The distance between the United States is far, and that statement remains true whether you are describing geography, culture, or business practices. But how much of what we have been led to believe about the country with the world’s second largest economy is true and how much is hype?

We decided to ask someone who is there, making a living bridging the gaps in supply chains and understanding between Chinese companies and their Western customers.

In this week’s Dial P for Procurement interview, Kelly Barner is joined by Jeffrey Goldstein, Founder & President of ONWARD Global. More important than his title though, is his location. Jeffrey has been based in Shanghai, China for the last 12 years. He works with international startups, brands, and retailers, serving as their on-the-ground representation in China, managing their sourcing, manufacturing, and ethical compliance.

In this interview, Kelly asks Jeffrey frank questions about:

• How companies have partnered with firms based in China over the last couple of years despite the strict travel restrictions imposed as part of China’s ‘Zero COVID’ policy
• Whether commonly held notions of what a ‘business relationship’ means in the West versus China are compatible
• Procurement investments in digital transformation – have they improved interactions with Chinese suppliers?
• The risks Western companies may be creating for themselves if they push Chinese suppliers too hard on price

Intro/Outro (00:01):

Welcome to dial P for procurement, a show focused on today’s biggest spin supplier and contract management related business opportunities. Dial P investigates, the nuanced and constantly evolving boundary of the procurement supply chain divide with a broadcast of engaged executives, providers thought leaders give us an hour and we’ll provide you with a new perspective on supply chain value. And now it’s time to dial P for procurement.

Kelly Barner (00:32):

Hi everybody. Thank you so much for joining me for this episode of dial P for procurement today, I have a video interview for you that I think you’re really going to enjoy quick programming note, or we get started though effective this year. Dial P now has all of its own dedicated RSS feeds. So any platform or service that you use to consume your podcast content on we are there. So please make sure to subscribe if you feel so moved, offer us a review that will help other people find us and bring new people into the conversation. So without further delay, I would like to introduce a guest that I’m very excited to have met and to have brought to you for this conversation today, I’m joined by Jeffrey Goldstein, who is the founder and president of onward global. So hi Jeff, thank you so much for being here with me today.

Jeffrey Goldstein (01:17):

Thank you so much, Kelly. I’ve been following you and enjoying your content for a while now, and it’s an honor to be here with now,

Kelly Barner (01:23):

Speaking of here in this virtual world, any of us could be anywhere, but where you are is gonna be an important basis of our conversation today. So why don’t I have you start by providing a brief description of what you do and as I teased where you are right now? Sure.

Jeffrey Goldstein (01:39):

Well, I’m calling in, uh, it’s your morning in the us. I’m calling in 12 hours ahead of you from Shanghai, China. I’ve been based in China for 12 years, and I own a company called onward global, where I work with international startups, brands, retailers, and helping represent them here in China, managing their sourcing, manufac, actioning, and ethical compliance.

Kelly Barner (02:06):

So clearly we’re gonna have an incredibly relevant conversation for anybody in procurement supply chain, but just a few curiosity type things before we get into the business stuff. What is daily life in China? Like for somebody I’ve certainly never traveled there? Um, what is something about daily life that you could share with those? Who’ve never traveled to that part of the world?

Jeffrey Goldstein (02:26):

Sure. Daily life in many parts of China moves quick. And I think the reason for that is for how fast things have really developed here and how fast they’re continuing to develop. So cities in China are usually categorized by tier one, tier two and or three, and those are defined by their level of development and in a tier one city like Shanghai or Beijing that has between 15 to 25 million people. There’s a very cosmopolitan, uh, city in Shanghai where I am very similar to New York London in terms of, uh, you know, it’s hustle and bustle. In the meantime in tier three cities, which, uh, you have a very similar but different hustle and bustle. These are growing cities with populations of five to 10 million people with major your manufacturing hubs around them. Many of which literally when I first came to China, 10, 12 years ago were dirt roads and now are aligned with movie theaters and Starbucks. It’s quite incredible.

