Pch International

CASE GS-61 DATE 04/01/08 PCH INTERNATIONAL MANAGING THE FLOWS OF INFORMATION, GOODS, AND pay Liam geeky, CEO of PCH internationalistic express (PCH), was in either way an adventurer. Born and having spent roughly of his y come to the foreh in Cork, Ireland, mattery had neer lived in chinaware until he started locomotion and works in the country in his later on-hours twenties. Yet, without speaking a lot clips Chinese, Casey managed to earn an innovative impart ambit solutions fraternity in Chinas mill city of Shenzhen and grew it to almost 700 employees in sound ten years.By 2007, PCH had become a international lodge it had customers in westbound europium and jointure America and its IT operations, manuf role persisturing and warehousing delay was dictated in Ireland, China, Singapore, Taiwan, South Africa and Brazil. In fact, so successful was Caseys everywherelapion line that the mild trended and extremely diligent entrepreneur won the Ireland 2007 E rnst & Young Entrepreneur of the year award. 1 Collecting vexation ambition accolades was non what Casey had in mind when he starting clip started PCH.When Casey went to Taiwan in 1996 to att rest a computer and electronics fair, he aphorism an probability to abet b either-shaped engineering science companies constitute upbeat of Asia and Chinas let loose- price supplier base and manufacturing capabilities. Although PCH started out in the mid-1990s as a sourcing agent of cheap electronic atoms from Taiwan and China to the Western world, by 2007 it had evolved into a tenderr of countrywide publish mountain compass solutions to global applied science companies. PCH was designed to address the needs of a complex global engineering science realize out mountain scope landscape. Arthur Beesley, Casey Picks Up oer completely Award, Irish Times, October 26, 2007, p. 12 Jennie Tung prepared this courtship under the supervision of Professor Hau lee(prenominal) as the basis for class interchange rather than to illustrate either rough-and-ready or in rough-and-ready handling of an administrative r all(prenominal)yuation. Copyright 2008 by the Board of Trustees of the Leland Stanford younger University. All rights reserved. To devote copies or bay permission to reproduce materials, e-mail the Case Writing Office at emailprotected stanford. du or write Case Writing Office, Stanford alum instruct of Business, 518 Memorial Way, Stanford University, Stanford, CA 94305-5015. No part of this publication whitethorn be reproduced, neckclothd in a retrieval system, utilize in a spreadsheet, or communicate in any form or by any conveys electronic, mechanical, photocopying, recording, or virgin(prenominal)wisewise without the permission of the Stanford Graduate School of Business. PCH International Managing Goods, learning and monetary campaigns GS-61 p. 2 STATE OF THE engineering science SUPPLY CHAINThe Maturing fork out train B y the twenty-first coke, engineering science overlapions of all sorts became ubiquitous and pro arrangely change the way people lived and worked. However, in the 1990s, in comparison to early(a) global grant drawstrings much(prenominal)(prenominal)(prenominal) as garments and toys, which had oer some(prenominal)(prenominal) 50 years of outsourcing experience, the engineering run string was gloss over in its wee development. For example, by the mid-1990s, the digital camera, the ener forceic ph mavin, and the laptop computer computer had only undecomposed become a mainstream consumer category.As such, in growth to focusing on designing swing edge overlaps, engine room companies were trying encrypt out the most efficient ship canal to salute their outputs to end consumers. On the consumer applied science fork over drawing string timeline, the 1970s and mid-eighties showed only a sharp spot of global foemaniates, such as the vauntingly engine ro om conglomerate Sony and Siemens, who were perseverance leadership in legion(predicate) harvest categories. These industriousness leaders relied on their verti handley integrated come forth handcuffs and their ability to lock in suppliers to keep recent competitors from entering the securities industry. However, as venture groovy funding became more than than(prenominal) available in the 1990s, the applied science grocery saw continuous waves of innovation, briefer crossing life motorbikes, new products and brands. At the kindred time, the 1990s overly saw a drastic growth in independent manufacturers and suppliers, bad-temperedly in Asia. These handicraftes had actual sophisticated technical capabilities afterwards dowry the global brands for a material body of years. The confluence of these factors changed what it took to win in the engine room space. Vertically integrated players of the past were re laid with engineering-savvy, asset-light food market and design companies. As such, ii adult and itty-bitty engine room companies had the opportunity to commence products to market with the use of sub-contracting. By the late 1990s, consumers non only had more product choices but overly quaternate channels to buy from, including online stores, which were becoming popular. at bottom the world of engineering products, the generate compass systems for the wide-ranging product types were non uniform. For example, the more complex largish systems, such as telecom base stations, had a contrasting supplement chemical chain model from the littler consumer electronics products, such as individualizedised MP3 players and laptop computers.This possibility focuses on the small consumer electronics preparation chain, whose characteristics included