How to Spot Red Flags in Your Supply Chain with Darren Long

Transcript:

Transcript 

Jared Ward00:08

everybody, welcome to this episode of ops unfiltered. I'm your host, jared, founder and ceo of luminous. Today we have a very special guest, darren long, so he's actually the father of one of my previous guests, rossin. So, dar, can you just give us some quick background? What's your experience with supply chain operations and modern companies?

Darren Long00:35

And modern companies. Does that include back before the 1990s?

Jared Ward00:39

Yeah, actually, let's start there. So not modern, let's go back to the 80s.

Darren Long00:44

I don't feel modern back then. Yeah, so my first commercial transaction was in 1989. And I guess I can talk about this because it's so long ago and the statute of limitations would be in my favor. My first assignment was to go buy Levi's in China for a small company in Missouri. Oh wow, yeah, I didn't know you couldn't just go buy Levi's in.

Jared Ward01:05

China for a small company in.

Darren Long01:05

Missouri. Oh wow, yeah, I didn't know you couldn't just go buy Levi's. I was too young and naive to understand that there were supply chain constraints or legal issues, right. So I found the factory that made the Levi's, but they couldn't sell me Levi's. They could sell me the jeans. And then they pointed me down the street to buy the labels.

Jared Ward01:26

How did you find the factory back then in the 80s, without much technology?

Darren Long01:30

Yeah, 89, 90, 91. That in itself is a very interesting story. Right, there were no phones. A factory for 300 or 400 employees may have one phone, they may have one fax, and they were not accustomed to being visited. Visitors didn't show up, there was no mass transit, there were very few taxis and in large part it was because they didn't need it. They hadn't designed or developed anything to convey potential buyers to the factories.

02:03

Because up through the 80s and into most of the 90s, you had trading companies and they were your exclusive and only portal to access the China markets. And I think there were six of them, six major ones, and those were exclusively licensed by the government, and if you wanted to buy something, essentially you went through a branch of one of those duly authorized, certified and licensed trading companies and much of your purchasing was done through large trade shows or trade events. Well, I was born in a time when that was. You summed your nose at that and you went right to the source, and so I would show up in China, knowing that there were certain areas of China I couldn't travel to.

Jared Ward02:46

So even in the 80s, 90s, this idea of going direct to the factory was very much like get somebody to go and do that you had to.

Darren Long02:55

Foreigners were not allowed to travel most of China at that time. Really, yep, was that a law? It was a law.

Jared Ward03:03

Oh, wow.

Darren Long03:03

And however clearly stated it was when I went to buy tickets to certain towns, to go to where I understood factories were. I couldn't buy the tickets. They wouldn't sell them to me no way, just because, like the color of your skin or the law.

03:18

Well, they also mentioned my nose was a little larger than most people, so it wasn't just the color of my skin. So, yeah, and they would just say sorry, there's no tickets left, and so I would use friends or former schoolmates from Nanjing University, where I went to school, and they would buy the tickets for me and then I would travel on the bus or the train, depending on how far away it was was okay.

Jared Ward03:44

So before we get a little bit deeper into that, um, okay, so very deep background in international business, specifically supply chain sourcing. Um, how did you get into that? Like, how, obviously you speak chinese. I do needed to back then to actually navigate. Clearly, I loved it, loved it. So what led you there? Like, how did you learn Chinese? Why did you start sourcing for people?

Darren Long04:13

Well, first of all I got a D plus in Spanish and I think I got a D D plus in French when I was in high school, so I didn't recognize that I had any language skills at all. And I was called on a mission for the Church of Jesus Christ of Latter-day Saints and I was called to serve in the Taiwan Taichung Mission. I didn't even know where Taiwan was. I had to ask my dad when I'd read him the mission call on the phone and dad says well, son, I think it's next to China. I thought, oh, that's a long ways away. I'm going to have to learn Mandarin, chinese and that's what your assigned language will be. But when I was in China and learning the language I actually I can't take credit for it. I didn't have to work for it like I saw so many others. I didn't have to work for it like I saw so many others. It felt like it came second nature to me. So I was very fortunate. That way the pictographs and ideographs just stick in my head.

Jared Ward05:14

Interesting.

Darren Long05:15

And so through 85 to 87, that was my life proselyting in China and learning the language, and we had to learn characters.

Jared Ward05:24

Okay.

Darren Long05:26

So I focused a lot on the characters. And then, 1988, I went on a study abroad to Nanjing University through BYU program Kennedy Center. How old were you then? 1920. Okay, cool, old enough to shave, but not much.

Jared Ward05:38

Yeah, okay, that's when you went to Nanjing University. Yes, how was? I'm just curious the transition, because I speak Chinese as well. Really, yes, I can speak. Wow, that's great. The transition to Taiwan, chinese, to Nanjing University. How was that?

Darren Long06:02

My instructors found all of us to be kind of hilarious. It was oh, you guys sound so Taiwanese, you guys sound so Taiwanese.

Jared Ward06:08

What is Taiwanese? What is that characterized by?

Darren Long06:13

Chinese spoken more from the front of your mouth. As an aspirate, it's spoken more from the front of your mouth and whereas in mainland China it's more from the back of the mouth. It's more full mouth 是不是 对。 你是不是这样子, 你是不是 要不要? And there's a lot less focus on the structure and the tonal. There's a lot more emotion shown, I think, in the way you express Mandarin Chinese on the mainland, the way you express Mandarin Chinese on the mainland. I've often been told when I went back to Taiwan that your language is too mainland-y, it's a little sloppy, and that's because the fourth, the end of a sentence. You may trail off and it may not be as an explosive fourth tone or a soft third tone or an upward swing second tone. It's more colloquial and it didn't take me long to appreciate the more sing-songy nature of mainland Chinese over the Taiwanese, more provincial language.

