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Agenda n n n n Why Manufacture in China Types of Manufacturers Finding a Agenda n n n n Why Manufacture in China Types of Manufacturers Finding a Manufacturer What to Expect Prepare for the Unexpected Risks & Rewards Experiences

Larry Butz 25 years with Trane specializing in – Product Development – Technology & Larry Butz 25 years with Trane specializing in – Product Development – Technology & Product Globalization – Technology Transfer & Factory Start-up – Environmental Sciences Headed Intl Service Division Five Years as Engineering Manager for Trane Europe/Middle East (France) Technology Director for Trane Intl Environmental & Technology Spokesman

China 1982 -84 Two Shanghai Factories – – – – Customized Products Equipment Selection China 1982 -84 Two Shanghai Factories – – – – Customized Products Equipment Selection Process Optimization Quality Standards Training Supplier Qualification Factory Layout Product Testing Capabilities

China 1995 - 96 Large Chiller JV Ligang, China – – – Customization Technology China 1995 - 96 Large Chiller JV Ligang, China – – – Customization Technology Transfer Training Lean/Simple Processes Supplier Development

China & Asia 1997 - 2002 Technology Globalization & Environmental Spokesman China & Asia 1997 - 2002 Technology Globalization & Environmental Spokesman

Why Manufacture in China? n n Lower Cost Product Access to China Market Why Manufacture in China? n n Lower Cost Product Access to China Market

What to Expect n n n Lower labor costs Lower raw material prices Lower What to Expect n n n Lower labor costs Lower raw material prices Lower component/subassemblies costs Range of quality levels available Fewer constraints (regulations) on factories

Types of Manufacturers n n n State Companies Wholly Owned Locally Joint Ventures Wholly Types of Manufacturers n n n State Companies Wholly Owned Locally Joint Ventures Wholly owned Foreign Your Own – Build or Buy

Where to Find Heavy Industries Light Industries Where to Find Heavy Industries Light Industries

How to Find n n n Government Agencies Industry Directories Web Bidding Networking Shows How to Find n n n Government Agencies Industry Directories Web Bidding Networking Shows & Exhibitions

Be Prepared for Change n n Longer Pipeline Reduced Flexibility Change Control Cultural Differences Be Prepared for Change n n Longer Pipeline Reduced Flexibility Change Control Cultural Differences n n Societal Value Systems Business Customs National Laws

Be Prepared For Change n More Administrative Personnel n n Logistics-Import/Export Banking/LC/Currency International Law Be Prepared For Change n More Administrative Personnel n n Logistics-Import/Export Banking/LC/Currency International Law Communication n n Time Difference Language

Insight & Advice The relative cost of equipment vs. labor is significantly different in Insight & Advice The relative cost of equipment vs. labor is significantly different in China. Expensive labor saving equipment used in the US will not be the best choice in China. Be prepared to make minor changes in your design specifications to obtain best results.

Risks n n n Currency Variations Proprietary Design Info Political Risks n n n Currency Variations Proprietary Design Info Political

Environmental Considerations n n n Fewer Regulations Reduced Use of Coal Clean Air & Environmental Considerations n n n Fewer Regulations Reduced Use of Coal Clean Air & Clean Water Shortage Green Beijing Olympics Environmental Costing

Thank You for Your Time Larry Butz GEA Consulting, Inc 2420 N. Pine Creek Thank You for Your Time Larry Butz GEA Consulting, Inc 2420 N. Pine Creek Rd. La. Crescent, MN 55947 Tel: 1 -507 -895 -6826 Fax: 1 -507 -895 -4001 Email: [email protected] com www. gea-consulting. com