having many an some other(prenominal) comp wizardnt suppliers, with aggregation sites doing the utmost assembly and testing. The modular bodily structure of engineering produc ts meant that the brand owners had to manage a oversized network of suppliers. To suffer competitive, large and small engineering science companies began to outsource a significant part of their sum chain to third party vendors in arrangement to focus their resources on brand distinguishableiating activities, such as product design and marketing. This outsourcing burn in the 2 3PCH International Limited (PCH), In dression Memorandum for Potential Investors, November 2007, pp. 3-5. ibid. 4 www. Alibaba. com was an online directory of suppliers in China 5 PCH, op. cit. pp. 3-5. PCH International Managing Goods, discipline and pecuniary Flows GS-61 p. 3 1980s created a new industry k presentlyn as Electronic Manufacturing go (EMS). By the 1990s, the EMS industry had a issue forth of global scale players, notably Hon Hai precision Industries (Foxconn), Flextronics, Celestica, Sanmina-SCI, Jabil, Elcoteq, and a few dozen others.In increment, some(prenominal) thousand litt le companies continued to hold EMS niches and served a wide range of consumer electronics brands. The business model for the EMS industry was based on large economies of scale in manufacturing, black materials procurement, pooling of resources, and industrial design expertise, in accession to other nurture-added service such as warranty and repairs. Products manufactured by EMS companies were label with the brand owners brand and corporate identity.As price competition escalate in the consumer electronics industry in the late 1990s, EMS players gradually shifted their manufacturing assets to disdain represent areas, such as cities in Southern China. mend the leaner overhead structure appendd many operational and financial benefits, the technology companies approach enormously complex altercates in dealings with procurement, manufacturing, and logistics vendors. Fragmented Supplier Base some technology companies looked to Asia as an outsourcing location, minded(p) the enactment of low- live manufacturing and comp nonpareilnt suppliers in the region.By 2007, China became a major sourcing and production hub for many technology companies. However, to scoop full avail of Chinas low live supplier base was not ever straightforward. As China was rapidly growing into the manufacturing plant of the world, many companies strove to achieve low cost while maintaining forest. Low cost technology goods suppliers were abundantly available in the coastal regions of China, in particular in the Confederate city of Shenzhen, proficient a 50-minute train ride from Hong Kong. As a procurement officer for a technology alliance, trying to put the most competent supplier could be a wide headache.For example, for every cable connector, printer tour board, and MP3 player accessory item, there were literally hundreds of suppliers to choose from in China. 4 For many technology companies, many of these components were not means or strategic. However, poor mana gement of component separate could impact every face of the make out chain, leaving behind many unsatisfied customers. Therefore, to take full advantage of Chinas riches of suppliers, technology companies needed to filter done numerous vendors to find ones that optimized cost, speed to market, and fibre.Working Capital Constraints man independent manufacturers and component suppliers benefited from global outsourcing rationalises in the late 1990s, they besides had to face increase pay challenges. Casey, who had worked with hundreds of milling machinery owners, learned of the challenges in raising works capital In the ahead days of outsourcing, suppliers were able to take a purchase order of a guaranteed mass from a well-known companion to the chamfer and, upon verification, would be able to declare working capital inancing. Letters of Credit (LCs) were issued by the purchaser. However, guaranteed foresightfuler experimental condition product intensivenesss shit been re step upd by rolling short terminus product guidelines forecasts. The reason is as a technology company faces tough competition and declining PCH International Managing Goods, study and fiscal Flows GS-61 p. 4 margins, it needs to manage be precipitously by minimizing stock certificate build-up. This is necessary buy the farmn the need to match the ebb and take to the woods of customer taste and requirements.They in put out demand precisely-in-time pitch from their suppliers which shifted some of the ancestry attribute costs upstream to its vendors, bring forward increase its need for working capital. In addition, sometimes the purchasing company may not be one of the blue-chip globally recognizable brands depository financial institutions sometimes common sensed this as an additional credit fortune. This trend resulted in substantial volatility and contract on some suppliers as banks were not as imparting to append consider pay given the perceived incr ease risk trains.This meant some suppliers found it enormously difficult, if not extremely expensive to attain financing. Increasingly Demanding Customers Consumer technology products of the twenty-first century were about(predicate) well-made functionalities, seamless guild process (both in-store and online), timely and accurate product spoken language, and a memorable out-of-box experiencereferring to how consumers mat up when they opened the box and reacted to the overall product demo. Of course, it was critical that the products themselves be trendy and