Jared Ward07:17

Before we move on from this topic, what are some advice that you would give to Chinese speakers going into international business? What do you learn? Why do you learn it? What type of Chinese do you learn? Taiwan Chinese? Do you learn Mainland Chinese? Any tips?

Darren Long07:41

You learn any Chinese you can grab a hold of and just have fun with it. The largest working with a lot of interns and having them come over with mostly religious background Chinese and exposing them to the broad range of business and interpersonal Chinese. The best advice I gave any of the interns was have fun, Don't take it personal, Get it wrong and enjoy getting it wrong and then allow that to be a learning experience in itself. You're rarely going to forget something. Where you say something it ends up being a joke of a lifetime. You're going to remember that experience and it's going to be fun for you going forward and reduce the learning stress. Just have fun.

Jared Ward08:22

I love that. That's awesome. Okay, so you've learned Chinese. You went to Nanjing University, so in 1989, that was your first official sourcing visit where you found a factory and you were sourcing Levi's for a company in the United States. Right yeah.

Darren Long08:39

There was a Levi's shop in my hometown of Cape Girardeau, missouri, levi's shop in my hometown of Cape Girardeau, missouri, and she said hey, you know, if you can pick me up some Levi's while you're on, you know your next trip, would you? You know, would you mind? I'm like well, of course, because I knew where the denim was made and back then there weren't a lot of products made out of China they were still working on developing their plastics, and electronics was really unheard of. So silk denim that was pretty much my assignments back then. It was a limited scope, very limited scope.

Jared Ward09:17

And what did that experience catapult you into? I'm guessing that experience sort of catapult you into your career and building an actual company. Yeah, what followed after that?

Darren Long09:27

Well, it was a series of catapults, because in the late 80s, early 90s, people were mentally unaware of what a China opportunity would be for them. We were still somewhat agricultural and industrialized as a country. Very little technology, communications to China was thin, if any, and most of the time you could try to send a fax and the line connection was so staticky that the fax would come out unclear. So it wasn't an easy bridge and I like the springboarding into it because really you had to land and just go for it. There was very little structure, no phone books, no ways of finding anyone, and so when you came to a central location it would be in a city with the only hotel that was authorized for you to stay in if you were further inland from Shanghai, and then you would start asking the concierge, the hotel management, sit down and invite them to dinner. Do you guys know of any factories that make plush toys? Those are my second items, wooden toys.

Jared Ward10:41

So the way you would find things back then is you would fly into one of the major port cities like Shanghai or Hong Kong and you would just make your way in have dinner with the concierge or like the whatever person there that you can actually get some intel.

Darren Long10:59

You'd have to warm up to them. I would typically stay a month to two months at a time. Yeah, you couldn't just get a ticket somewhere. The train from Shanghai to Nanjing at that time was a full day, wow, yeah, and you'd get. You'd often get ash and soot on your face because the windows were all open. There was no air conditioning in the cars it's hard to imagine and you arrived sore. You arrived sore and most of the seats were standing seats, so you would stand up for the whole ride. You'd sit down in between. If you had a couple of seats open, you'd sit down on the hard board. Those were hard. And then what you do for have?

11:46

I heard of a plush toy factory, which I did, and here's an example of the challenge of finding things. The little town was named Wuxi, which means no tin, and it's kind of a fun way of naming a town no tin. But I got one of my fellow students had purchased me a ticket, a bus ticket to Wuxi, and I went out to Wuxi and I was looking for this plush factory. It got a little bit late. I found them, but I missed my ticket back. I missed my bus back. I didn't have a place to stay. There were no hotels, and so I went knocking on doors on Liguans els, basically overnight els, and they wouldn't take me in. And I got to.

12:30

It got a little bit later and one of the ladies had pity on me. I could see it in her eyes. She said come back after dark. And so I came back after dark and she let me in and she was looking around left and right and when she came in she goes. She said don't say anything, I don't want to see your passport, you can't sign in. You have to be in like now after dark, don't talk to anybody, and you'll need to leave before dawn Because there's a neighborhood boss that comes around and checks the books to see who's staying here and checks their papers.

13:03

And she said I just couldn't stand having you on the street overnight. So she put me a little tick it was a straw tick on the ground in the back room, in the kitchen, and I had a little bowl of water and a towel and she gave me a manto and a thing of dojong in the morning and I was gone. Wow, yeah. And then I realized why, why I didn't want to be in other towns late at night, and not because of danger or anything, but they really didn't have the infrastructure to support people coming in and I respect that and they were trying to protect their own people from having this um, the social anxiety of seeing foreigners coming in and knowing that they couldn't entreat them, they couldn't take care of them.

13:47

That's really interesting, no facilities.

Jared Ward13:49

Wow, it was a fun experience, okay, so I mean, back then the infrastructure wasn't set up in China, it was truly difficult to source a factory that could do wooden toys or denim. Keep going down that route. What are you talking about? You would have to. You have to find somebody who was, uh, local to the area who could actually guide you in in a right direction. That was really the only way to source factory back then. You did how, how?

Darren Long14:16

would. How would you do that? In fact, the only way. The reason I found the wuxi was because the concierge was from wuxi and he knew of a plush toy factory. That's the only wow, the only way I found it. So that's mind-boggling. Yeah, so because it was so difficult to get around, you purposefully stayed a long period of time and it took you days to either track your way out, to walk your way out to where the described factory would be and often they wouldn't let you in the first visit and then you would come back the next day or the third or fourth day and just knock on the door and say hey, I have orders for you and I can speak Mandarin. We can go through the orders and see if this is an opportunity for you or not.

Jared Ward14:59

And they would tell you to come back the next day, like ah, come back the next day around 3 o'clock.