Kelly Barner (03:33):

Um, now if we, we stay for just one more question on sort of the personal side of things, what is something social or cultural that, that you find interesting that you can share about life in China? Um, that the rest of us might not know.

Jeffrey Goldstein (03:49):

Sure. You know, I think it’s hard sometimes to realize, and to remember that Chinese civilization dates back more than 3,500 years and China, uh, civilization has had a huge influence throughout east Asia. And so while we may know that things like gun powder and the compass and paper and silk all originated from China, I think a lot of people don’t realize that Chinese cultural philosophies also originated from China dating back more, more than 2,500 years ago. And these cultural philosophies such as Confucianism, for example, still plays a very deep role in China and east Asian culture, uh, and are very, very different than, uh, American and Western culture. And so that’s obviously very important to, to recognize and to appreciate when trying to understand this part of the world.

Kelly Barner (04:43):

No, absolutely. And, and those things do tend to run deep. Right? I can even speak from my perspective, if I think just in the us scope, I’m obviously in Boston, we consider ourselves, you know, from an American standpoint where the history comes from when we talk to colleagues in Europe, you know, they laugh at the newness of our, our history, right? Because comparatively it’s so much younger. Now when you jump to where you are in China, you’re talking about a completely different scope and scale of time and, and all of that ends up being carried by, by everybody sort of, as you said, culturally, there are these enormous factors that, that, um, certainly I’m sure it’s interesting. And I’m sure some of them come into be business as well as being part of personal life.

Jeffrey Goldstein (05:23):

Absolutely.

Kelly Barner (05:24):

So one of the interesting things that you’re gonna take us through today is sort of like a doing business in China, 1 0 1, uh, China is in the business news a lot and certainly even professionals, whether they’re in procurement supply chain or otherwise based in Europe and the us have first, second, third tier supply partners that may be based in China. Um, but given our distance, we probably over generalize a little bit. So China is a massive place from your perspective with boots on the ground. Is there one China or is it more geographically broken down or even as you just mentioned, are we better off thinking of it in terms of development tiers?

Jeffrey Goldstein (06:06):

Sure. Great question. And China’s made up of 22 different provinces and has 56 different ethnicities, meaning that just within China, there are hundreds of different languages and traditions throughout the country. And as I mentioned, a few questions before it’s also categorized and broken up really by tier one, tier two and tier three cities. So the level of consumer sophistication, qualified employees, infrastructure, labor cost all really differs throughout the country from a sourcing and procurement aspect. It’s important to note that most exported consumer goods that are manufactured in China and exported to the us come from four provinces on the Eastern coast of China. And these have incredibly well developed supply chains, healthy competition between factories, a wide variety of raw material availability. And four out of five of the largest ports in the world are located in these four provinces. So it’s a very big and diverse country, but if you know where and how to look, uh, you certainly have an advantage

Kelly Barner (07:19):

Now. And, and that brings us to our next question. So I was going to ask you, what should the typical business person, even beyond procurement and supply chain know about China? It sounds like to start with knowing of something a little bit more specifically about where you’re sourcing. So digging a little bit deeper than just China, as a whole thinking about province, think of about maybe what port is nearest by, what is something else that we should potentially learn to educate ourselves if we have a, a first or NT supplier in China? You

Jeffrey Goldstein (07:50):

Know, I think some of the perceptions that people have about sourcing or manufacturing in China is, you know, the first perceptions may be is cheap product cheap quality, a concern over ethical compliance within the supply chain. And the thought that my gosh, China’s so far away, how am I ever supposed to really control my supply chain or ensure transparency or to really know who I’m working with? I think these are all quite outdated. I always tell my clients or companies that I work with that the Chinese supply chain today is so developed and sophisticated that we, you can develop and manufacture anything at scale. If you start with professional sourcing, uh, and good sourcing in, in China requires time, and it requires resources to identify qualified factories, to physically vet them and to establish relations with them at different levels of management hierarchy. And I say that because Chinese culture is very relationship driven. So the vetting process of suppliers and understanding a supplier’s real capabilities, intentions, and commitments oftentimes comes during, or even after that relationship building process. Um, and that can be very frustra trading for companies, but if you have the time and the resources and the understanding, anything is possible here,

Kelly Barner (09:20):

Well, and let’s stay with that because we’ve talked a little bit about the role that history and innovation and different types of philosophies have on modern Chinese culture. But let’s talk a little bit about modern Chinese business culture. Certain, as I mentioned, China is often in the news. Uh, you can’t be in the news a lot and have it always be good news. You talked about the relationship aspect. What are some of the other business cultural or potentially even issues with political tie-ins that people need to be aware of if they’re doing business in China?

