Observation in Wenzhou

Introduction:

Terminal is a kind of quick connection device for cable harnessing assembly. This is one of the famous industries in Wenzhou, meanwhile, the low voltage, high voltage electricty controlling device, leather product and automotive spare parts are also the famous industries in that area. Because I worked for that industry of terminal manufacturing and have some experience for that. For a long time, Wenzhou's terminal is always the strongest competitor with Guangdong's terminal manufacturer. Unfortunately, I have no chance to visit Wenzhou to have a fully assessment. Last year, I joined the audit team and went to Wenzhou for observation.

Scope:

Visited two famous terminal, housing and connector manufacturer in Wenzhou. Their sizes are very similar and they have different vision I found. I am going to use these two samples to summarize their common advantage, common disadvantage and differences.

Common advantages:

1. Good business network: the senior management of companies owned their stronge business network in both north and south part of China. The bosses of both companies were started in a salesman to build up their business, for many years experience and effort, they are not only know the business partners in whole China, also, they get so many technicial support from GuangDong and Taiwan partners.
2. Quick and wide sensation: because of their well established business network, they can recieve the news and marketing development signal faster than other district. Also, due to they have more updated news on hand by thier network, their mindset are much wider than the others. Furthermore, they are willing to learn the way of operation. This is one of the important factors of their success.
3. Good relationship and teamwork: This item is not talking about the relationship and team work within the company. Furthermore, they have much better relationship with Goveronment out of the district in Wenzhou. In simply say, the classmate of the bosses are all working in government, even to be the town mayor, offcause, they can get the benefit in local policy by this relationship. On the other hand, their family supporting is also significant.
4. Market reputation: They almost seperated the industries by different town districts. For this town, the famous product is leather product, for another town, automotive spare parts is their main product for most of her companies. During the visiting, I found so many foreign customer to visit that area to look for their supply. It is too easy to get a suitable supply when they walk around the town.
5. Resource sharing: Because of the market established successfully, the other supporting partners setup in their related area for business. For example, there are so many machining vendors for tools located in the town closed to the terminal manufacturer, offcause, they know the companies are needed tooling and machining sub-contract. Due to the case, the human resource also reinforce the industry in Wenzhou because many techinical people knew that they can get a job easily in Wenzhou.
6. Geographic location: I believed that we no need a detailly explanation. Please look at the map, Wenzhou locates in the middle between Shanghai and Shenzhen.

Ineluctable situation, disadvantages accompanies with advantages all the time. I found some potential problems for the terminal manufacturing industry in Wenzhou as below,

Common disadvantages:

1. Government policy: Due to high income of the companies in that area, the local tax rate and the land price increased accordingly. Intangibly, the local policy will block the way of the local business for further development. At this moment, some industries are started to move the main manufacturing base to Hangzhou and Suzhou.
2. Environment protection: Focus on terminal manufacturing, the plating process is a main factor of success. Due to the policy of environment protection, the plating sub-contractor as forced to consolidate into one area. The plating technique is much lower than Guangdong area, and deeply affected their quality of product (dimensional quality). For the global harness manufacturer are using the fully automatic crimping machine for process and Wenzhou's terminal can not be used in that way obviously. It makes the industry far away to deal with global customer, I am sorry that I can not see they have any solution of that.
3. Not attend to their proper works: due to the quick and updated news, good business network and huge capital we made from many years, the bosses from Wenzhou started to shift to other high return business such as land and real estate trading, even cotton trading. As we know, it is the easiler and fastest way to get fortune, offcause, it needs some lucky. They no more concentrated their core business (manufacturing business). Without attention of technical and management improvement but just step on their feet, I have no surprise that the industry in Wenzhou would be catch up by other district.
4. Fortune can not be extended to third generation: This is a Chinese maxim and always proved its accuracy by real cases. If our next generation saw us just working in speculation but earned easily and quickly, they will do the same way in their lifetime. They don't know the previous generation how to save the capital at the beginning and how they were working to build up the business. In Wenzhou right now, all the bosses are going to or went to play the land trading, what happen to their next? How many land left for them to trade at that moment? I hope they should consider my concern here!

The differences between that two suppliers:

1. The bigger supplier shown me that they are going to expand the company in capacity. No evidence shown me that they are going to improve her management system as well as quality system. They told me that they order a lot of production machines, but I can not find the machines has any upgrade. Turnaround to lean, I can not see any concept they knew of lean. 5S, standardization, continuous flow are totally absented there, Self-complacent!
2. The smaller supplier shown me that they understood the disadvantage of the industry, also shown me that they are finding the solution. For the common disadvantage item 2, they planned to setup the plating process internally to control the quality. It is good signal! At least they have a little bit ideas of continuous improvement. On the other hand, the management shown me the motivation of improving refer to their new plant planning. Some years later, I believed the smaller supplier will catch up the bigger one.

P.S.:

First of all, the above two post are just my personal observation and may be not showing the true at all. This is only my visiting summary for reference. Eventaully, this business trip is so valuable for me to analysis the terminal manufacturing industry and I gained much for my experience!