Darren Long15:03

Come back the next day Like ah come back the next day around 3 o'clock. Come back the next day. Come back, lao Ban Bu Zai. Come back the next day. You know those sorts of things, so I would just keep coming back, man the level of persistence.

Jared Ward15:13

Well, we are so spoiled today, so spoiled the level of persistence, that you have to have to do something, as we think of that nowadays, like sourcing a factory, like we think of that nowadays, like sourcing a factory, like that's easy. I can just go to 168. You call them, email them Back, then, wow, go into one of the main cities. It was super difficult to find a place in land. Talk to somebody who had local knowledge Then they had no clue you were coming. So you just have to be persistent until you can finally get a meeting with the boss. That's it.

Darren Long15:47

That's it, or someone that would open the door for you. The Laoban usually lived on campus. They had a lot of dormitories that were on campus for quasi-remote workers. They might come in for the week and then return back to the weekend Keep in mind it was still primarily agrarian for the week and then return back to the weekend Keep in mind it was still primarily agrarian. One of my first plastic factories that I ever saw when I approached, it was, they were rice paddies and I was literally walking across the median of a rice paddy.

16:17

It was a little wider than most and I went out to it was a tin roof shack, a total B-52 sort of thing, tin roof shack. It was rusting and it was in the middle of a rice paddy and, jared, I kid you not, they had wheelbarrows bringing in plastic pellets to put into a plastic injection machine in the middle of the rice paddies. Oh, my goodness, and that was the rise. That was the way. I think the farmers were some of the most innovative, creative. Let's get things done. People around.

Jared Ward16:50

You know it's such a commentary, like you talking about these experiences in the 80s and 90s, such a commentary. So many people don't understand the progression of China between, like, the 80s and modern day. It is mind-blowing how many decades they got ahead in just you know, 20 years. It's astounding and you got to see that.

Darren Long17:15

Yes, I got to see it, and I wasn't supposed to be in some of those locations, right, I got lucky. I had fellow students from Nanjing University that would buy me tickets and go out with me and show me literal communes where they work together to survive and to strive and thrive together, and seeing how they aggregated skill sets and used underutilized facilities to make more of what they had, it was inspiring to me, jared, frankly.

Jared Ward17:44

So I have a question as somebody who got to experience China very unfiltered, very non-Westernized what were some of the things that you admired about the culture, like what were just? I'm sure back then you got to really see the highlights of wow, that's a massive difference between American culture. Can you give us some of those highlights or some of those lessons that you learned in the unfiltered China when you first?

Darren Long18:19

arrived, your senses and sensibilities were often distracted by what appeared to be remarkable differences cultural differences, smells, food, ways of doing things. You were assaulted by these differences and then, if you quieted yourself a little bit, specifically in these agrarian centers where they were aggregating unique skill sets and trying to create more for themselves and this was a lot of Deng Xiaoping's policies that were slowly finding root about enabling and empowering farmers to be innovative in everything that they do to benefit society as a whole. Because they recognized farmers blessed the whole of society. Without them people wouldn't be eating right. He also recognized the one thing that I saw, similar to where I grew up in southeast Missouri, rural Missouri.

19:16

I had friends that were farmers and in my third, fourth and fifth grade years I was in an agricultural community. They were extremely innovative, doggedly perseverant and fiercely loyal to their neighbors. If someone had a call, someone needed to do something, they were out there. You didn't have this call it urban and city-dwelling divisions where people kept to themselves. It really was communal. They grew up knowing each other. They all went to the same school, they all farmed the same land for a generation or two generations, or three generations.

19:57

The teacher, his name was Zhang. He taught his the little town maybe called Zhangcun, and everyone in that area was Zhang, gongchang, zhang, and this was their culture, this was their family. You might go for 30 minutes or 40 minutes to find other families Chen's, zhang's, gong's, whoever and they're all very family-centered, localized and centered on seeing their own family progress, not just subsist. And I came into that period of time when we're not going to sit back and subsist anymore. The cultural revolution is behind us. The world is open for a new age and I need to make a better place for my children. That was what I heard people talking about over dinner. Darren, you come from America. What's it like there? It was very difficult to comprehend. I want to make a world like that for my children. That's what they would say. How can I make, tell me how I can make this more, more able of facilitating the increase of capacity and education and reach of my children.

Jared Ward21:06

That's so interesting. Now, talk about a little bit the the difference that you've seen. Talk about a little bit the difference that you've seen, or, I guess, the evolution of China from the 90s to modern day. I mean, wow, talk about when did you start noticing in your trips, your many trips back to China?

Darren Long21:27

When was one of those trips where you're like, wow, things are different. So when I first went to Shanghai in 1988, the first time we landed in, the little Shanghai airport was virtually downtown. It seemed like it was a long ways from town. And each time I came back I didn't always come back through Shanghai. And there was a period of time and that was because southern China had received special economic zone status, specifically the areas outside of Hong Kong. You had Shenzhen, which was like the Wild West. I mean, the city streets were literally muddy and stuff. And you're slogging it through and it was amazing and you're buying Dell. No, what was it? What was the? I forgot what the name of the computer was. Everyone wanted back then. But they were making these computers, assembling them all along the street in cottage style, and so they'd fold and bend the case, they'd paint the case and they'd keep going down the street and then they would be stacking the boards and putting them with power supplies. Yeah, open front, there was no—they didn't worry about dust, dude, it was insane. And I could buy computers there with name-branded US computers name-branded US computers and bring them back to the States and sell them. The interesting thing was I didn't go to Shanghai for several years, I don't think because so much activity was happening in southern China in these areas. My wife and I went to and taught English at Nanjing Aeronautical Institute from 90 to 91. Went to and taught English at Nanjing Aeronautical Institute from 90 to 91. And so we were there just after Tiananmen and we saw some of the dampening effects of Tiananmen. But the further away you were from Beijing, the less they cared about all that hocus pocus and that political whatever. Yeah, and in fact they would say, the reason we're doing this right now is so that never happens again. They were purposeful in Shenzhen and they were purposeful in those areas to push as much economic advance as they possibly could, not only for their own people, their own family, but also for the country. They realized they were making new strides. So when I came back to Shanghai and they were already building these bridges, I could see them up on derricks and see these. Why are they running the bridge that high, I asked myself. Well, they realized they were running bridges that high because they had two or three other bridges that were going to be going underneath it, and I just didn't have that vision. They did. They're building the heck out of stuff.

