Pch International

CASE GS-61 DATE 04/01/08 PCH INTERNATIONAL MANAGING THE FLOWS OF INFORMATION, GOODS, AND finance Liam facey, CEO of PCH worldwide Limited (PCH), was in ein truth way an adventurer. natural and having spent most of his y egressh in Cork, Ireland, Casey had n invariably lived in mainland mainland chinaware until he started traveling and working in the country in his young twenties. Yet, with bug out speaking frequently Chinese, Casey fudged to establish an innovative fork oer icon solutions political set offy in mainland Chinas pulverisation city of Shenzhen and grew it to almost 700 employees in adept ten twelvemonths.By 2007, PCH had become a ball-shaped ac lodge it had customers in Western Europe and North America and its IT operations, manufacturing and wargonhousing support was primed(p) in Ireland, China, Singapore, mainland China, South Africa and Brazil. In fact, so successful was Caseys profession that the mildmannered and extremely diligent entrepreneur won the Ireland 2007 Ernst &038 Young Entrepreneur of the year award. 1 Collecting business line competition accolades was not what Casey had in look when he first started PCH.When Casey went to Taiwan in 1996 to attend a calculator and electronics fair, he saying an fortune to jockstrap global engineering science companies attain emolument of Asia and Chinas suffering- exist provider base and manufacturing capabilities. Although PCH started out in the mid-1990s as a sourcing agent of low- wrongd electronic shares from Taiwan and China to the Western creative activity, by 2007 it had evolved into a provider of comprehensive hang on string of mountains solutions to global engineering science companies. PCH was imageed to address the expects of a complex global applied science add chain landscape. Arthur Beesley, Casey Picks Up general Award, Irish Times, October 26, 2007, p. 12 Jennie Tung prepared this crusade under the administerment of Professor Hau Lee as th e basis for class discussion quite an than to illustrate either effective or ineffective manipulation of an administrative situation. Copyright 2008 by the Board of Trustees of the Leland Stanford Junior University. All rights reserved. To g all overn copies or request permission to reproduce materials, e-mail the Case Writing propose at email&160protected stanford. du or write Case Writing Office, Stanford tweak civilise of Business, 518 Memorial Way, Stanford University, Stanford, CA 94305-5015. No part of this publication whitethorn be reproduced, stored in a retrieval governance, substance abused in a spreadsheet, or transmitted in every form or by any means electronic, mechanical, photocopying, recording, or divers(prenominal)wise without the permission of the Stanford Graduate School of Business. PCH International Managing Goods, go throughledge and pecuniary Flows GS-61 p. 2 STATE OF THE TECHNOLOGY cut CHAINThe Maturing leave cosmic string By the twenty-fi rst degree Celsius, engine room yields of all sorts became omnipresent and profoundly transformed the way people lived and worked. However, in the 1990s, in similarity to other global tally chains much(prenominal)(prenominal) as garments and toys, which had over roughly 50 years of outsourcing experience, the engine room sum up chain was steady in its premature development. For example, by the mid-1990s, the digital camera, the mobile ph oneness, and the laptop calculator had only hardly become a mainstream consumer category.As such, in summation to instruction on designing cutting edge fruits, technology companies were trying portend out the most high-octane ways to deliver their harvest-feasts to end consumers. On the consumer technology give chain sequenceline, the 1970s and 1980s showed only a fine fare of global brands, such as the monolithic technology conglomerates Sony and Siemens, who were industry leader broadcast in to a greater extent harves t-time categories. These industry leaders relied on their vertically integrated supply chains and their ability to interlace in suppliers to keep naked competitors from entering the securities industry. However, as venture smashing funding became much avail fitting in the 1990s, the technology market saying continuous waves of innovation, shorter product lifecycles, freshly products and brands. At the same time, the 1990s overly saw a drastic increase in independent manufacturers and suppliers, especially in Asia. These businesses had developed sophisticated technical capabilities after serving the global brands for a government issue of years. The confluence of these factors changed what it took to win in the technology space. vertically integrated cultivateers of the past were re situated with engineering-savvy, asset-light marketing and design companies. As such, both bear-sized and small technology companies had the opportunity to bring products to market through th e use of sub-contracting. By the late 1990s, consumers not only had more product choices moreover also multiple channels to buy from, including online stores, which were becoming popular. Within the world of technology products, the supply chain systems for the consider adequate-ranging product types were not uniform. For example, the more complex biggish systems, such as telecom base stations, had a unalike supply chain model from the smaller consumer electronics products, such as face-to-face MP3 players and laptop com pointers.This case taperes on the small consumer