Jeffrey Goldstein (09:54):

Sure. Well, I think from a political aspect, the elephant in the room, right, is the trade war. Yeah. And so I’m, I’m gonna be giving an answer to this, but reminding listeners that I represent and I work with us companies and us buyers, not Chinese suppliers, but us importers who are today paying an additional 7, 15, 20 5% tariff have really, really been impacted. And the thinking is that this would incentivize them to diversify where they source from. What many of these companies have learned though, the last few years for better or worse is that they’re so simply just no place to go, at least not immediately. Yeah. There are not many other countries. There may not be other countries out there that have as diverse, efficient, large and competitive as supply chain is China. So it’s going to take time in the meantime, Chinese factories who are selling products to U us importers, and many of whom have helped or been forced to absorb that extra tariff from their customers. They’re trying very hard to replace their us customers some more successful than others. So if you talk to a us importer or Chinese factory about what’s going on these days, they’re both feeling a lot out of pain and it’s a half, half a trillion dollar supply chain under severe economic and political stress and how this is all gonna play out in the next few years that’s anybody’s guess.

Kelly Barner (11:32):

And that is where it’s so important for us not to be hold into some of these outdated ideas. Right? You talked about some of the ways that we might think about it. I can even think in my own experience, you know, I’ll I’ll date myself. Oh my goodness. Before cloud technology, um, we would talk about low cost country sourcing. We would talk about either outsourcing or offshoring, depending on how precise you want it to be now working with companies in China companies in, as you said, Asia, it’s now just sourcing, right? It’s no longer as we don’t need to be as specific because as you said, there aren’t really any alternatives. So it’s not like we’re saying, okay, I could E either buy this component or have this process conducted here or do it in a low cost country. China is kind of the place to have these things done. And as you said, it, it’s going to take time and a commitment on the part of companies, if they really do wanna be able to source from other parts of the world. Yeah. Now fully.

Jeffrey Goldstein (12:29):

Yeah. Fully agree.

Kelly Barner (12:30):

When, when I think about, certainly I’m sitting here in Massachusetts, China does seem incredibly far away and over the last few years, travel of all kinds has been restricted. What are the advantages? And certainly I’m, I’m asking you this, knowing that you are the boots on the ground, what are the advantages for us based or Europe based or north American based companies working with someone who boots on the ground when they know that they’re going to be sourcing products or components or materials in China?

Jeffrey Goldstein (12:59):

Sure. I mean the most immediate advantage of having someone on the ground is that Skyper emails don’t always do justice, or don’t always do the job and trying to communicate timely or sensitive challenges and opportunities across, across the world. So by having someone who can immediately be on site for you at a supplier on behalf of headquarter, that can really help expedite negotiations, understanding the root cause of challenges, helping implement corrective action plans, things of that sort, um, that has an immediate, uh, positive impact on your, your operation. Taking that a step further. There’s the reality that suppliers tend to operate better when they know that they can be held accountable. Right? So when a supplier knows that there’s someone here on the ground that can come inspect them or audit them at any time, they’ll usually perform better. And that’s especially the case when a supplier that the person that boots on the ground here on behalf of headquarter has decision making power and reports directly to senior management at headquarter, and has the power. If a supplier is not performing well to call up the COO and say, Hey, listen, these guys aren’t complying. I’m here in China. I have capabilities to source other vendors. How do you want to proceed? So that alone just elevates the level of performance and accountability that your suppliers may have. Yeah.