23:58

And from then on I started coming back a little bit to Shanghai, going into Nanjing where I had friends, and then every other visitor. So, and that is when I began to see this crazy economic engine kick up and start just going crazy, and there was a unique energy, jared and people were smiling. They genuinely were smiling. I mentioned to my wife from 88, 89, 90, 91, you'd walk on the street and there was this dampened spirit about things and people seemed somewhat unfamiliar with smiling and open laughter, that it was a little bit too out there for people and when they would laugh they'd cover their mouth real quick and then they'd laugh together. It was funny. And you saw guys and girls walking down the street holding hands. It was nothing, they were friends. There was none of this unique cultural or identity. People were just themselves or identity.

Jared Ward24:56

People were just themselves, and the way you describe China in the 80s and 90s is, it's like, very romantic.

Darren Long24:59

It's like I look back at it, it's somewhat a romantic. They were very innocent. The people were all very innocent, all very sincere. They would tell you politely what they felt. If you asked them twice about something unique, they would tell you a little bit more bluntly and they would rarely tell you anything in a rude manner. They just had too much respect for the people around them as well as you coming over and speaking Mandarin. But they were really honest and just sincere. That's very interesting. Yeah, the economic boom changed a little bit of that and brought in a competitive spirit that was remarkably different through the late 90s and 2000s. It was in competition and sharp teeth and let's get down to business.

Jared Ward25:46

And yeah, yeah, it really changed. Well, let's pivot a little bit into some of your work. How did you, when did you form your own company that essentially helped people find manufacturers in China and manage their production? What was that first company and why did you find it?

Darren Long26:09

Jared, that's a good question. I didn't start my first company early enough. And why did you find it, jared? That's a good question. I didn't start my first company early enough. I think even I was a little bit naive on what an individual could do or could accomplish, and so I just did a lot of freelance work in my own name and put people together with factories so they could buy directly from them, and so I would get paid on completion of service. It was similar to what we might call today as a BTO build and turnover.

Jared Ward26:36

Okay.

Darren Long26:37

So I would help them generate a relationship with the factory, get product going that was acceptable, with the right order of operations. Statement of work quality. Statement of work quality. Um aql wasn't even heard of and generally back then, but we would set up our own quality standards, acceptable quality standards, what?

Jared Ward27:00

what would you? What would you charge back then for a project as simple or simple? As simple as you know, um, a moderate-sized company in the united states wants you to find a factory and get the first production run accomplished.

Darren Long27:16

That's a little bit embarrassing, but I think one of my first fees for service were like $900.

Jared Ward27:25

Oh, my goodness.

Darren Long27:28

I think it was because I felt bad asking $1,000. It just seemed like a big number.

Jared Ward27:37

Oh, my goodness, what a bargain somebody got. It's like somebody coming in doing what you were describing in the 90s, Like that is. I mean that's like hundreds of thousands of dollars of value.

Darren Long27:51

I recognize that now. At the same time, I remember explaining to myself the hardship I was going through. I was also learning, and when it took me two months or three months or two trips to get something completed for someone, I often felt a little guilty charging that because why couldn't I do it faster? Why couldn't I do it?

Jared Ward28:12

more efficiently. I relate to that as a fellow business owner. When I first started Luminous Software, I didn't charge anything for our first customers and I simply saw it as, like you said, I'm not an expert yet it's not working like our competitors. So I totally see where you're coming from. You know that's part of you got to get the hard knocks in first. But there's also a side of me that's like what else are they gonna do? You provided like that's. It's such a straightforward value add like I will set you up with a manufacturer yeah, it's cool.

Darren Long28:52

Yes, I remember there was discussion over the sharing of expenses and or um, they purchased plane tickets for me and there were those but the the fee for service. I remember I think that I'm really remembering the first one was like 900 bucks and I thought I was. I was was on cloud nine, that's awesome.

29:15

I'm in business now. But yeah, we really didn't start a named business until late into 2000s, oh, okay, yeah, all through 90s. And there was a period of time, Jared, because I would have to be gone. Literally I'd have to be gone three, four, five months. It was stressful on my family relationship. So it was periods of time when I would work and consult and provide advice on how to do business in China from the United States and I wouldn't be taking my long monthly or multi-month trips. Yeah, it would be. I'd go to the canton trade fair and I would stay for three months.

Jared Ward29:56

I love, I've gone to the canton fair. Yeah, it's amazing because after the canton fair.

Darren Long30:01

What do you do? You go back home? No, you actually have to go to visit the factories of the contacts you made and qualify them, see what products they really do make. Or are they because you you went through trading companies? Right, You'd have to coordinate with the trading companies to go see the factory and then you'd have to validate is that really the factory they're going to make my products from, or is it that tin roof shack out in the middle of a couple of rice paddies? No, the quality could still be right, but I need to know, for my client's interest and vantage point, where is it really going to be manufactured. And so that became the sequential challenge validation location and then making sure the quality is always exactly right.

Jared Ward30:44

I think that's a great pivot into modern day sourcing. So this kind of rapid fire question I want to get a quick answer from you. What are your thoughts on the evolution of modern-day sourcing platforms like Global Sources, alibaba, made in China? What are your thoughts on those?