electronics supply chain, whose characteristics include having many component suppliers, with assembly sites doing the final assembly and testing. The modular building of technology products meant that the brand owners had to manage a large network of suppliers. To adhere competitive, large and small technology companies began to out starting time a significant part of their supply chain to third party vendo rs in rule to focus their resources on brand diverseiating activities, such as product design and marketing. This outsourcing burn in the 2 3PCH International Limited (PCH), entropy Memorandum for say-so 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, Information and monetary Flows GS-61 p. 3 1980s created a new industry cognise as Electronic Manufacturing run (EMS). By the 1990s, the EMS industry had a number of global collection plate players, notably Hon Hai Precision Industries (Foxconn), Flextronics, Celestica, Sanmina-SCI, Jabil, Elcoteq, and a few 12 others.In addition, several thousand smaller companies continued to occupy 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, raw materials procurement, pooling of resources, and industrial des ign expertise, in addition to other value-added service such as warranty and repairs. Products construct by EMS companies were labeled with the brand owners brand and corporate identity.As price competition intensified in the consumer electronics industry in the late 1990s, EMS players bit by bit shifted their manufacturing assets to commence live areas, such as cities in Southern China. sequence the leaner overhead structure provided numerous operational and financial benefits, the technology companies faced enormously complex challenges in dealing with procurement, manufacturing, and logistics vendors. Fragmented supplier Base Many technology companies looked to Asia as an outsourcing location, disposed(p) the number of low- court manufacturing and component suppliers in the region.By 2007, China became a major sourcing and production hub for many technology companies. However, to carry on full advantage of Chinas low cost supplier base was not always straightforward. As China was cursorily developing into the manufacturing plant of the world, many companies strove to achieve low cost succession maintaining musical note. Low cost technology goods suppliers were abundantly unattached in the coastal regions of China, in particular in the southern city of Shenzhen, just a 50-minute train ride from Hong Kong. As a procurement officer for a technology accompany, trying to identify the most suitable supplier could be a huge headache.For example, for e rattling cable connector, printer racing circuit board, and MP3 player supplementary item, there were literally hundreds of suppliers to choose from in China. 4 For many technology companies, many of these components were not core or strategical. However, sad management of component parts could impact either aspect of the supply chain, leaving behind many unsatisfied customers. Therefore, to take full advantage of Chinas wealth of suppliers, technology companies inevitable to filter through numerou s vendors to find ones that optimized cost, speed to market, and quality.Working deep(p) Constraints While independent manufacturers and component suppliers benefited from global outsourcing causes in the late 1990s, they also had to face increasing financial support challenges. Casey, who had worked with hundreds of factory owners, observeed of the challenges in raising working capital In the in the first shopping center days of outsourcing, suppliers were able to take a procure order of a guaranteed account book from a well-known company to the bank and, upon verification, would be able to obtain working capital inancing. Letters of Credit (LCs) were issued by the purchaser. However, guaranteed lasting status product volumes have been replaced by rolling short term product guidelines forecasts. The reason is as a technology company faces ruffian competition and declining PCH International Managing Goods, Information and pecuniary Flows GS-61 p. 4 margins, it expects to manage cost aggressively by minimizing size up build-up. This is necessary attached the need to match the ebb and flow of customer taste and requirements.They in secrete demand just-in-time auction pitch from their suppliers which shifted some of the stock certificate holding costs upstream to its vendors, further increasing its need for working capital. In addition, sometimes the purchase company may not be one of the blue-chip globally recognizable brands banks sometimes perceived this as an additional credit risk. This trend resulted in substantial volatility and twinge on some suppliers as banks were not as pass oning to provide trade finance given the perceived increased risk levels.This meant some suppliers found it tremendously difficult, if not extremely expensive to obtain finance. Increasingly Demanding Customers Consumer technology products of the twenty-first century were about superior functionalities, seamless ordering process (both in-store and online) , timely and holy product auction pitch, and a memorable out-of- blow experiencereferring to how consumers felt when they opened the box and reacted to the overall product presentation. Of course, it was critical that the products themselves be trendy and cool, and accompanied by a whole host of accessories to jazz up the products.For many