Interview with CIL China | Benelux companies showing resilience

Benelux companies in China are operating under COVID19 measures. What have been the impact of these measures and how are companies doing at this time? With a series of interviews of the Benelux of Commerce business community, we aim to share the stories of Dutch, Belgium, and Luxembourg entrepreneurs in the South of China (PRD/GBA).

Company: CIL China
Location: Guangzhou, Guangdong

CIL China is a Dutch sourcing and supply chain company in Guangzhou. The company is owned and managed by Ben Boterkooper, also a board member of the Benelux Chamber of Commerce PRD. Since 2012, Ben Boterkooper is active in China and currently he is based in Guangzhou. CIL China offers services such as sourcing, product development, supply chain management, quality control, and more. They differentiate themselves in being the office for companies that don’t have an office in China or the region, working based on a service fee (fixed fee, hourly or monthly) rather than commissions or being a trader. For more information, visit the website www.chinaimportleads.com.
 

1. What has been the impact of the Coronavirus on your company and business? 

The impact has been significant. We manage supply chains of many SME companies, so every year we have a shutdown of production and supply chains during the Chinese New Year period. This was nothing special. This gap is normally calculated as we already work with our clients already from November and December to plan orders timely to not get in supply difficulties around this period. However, obviously supply chain planning got disrupted by the extension of the national Chinese New Year holiday (lockdown countrywide). 

Some factories we work with could start quite soon after the lock-down. But some factories also announced to us that they would resume production from March the 1st or10th. Causing the situation that one factory could resume production, while the other was still not operational.
 
Also, per region the regulations were different. Many different provinces, cities, and municipalities also didn’t have a uniform policy or execution of the policies. Supply chains consist of different kinds of suppliers to produce a product. If one of those suppliers cannot supply, the supply chain cannot fulfill, causing factories not to be able to produce a product. That made some factories being able to start up again, but not able to produce for example a specific product.

Additionally, the government has imposed regulations and terms to allow companies to resume production. At first, very strict terms such as having a bigger stock of hand alcohol, masks, and other protective material per worker, quarantine room per worker or dozens of workers, and not allowing third parties for inspections on the factory ground were effective. Every week these regulations and terms changed, which made it very difficult to make predictions about when production could be resumed. 

Beside all regulations, terms, and disrupted supply chains there was also a labour problem for many factories. At the moment they could start their production again, there was a lack of available labour. Many factory workers went home?to their hometowns for Chinese New Year but didn’t return. Mostly because of them being afraid to travel back. It was not attractive to travel by bus, trains or other transportation with many people. With the risk of being infected. But also landlords would not allow them to rent their rooms in the factory areas, which was an extra demotivation to return. 

When our client’s supply chains are impacted, we as a business also. In an attempt to start up again we were initially busy with getting factories operational again before normal routine work could return. The impact on our clients has been also the impact on us regarding work. For us as a company only it was not a very big impact. Although it was a strange situation to work together in our office while everyone is wearing gloves, masks and washing hands frequently. 
 

2. What kind of government regulations did you have to implement? How has the communication been with institutions? 

As we are an office managing supply chains. We help companies with sourcing, inspections, and supply chain management from our office. As we are able to work from home, so we did. The government demanded from us to have enough protective materials such as masks and hand alcohol before we could resume work at the office. We needed to apply in an online system to receive permission to do so. 

Communication with the government has been excellent. Governments could be reached with several phone lines. You got informed by SMS messages and if needed you got a call to verify some things. It is remarkable how fast the Chinese government, in cooperation with the effort of determined Chinese companies and people, can create applications and systems to control the people, companies, and therewith the Corona situation. Applications don’t look always very tight and lack some details, but it works and is effective.
 

3. How did you start-up your business again and on what capacity have you been operating? 

We have been starting up by working from home. We needed to get the supply chains resumed as fast as possible for our clients. So initially we did our best to help the suppliers of our clients in their needs to start up again. If a supply chain resumed operations again, our normal work of management also returned. 

However, working from home is obviously not an ideal situation. To increase productivity and getting the team feeling of the company back we initiated first a half office and half home schedule. With five hours working at the office and a minimum of three from home, we started to work from the office again. In this way, colleagues could avoid traffic jams and therewith avoid the crowded metro’s, busses and other transportation. 

Soon afterward all colleagues resumed full working days at the office. As supply chains got back on track again, employees by themselves already started to stay full days at the office as workload also increased again.

4.What kind of business activities can and can you not do at the moment? 

We can execute all work that needs to be done. As we are managing supply chains, we can do most of the work from the office. Luckily we are welcome again at the factories so we can execute inspections and audits again. Our working method for working with Chinese companies is also not location binding, so from distance, we can improve and control quality levels well. 

We only experience still difficulties in delivery times. As supply chains have restarted, operationally it is still not 100%. Lead times, therefore, increased significantly. Although we try to work with factories to speed up, production with acceptable lead times is still sometimes not easily plannable. 

Also, I personally as a foreigner in China, the current restrictions on travel have a big influence. It is not advised to travel to other regions as there are measures for foreigners taken to control the influx of foreign infections to China. Lower-level government officials interpret regulations in their own way, and it is, therefore, happening that even if I stay already a long time in China, an official can make the choice to put you in quarantine if he is not sure. As long as I stay in the city where I live, everything is registered. However, when I travel it will be a big gamble on being put in preventive quarantine or not. This causes that I can personally not visit factories and maintain personal relationships with companies in other regions. 

Also very important to mention is that the economy has been hit hard. Many companies have been closed due to bankruptcy. Where supply chains are getting back up again, some factories have fallen due to bankruptcy or having major financial issues. The whole economic situation causes that companies are less looking forward in terms of innovations, new products, new markets, etc. Companies are changing and innovating their business models to survive in this new environment, however, this is more to save their business instead of growing their business. The urge for innovation, new developments, and looking into the future is not there at the moment. This is a big difference from before the virus outbreak. This also makes less people willing to listen to new ideas, products, and developments. They are more busy to survive.

5. What are your expectations for the coming months and this year? 

With the current supply chains back on track, we are at the moment running stable operations. However, due to the more intensifying outbreak in Europe and the US, the related measures in place by governments and economic damage I expect a significant drop in the demand. In our network, we hear that many orders at factories are cancelled. Even up till 80% – 100%. The percentage that indicates the fall of the demand. Where first the supply was on hold, the demand will fall. 

We work on service base. So that means we don’t take a margin on products or work on commission. We charge a service fee for the management of productions and supply chains, inspections, development, or sourcing factories. On one hand, we charge by the hour or we work on monthly contracts. So our business model is quite strong in these circumstances. Unless our clients will give up their contracts or need to apply for bankruptcy.
 

6. Any other information you would like to share please feel free? 

Many people have been fired these days. A lot of families have problems with paying their mortgage and credit cards. Also, other companies have taken measures to reduce costs by cutting salaries or not paying salaries for the days of lock-down. Our colleagues were very worried to not receive full salaries and probably also thought about a scenario where they might get fired. We are very supportive of our employees and their lives. So I have been from the start of this situation very clear to our colleagues “we will not let you fall now”. This gave them a safe and positive feeling. 

I think it was therefore very important to be open about the financial situation and also how we financially could come through this period. They know exactly what was important to happen to ensure our financials for a while. So that they also know what is important in these days. Creating a clear objective, focus, and performance in a time of chaos. What has been also very important to us is to stay positive and try to laugh in the office. The news during the outbreak of the virus, and still, have been generally very negative. Positivity has helped us to become a closer team.