Darren Long31:01

Global Sources just started when I was in college and it was the only internship program available for us, so I have a framework for the Global Sources origin. When it started, I think it was less commoditized right, it was more individual service and folks were the companies on both sides of the pond knew that a full breadth of services needed to be offered in order for people to actually have success in transactions with China. Banking transactions are difficult, whatever, but what did I see? The differences between then and now. It means today I'm less the cowboy version of me needed to be in existence years ago in order to kind of bridge some gaps and to forge some paths and all that. And I think what these platforms have done is they've thoroughly learned and aggregated the experience set that I had to identify the easiest paths possible to provide access to markets they really have.

Jared Ward32:08

I think you just said well, it's like they provide access to markets. They give you some level of access that you otherwise wouldn't have been able to have before their existence.

Darren Long32:18

The early method of it was straight access, with no filter and no qualifying values either, because a lot of it was early was the trading companies that validated everything for you. You really couldn't go to the factories.

Jared Ward32:32

Very few people could truly. What is a trading company? Real fast, you've said that a couple times those trading companies.

Darren Long32:37

They had the license to receive foreign currency, use foreign currency, convert it into local currency, buy the goods that were being manufactured and facilitated by contract Directions how to make it, drawings, whatever that contract pack was Call it a tech pack and then they would take possession of it for you as your agent and then ship it to you. That was it. That's what a trading company did. They were the government's authorized interface to foreign parties.

Jared Ward33:09

I think that's something that I didn't even realize is they were. They were government authorized middlemen. They were that's exactly right.

33:17

And there was. I like you said, I mean there's. There was true value in trading company. There still is today. It's just interesting the the evolution to these platforms. What? What do people miss out when they go through Alibaba? So you just explained, you know it gives you access to markets. It gives you vetted access in a lot of cases to these markets, qualified opportunities to manufacture goods. What do people miss out on if they go through Alibaba versus through Darren and your company?

Darren Long33:50

Oh, I would say that there's one particular thing that they miss out on is the ability to customize I won't even go into the true validation of the factory the ability for you to evaluate and compare companies on site. I won't even go into that, but I think what many times we try to avoid the discussion of liability through saying, oh, but they're a gold supplier or they're a gold vendor on Alibaba. They have all of these qualifications, do they? Have you validated them in person? I think everyone has a story of the successful story of buying it off of Alibaba. It really went well. And then the same person may have another person, a friend or someone they've heard of or a family member that got something off of Alibaba and it was not what they ordered and they feel like they really got, took to the cleaners and now they know why they're not in international trade.

Jared Ward34:50

So what causes some of those bad experiences on the back end, like from my perspective? I see a manufacturer, their profile on Alibaba, I start talking to them. Seems fine, I get a sample. Awesome, put down the money, I get it. And it's like this is not the production sample. Like. What causes something like that?

Darren Long35:10

I've been asked this question before. And why would it happen? How would happen? People wouldn't do that, and I give everyone the benefit of the doubt. There may be some. Something got lost in translation, maybe one person's perspective of a finished article really isn't another person's, or something got messed up in production and this seems acceptable. Maybe because there's not an AQL statement which fully specifies what is acceptable and what's not acceptable, or what the major or minor flaws are acceptable, or how many points are going to be docked for these particular incorrect forms or incorrect methods of delivering the product, wrong color, wrong shape, whatever right. But I think there are some just genuinely bad actors that they don't care. They've collected the check and they're going to ship this over and they're a long ways away. What will it matter? And fundamentally, I think it's those sorts of people and I don't see a lot of them in China, but they are there and that's why we have a sourcing office. I've worked with people that I hired away from other companies because of how honest they were.

36:21

And I've worked with them now for over a decade, 15 years. So, yeah, some of them were critical experiences for me. I had a battery-powered and I this is interesting One of the things I do with the supply chain is I'll find, call it the flagship product, or I'll ask my client to say all right, this is your widget, what makes your widget unique? And they'll tell me. And then we'll go through and identify, in terms of priority, how do you want me to carry forward on identifying the factory that you want and getting this product for you and everything. And then I'll say, all right, who is your primary competitor and why are they number one or number two within this particular space? And then they'll explain it to me. And then what I do, Jared, is I will go and find the competitor supply chain and I will study it and I will crawl down into the root of the supply chain and find their raw materials. I've done it for everything from batteries to magnets centered objects. I've been to the side of mines where they mine metals that they use in automotive or electric motors and generators.

37:38

Yeah, it's a very unclean environment. There's no way we would ever have in the United States. I understand why the EPA pushed it all over to China and then shakes their finger at them, saying China, you got to clean up your act. It's just a messy, it's very, very dirty. And so I study the supply chain and I go to all of the prime element suppliers to understand where the weakness of that supply chain is, so I can recognize and share with the client where they're going to find potential weakness or exposure cultural or EPA regulated exposures and what they're going to find potential weakness or exposure cultural or EPA-regulated exposures and what they're doing.

38:17

And then I go to my client and then I say, okay, here's how we can avoid some of these exposures or here's what we can do strategically to help you avoid what might be pitfalls for other participants within your segment, other participants within your segment. And then we build from there on what their sensitivities are or their levels of their fear of exposure, and we'll build off of their supply chain and their product. And so that's how we differentiate from what you might get from an Alibaba, which is a final package good, but you really don't know what's on the backside. It's a Wizard of Oz thing. You get to the factory, but do you really see behind the curtain? And we don't even go to the curtain. We just go to everything behind it and say here's what you're going to build your product with. What do you feel comfortable doing?

Jared Ward39:07

Yeah, I think it's so many. It's such a common phrase to say boots on the ground, so many it's such a common phrase to say boots on the ground and you guys genuinely provide boots on the ground to to those companies who actually want something. They want to see behind the curtain, they want to see exactly what's going into it and optimize every single little detail, I think even just the visibility that that will provide. There's, there's so much potential value that you can provide.