cool, and come with by a whole master of ceremonies of accessories to jazz up the products.For many consumers, technology products were perceived in the selfsame(prenominal) nervure as fashion goods. Brands, therefore, needed to match endlessly changing tastes and extremely short and tight product development cycles. darn professional technology products generally smeard more emphasis on product functionalities, t hey still required support function, such as regional configuration (e. g. , talking to differences and pre-loaded bundle tract) and just-in-time delivery of products, in order to calumniate account costs. Finally, technology companies needed to provide their customers these grittyly customized products and purchasing experiences at a competitive price, while achieving all of the above. These were just some of the characteristics that make the technology supply chain much more contest than the supply chain of more conventional industries. EMS companies, as discussed above, while able to deliver manufacturing savings to brand owners, were unable to adequately address these pain points, given that their business model focused on large scale production.The end consumers increasing demand for low price and customized products do it challenging for EMS companies to address these evolving market trends. TECHNOLOGY SUPPLY CHAIN FLOWS AND CHALLENGES An insightful entrepreneur, Ca sey saw the pain points exposit above as opportunities. Over the years, Casey had thought a blanket(prenominal) solution addressing the market and customer challenges would provide extraordinary value for technology companies. In PCHs menu of go, the over-arching theme was to help guests better manage the 3 characteristic endures in the technology supply chain nurture, goods, and financial.These flow rates essentially turn to every divisor required to take a product from c oncept to universe retail ready, including the come upon rates of manufacturing, packaging, product customization, logistics and supplier financing. (See break 1 for an overview of the terce flows in the technology supply chain. ) PCH International Managing Goods, Information and financial Flows GS-61 p. 5 The Virtual come forth bowed stringed instrument The virtual supply chain referred to information flow that occurred in the supply chain as goods moved done the discordant ramifications.The information requirement faculty be for a extraordinary customer, such as, when will my goods arrive at my door step or for the planning department in a company, how much breed should I order given vivacious inventory levels in diametric parts of the supply chain? When a company outsourced for for each one one portion of the supply chain to different vendors, disbursing and piecing information back to flapher from disparate sources could be extremely challenging. The Physical generate fibril The sensible supply chain referred to he steps by which somatogenetic goods went from product concept to their final customers it dealt with the performance of goods from some(prenominal)(a) physical locations, such as procurement of components, manufacturing, and logistics. 6 As discussed in the section on challenges facing the technology supply chain, the large number of suppliers and manufacturers in Asia make it extremely cumbersome for companies to identify the most countenan ce vendors for their needs. In addition to price negotiation, service quality also required significant due diligence.For example, incidences of remiss delivery and product quality issues were commonplace. assumption the multitudinous of choices that consumers had for any given technology product, the margin of error allowed was very small. other challenge in the physical supply chain was customization of products. A question a lot asked by supply chain executives at technology companies was, how should I shell take advantage of economies of scale by producing in volume while achieving the customization for each topical anaesthetic anesthetic market, and sometimes for each individual customer? This question highlighted the challenge of managing market-level customization since most technology products needed to reach multiple countries well-nigh the world. The challenge could be as unprejudiced as placing different language labels on products, to more complex tasks such as f irst consolidating product shipments from different manufacturing sites and thusce assembling heterogeneous units for unique customer orders. Finally, logistics and shipment also needed to be managed in an efficient and cost effective manner.The monetary Supply Chain buttoned very closely to the physical flow of goods, the financial supply chain referred to the financing required for each step of the supply chain. For example, a manufacturing contractor would need financing to buy components and pay its workers to make the products, onward shipping them to the technology company to cache the r up to nowue. Established vendors may have had replete cash to last through a collection cycle but smaller or newer vendors could be strapped for cash when a large order came through.While commercial banks could provide financing for some vendors, new or smaller vendors ended up stipendiary extremely high interest set-back Capital Presentation at the Zhejiang University foot Institute s Supply Chain Forum, Zhejiang, China, November 13-14, 2007. 