Kelly Barner (14:26):

Now one other 1, 0, 1 question I wanna ask you, you know, you’ve talked about expediting things. You’ve talked about having someone on the ground to address things immediately, but earlier you talked about sort of this relationship building aspect. And I know from my own experience of working with teams in very different parts of the world, that our concept of time is not always something that necessarily translates. You know, two Americans will get a, in a room and say, okay, you’re either my friend, you’re a potential friend. You’re my enemy. You’re a potential enemy. We’re gonna figure it out pretty quick and get right down to business. But when we bring in the cultural considerations and the expectations around building relationship, potentially also building trust, can you talk a little bit around some of maybe the speed of decision differences or the investment of time in building relationship expectations that might differ between Asia and the west?

Jeffrey Goldstein (15:21):

Sure. That’s a great question. I mean, I mentioned before peeling an onion, if you talk to a lot of buyers or procurement people who spend time sourcing or in vendor, supplier management in China, they’ll use the phrase, peeling, an onion to get down to the bottom of things and sometimes two step forward, one step back, um, you know, it’s, the culture is different. The language is different. Yeah. And, um, you know, Americans tend to view the world intend to make decisions and tend to think of things in very black and white yes or no. And in China, I think over most of Asia, at least east Asia, they navigate in this gray zone, uh, where yes. May not always mean, yes. I mean, in some cultures saying no to your ball, to your customer saying no to a power of authority as disrespectful. Um, so certainly understanding your supplier’s capabilities, intentions, and commitments that that can certainly take time. And that’s why I mentioned, you know, it’s important to take a professional approach to sourcing because the buyers and the individuals who just go online, find a company and place an order. Those are very often the companies that you hear about, uh, being shipped junk and, you know, uh, having the China horror story, which we’ve all heard of.

Kelly Barner (16:48):

So you can sort of help double translate, right. Obviously there’s, in some cases, a language barrier, depending on, you know, how much English is spoken on the ground, but you can also sort of culturally translate where maybe everybody heard no. Or maybe everybody heard. Yes. But based on your experience, you can say, just letting you know, that was a no, that means, yes, that was a yes. That means no, that’s a, yes. That means maybe, um, having all of those factors at play. I see where that’s almost even the difference between boots on the ground and boots on the ground for 12 years. Right. Because you can be boots on the ground and immediately be in a factory or a facility, but you’re steeped in the culture. At this point, you can pick up some of the nuances,

Jeffrey Goldstein (17:28):

Right. That’s right. And you know, the, the other thing that’s interesting, and this is actually something that I find my clients and headquarters may not always feel the same, but, you know, look at the, a lot of the time, the supplier is not always at fault, right? A lot of the time it’s the procurement corporate procurement office or headquarters or the design team that is communicating things in an inefficient manner or departments within headquarter and the corporate structure aren’t communicating well. Um, so a big part of it in my work is I represent headquarter and managing suppliers and the supply chain, but sometimes it’s also calling headquarter and saying, Hey, let’s and guys, or gals, you know, the way we’re communicating this a supplier, they don’t understand it. Uh, or I’m American. I read English just fine, but I don’t even understand it. So it’s also bridging the gap on both ends, you know?

Kelly Barner (18:24):

Okay. Now I, out of curiosity and I keep thinking of follow up questions to ask you in 12 years, digital technology, digital business has changed a ton. I wonder if in some ways our increasing reliance and dependence upon digital as our means of information storage and communication has actually created as many potential risks. Um, and this is completely global, not in China or not just in Asia, but where, where you, you do have all of the relationship and the nuance stripped out of a message when everything is being transmitted through system APIs or system generated emails. Is there a role that digital technology plays in this where it’s either maybe increased the complexity or increased some of the misunderstandings, or is there an opportunity for us to improve the way we use digital technology to actually alleviate some of those misunderstandings?