consumers, technology products were perceived in the same vein as fashion goods. Brands, therefore, needed to meet constantly changing tastes and extremely short and tight product development cycles. While professional technology products generally placed more emphasis on product functionalities, they simmer down mandatory support work, such as regional configuration (e. g. , language differences and pre-loaded software program) and just-in-time delivery of products, in order to play down inventory costs. Finally, technology companies needed to provide their customers these highly customized products and purchase experiences at a competitiv e price, while achieving all of the above. These were just some of the characteristics that make the technology supply chain much more challenging than the supply chain of more traditional industries. EMS companies, as discussed above, while able to deliver manufacturing savings to brand owners, were unable to adequately address these bruise 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 perceptive entrepreneur, Casey saw the pain points described above as opportunities. Over the years, Casey had persuasion a comprehensive solution addressing the market and customer challenges would provide iniquitous value for technology companies. In PCHs menu of go, the over-arching theme was to help thickenings better manage the three distinctive flows in the technol ogy supply chain discipline, goods, and financial.These flows essentially addressed every element required to take a product from concept to being sell ready, including the key locomote of manufacturing, promotion, product customization, logistics and supplier pay. (See demonstrate 1 for an over assimilate of the three flows in the technology supply chain. ) PCH International Managing Goods, Information and Financial Flows GS-61 p. 5 The Virtual yield stove The practical(prenominal) supply chain referred to information flow that occurred in the supply chain as goods moved through the variant stages.The information requirement powerfulness be for a preposterous customer, such as, when will my goods arrive at my door step or for the planning part in a company, how much inventory should I order given existing inventory levels in different parts of the supply chain? When a company outsourced all(prenominal) portion of the supply chain to different vendors, disbursing and piecing information mainstay to adopther from disparate sources could be extremely challenging. The fleshly show Chain The physical supply chain referred to he travel by which physical goods went from product concept to their final customers it dealt with the movement of goods from dissimilar 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 made it extremely cumbersome for companies to identify the most bewitch vendors for their needs. In addition to price negotiation, service quality also required significant due diligence.For example, incidences of delinquent delivery and product quality issues were commonplace. given up the myriad of choices that consumers had for any given technology product, the margin of error allowed was very small. Another challenge in the physical supply chain was customization of products. A question much asked by supply chain executives at technology companies was, how should I best take advantage of economies of scale by producing in volume while achieving the customization for each(prenominal) local anaesthetic market, and sometimes for each someone customer? This question highlighted the challenge of managing market-level customization since most technology products needed to pull in multiple countries nigh the world. The challenge could be as simple as placing different language labels on products, to more complex tasks such as first consolidating product incumbrances from different manufacturing sites and thus assembling heterogeneous units for unique customer orders. Finally, logistics and shipment also needed to be managed in an efficient and cost effective manner.The Financial Supply Chain Tied 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 exa mple, a manufacturing contractor would need financing to buy components and assume its workers to make the products, before shipping them to the technology company to collect the r veritable(a)ue. Established vendors may have had enough gold to last through a collection cycle plainly smaller or newer vendors could be strapped for cash when a large order came through.While mercantile banks could provide financing for some vendors, new or smaller vendors finish up paying extremely high gratify First Capital Presentation at the Zhejiang University Innovation Institutes 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 sign years of operationsuntil they had developed a stronger tag record to borrow at more complaisant rates from banks. THE PCH SOLUTIONBy 2007, PCH counted a number of global clients as customers. Among its clients were three of the top louvrer ad hom inem computer companies, three of the top five telecom and networking companies, and the top five leading contract electronics manufacturers. 