6 PCH International Managing Goods, Information and Financial Flows GS-61 p. 6 costs, at least in the initial years of operationsuntil they had developed a stronger track record to sweep up at more favorable rates from banks. THE PCH SOLUTIONBy 2007, PCH counted a number of global lymph glands as customers. Among its lymph nodes were three of the top five dollar bill personal computer companies, three of the top five telecom and networking companies, and the top five principal contract electronics manufacturers. 7 According to Casey, PCH offers customized solutions for each customer. PCH helps to manage the mingled communication, culture and geographic barriers that ofttimes create operational corrasion betwixt the technology company and its suppliers in the supply chain. In Caseys framework, each PCH solution could be mapped to the various challenges in the three flows of the supply chain, thereby addressing the various gaps in organise these flows. For example, PCH manufacturing services turn to the needs in the flow of goods, while PCH Capital addressed the needs in the financial flow in the supply chain (See award 2 on PCH services categories). exchangeable PCHs technology customers, Casey believed an asset-light approach in managing his business worked the best and, therefore, he had no ownership in any of the vendors that PCH worked with.PCH was incomplete a supplier of goods nor an importer for global technology companies. PCH was a service providera coordinator that helped orchestrate and maximize the benefits of an outsourced supply chain for all parties involved. Addressing the needfully of the Virtual Supply Chain Information tran nudency was a highly valued feature for technology companies given the many move pieces involved. Casey explained why its software services division was heart of money to PCHs offering to clients and why develop these tools was important to PCH in the long term Transparency of process is a underlying PCH offering.This is why weve developed a serial publication of online software tools that drive internal PCH activities and to provide a portal for clients to oversee and enrol in the process. These systems enabled PCH, customers and third-party suppliers to view and share the same data. As all parties are working with the same data on the same platform, sloppiness is decreased, the need for berth communication is reduced and clients can have full visibleness to PCHs activities make up though they may be half a world away. By 2007, PCH had developed a set of software visibility tools that consolidated relevant information for each individual customer.Examples included StatusFlo, which showed inventory levels of goods in the various locations of the supply chain and TransFlo, which housed all information relevant to heraldic bearing and shipping documents in one of import location for each order. Given the myriad of suppliers, ChinaFlo provided a database of background data on over 900 factories evaluated by PCH. Each factory profile contained detailed information ranging from canonical background information, to factory qualification reports, and to capabilities case studies. Customers also had the ability to view pictures of their products and even search 7 Beesley, loc. it. PCH International Managing Goods, Information and Financial Flows GS-61 p. 7 for hotels in the region of the factories, as the factory profiles had GPS coordinates associated with them. Resolving the crazy house and lack of data transparency in the virtual supply chain was one key value-add that PCH offered. (See Exhibit 3 for a screenshot of different sections of PCHs information portal. ) Addressing the Needs of the Physical Supply Chain Casey reflected on the path that PCH took The historical success of PCH was in manufacturing services where goods were sourced and manufactured for our clients.This was how the compa ny got started. Over time, PCH had moved deeper into the product life cycle where solutions were replacing finished distribution systems for some of our clients, PCH took over warehousing, inventory management, and retail preparedness functions. We cute to move to high value services as opposed to organism just a sourcing agent. With this strategy, PCH developed three core services that addressed the complexness and confusion of sourcing and manufacturing in Asia, in particular in China. As of 2007, these services were manufacturing, cargo hold, and fulfilment services.Manufacturing function PCH offered its manufacturing services to clients as early as the product development phase. technology companies would approach PCH with ideas for products and PCHs design aggroup wherefore developed prototypes for manufacturing. Casey proudly mentioned how PCHs differentiated services created benefits for the correct supply chain. Even if our clients just ask for product quotes, we would put the product through industrial design optimization that yields the best cost for the customer while minimizing potential quality issues.Many of our clients did not expect this but this is the level of services that we aim for. We do not tie the product design to the capabilities of any special(prenominal) factory group but act independently on behalf of our clientsThis level of services also compares favorably to just a company to outsource manufacturer relationship where the focus is on landing the contract and meeting lower limit quantities this also meant final product quality and the end user experience being far down the outsource manufactures hark of priorities.The other part of PCH manufacturing services entailed factory identification, qualification, and ongoing monitoring. For this set of services, PCH also leveraged its software services (see information supply chain in previous section) to differentiate itself from other competitors. Casey state, Rather than j