Jeffrey Goldstein (19:20):

That’s a good question. I think, you know, just like the logistics industry right now has been making huge transformations and changes in how they’re implementing tech. You know, it’s crazy to think that just a few years ago, the logistics industry was still relying so much on just paper stamps that’s right. And pens. And I think at a sourcing level, at least in product development and purchase order placement and communication, there has not been a lot of tech advancements, um, at least on a ground level in procurement between, um, Chi between the us and China. But those are certainly things that yeah. You know, I’d look forward to utilizing if they were out there.

Kelly Barner (20:04):

Yeah. And that’s, and that’s an interesting thought for me to take back to a procurement and sourcing community because, you know, spoiler a lot, we think we’re doing pretty great. So clearly there are still opportunities for us to continue to improve. And maybe it has to do with, you know, we have some conversations internally around, oh, what is the supplier experience? How easy is it to onboard suppliers? How easy is it for them to get information or have transparency into what’s happening that suggests to that there’s still an opportunity, especially multiple tiers into the supply chain for us to improve the flow of information and the sophistication that we’re able to bring to bear. So that suppliers in China are actually benefiting from it and know what we want.

Jeffrey Goldstein (20:45):

Yeah, absolutely. I mean, the other thing to consider that a lot of Americans, or, you know, foreign companies don’t realize a lot of apps and websites do not work here in China. Um, I’d say half the applications that we use in America on a daily basis do not work here in China. Okay. Um, so that, that’s another thing to consider is how viable are they for Chinese suppliers to really utilize and, and take advantage of?

Kelly Barner (21:11):

Absolutely. Um, so I wanna dig a little bit deeper beyond the 1 0 1. Um, and think about what it’s really like for professionals and companies to do business with China, from afar. You know, we’ve talked about the fact that you can be boots on the ground. You’re a established, you fully understand what’s going on there, but like everything else over the last few years COVID has played a huge role in terms of how companies in, in these two areas of the world work together. Um, can you give me a sense of where are things now around in and out travel restrictions and how is that maybe, you know, put it in the context of the, the changes and the shifts that you’ve seen over the last couple of years?

Jeffrey Goldstein (21:52):

Sure. I mean, China has had a very strict, uh, zero COVID policy for the last two years. And you know, it it’s ironic because this is obviously where this whole thing started and grew. Uh, but since China contained it two years ago through their very strict policies and methods, we really have been zero COVID in China. I don’t know anyone who knows anyone who knows anyone who knows anyone in China, who’s gotten COVID the last two years. Um, and they’ve been able to achieve that by having very strict travel restrictions and obviously keeping their borders closed. Uh, so it’s very difficult for corporate for anyone to, to travel to China today, other than very senior corporate executives or family members that meet very specific requirements. Um, unfortunately I really don’t see borders opening up this year and maybe even going into 2023. Mm.

Kelly Barner (22:54):

Now, to what extent prior to all of this would high level corporate executives have been traveling to China to either meet with supplier leadership teams or visit facilities. So I guess I’m trying to get a sense of how much of a fall off is this really,

Jeffrey Goldstein (23:08):

Uh, it’s interesting I’m mean usually, you know, it depends on the size of the company, right? Um, a 5 million company who’s purchasing 5 million versus 75 million, you know, will differ. But usually, and I always recommend my clients that come out here a few times a year at minimum, uh, to visit their factories and to understand where their production is taking place to build relations with owners. Like I said, China’s very relationship driven. So the, the time spent at dinner and having drinks with a factory owner oftentimes is just as important, uh, for the long term relationship as the time spent, you know, in an office at the factory.

Kelly Barner (23:49):

Now let’s talk then about some of the risks and let’s actually stay with that relationship piece. Uh, because I think when I was initially thinking about asking you about risks, my brain instantly goes to operational, but given some of the concerns, given some of the supply chain and securities, we’ve all been dealing with, um, I’ve heard people say, you know, now’s not a good time to make new friends where you do have existing relationships. Those are absolutely mission critical, and you wanna protect them. What are the risks that start to fester and grow around maybe the breakdown of those relationships, because you can’t sit at the dinner table face to face.

