HistoryChina Performance Group (CPG), a fully owned division of TransContinental Trade & Finance Corporation, started operations in 1978. The early history of the company is closely intertwined with the story of China’s emerging export business as we explain below.
CPG originated as an internal organization. It was created to facilitate the sourcing process of the consumer goods the company bought in China for resale to the US market.
During the seventies, China’s export business was primarily commodities driven and it was very small in volume, about $100 mil per year to the US. The Canton Fair was the main export business venue, which took place twice a year, lasting a month per session.
All importers of China products had to work through a rigid Foreign Trade Corporation (FTC) system, which did not grant access to factories and all quality control had to be conducted off-site through a sample verification process. The speed of processing an order was also an issue, as China took at least twice as long to process an order as neighboring Taiwan and South Korea.
On the other hand, with the FTCs, fraud was not an issue and factory pricing was excellent.
As an early believer in China's potential for exporting manufactured goods, CPG pioneered a number of changes with the FTCs including:
- Developing and broadening the products range
- Improving trade and payment parameters
- Shortening delivery times
- Gaining better access to the factories
In the early eighties, the FTCs started to decentralize geographically by allowing provincial and regional FTCs to deal with western buyers and by loosening management of product categories. As controls loosened, CPG buyers had to increasingly be wary of product quality and order performance.
Exports to the USA grew to $8 billion (1989). The recognition of China as the country of choice for sourcing products led to a corresponding decrease of the high margins CPG’s trading business had enjoyed. CPG had always kept one step ahead of the rapid changes occurring in China and so, at this time, CPG’s business model changed: we decided to no longer take title to the merchandise but instead, to offer our customers direct access to Chinese factories. The new business approach was a complete focus on service: by helping its customers buy direct from China, CPG by-passed numerous levels of intermediaries and created an effective and practical interface with factories.
Since CPG bought the goods for itself, it was essential that our systems delivered quality and performance throughout the supply chain. CPG’s proprietary sourcing procedures were fine-tuned to achieve the following:
- Determine if factories could deliver on their promises
- Help factories set up their own quality control procedures
- Support the system with a documentary trail
- Monitor the progress of production
- Expedite delivery
- Prevent problems from occurring
During this decade, CPG also expanded its customer base to include European and Australian companies.
In the nineties, China’s infrastructure was improving dramatically and it became much easier to do business. Quality improved, pricing information became more readily available, and the range of products increased: China was quickly becoming the place to buy from, and its export volume started to explode (Exports to the USA grew to c.US $66 billion in 1999).
The service model created dynamic growth for CPG and it was fine-tuned over time to offer the on-site expertise needed to take advantage of the vast and complex China supply-chain. A number of additional services were introduced to meet customer demand, including:
- Factory audits: Not just technical and financial, but also ethical.
- Pre-qualifying suppliers
- Competitive research
Well into the new millennium and the information age, access to China pricing and production has become easier and faster. China sourcing opportunities have multiplied exponentially, and so has the volume of business. China exports to the USA had multiplied to $320 billion by 2008, over a 32 times more than when CPG first started. In 2009 China exports globally had grown to over $1.3 trillion.
Resulting from the massive economic growth during the past two decades, labor wages have risen quickly and has increased the pressure on Chinese suppliers. Suppliers respond by seeking increased productivity and producing higher-value products.
However, navigating through this evolved environment is challenging. The massive number of suppliers, agents, factories, and b2b businesses can leave a buyer overwhelmed and confused, especially when there seems to be no guarantees for reliable quality and consistent pricing. Cultural and language barriers still exist which add to the frustration.
In this changing landscape, companies are looking for reliable sourcing advice and savvy supply chain management services. CPG, through its experience, vision, and know-how, continues to provide the best support to companies worldwide.