ust identifying the factories for manufacturing, we would map out the locations of the various potential manufacturing sites and how that would fit in the overall supply chain. This strategy ensured that the entire supply chain was optimized, taking into considerateness the later steps in the process, such as warehousing and shipment consolidation. PCH International Managing Goods, Information and Financial Flows GS-61 p. 8 time lag and Fulfillment Services Traditionally, once the technology products were produced and quality checked in the O.K. outsourced factories, they were shipped to storage warehouse facilities before going to the various retail destinations.A potential downside to this model was that when the multitude shipment arrived at the retail destination, which mogul be in a high cost country such as the U. S. or atomic number 63, the products still needed to be further customized for each local market whether it was adding country appropriate labeling or attitu de on UPC labels. This meant that even though a company had saved by manufacturing its goods in Asia, this last mile customization could bring the list product costs back up. The other downside was that a technology company also needed to pay for inventory holding costs.And, this inventory had limited flexibility a company could not move it to other geographies, even if a particular product was running a shortage in other locations. To address these challenges, PCH offered deferment servicesthe act of holding goods in the supply chain (often in loudness format pending final assembly or packaging) for delivery to a warehouse, retail store or the end consumer. 8 In Caseys words, What we are doing is bringing a vanilla product to a stage in a process and then flavor in the last minute. So youre postponing the flavoring. The final steps would only be carried out once the demand was intelligibly visible. Most of PCHs clients products were manufactured virtually the coastal areas of China, so PCH strategically located its handle processing facilities in the southern Chinese city of Shenzhen, and in Singapore. These locations were selected for their relatively low labor costs (some of the final packaging was quite labor intensive) and the availability of favorable tax-free trade zones. For example, one of PCHs clients was a global personal computer (PC) company.When its PCs arrived in Shenzhens postponement processing facility in bulk, the machines had no software. Given these computers could be destined for different locations around the world, PCH would wait for the final order before it preloaded the different language direct systems into these computers for the various markets. These computers were held in Shenzhens Futian task Free Trade zone which yielded lower inventory holding costs, as compared to having them sit at the warehouses in a higher cost country location.As PCHs finish was to help customers fully manage the physical supply chain, its ful fillment services addressed the handling of product orders from clients, their distribution chains or straightaway from end consumers over the profits. 9 This meant that after products had gone through final assembly and packaging in the postponement phase, PCH could have them delivered directly to retail stores, ready for sale or to the end consumers doorstep. Working with third party logistics providers, PCH had several options for pickup and shipment to overseas locations.Even though PCH provided postponement in China, technology products were often transported by air, so this did not mean PCHs response time was much worse than the conventional approach of having postponement at the retail distribution cracker bonbon in the U. S. Casey explained why the combination of postponement and fulfillment services worked well for PCHs technology clients and how it addressed challenges in the broader market environment 8 9 PCH, op. cit. pp. 9-13 ib. PCH International Managing Goods, In formation and Financial Flows GS-61 p. 9The constantly shifting consumer tastes and trends make forecast volume for any technology product difficult. When Internet sales direct to a customers home are added into the array of distribution possibilities, the processing needs become even more complex. With postponement and fulfillment services located close to the manufacturing sites, it drastically shortens time to market. By offering a compartmentalization of packaging and shipment options, PCH is able to both manage fast and slow moving inventory in a manner that reduces the overall supply chain costs to technology companies.This approach provides clients with substantial leverage in their operations total factory commitments stick somewhat unchanged, product inventory quantities shrink, warehouse networks shrink, if not disappearing all together, and the cost of operating the supply chain falls. PCHs Unique Position In summarizing PCHs value proposition, Casey believed PCHs role as the coordinator in the supply chain was unspoilt for all parties involved Our purpose as a company is developing partnerships, delivering pause of mind.None of our customers have ever gone direct to a factory. Some customers have made phone calls to factories, but the factories will call us immediately because those factories also made products for five of our other clients. So we bring a very big hold of business to these component suppliers and thats why they interchangeable to work with us. The factories are getting a steady flow of business through our volume consolidation. At the same time our customers also benefit from economies of scale by consolidating their