Jeffrey Goldstein (24:27):

Yeah. Great question. I mean, I think there’s two primary risks right now that north American companies ought to be focused on trying to minimize one of those risks is happening from suppliers simply just knowing that their customers can’t travel here and that their customers don’t have as much oversight. And so this is creating an opportunity for suppliers to consider subcontracting and they benefit from this by reducing their overhead and saving costs by manufacturing and unauthorized locations. And if they do this, the risk to buyers is not only the non-compliance with the social responsibility commitments that they’ve made to their customers, but when their purchase orders and production is really broken up into different subcontracted facility, the higher chance of quality defect and inconsistency, another very important risk that’s happening is that over 20 years of buyers negotiating lower and lower costs from their suppliers, many suppliers today just simply aren’t sustainably profitable.

Jeffrey Goldstein (25:41):

Okay. I’d say that the average Chinese supplier that selling a, a good product between the price of three to $10 to their customer, their customer being a us importer, they’re making an average of three to 5% gross margin. And so the financial risk is high for them. If they’re unable to operate with a certain level of confi consistency. And so when suppliers find cells in that situation, they may start considering how do I cut corners? Yeah. And they cut corners by changing material, by changing a process or by, you know, changing some other level of, or aspect of integrity. And if buyers don’t have a good relationship or a good communication with their buyers, with their suppliers, I mean, they may be finding that out simply just too late.

Kelly Barner (26:33):

Yeah. Now, even in north America, we’re seeing a lot of suppliers start to push back because labor shortages, fuel costs are up raw material costs are up and we are constantly getting phone calls and emails from these suppliers saying, I can no longer come through on the rate that we’ve contracted because of a, B and C given what you had said about in not all cases, but some they’re not being a lot of viable alternatives ready today to take this volume from China, I’m being interested in your thoughts, why a Chinese supplier pressed on margin would find a way to subcontract versus going back to their customer and saying, you know, you read the newspaper. I can’t hold that rate anymore. Here’s detailed math. Um, is it the interaction with the companies in the different parts of world? Is it the sense that subcontracting really is the fastest, best way to do it? Why would Chinese suppliers push down as opposed to pushing up, which is what we’re seeing in the west?

Jeffrey Goldstein (27:33):

Sure. Certainly. I think suppliers try. Right. And, um, you know, China, like I said, they have such a developed chain and there’s so many factories that the first response a buyer gives is, look, you can’t meet my price on this. I’m gonna go find another factory. Okay. And that, that’s kind of the unfortunate situation today. Um, you know, it’s interesting before 2008 USA was the market. The, that factories just, you know, you walked in as an American, they would just, they would love you. You’re an American buyer. There’s no market in the world that, that, uh, can compare to the us after the 2008 financial crisis. A lot of north American companies, a lot of foreign companies either went bankrupt or were delayed in their payments and that true down the supply chain. And that was the first lesson that Chinese suppliers, uh, really learned. And with COVID now, um, you know, and the trade war and buyers, just continuing to push. And as they would say, maybe crush their suppliers, negotiating with their suppliers. They they’re looking for alternative options right now. Certainly just like American companies are looking for alternative places to manufacture Chinese factories are looking for alternative buyers.

Kelly Barner (28:54):

So right now we’re in a little bit of a, you know, you gotta dance with the one who brung you kind of situation. Right, right. China’s gotta deal with us because we’ve been their customers for so long. We feel compelled to do business with them because we can’t find ready alternative sources. Um, is there a way that you can mediate, not just the specific situation of, you know, is this factory compliant, you know, is the information getting back and forth, but is there a way for you to mediate sort of the understanding of some of these relational issues around, okay. American company, you need to understand, you may threaten to go to another factory, but you’re, you’re causing other things to happen. And Hey, Chinese supplier, we know you’re just trying to do what you have to do in order to keep your rates the same, but can you see where you’re creating problems for this Western country? Are those some of the kinds of conversations that you get involved in?

