TT Electronics - China Connection
TT’s China connection
Thinking about joining the rush to China? Brian Tinham talks to Dale Kirkwood at automotive supplier IT Electronics about this company’s experiences.
If you’re thinking about acquiring a business in China, setting one up or outsourcing manufacturing in that direction, take some tips from an organisation that’s been there, done it and bears the scars and successes. I’m talking about global electronics conglomerate IT Electronics, which operates mostly in the automotive industry but also the electronic, electrical, computer and general industrial markets, specialising in sensors and systems.
Just a couple of years ago it acquired a company making backplanes and cables in China, so Dale Kirkwood, TTs IT manager for contract management services, has first hand experience of some ofthe issues, what works and what doesn’t. And for him, on the IT side the points to watch carefully are all about communications, system development and support, local skills and training. All your operations, he says, will be bounded by the con straints and realities of these on the ground.
“For example, when we acquired our company in China, it already had a Western ERP system, Exel’s Efacs, in place,” explains Kirkwood. “Which you’d think was good: we knew Efacs because we ran it at several of our locations around the world – along with SAP and two or three other systems. But actually it immediately pre sented us with some difficulties because it was an old client/server version at 8.1.6.
Up to speed?
“Even though Exel had opened an office in Shanghai with a view to moving into the Chinese market, it’s staff there were only really familiar with the latest Java-based and web-delivered version, Efacs 8.5.6. So in fact we had an ERP system that worked and that we knew well, but that would be difficult to support locally and presented a business risk.”
What about remote support? “Because of the huge time difference, you just cannot rely on support from Europe. If you try, you’ll find you’re hit with at least a 36 hour turnaround time on problems simply because Europe only wakes up as China shuts down. That can be a mega problem.”
For TT the solution was to upgrade its acquired factory system to Exel’s latest version – a decision helped by the fact of substantially improved functionality, including multi-lingual support with simplified Chinese. “For us, doing that meant a double win: a potential for improved business processes and operations, as well as easier training for the local workforce. It was a no brainer,” says Kirkwood.
Except, of course, that it was also a significant upgrade – not just some enhanced screens. And that in turn meant some due diligence around some ofthe new modules, like Exel’s new CRM (customer relation ship management) and built-in content and document management. It also meant working out how to man age the data migration and system installation, testing and go-live phases – again with that inevitably limited local support.
“Exel did their best, but we needed Chinese support for migrating the database, for example. Efacs’ new database is a lot cleverer with the data than the older ver sions: it’s much better – a 21st Century system in every sense. But it meant that data had to be cleaned up and run very carefully for the migration. As a result, Exel in China often had to escalate our issues back to the UK. Once we were up on the new system we were fine and we still are. But if you want my advice: be sure you have local support on the system at the level you’re buying.”
And the corollary: if you’re choosing a system to run a green field site, although the natural temptation is to put in one you know well, that might not be the best choice. Says Kirkwood: “There are plenty of well qualified Chinese people but you need to consider their core skills and the language barrier. The best people don’t necessarily speak English very well, yet you’re going to have to leave them managing whatever system you select for 16 out of 24 hours every day when you’re out of communication.”
His advice: be aware of some of the local ERP systems, like Kingdee in China. “It’s quite a good business management system and a lot of Chinese companies use it – meaning a lot of people you’re likely to want to hire will have used it too. So you might want to consider one of these systems to guarantee local support and no language problems.”
He concedes that such a choice presents its own issues and that it can only work for organisations that run remote business units autonomously, but says:
“Remember, if you go for a Western system you’ll have to bring in expensive consultants from outside and your users will have to learn it in what is for them a second language.”
Finally, there’s the other side of communications the electronic type. “It’s a nightmare running connections with different countries,” says Kirkwood. “For example, Internet bandwidth between China and the UK can be lousy, even from Shanghai. If you’re trying to run a VPN (virtual private network) between China and the UK, there will be times when it’s just plain impossible. Internally within China it’s fine but with the outside world there’s a very high contention ratio and possibly 20 or 30 TCP IP hops – which is hopeless.”
“Be sure you have local support on the system at the level you’re buying”
Dale Kirkwood, IT manager
There are, of course, alternatives like ISDN and tele phone links, but they’re expensive – even if you’re only talking about a few hours of data download a day. “So if you’re considering remote operations or system man agement, or even green screen systems with a phone link on 24 hours a day, there are going to be real cost implications. You need to seriously consider those comms limitations; there can be very real wide area infrastructure problems.”