Darren Long39:33

I might say it's an education in their field. Many of them, you know, we're non-industrialized now fundamentally no-transcript. What are the core elements? What could you find in terms of a liability or market shift within a particular and that's going to drive your pricing or, potentially, because of human condition, make it look like you're exploiting a particular population? We need to avoid all of that. In today's modern world and communication, where everything really travels at the speed of light, everything really travels at the speed of light, right. The industrial revolution, followed by the communication and transportation revolution, has made the world flat and you do have to have boots on the ground and you do need to have transparency down in your supply chain or you're really exposing yourself to the liability of 700 people in between the design of your product and the receipt of your product.

Jared Ward40:28

Let's put on our projecting hats real fast. So obviously you've seen so much change in China and the United States, both of those countries, how they fundamentally do business is ever evolving. Where do you see China in the next 50, 100 years? And where do you see America in the next 50 to 100 years? And I'm talking like in a broad sense. You know, obviously the United States is not a manufacturing economy, China is. China's economy is evolving. Where do you kind of see those two economies in the next 50, 100 years?

Darren Long41:07

So in 2015 through 2019, our three offices began to undergo what I would consider an increased evaluation cycle. Tax leaders or certification or licensing officials would come and visit the offices just to check and make sure their documents were in order and maybe just sit down and get some you know, extra handout or something. They always had their hands out and it wasn't really costly. But we'd have to pay a fee To the government, to the government, the official that would come out and do an evaluation.

Jared Ward41:50

Interesting.

Darren Long41:51

And so how does this play? The additional oversight created what I considered to be a bit of an ill wind. And so, in 2019, I commissioned a study with one of our interns to help explore a Central American or call it a Western Hemisphere option for our clients, because at that time, we could be doing anywhere from a million to three million garments a month out of China literally A million to three million garments a month. We had electronics, medical devices, electric motors, generators, magnets, bicycle components, electric bicycles, motorcycles. We were exporting a wide range of products and I thought this sort of ill wind isn't boating well near term and I perceive it to be a negative impact midterm, and who knows what long term is right. And so we commissioned a study in Central America to help identify what country would be the best country to locate a garment factory, because that occupied 60% of our business, between 60 and 80% depending on the month. It was basically a political risk location, supply risk, supply chain risk, everything all blended in together, and Guatemala was like third on the list, nicaragua was first and Honduras, I think, was second. And I went and visited those countries and it was amazing to me to find them not economically viable due to supply chain constraints. They did not have the infrastructure like China had and they had fallen behind in the investment cycle global investment cycle because China made themselves so appealing Jared, they were easy to work with. Really I talk about the hardships of the early days, but the way they communicate, the way they do business, the pace of business. There's a lot to be learned from China. For Americans too, that's interesting About focusing and just getting stuff done and quit whining and complaining. Just get down to the work, get it done and through that, find a new level of happiness and opportunity.

44:04

Central and South America had missed the industrial and some of the technological innovations that had really bridged the business gap between China and America. We set up in Guatemala why? Because we're seven days door-to-door on the East Coast Midwest and 15 days West Coast door-to-door, and that shortened people's cash cycle and from a garment perspective it worked. But I couldn't bring over other tech, I couldn't bring over plastics, I couldn't bring over any sort of forming. They just didn't have the infrastructure there. Electricity isn't widely distributed.

44:41

China has done such a marvelous job supporting their infrastructure and development to enable industry to be globally competitive, but that wasn't happening down there. So we still do a lot of supply chain out of China. Where do I see things happening? I see a divergence in the low-cost labor set being brought closer to home, because there really is low-cost labor in Central and South America. China is investing heavily right now in Mexico and they will for the next 10 years Five for sure. 10 is a reach because they are seeing the inability to reach US market and Western markets due to ideological differences that are growing, and it's not so much that the issues didn't exist before, it's that people are making noise about them now, yeah, and finding a reason to say I don't want to do business now.

Jared Ward45:36

Right.

Darren Long45:37

But, like I said before, some of the dirty chemical processes that were exported out of the United States, they were done purposefully and then no one cared about what it was doing to China. It was our own appetite that was hurting their environment and then we blame them for hurting their own environment. Now that's me taking a little bit of a bench. You know politician side of things, but it really is a. I view that as being the negative side of US influence in China. Here. Do this for us, but keep it clean, and or don't tell us.

Jared Ward46:09

Yeah, right, right. And then slapping them on the wrist when you find out about it and and then that just escalates.

Darren Long46:15

And that's where we find ourselves today, where we haven't, in a balanced way, really sat down and talked about our differences and, critically our similarities. The the desire of the chinese businessman is exactly what the desire of that farmer was back when I met it is how can I make my situation better so that my children can excel in a global economy? It's the same thing they're asking today. It's the politicians that tend to drive things sideways and lever situations so that it becomes untenable for the most of us. But where do I see it going in five to ten years?

46:51

They've already that road and belt or the belt and track or whatever that is that program. They set that up and started that up a decade ago because they knew this day was coming, and so they have incredible amounts of foreign direct investment in Africa, and they have incredible amounts of foreign direct investment in Africa, and they have incredible amounts of foreign direct investment in Mexico and Nicaragua and any other country in Central and South America that will take their dollars and change their statehood, affiliation, recognition from Taipei to Beijing, and we don't invest in that. So, fundamentally, the United States is giving away global territories and global markets by not addressing issues of finance and supportive economic development. We tend to foster relationships through other methods and terms, but the Chinese are just straight economics. What do you think we're going to adjust it? Other methods and terms, but the Chinese are just straight economics.

Jared Ward47:51

Is that? What do you think that's going to?