Jeffrey Goldstein (29:47):

Yeah. I mean, that, that’s a great, that’s a great question. And, you know, as, as we said before, sometimes part of my job is communicating back to headquarter, pushing back on headquarter a little bit training headquarter. Yeah. And so, you know, sometimes when, even one of my clients or when a buyer is really negotiating hard with a factory, we gotta say, Hey, listen, you know, if we’re really gonna negotiate this hard or reduce their price this much, yes. We’re gonna be getting a better cost right now. But that means down the line, they may be jeopardizing or set sacrificing some of the quality. And so down the road, instead of inspecting a production order twice, we may have to go do four rounds of inspections. Okay. At the end of the day, that’s just as costly as a accepting a slightly li uh, higher cost upfront.

Jeffrey Goldstein (30:38):

Right? Yeah. Um, so those are, there’s certainly the give and take. And a lot of the time it is educating headquarter and buyers as to how to think about it. I mean, the challenge that I have sometimes, and I think that suppliers have as well is, you know, especially when you work with the bigger corporations and retailers, a lot of the time the buying office and the ethical compliance office are inv very different parts of the building, you know, maybe for a strategic reason. So when you talk to a buyer about, Hey, listen, it’s very hard to make this product for $6, especially when I’m trying to implement all these corrective action plans and ethical compliant programs. The buyer says, look, I’m a buyer. Don’t talk to me about that. And then when you have that conversation with ethical sourcing director, they’re like, look, I don’t deal with buying. Just make sure you implement the corrective action plans. Yeah. So, like you said, it’s, it’s gotta be a give and take and a balancing act if you will.

Kelly Barner (31:34):

Yeah. Now, so often in the west, uh, these end things end up getting monitored or visibility is created through regulation, right. We tend to say, okay, there’s some new law and now we’re required to do this reporting, or now we’re required to whatever the frequency of, of inspections is. Do you see Western companies bearing the cost of proving their regulatory compliance? Or is that something that ends up also getting pushed off on suppliers? Um, that there’s either a cost in terms of, you know, literally having to pay some kind of fee to proof that they’re compliant or even the cost of distracting their team from doing some kind of primary operational thing in order to sit down with you and your team and answer questions, what does the overhead look like on the supplier and when, and regulations increase in the west?

Jeffrey Goldstein (32:26):

Sure. You know, it’s interesting because before I was in sourcing, I was actually an ethical compliance and social compliance manager, an auditor. Uh, so I’ve seen both sides of it. And I learned that, you know, there’s an unfortunate reality, uh, in the supply chain today. And especially in those 150 page corporate guidebooks that so many companies have

Kelly Barner (32:54):

The nice glossy ones.

Jeffrey Goldstein (32:56):

That’s right. Yeah. That, you know, the math just doesn’t add up in trying to get that a or green social compliance audit report, and still trying to make a $5 50 cents backpack. The math just doesn’t add up. And so I remember when I was in that position as an ethical compliance manager here in China, a lot, it was me understanding both sides of it. And, you know, working to educate not only the factory, but also headquarter sometimes and saying, look, if we’re just gonna have a black and white pass or fail audit, it’s unrealistic. We’re giving suppliers the incentive to lie. But if we’re very honest with them and we say, look, we understand passing everything with a green or grade a compliant, you know, result today is not possible. Let’s try to meet 75%. Be very honest with us as to what your challenges are. And then let’s work together step by step to try to input meant those corrective action plans over a certain period of time. Then the factory can kind of, or the supplier can relax a little bit, feel more open, um, you know, and, and communicate better. And the more understanding and communication there is, right. And so win-win for everyone. Well,

Kelly Barner (34:16):

One of the things that really strikes me as interesting, and I’ve had this thought a few different times during our conversation is that as much as I came to this sort of anticipating, okay, let’s talk about differences. There are some very key similarities to what you are talking about to what we’re even hearing from north American suppliers. So for instance, the issue of on time payment or reasonably timed payment, especially as companies try to do more business with small suppliers that becomes, uh, far more critical to those suppliers dependent on that cashflow. So that is certainly a topic that resonates. We’ve heard that a lot of times, but even this idea around the pressures created either by regulation or by truthfully consumer expectations, you know, things like environmental, social, and governance, like supplier diversity, there’s the expectation of what they wanna see in that nice glossy report.