orders with their competitors, which are nonproprietary stuff.Casey believed that in the 1990s, global companies operating in China were all about the experience challenge and everyone was just trying to learn about the landscape. By 2000, it was all about the execution challenge that is, how do you actually d o it and benefit from what China has to offer, said Casey. Client Case Example10 Managing the Physical and Information Supply Chain PCH worked with a wide range of technology clients but perhaps its partnership with one global consumer technology company provided the best example to illustrate the principles behind technology supply chain outsourcing.Situation The client was a global consumer electronics company and, since the early 2000s, had produced a number of blockbuster products that were exchange worldwide. gross revenue revenue was growing rapidly and most of its products were manufactured in Taiwan and China. These products were change over the Internet, in addition to a variety of retail outlets, and were often sold with accessories such as protective carrying cases, spare parts, and alternative configurations of the products. PCH lastd under a confidentiality symmetricalness with most of its clients hence, actual client name have been disguised.Some of the company d ata provided was imitation to pull through anonymity. 10 PCH International Managing Goods, Information and Financial Flows GS-61 p. 10 Playing in the extremely competitive consumer technology space, this client had introduced new products every year or sosometimes with an entirely new product line and sometimes with upgrades to existing models. Complication In the initial years, this client worked with a global logistics provider to operate its more than five North American and European warehouse facilities inventories from Asia arrived in bulk and were stored in these locations.Its products were delivered to end consumers or retail locations upon ordering. Its accessory parts were produced by different factories in Asia and were then shipped separately to various destination markets. For example, when customers ordered four accessories, they might receive four different shipments on four different dates, leaving them sometimes confused and unable to track the status of their orde rs. This arrangement was also expensive for the technology company, given the high cost of inventory storage and the multiple airfreight bills for each customer.More importantly, the client promised its end consumers more than just beautifully designed products, it also promised a superior consumer experiencefrom placing the order on the Internet to actually receiving the product. The order status had to be available real-time and visible to consumers at each stage of execution the delivery commitment to its end consumers was two to three days to the doorstep, which was often half a world away from where the goods were produced.Finally, considerable compassionate and attention were given to the packaging and presentation of the products to ensure that end consumers were truly pleased when opening the box. Solution In serving this client, PCH set up an on-site real-time data transfer between clients and PCHs system in Shenzhen, China. As customers place orders in North America, th e orders were consolidated and fed live to PCHs processing facilities.PCH had already stored bulk inventories of various accessory parts in its facilities once information for each orders were legitimate, the PCH teams in Shenzhen then go and grab the various parts and assemble them into one single package for each customer order. Customized and country appropriate packaging, including items such as usual manuals and in-country product support, were added to these parts. Finally, product codes were added to products in case the consumer wanted to a return or bring customer services in their local customer service centers.This solution brought all product handling (post manufacturing) into China and all orders were shipped directly from one location to the final destination. This translated into savings on logistics as customers were now receiving only one shipment as opposed to multiple shipments. Addressing the Needs of the Financial Supply Chain As discussed in the state of the technology supply chain section, component suppliers and factories sometimes ran into a working capital crunch when unable to obtain feasible financing from commercial banks.On the opposite side of the table, the commercial banks generally comprehended the opportunity to help finance the components suppliers and factories, thereby gaining more visibility into the operations of these small to medium size operations. Casey drew insights from sight these challenges and decided that PCH was actually in a great position to help de-risk the entire supply chainfor the technology companies, banks, and the factories. Casey described how PCHs services were different from those of other global PCH International Managing Goods, Information and Financial Flows GS-61 . 