Darren Long47:52

adjust it. Ten years from now they'll be divested in China. In fact interesting, you'll like this. Sorry to interrupt. You're good that some target basically has said we're not going to be producing in China anymore. China is the backup source for manufacturing going forward. When Target makes a statement like that to their own executives and sourcing managers, they're moving out of China. In fact, a Chinese company invested in our Guatemalan factory so that they would have a Central American source for their center hub for their operations. So it's just going to slide and we're going to see a greater divergence in economic decoupling with China and the United States to where I'm not sure how much trade we will be doing in 10 years, unless the political lesions can be healed through real dialogue about what's really going on in the world.

Jared Ward48:47

What emotions or ethos is behind china's aggressive expansion? Is it concerning at all or is it like, no, they just they're wanting to always expand their, their ability to have international trade or be at the forefront of it. Is there something malicious behind it? Do you think it's mostly benign?

Darren Long49:14

So I studied and graduated in ancient Mandarin.

49:18

The purpose for going to Nanjing University and studying, really, the ancient characters, I thought in order for me to understand and do business successfully with the Chinese, I needed to understand the formative thought behind their current practices.

49:32

So I studied the characters and I studied poetry and I studied literature and then I studied politics and I read the Chairman Mao's Little Red Book and I did that so I could understand how to answer what you're saying right now, what you're asking right now, and my answer is this the Chinese people are focused on the continuation and proliferation of their culture, society and economic well-being period and they're willing to set aside and put aside personal discomforts and call it regional, inner city discomforts to be on the winning side of that discussion all the time. Globally they're focused as a people and what we see politically is kind of the uncomfortable and ugly side of it. But the people themselves are very competitive and very compelled to again make sure that they have a place for their children on the economic platform of the world going forward 10, 20, 50 years from now, and they have a long play vision. It's not a short play. Yeah, that's where I see and it's unabashed. They don't apologize for that pursuit.

Jared Ward50:59

Do you think the United States has anything to worry about?

Darren Long51:03

Their worry should have started 10 years ago and I suspect, within known circles and well-advised circles, that they knew these sorts of difficulties were coming. And in fact, in some ways, depending on what your political leaning may be, you might argue that, depending on your political leaning, that the flames were fanned by certain political interests, and as well as corporate interests, to create divides and then reconnecting at certain times to either reinvigorate or re-solidify particular agreements and directions globally, because it seems these are cyclical and I've witnessed enough of them to know that they seem to be placed just outside of memories. Recollection to know oh, what happened 10 years ago? Well, okay, now I see what they meant. And so, 10 years from now, china has already transferred their economy into a consumer-based economy. They've already turned the corner, and once they can do that, then they can consume their own, the product of their own domestic production. They don't need foreign direct investment and they don't need us buying their products anymore. To a particular degree, we've seen changes in their economy recently.

Jared Ward52:23

We've seen changes in their tax structure and their tax policy integration Do you think the United States needs to similarly pivot and become more of a manufacturing country?

Darren Long52:37

Absolutely yes. In the 90s and the 2000s, I thought I couldn't be in a better business. Everybody wants to go to China, china, and I'm already here. And it was easy, jared. It was really easy. And then, as I got a little bit older and I began to see the tea leaf proverbial tea leaves forming in the bottom of the cup and it was like wait a minute, wait a minute basically deleverage their capacity for self-sustaining industrial and potentially even agricultural activities. Have we lost and forgotten certain core competencies that we need in order to sustain ourselves? And then I began to be a little bit of a reshoring evangelist, and that really did happen about 2014, 2015. I started relooking at what was the path of my life. If things happened right now that were disquieting, would I regret offshoring so many jobs? And the answer was yeah.

Jared Ward53:41

Yeah, that's a really interesting perspective.

Darren Long53:43

And I need to work now for the rest of my life to see if I can't re-equalize the balance of trade that I may have offset. What can I do to my own footprint to leave the world a little bit better and more balanced and also to provide some balanced advice not that I was ever self-centered. And come to China, no matter what. I always counsel the businesses to retain some of your manufacturing base in the United States for the what if occurrence, for the black swan occurrence, because if China gets shut down, if there's a typhoon, there's a number of things that could cause problems in trade with China. You better be able to sustain yourself here for a short period of time to bring up your supply chain If it gets squashedashed. Covid was a perfect example of that. Right, goodness, you got to experience that. So I I had bird flu in 20 um swine flu and bird flu in 2004 was a precursor to what we went through.

Jared Ward54:42

Goodness yeah well, two more topics I want to dive into real fast, sure Sure. Number one is troubled clients, troubled purchase orders, manufacturing runs. What are the top three things that you've learned from the bad experiences with customers?

Darren Long55:00

Manage expectations, and you do that only by truly understanding what caused the problems. You need to manage expectations and you do that through going in and studying a little bit and being very objective of what the cause is so that you can inform them. And the last thing is to look at every disruption as an opportunity. These supply chain disruptions, process disruptions, manufacturing disruptions they're all opportunities to learn. If you don't look at them as opportunities to learn, you end up getting bitter about the relationship, finding reason to blame this person or that person or the other, and it ends up being a non-accretive experience. Those are the three things that I think I learned from and I learned to manage through, and in every instance where I did that Jared, I ended up developing more business with them.

Jared Ward55:53

Interesting. So you take those bad experiences, find the source of the problem, come forward with it and a lot of times it expands the business relationship.

Darren Long56:03

Yes, With one company. They were seeing some IP leak, and so they asked me to find the factory that was making leggings. How many factories in China are making leggings? Thousands.

56:17

Well, it turns out I found them and I went to visit them and, strangely enough, this man would not let me into his design studio. He would not let me into his design studio. He would not let me into one room. The door was locked. I didn't speak English. This is kind of a funny thing. I wouldn't speak English. I mean, I wouldn't speak Chinese when I first went to them. Oh, you'd fake.

