A Chinese Connection For Dallas
Ray Sun makes China work for North Texas business.
On the ground floor of the sprawling Dallas Market Center, Ray Sun, a smallish, friendly man with a youthful demeanor, was standing just outside his products showroom. Nearby his display window exhibited an array of precision machine parts, all gleaming and stainless steel, as well as a child’s board game featuring dinosaurs.
Each of the displays has a creation story that Sun, 55, was eager to tell to a visitor one recent day. But when he was informed that his guest was a journalist, something extra lit up in Sun, who’s the owner of a Plano-based consulting firm called Advantage China. He insisted that the reporter head straight for the Center’s fourth floor to meet with two clients who, he proclaims, may have a hit on their hands at the Center’s big gift show in January.
That chance encounter was intriguing to this writer. But it offered little hint of the colorful, dramatic route that Sun has followed from the teeming streets of Shanghai to studies in Montreal to serial business failures as a Toronto software entrepreneur to Dallas, where Sun has become a self-made, if belated, success in international commerce. In a nutshell, Sun has made it his business to make China work.
And, he’ll make it work for anyone—from the U.S. units of Swiss-based multinational corporations to suburban Dallas housewives who think they’ve got the Next Big Thing. He’s currently overseeing 20 projects, which he expects will triple revenue to eight figures for Advantage China next year, when several projects will go into full production. The two local women with whom Sun urged a meeting, for example, sold decorative items with a wholesale value of $7 million in their second year in business, after developing a product line with Sun’s help. Then there are medium-sized companies that need to remain competitive with rivals already outsourcing to Asia, or others who can’t quite find someone—in the United States or abroad—who can turn their idea into a marketable, blister-packed product priced to sell.
Sun says he can get a plastic prototype made in China for a fifth of the cost in the United States: $2,000 versus $10,000. For many would-be entrepreneurs, he says, the latter price would “kill” a project before it got off the ground. And that’s why he’s so valuable, he insists, to North Texas businesses. Among them: a company that supplies equipment for power plants, and another that makes a gadget for laying tile on mall floors.
Understanding The Process
Working as a transpacific consultant wasn’t Sun’s original idea when, in 2004, he followed his wife, a physician with two medical specialties, to Texas. Here, she took a position with a Fort Worth hospital. Using his software background, Sun built a website offering thousands of Chinese-made products. But he found few buyers. When he began offering his personal services as a hands-on go-between, however, Sun felt he had struck pay dirt. His first contract was for the creation of non-stick camping cookware for a Colorado maker of freeze-dried meals for hikers. His Shanghai-based staff of two—it since has grown to 10—identified four manufacturers with the ability to produce the plates and pans. When all the pieces arrived from various points, a warehouse was rented for a day, and temporary workers assembled the kits. “I made no money on that order,” Sun recalls. “But it made me fully understand the process and gave me confidence that I could do it.” Years later, the sets are still being made and sold.
Sun knew that finding a supplier is often less than half the job. Quality control remains an elusive concept in a country that is making great, but jagged, leaps from Third World practices to cutting-edge processes. Thousands of suppliers rely on networks of mom-and-pop workshops of varying reliability, few with any meaningful reviews or independent testing. Yet Sun discovered a small Chinese village that specialized in rubber products that meet American standards, for instance. Villagers there turn out countless window squeegees of “very good quality,” he says. And although a large manufacturer won’t set up a production line for a small order, hamlet workshops are more than happy to get the work.
Corruption and red tape are less a problem for him in China than spotty, or nonexistent, quality control, he contends. Another complication is that only a limited number of companies have coveted export licenses, necessitating the payment of a fee for their use, ranging from 1 percent to 1.5 percent of the shipment’s value, he says. A food product would be a different matter, particularly after all the toxic contamination scandals in recent years. Foodstuffs require a myriad of licenses and protocols, which somehow still fail to stop periodic unsafe food incidents that plague China. For that reason, Sun steers clear of edibles and commodity imports.
Still, there are countless ways an unwary foreign importer can be cheated when bringing in non-food items. If it’s made of plastic, Sun asks, is it made from inferior, recycled material? The answer: “They don’t tell you.”
For first-timers trying to get an item fabricated, there’s the problem of where to begin. When prospective U.S. buyers use such popular Internet sites as Alibaba to source a product, they’re unaware that more than half the listing companies are brokers, not actual
manufacturers, Sun says. “You can’t do business by phone or email. You have to go there, wherever it is, and meet them face to face,” Sun says. Only then, he adds, can you size up the operation and its ability to deliver.
“Ray Sun is right,” attests Jeremy Haft, an American consultant who has run companies in China for the last 15 years and teaches at Georgetown University. “How big is the quality control problem? Huge. It pervades China’s entire industrial and agricultural base. It goes way beyond just the attitude of the workers. One cause is severe fragmentation. So, take a look at a pen on your desk. This might take three players to make in the U.S.” But in China it could take 15, Haft points out in an email. “All the sub operations occur at separate plants. Plus there are a number of middlemen involved in the distribution of the raw materials and the final product. Each player in the chain adds risk, time, and cost.”
Sitting down with a would-be entrepreneur in Dallas or Denver, Sun says, he can bring an immediate reality check by factoring in likely manufacturing and shipping costs, then contrast that figure with what the object could fetch on the U.S. market. His napkin-back spreadsheet requires a U.S. selling price that’s six times the cost in China, or the venture will fail.