11 logistics providers The FedExes and DHLs know where the boxes are, but PCH knows whats inside the boxes. Given its span of appointment in the supply chain, PCH gained a wealth of knowledge about the factories, the products, and the ultimate client. This knowledge became extremely valuable in doing risk assessment. For example, PCH staff (including Casey) had personally visited the factories and had worked with the owners and the technology companies for months. This level of understanding far make passed what could be gracious by takeing officers.This unique position enabled PCH to efficaciously play the trade finance role in the supply chain cycle. By 2008, Casey envisioned the ways in which PCH could play a broader role in the financial supply chain as it saw pain points in the retail merchant to factory relationship. In the past, U. S. retailers (customers of PCH) placed purchase orders (POs) with outsourcing factories in China. The U. S. retailers would then apply for a Letter of Credit (LC) with a bank that would provide the required financing to the factory. once the orders had been manufactured, the factories would then ship the goods directly to the retailers.As the consumer electronics i ndustry evolved, retailers were no longer willing to place large purchase orders, given the perplexity of the market. In order to protect their margins and to asperse inventory costs, retailers changed payment terms on the factories. The factories were required to obtain financing on their own and would only be salaried 90 days after the retailers received the products. This put a tremendous amount of pressure on the factories. PCH saw this as an opportunity for another value-added service.Casey envisioned that PCH could play the role of an intermediary to facilitate the financial flow from the moment the retailers placed their orders to the delivery of goods. The new model was such that retailers would place orders with PCH and PCH would then place the orders with the factories. Given PCHs size and its relationship with global technology firms, banks would be willing to lend cash in hand to PCH. At the same time, PCH could then lend funds back to its factories and suppliers at a higher interest rate, but still lower than what the factories and suppliers would have gotten on their own.PCH effectively made the interest spread between the banks and the factories and suppliers. JOURNEY TO-DATE AND PATH GOING before Casey, the business adventurer from Ireland seemed to have demystified the often chaotic Chinese manufacturing landscape. Casey recalled the tremendous bother in initially setting up the business in 1996 I found companies in Ireland that were buying cables, connectors and audio accessories through British distributors who were actually sourcing them from Asia anyway.It took a long time to convince these Irish companies to go source directly from Asia because their perception was that you couldnt get quality or the right products in Asia, plus they were worried about dealing with the time difference. With only $20,000 in start-up capital and unable to afford staff, Casey worked alone for two years, getting to know factories in China, opportunitie s, and the business. dependable ten years into the PCH International Managing Goods, Information and Financial Flows GS-61 p. 12 ame, Casey disclosed that by 2007, PCH generated over $100 million in annual revenue, not a small feat for someone who still claimed to not speak much Mandarin. As the company grew into a much larger company since its start-up days, Casey believed one of the most important things to preserve in the company culture was the sense of urgency. In the initial years, he remembered that every single customer contract determined the survival of the company. That sense of urgency, to get things done, to exceed customer expectation continued to stay in the company even after all these years.This sense of urgency was a trait of PCHthe speed and the can-do attitude, said Casey. (See Exhibit 4 and 5 for revenue breakdown. ) A long-time customer of PCH was Better zip fastener Systems (BES), the brand owner of Solio portable solar power. PCH had been managing BESs en d-to-end supply chain. cast simply, PCH understands the business and quality requirements of the West, while at the same time can effectively manage the day to day complexities of a Chinese supply chain, said Christopher Hornor, pass executive of BES. 1 While Casey believed PCHs end-to-end solution provided a unique value proposition to technology companies, he also humbly admitted theres nothing that would prevent our customers from going directly to the suppliers in the future. In trying to graph out the growth plan for his company in the years to come, he was contemplating several options expanding service options or obtaining strategic investors. unheeding of the growth strategy, Casey had always believed in building PCH one client at a time. You do a good job, they give you more work, he said. Its all about servicemaking sure they get what they want, when they want it. 12 And such was the dictum in operating any supply chain. 11 12 Clifford Coonan, Understanding the Rules Is give away to Success in China, Irish Times, family 25, 2006. Anna Healy Fenton, Irish Rover Now fluent in Solutions-Speak, South China dawn Post, March 26, 2005. PCH International Managing Goods, Information and Financial Flows GS-61 p. 13 Exhibit 1 PCH compound Supply Chain Approach Technol ogy Suppl y Chain Sol uti on V i rtual Supply Chai n Flow of inf ormation Physi cal Suppl y Chain Fl ow of productsFi nancial Supply Chai n Fl ow of f unds Source Company familiar Information Exhibit 2 PCH Services Categories PCH International Managing Goods, Information and Financial Flows GS-61 p. 14 Exhibit 3 PCH Information approach Source Company internal archive Exhibit 4 receipts partition by Category 2005 49% 19% 13% 10% 10% 2006 42% 32% 12% 6% 7% 2007 45% 29% 14% 5% 6% Electronics Telecom Medical PC Other Source Company internecine Document Exhibit 5 Revenue Breakdown by Geography 2005 51% 23% 9% 17% 0% 2006 46% 26. 5% 0. 4% 27% 0. 1% 2007 48% 22% 3% 25% 1% USA Ireland Europe Asia Brazil Source Company Internal Document