56:42

I have my Chinese assistant with me, bree or Crystal or someone else, and they knew the play, they knew the playbook. We'd go in. I'd speak only English. They someone else, and they knew the play, they knew the playbook. We'd go in. I'd speak only English. They would translate, and somewhere through the process they would offer them. I'd say, look, I'm just translating for the guy. But I know if I approach him with a certain amount of money, he'll pay you an amount of money and really I want to look good. If you can let me in that room, it'll make me look good. I'll share my tip with you. I'll share whatever. And you know what Often, jared, they would let him in and then I would realize, okay, we've got a broken supply chain here.

57:18

Yes, your designs, engineering designs, whatever. It could be clothing, it could be electric motors, it could be medical devices, dental devices, whatever I was doing, if I found their competitors, remember, I went in and I studied the competitor supply chain. If I found them open to handouts, you knew that there were other factories similarly aligned. Right, this guy would not even let us in. I came back a second time. I came back a third time and he said he didn't want to talk to me a third time because he figured I was a spy.

57:50

Wow, a third time. And he said he didn't want to talk to me a third time because he figured I was a spy. And later on he's been one of my best friends in sourcing because I told him why I was there and I thanked him for letting me prove his supply chain and prove that he was a high level of integrity in everything that he did. And so it's one of those things where you take what you've learned from the supply chain. And when I went back to the customer that asked me to find their supplier. Are we getting ip leak? I could tell him absolutely not. This guy wouldn't take a bribe from a local, wouldn't take a bribe from me. And when I started speaking chinese to him he just laughed. He laughed, he goes. I knew it. I wondered you were just asking too many questions, as if you were understanding the discussion I was having with the translator. But I've been there three times trying to crack his shell. He just wouldn't let me in.

Jared Ward58:37

That's really cool.

Darren Long58:38

So but yeah, that's, you learn that you learn how to express your own technique and validating someone's integrity and the integrity of a supply chain. Validating someone's integrity and the integrity of a supply chain.

Jared Ward58:48

What advice would you have for this is the last question, because we're running out of time what advice would you give to an e-commerce founder or operator, let's say somebody running a $20, $30 million a year business who is almost exclusively relying on China? What would your advice to them be? Would you tell them diversify Everything would be really blunt like get out of China. What do you think they should do to prepare for the next 10, 20 years, brands that are really going to have success from a supply chain perspective?

Darren Long59:28

First of all I would congratulate them Raising anything past the 10 million mark. You know that's when you can start really getting legs and it takes so much work and effort to get to that 10. My hat would be off to them and I'd recognize they've got some great qualities that help propel and drive them through those levels of success, because it takes drive and grit. People say it's luck. It's really not lucky.

59:53

The second thing I would say is that, yes, to assume that the economic conditions and political conditions between here and five years from now, or whenever you have your perceived exit to stay the same is a wrong assumption and it could bite you. And if you want to exit, you're going to want to assure the potential purchaser that you have alternative plans where you've considered the political risk, the economic risk, the foreign currency risks, and you can say with confidence and this guy's going to see through your smoke and mirrors, if you just got smoke and mirrors, he's going to see if you genuinely assessed what other market alternatives there could be for your product to maintain if he buys it, to see that this business can be self-sustaining through any economic downturn averse from a regional perspective. And so I would say, yes, you should at least have a plan B. If Target is going to say China is their only plan B right now, that's their backup manufacturing, then you'd better have at least a backup that's outside of China. I like that perspective Right.

01:01:01

They're smart, they got plenty of ears in the air and boots on the ground. So I would encourage them to, in some of their spare time, identify a particular range of countries that have good sourcing for their particular line of product, find factories there or connections there that they can begin to slowly. Don't run into it or rush into it. That can be destabilizing as well. Your time is to get you where you are. You've spent a lot of time to get there and you don't want to immediately fracture your time, but to a portion a certain amount of time to study and learn what the supply chains are like within these new locales, what the regional customs are, what some of the challenges might be different than China to Central America and whatnot.

Jared Ward01:01:46

Okay, well, I think this is probably a good place to end it. How can people find you and your company? Only and um and people know why.

Darren Long01:02:13

Because I keep their products and their projects and in strict confidence, um, but the uh website I'm sure you could put that up on for the garment factory in guatemala is infitex. Okay, I, n, f, I, t, e, x, c a dot com and that's specifically for garments and we've got a magnificent factory down there. We do Pendleton, we do Grunt Style, we do Columbia, we do Timberland, we do Puma. We've been able to bring over quite a few brands For our China business it's Innovasia, scmcom, and we still do a lot of. We still do garments and clothing out of China and we're expanding a little bit into Indonesia right now with Rosson he's helping us crack that open and we do a lot of electronics, pickleball stuff oh, that's cool.

01:03:02

Yeah, pickleball are you kidding? That is amazing. Just the explosion of pickleball explosion is right. So we do a lot of bag development for some Amazing, just explosion of pickleball Explosion is right. So we do a lot of bag development for some other labels and do a lot of other paddle development. It is fun to be in such a dynamic sport like that. I haven't seen anything like that since Ironman, when we were doing Ironman.

Jared Ward01:03:24

Oh man, I'm excited to get some of these clips to you from this podcast. I think people are very attracted to from a supply chain perspective, to people who have been there who have real authentic stories. I could talk all day, especially about, like the topics at the beginning of the conversation just about like old China, the nineties, two thousands, but this was definitely an interesting conversation for me.

Darren Long01:03:55

I hope whoever watches gets some value out of it. But thank you. Yeah, Thanks for thanks for stopping by, and these are questions I hadn't thought about for years, and so it's. It's been invigorating. I appreciate it.

Jared Ward01:04:07

Thanks for having me.

Darren Long01:04:08

No problem.