Kelly Barner (35:07):

And then there’s the poor team of people tasked with not only trying to hit the expectations, but prove that the expectations have been hit. It actually sounds there’s a lot more similarities. Yes, you may be a whole lot further away and there are language barriers and time barriers and cultural barriers, but it’s really sort of the same set of challenges that, you know, you are feeling that we are attempting to work through locally. Um, and it’s interesting, even when you talk about, you know, it was a lesson learned for Chinese suppliers, that payment might be an issue that has been a huge cry in north America, Western Europe, even Latin America, depending where people have manufacturing facilities on time, payment of suppliers is an enormous issue. So clearly there are, as you said, just like the ethical compliance office and the procurement office might be far away.

Kelly Barner (36:00):

We also, haven’t seen finance in a little while, so they’re working towards their metrics. They’re trying to protect their own working capital, but there are implications into the supply chain. Um, now I know you mentioned that a lot of your work is educating headquarters about either dynamics or shoes or conditions on the ground, and that’s very specific to their situation. But if there are companies here in north America, Western Europe, who don’t have someone like you on the ground, educating them specifically and need to bolster their general education, what is a way for Western companies to increase their understanding, not only of how things work culturally and operationally, what the opportunities are, but also maybe how some of their processes and policies are making it difficult for them to leverage maximum value from suppliers that are in Asia.

Jeffrey Goldstein (36:51):

Sure. Well, if a company is already, already sourcing in manufacturing in China and they have they’re, they have no, I’ve been in China for two years to meet with their suppliers and they have the resources and capability to hire someone, even if it’s just for a short term period to go verify things on their behalf. Yeah. I would strongly suggest that, um, if they don’t have the resources or if that’s not something they’d like to consider, I just being very proactive in keeping in touch with your suppliers is so important. You know, the, the horror stories emerge when buyers just place an order and then they just cross their fingers and hope that 60, 90 days later, the shipment’s gonna be on time. Right. Um, so, you know, we have social, we, we use Skype, all the suppliers use Skype. So just being proactive and trying to get weekly updates from them and, uh, really being partners with them to, to understand what the challenges are and, and working together to, to resolve those, uh, issues. If you’re a company that is starting from scratch and you know, nothing about China and you want, wanna learn about it, there’s tons of resources out there on LinkedIn. There’s great books, documentaries, and I’d be glad to follow up with you and, you know, provide a list that you can share with anyone as a future follow up. Yeah.

Kelly Barner (38:13):

Um, so you’ve shared some best practices and, and think that’s interesting. And it, it reminds me of a, a saying that I heard back from consulting days, hope is not a strategy, right? That is, that is not how things should work. Um, and I appreciate all of those recommendations and best practices. Now, if people wanna take you up on your offer to share what you know, or make recommendations of other resources, what is the best way for them to get in touch with you?

Jeffrey Goldstein (38:38):

Sure. The audience can learn more about onward global and the services I provide@onwardglobaldotcomonwardglobal.com. Uh, they can reach out to me on LinkedIn. I think you’ll be sharing, uh, a, a link on that with listeners and, um, they can contact me at Jeffrey onward, global.com.

Kelly Barner (39:02):

Well, Jeff, thank you so much for spending this time in your late evening. Um, I, I think it’s good for us to realize the similarities, but it’s also good for us to be aware of what we need to be doing from afar, especially when we can’t have boots on the ground. So I appreciate you sharing your time and expertise with us.

Jeffrey Goldstein (39:19):

Sure. My pleasure. Thank you so much, Kelly,

Kelly Barner (39:21):

And to everybody in the dial P either listening or watching audience, thank you also for your time and interest, but don’t let the conversation start here. If you have questions, additional thoughts, things that you wanna share, please, on social media, please share a review of this particular podcast. And as I said earlier, make sure you subscribe so that like this fascinating interview, you don’t miss any future content on that note. Thank you for joining us for dial P for procurement here on supply chain. Now I hope you all have a great rest of your day.

Intro/Outro (39:53):

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