7 According to Casey, PCH offers customized solutions for each client. PCH helps to manage the various communication, culture and geographic barriers that often create operational friction amongst 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 coordinating these flows. For example, PCH manufacturing services addressed the needs in the flow of goods, while PCH Capital addressed the needs in the financial flow in the supply chain (See Exhibit 2 on PCH services categories). equal 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 ne ither a supplier of goods nor an importer for global technology companies. PCH was a service providera coordinator that helped form and maximize the benefits of an outsourced supply chain for all parties involved. Addressing the Needs of the Virtual Supply Chain Information transparency was a highly valued bear for technology companies given the many moving pieces involved. Casey explained why its software services division was core to PCHs offering to clients and why developing these tools was all-important(a) to PCH in the long term Transparency of process is a tele yell exchange PCH offering.This is why weve developed a series of online software tools that drive inner PCH activities and to provide a portal for clients to oversee and participate in the process. These systems enabled PCH, customers and third-party suppliers to view and share the same selective information. As all parties are working with the same information on the same platform, confusion is cut down, the ne ed for status communication is reduced and clients can have full visibility to PCHs activities even though they may be half(prenominal) 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 billing and shipping documents in one central location for each order. Given the myriad of suppliers, ChinaFlo provided a database of primer data on over 900 factories evaluated by PCH. Each factory indite contained detailed information ranging from basic 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 v icinity of the factories, as the factory profiles had GPS coordinates associated with them. Resolving the chaos 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 company got started. Over time, PCH had moved deeper into the product life cycle where solutions were renew entire distri thoion systems for some of our clients, PCH took over warehousing, inventory management, and sell conceptualisation functions. We wanted to move to higher value services as contend to being just a sourcing agent. With this strategy, PCH developed three core services that addressed the complexity and confusion of sourcing and manufacturing in Asia, in particular in China. As of 2007, these services were manufacturing, clutches, and fulfilment services.Manufacturing Services 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 team then developed prototypes for manufacturing. Casey proudly mentioned how PCHs sayd services created benefits for the entire 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 likely 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 specific factory group but act individually 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 t he contract and concourse minimum quantities this also meant final product quality and the end exploiter experience being far down the outsource manufactures list 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 said, Rather than just 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 consideration the later steps in the process, such as warehousing and shipment consolidation. PCH International Managing Goods, Information and Financial Flows GS-61 p. 8 Postponement and Fulfillment Services Traditionally, once the technology products we re produced and quality examine in the approved outsourced factories, they were shipped to warehouse facilities before going to the various retail destinations.A potential downside to this model was that when the bulk shipment arrived at the retail destination, which might be in a high cost country such as the U. S. or Europe, the products still needed to be further customized for each local market whether it was adding country appropriate labeling or putting 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 total 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 postponement servicesthe act of holding goods in the sup ply chain (often in bulk 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 clearly visible. Most of PCHs clients products were manufactured around the coastal areas of China, so PCH strategically located its postponement processing facilities in the southern Chinese city of Shenzhen, and in Singapore. These locations were selected for their relatively low aim 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 differen t locations around the world, PCH would anticipate for the final order before it preloaded the different language operating systems into these computers for the various markets. These computers were held in Shenzhens Futian Tax 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 goal was to help customers to the full manage the physical supply chain, its fulfillment services addressed the handling of product orders from clients, their distribution chains or directly from end consumers over the Internet. 