Note: The following is a guest posting by Bradley A. Feuling, CEO, and Yi Kong, Vice President, Supply Chain Operations, Kong and Allan.

Procurement from China is growing. The $1.7 trillion USD or 12.33 trillion RMB produced in 2007 for export provides strong evidence. With increasing manufacturing for foreign and local consumption, new companies are sprouting up. In many regions, we find companies that are untraditional to the historic capabilities of the area. This is just one factor to take into account.

Example: Suzhou
Consider Suzhou in Jiangsu province. Historically, Jiangsu, Zhejiang and Anhui were known for light industry manufacturing such as fabrics and textiles. Automotive manufacturers are now entering what was once silk alley. The difference in local capabilities impacts skill development and material handling processes. Chery automotive in Anhui represents one exception.

Other regions in China
Traditionally, the northeast region focused and still does on heavy industry manufacturing. For automotive, steel, and oil buyers, strong sourcing partners are located here. Currently, the region has experienced slower economic growth, although First Automotive Group provides a developed supplier network.

Shandong province, between Beijing and Jiangsu province, was agriculture based. Many smaller companies have developed in Shangdong, yet the larger supplier bases are linked today to the electronics industry with Haier and Hisense.

Moving south, are Guangdong, Hunan, Yunnan, and Guizhou. Guizhou and Yunnan are known for liquor production, Mao Tai being a famous manufacturer. Guangdong, with its proximity to Hong Kong, became the first area for export-focused manufacturing. Many foundational industries required low-skilled labor such as furniture and textiles.

In Central China, there are Shanxi and Sichuan. Sichuan was a military equipment manufacturing center, also serving the wine and liquor industries. Today, electronics suppliers are developing with the growth of Changhong.

Lastly, we look to Inner Mongolia and in the west, Shaanxi, Gansu and Xinjiang. Inner Mongolia was a livestock -based economy. Today, the province is best known for dairy manufacturing. Western China was and still is the raw material resource base of China: iron ore and crude oil. Currently, the Central Government is influencing the movement of manufacturing to the west. Although investment has been high, a developed society mentality has yet to take hold.

Offsetting risks
The risks are numerous to manufacturing products in an area historically not known for specific production. Knowledge and education of product specifics must be understood therefore training costs will be higher. Material management and handling procedures must be analyzed. For example, automotive logistics capabilities in northwest China will be stronger compared to Shanxi, although suppliers may exist. Also, understandings of western sense of service and practices in dealing with foreign companies will reduce certain risks. Regions along the east of China will offer a greater number of sourcing partners who have experience working with foreign buyers.

Bradley A. Feuling is the CEO of Kong and Allan, LLC, based in Shanghai, China. Kong and Allan is a consulting firm specializing in supply chain operations and global expansion. Yi Kong is vice president, Supply Chain Operations.