Guanxi -- Relationship in Chinese -- Is Overrated

Run a Google search on the Chinese phrase “Guanxi” will get you over 500,000 hits on topics mostly concentrated on doing business in China.  The phrase has been over-used, over-quoted, and over-rated, for the past 20 years since China opened its commercial door to the rest of the world.  Sometimes, the phrase has been hailed as the center and the focal point of running a successful business in China.  Everything else, such as a sound business plan, a strong financial background, and genuine knowledge of the industry, becomes only the supporting cast.  With Guanxi, some believe that running a business in China is as simple as taking a deep breath.  Without it, it is deemed that any business will fail even with a sound and solid plan.  The author is not trying to downplay the importance of maintaining a good relationship with your business associates in China.  He believes, however, that a business built only on Guanxi is doomed to fail in the long run.

After years of development, transformation, and most of all, growth, businesses in China is no longer a closely knit society protected by the confinement of the Chinese laws and regulations.  Instead, they are competing in the global economy, where quality, time to delivery, innovation, and cost competitiveness are the source for success.  Instead of a proliferation of Guanxi, here are a few examples that the Chinese suppliers are developing themselves into the world class suppliers:  

• Supplier transformation: Chinese suppliers are now equipped with the latest technologies, armed with the best talents, and sourced from the most competitive areas, to provide the world the most innovative products at the most competitive price.  The Chinese auto industry, which has seen an amazing growth in the past 10 years, is projected to pass the total production capacity of that of United States within this decade. 
• Rules and regulations advancement: Smart suppliers are focused on becoming the best of their respective businesses.  Many are adopting the rules of the ISO, FDA, CE, and other government regulating agencies.  The notable ones are ISO16949 for the automotive industry, ISO13485 for the medical device industry, and ISO14001 for Environment management. 
• Information technology investment: Oracle, SAP, and other ERP software now forms that basis of many Chinese suppliers IT infrastructure.  Further investment in IT to fill other needs such as Customer Relationship Management (CRM) and Supplier Relationship Management (SRM) are now making its way across China.  These tools have been widely available in United States, and now the Chinese suppliers are quickly adopting them.
  

Guanxi may have played an important part during the growth of the China economy over the past decade.  It will still play a role in the future.  However, Guanxi is not going to develop the technological advancement that is required to support the growth of the auto industry, to help comply with the many rules and regulations around the world, nor to transform the information technology landscape.  Instead, a successful business in China will require a sound business plan, strong financial background, and genuine knowledge of the industry.

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Simple Way to Become FDA 21 CFR Part 11 Compliance

Many suppliers in China are confused by the FDA requirements. This has further added to the headaches when overseas sourcing professionals are trying to identify suppliers that are FDA compliance. In the FDA maze, FDA 21 CFR Part 11 -- Electronic Records; Electronic Signatures -- (Part 11) has generate quite a bit of press. For those who are unfamiliar with the requirement, I recommend a quick and brief review of the FDA guidance located in the public domain. A pdf version can be downloaded here. In short, FDA has dictated the use of the Part 11 guidance in March, 1997. Under widespread scrutiny by the industries, stating that the original guidance may not be consistent with FDA’s original intent in issuing the rules, and other factors, FDA has withdrawn the original guidance, but remained firm on the future usage of the Part 11. During the transition period to full Part 11 compliance, the FDA has outlined 3 main elements of the guidance:

1. Part 11 will be interpreted narrowly; FDA is clarifying that fewer records will be considered subject to Part 11.
2. For those records that remain subject to Part 11, FDA intends to exercise enforcement discretion with regard to Part 11 requirements for validation, audit trails, record retention, and record copying in the manner described in the guidance and with regard to all Part 11 requirements for systems that were operational before the effective date of part 11 (also known as legacy systems).
3. FDA will enforce all predicate rule requirements, including predicate rule record and recordkeeping requirements.

Basically, instead of a full-blown industry wide adoption, FDA will now use “discretion” and “interpretation” when auditing for Part 11 compliance. This, obviously, is good news for most firms that are not yet FDA compliance. However, the delayed guidance only means that companies will now have more time to determine the best strategy forward, and HOPE that the early adopters will work out all the bugs, where a clean, simple version of Part 11 will be available for late comers to follow. So, what shall an average medical device development firm do in order to prepare itself for future compliance?

1. Generate a log of documents related to the medical device, and specify whether the master document is being kept electronically, or on paper. For those who have not invested in document control software, the form could be done using a simple Excel tracking sheet. Further, please clearly states on the tracking sheet and on the document that only the printed version kept in the master document control area can be considered as the “controlled” version.
2. Do NOT implement a partial solution as suggested by the Part 11 guidance, i.e. only part of the documents is Part 11 compliance. Some may be tempted to implement a “pilot” solution to test out the document control software, or other software packages. However, this will only prompt for attention during an audit. Please remember a paper tracking mechanism will NOT harm you, but an incomplete electronic trail will.
3. Do start NOW with a pilot project. As with any kind of software adoption project, implementing the solution to all stakeholders will take some time. A pilot project will minimize any confusion for users. It will also help to flush out any bugs before rolling out the solution corporate wide. Many companies offer specific modules tailored for FDA compliance, i.e. Siemens FDA accelerator.

FDA compliance is not as daunting as most thought. On another hand, having the ability to comply with FDA will not only give your company and product the needed edge over your competitors, it may also "force" your company to have tighter quality standards.

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