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 truck and shipment to overseas locations.Even though PCH provided postponement in China, te chnology 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 center 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 Ibid. PCH International Managing Goods, Information 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 hearthstone 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 variety of packaging and shipment options, PCH is able to both manage fast and slow moving in ventory 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 remain somewhat unchanged, product inventory quantities shrink, warehouse networks shrink, if not go away all to sither, and the cost of operating the supply chain falls. PCHs unequalled Position In summarizing PCHs value pro bunk, Casey believed PCHs role as the coordinator in the supply chain was beneficial for all parties involved Our purpose as a company is developing partnerships, delivering peace 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 book of business to these component suppliers and thats why they like to work with us. The factories are getting a steady flow of business t hrough 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 knowledge 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 real do 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 sold worldwide. Sales revenue was growing rapidly and most of its products were manufactured in Taiwan and China. These products were sold 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 operated under a confidentiality compact with most of its clients hence, actual client names have been disguised.Some of the company data provided was fictitious to preserve 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 p roducts 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 quad accessories, they might receive four different shipments on four different dates, leaving them sometimes confused and unable to track the status of their orders. This formation 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 wor ld away from where the goods were produced.Finally, considerable care and attention were given to the packaging and presentation of the products to ensure that end consumers were truly delighted when open up 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, the orders were consolidated and federal official live to PCHs processing facilities.PCH had already stored bulk inventories of various accessory parts in its facilities once information for each orders were received, the PCH teams in Shenzhen then go and grab the various parts and assemble them into one exclusive 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 obtain customer servic es 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 foreign 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 appreciated 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 observing these challenges and decided that PCH was actually in a great position to help de-risk the entire supply chainfor the technology compa nies, 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 participation in the supply chain, PCH gained a wealth of knowledge about the factories, the products, and the ultimate client. This knowledge became extremely worthy 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 appreciation far exceeded what could be accomplished by suming officers.This unique position enabled PCH to effectively 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 retailer 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 industry evolved, retailers were no longer willing to place large purchase orders, given the uncertainty of the market. In order to protect their margins and to minimize inventory costs, retailers changed payment terms on the factories. The factories were required to obtain financing on their own and would only be paid 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 funds 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 FORWARD Casey, the business adventurer from Ireland seemed to have demystified the often chaotic Chinese manufacturing landscape. Casey recalled the tremendous trouble 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, opportunities, and the business. Just 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 thing s done, to exceed customer expectation continued to stay in the company even after all these years.This sense of urgency was a quality 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 Energy Systems (BES), the brand owner of Solio movable solar power. PCH had been managing BESs end-to-end supply chain. Put 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, forefront 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 chart out the growth plan for his company in the years to come, he was contemplating several options expanding service op tions or obtaining strategic investors. Regardless 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 truism in operating any supply chain. 11 12 Clifford Coonan, Understanding the Rules Is Key to Success in China, Irish Times, September 25, 2006. Anna Healy Fenton, Irish Rover Now Fluent in Solutions-Speak, South China Morning Post, March 26, 2005. PCH International Managing Goods, Information and Financial Flows GS-61 p. 13 Exhibit 1 PCH Integrated Supply Chain undertake 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 Internal Information Exhibit 2 PCH Services Categories PCH International Managing Goods, Information and Financial Flows GS-61 p. 14 Exhibit 3 PCH In formation Portal Source Company Internal Document Exhibit 4 Revenue Breakdown by Category 2005 49% 19% 13% 10% 10% 2006 42% 32% 12% 6% 7% 2007 45% 29% 14% 5% 6% Electronics Telecom medical exam PC Other Source Company Internal 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% ground forces Ireland Europe Asia Brazil Source Company Internal Document