His clients four floors up at the Market Center, for example, were two Plano women who, frustrated at the poor selection at major craft chains of decorations and accessories for their middle-school daughters’ school lockers, designed their own products under the Locker Lookz brand. All they needed were manufacturers to turn their idea into a full line of mixed and matched “wallpaper,” mirrors, miniature chandeliers and other gewgaws that only pre-teens crave. Attempts by Joanne Brewer and Christi Sterling to find a U.S. manufacturer that could produce the tiny lights proved fruitless. Sun, by contrast, found innovative Chinese companies that pulled it off.After a brief test season with a handful of retailers in 2010, Sterling and Brewer sold $7 million worth of goods in 2011. Sun had one employee dedicated full-time for a year to root out suppliers to produce 38 items—everything from paper products and mini-shag carpets to magnets and the battery-powered lights that automatically turned on and shut off when the locker door moves.
“Ray took us through it every step of the way,” says Sterling. “He sent prototypes to China, and early samples were sent back and forth, each time tweaked.” Product development was bird-dogged by Jenny Xu, the Sun employee in Shanghai assigned to the project for a year. Sterling and Brewer paid for the samples and air-courier charges, while Sun covered Xu’s salary and travel expenses. If the goods came to market, he would get a percentage of sales.
But even Advantage China can get burned occasionally. Round magnets designed to hold up the locker “wallpaper” quickly fell down. The cost of the rare-earth alloys from which the magnets are made had skyrocketed in price that year, and the supplier waited until the last minute to secure enough of the expensive elements. Realizing he could no longer profitably deliver magnets made to promised specs, the supplier substituted 20,000 weaker ones. Not only did the company refuse to give a refund, but Sun had to find a new supplier and pay a lot more the second time around. Now, whatever the size of the shipment, Sun insists on complete article inspections: “Goods must be perfect before shipped.”
The offspring of the despised capitalist middle class, Sun was a teenager in Shanghai during the Cultural Revolution of Mao Zedong, then chairman of the Chinese Communist Party. Sun spent years memorizing Maoist slogans in school and says, “For 10 years, I learned nothing.”
He considered himself lucky to own the officially approved biography of Gen. Georgy Zhukov, a Soviet hero of World War II, at a time of heightened political conformity, when most Chinese were deprived of Western literature (deemed “poisoned books”). And, even the most basic necessities were scarce. Sun’s three-generation family of six shared a single bicycle.
As a boy, Sun knew that his mother came from a privileged class, that her father had owned a fruit-canning factory before the Chinese Revolution. But only later did he and his two sisters discover that their father’s family too had been wealthy, owning land and buildings. Shocked and angry over being kept in the dark, Sun and his siblings confronted their mother, who defended herself by declaring, “Your Daddy never told me, either!”
Such were the times that a bourgeois heritage could deprive one of a school admission, a job, or a promotion. Even so, Sun managed to get a grounding in computers at a Shanghai university. He landed an IT job with the Shanghai center for disease control, where he met his future wife, Cecilier Chen Hua, a young doctor.
The 1989 pro-democracy protests and brutal crackdown in Beijing’s Tiananmen Square occurred just as Sun and his wife were waiting for passports. His wife had just snagged a research fellowship in France, and Sun had won admission to McGill University in Montreal for graduate studies in medical statistics. In those tense days, passports could not be issued without final approval from superiors who had to vouch that the applicants were not dissidents. Sun says he had long been used to keeping his personal beliefs to himself.
After McGill, Sun worked four years at Bell Sigma, then a year at IBM, then a year at the Bank of Montreal. The entrepreneurial bug had bitten and, along with a fellow Chinese immigrant partner, he formed a software business. But neither Sun nor his partner could grasp the fundamentals of dealing with investors—even those willing to invest $1 million, as did a group from Silicon Valley—so new were they to the capitalist West. It was an expensive lesson for both partners. With $100,000 he managed to salvage, Sun would later launch Advantage China.
Recently the company has faced a new challenge: the slowing Chinese industrial economy. Warehouses there have been packed with unsold goods. Low-end manufacturing has been lost to Vietnam and Bangladesh. Some high-end fabricating has even repatriated to the United States as the wage gap began to narrow and shipping costs rose. Wages in China have soared in heavily industrialized regions. The most striking examples were Sichuan’s 2012 minimum wage, which rose by 23 percent, and Shenzhen’s announcing a 16 percent increase on the 2012 minimum wage, following a 20 percent hike in 2011. Meantime, an analysis by InterChina Consulting predicts that China will likely lose its cost advantage sometime between 2015 and 2020 to low-wage countries with similar supply chains, such as Mexico and the CzechRepublic.
Despite all the “bad” news, Sun remains sanguine, confident that the negative trends will fall hardest on price-sensitive retailers like Wal-Mart, which he urges his clients to avoid. He believes his niche—small- and medium-sized production runs with quick turnarounds—will keep Advantage China growing.
“I now have a track record,” he says, referring to a certain alchemy that has, with the help of his Chinese connections, turned a number of entrepreneurial dreams into reality—including Ray Sun’s own. Today he owns a Lexus and a mortgage-free, 4,000-square-foot house in Plano and, earlier this year, he watched his only child graduate from Harvard.