention to point of Entry/Exit

22. How often do you physically go to a warehouse and do stock
count sampling?

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. How often does middle management initiate a change in
management/internal processes?

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. How often are your clients being audited by your company?

27. Sourcing issues
• Suppliers will always push purchasers for higher prices
• Every purchasing person is under huge pressure and
temptation
• Setting up a parallel team
• Cross checking with other companies
• Use online resources to check prices
• Details of any deal: delivery time, QC, penalties, down
payments, credit, transportation etc.

28. Where do you see fraud risk initiating from?

29. Turnaround and risk management
• Interim Management/ manager
• Turnaround will require a group of supporting
professional to audit, coach or replace existing
managers during through out the process
• Loose management leaves the best employees
exposed to such corruptive pressures in the field
and within time something will happen.

30. ``
Industrial turnkey project
management in China:
industrial incubator, Product
localization projects
Industrial
Projects
Operational audits,
transformation
and turnaround of
underachieving
subsidiaries in china
Business
Recovery
Equity
Partnerships
Joint investments with
international companies.
What PTL Group Does?
Operations management
for international companies
developing their Sales and
Distribution in China:
logistics, warehousing, HR,
marketing
Management Solutions
Outsourcing

31. www.PTL-Group.com
Shanghai Head Office
Room 301, 798 ZhaoJiaBang Rd.
Shanghai, 200030, P. R. China
Phone: +86 21 64453190, Fax: +86 21 64453191
Arie Schreier
Email: arie@ptl-group.com
Cell: +86 13817825201
Skype: ariesher
Contact Us:
www. PTL-Group.com
China • Israel • The Netherlands • Italy