Can you tell me about the different functions of your business that you outsource offshore and why?
We outsource a range of functions in our business for a number of reasons.
First, we manufacture in China and there are a number of factors involved in that. One is for unit cost and sustainability reasons. Producing our goods close to the source of quality raw materials is important to us, so for example the quality hardwood plywood we use is not available here but is in Asia, and the best quality tyres are also from Asia.
China is also a world leader at making hand-finished, high-quality wooden products on a large scale and their manufacturers use innovative technology.
Second, we outsource our warehousing and logistics. We use third-party logistics providers - or 3PL - in Melbourne, Toronto, New Jersey and the Netherlands, which allow us to hold inventory in-market with a short and reliable delivery lead-time.
Operating in the global marketplace, we have to decide whether to centralise our inventory and use a combination of sea- and airfreight for timely delivery, or whether to decentralise and hold product and spare parts locally.
Our product is relatively bulky and heavy, which makes centralisation a more complex option - though not necessarily unviable.
Third, we have distribution partnerships with about 20 overseas companies that represent Wishbone in their own countries - mostly in Europe and Asia. Language and cultural differences, as well as the travel distance from New Zealand mean that having locals represent us offshore in many cases is a great solution for us.
Like our logistics partnerships though, the value of outsourcing is highly dependent on the quality of our partners and our relationship with them.
And last, we outsource the cloud-based software that integrates our operational processes. Our operational functions are coordinated using a Vancouver-based software system called Orderbot. It's an incredibly powerful tool for productivity, which allows us to operate a global distribution network with a very lean staff base at HQ in New Zealand.
We signed up with Orderbot and helped them develop the functionality that we needed because there was simply no one else offering what we needed globally - complete integration of ordering, inventory, customer management, invoicing, fulfilment, and ecommerce from a single dashboard and at an SME price point.
How did you go about finding these partners who you outsource these different aspects of your business to?
We sought personal recommendations from trusted people in the industry mostly, but have also been known to jump on Google.
What processes do you go through to make sure these partners deliver what you want for your business?
We request detailed quotations and go back for more information as needed. We always cross-quote, then hold detailed, frank Skype meetings to explore the value set of the potential partner. Often we travel to meet a new partner in person, sometimes more than once.
Nothing beats a face-to-face meeting for making an accurate assessment of the values match. We instinctively choose partners whose company we simply enjoy. The 'would we go for a beer with them?' question has proven remarkably reliable.
Going to work, even when you're a global export business based in New Zealand, has to mean loving the people you work with wherever they're located around the globe.
What do you do to ensure things continue to run smoothly with your offshore partners?
Get together often. Decide from the outset that you're in it for the long-haul and when bumps arise in the road, treat it like a marriage - partnerships require hard work, tolerance and understanding on both sides.
What are some of the bumps you've encountered?
One in particular with manufacturing is there's a fair bit of travel involved. You can't think that outsourcing means you don't have to go anywhere; you still need to deal with those offshore partners as if they were local. We go to China five or six times a year, and when we do we're there for two or three weeks at a time. It's one of the costs you've got to take into account when you outsource.
Another one is the cultural differences. There are significant differences I think between our idea of a quality finished wooden product and others' understanding of what's good enough.
We've moved factories three times, and we've settled now and the relationship is really solid, but it has been a process to figure out how to specify in concrete terms what we need and to get that down in writing in very specific terms. We also pay a Chinese national full time to monitor quality control for us at the factory.
What advice would you have for another SME owner looking to outsource offshore?
Don't be shy. Ask friends and colleagues for recommendations, make cold calls - draw on any experience you can. And then get on a plane to meet the people in person.
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