5 Things You Need To Know To Successfully Do Business In China, With Scott Ellyson, CEO of East West Manufacturing

I would like to encourage more people to become entrepreneurs themselves. I would love to share stories and motivate people to take that risk. We want and need more people to start businesses. Second, our company wants to play a role in bringing new technologies to the forefront. We want to bring life to incredible products that will make the world a better, cleaner, smarter, safer, and healthier place to live. We would love to lead a revolution doing that.

I had the pleasure of interviewing Scott Ellyson, Chief Executive Officer and Co-Founder of East West Manufacturing, a global manufacturer headquartered in Atlanta, GA with operations in China, Vietnam, and India. Scott has an extensive background in supply chain logistics, strategy, and operations, and is particularly familiar with Asia. East West was founded with a simple goal in mind: help companies become more competitive by manufacturing their products at the lowest possible cost without sacrificing quality or delivery.

Thank you so much for doing this with us! What is your “backstory”?

I grew up just outside of Milwaukee on Pewaukee Lake and attended high school at Culver Military Academy in Indiana. I graduated from the University of Florida with a degree in Industrial and Systems Engineering and have been working in global manufacturing and distribution for over 20 years.

I began my career in the early 90’s, first on the floor as a traditional industrial and manufacturing engineer in Miami, FL and then as a strategic logistics and operations consultant with Price WaterhouseCoopers. My goal had always been to run my own business, and in 1996, I co-founded International Technical Services Ltd. (“ITS”), an electronics manufacturer in Hong Kong. While at ITS, I began working with DiversiTech, a distributor of HVAC/R products. In 1998, I joined DiversiTech as its Vice President of Offshore Manufacturing and within a year, I was given responsibility for three other divisions of DiversiTech — Warehousing, Transportation and Information Technology.

My entrepreneurial spirit drove me back to my greater goal of developing and building my own business, so in 2001, I led the spin-off of DiversiTech’s offshore sourcing division with one of my colleagues, Jeff Sweeney, and created East West Manufacturing.

We know that it is not always easy for a foreigner to do business in China. Can you share an interesting story about a challenge that you faced, and how you overcame it?

Setting up a Joint Venture with our motor factory outside of Shanghai was an adventure. We were the first privately held joint venture in the Jiangsu province. Creating alignment with our Chinese partners, navigating all the bureaucracy in China, the back and forth of getting agreements, and then getting the official agreements in place, constructing the buildings for the factory, and getting the teams in place were all quite a challenge. To me, relationships have always been about transparency and being forthright. I think the Chinese really appreciate honesty and transparency and that brings about a level of trust that they look for in a business partner. The relationship in China is more important than the agreement, and respecting their culture, what’s important to them, and doing that in a way that’s truthful is the core of creating a meaningful and lasting relationship. That and doing a whole lot of trips over there help. I’ve made more than 100 trips to China and Asia, which is a pretty big commitment to establishing meaningful relationships.

Are you working on any new or exciting projects now?

Looking at the mosaic of global manufacturing, China has a lot of advantages and specializations that we’re leveraging to support our customers. We are particularly interested today in acquiring more domestic manufacturing capability that can also benefit from our global supply chain. We’re going to buy pieces and components from China and other regions that will allow us to competitively make products in the U.S.

What advice would you give to other business owners who do business in China, to help their employees to thrive?

Our team in China enjoys what a lot of our team in the U.S. enjoys. They want to be challenged, they want to feel like there is a purpose for what they’re doing, they enjoy the exposure to the international aspects of what we do, they like to work in a fun environment that treats their people well. We’re doing programs that are contributing back to the community. For example, our China team went to a local hospital and we were greeters in the hospital. Ventures like this are not so typical, so we’re sort of at the forefront with these company values. Most of our executive team in China has been there over 10 years or more, and we get very little turnover in the organization which is attributed to the fun corporate culture we’ve put in place there.

None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful towards who helped get you to where you are? Can you share a story about that?

There are two people: one, my brother, who was the one who introduced me to Asia. He had been living there since the early 80’s and opened the door for me, taught me how things worked and started the building of the relationships for me in China. The second, Charles Lipman, who was CEO of DiversiTech. He believed in and supported us as an initial investor when we started East West Manufacturing. If I could name three, it would be my business partner, Jeff, who took the leap with me, is my best opposing force and counterpart, and helps keep the balance.

What do you think are the new untapped markets in China that may become the next “big thing”?

Just like the U.S., China is focused on technology but they’re developing technology at a faster rate than we’re developing ours. Looking back 20 years ago, you could never have imagined China could be where they are today, on a number of different fronts. As long as that rate of development in China is continuing to proceed, it’s going to be hard to predict where China will be in 20 years. The frontiers I see China making a lot of progress on are sustainable energy (they’re the largest users of sustainable energy in the world), high speed transportation, environmentally friendly cities, and technology. For example, nobody uses cash in China, they all pay by phone. The rate of adoption for technology like that is incredible and seemed to just happen overnight.

We keep hearing about the “Trade War”. What are your thoughts about it? Given the unknowns, how do you plan to pivot?

I’m entirely in favor of a level playing field. I don’t agree with the tactics, the politics and the strong-arming that is being done, but if the ultimate outcome is to have a more level playing field between the U.S. and China, or any other country for that matter, then I think that’s a good thing. Maybe it’s too early to determine where we’re going to end up, but I think the way we’re negotiating with China at the moment is entirely wrong. And a lot of the misinformation that is being cast is more harmful than helpful; we’re only sharing one side of the story and it discredits the entire argument. China did not steal manufacturing from the U.S., there were many factors at play that led to where we are today. And China and the U.S. have both benefited from our relationship via trade — not in every corner of course — but to act like the U.S, is a victim and has had no benefit is either uninformed or just dishonest manipulation. It should be an honest discussion, and we should leverage alliances with our allies to drive positive and productive change, as opposed to the approach we have taken thus far. Obviously, there is room for disagreement, and I could be wrong, but this is my viewpoint.

What are your “5 Things You Need To Know To Successfully Do Business In China.” (Please share a story or example for each.)

#1. When manufacturing offshore, having “feet on the street” is essential when working on a client’s behalf.

To ensure quality control, you must have a significant presence in each country of manufacture (whether working with sub-suppliers or a fully owned factory) to understand the local culture, negotiate the best pricing, and manage suppliers’ performance. This is not a new concept — it is of course true anywhere, including in the U.S.

#2. Offshore manufacturing in China (or anywhere) is not a zero-sum game.

The additional competitiveness achieved via targeted, strategic outsourcing inevitably leads to growth (in both sales and domestic jobs) for our customers.

#3. Trust, but verify.

You only get the performance and quality level for which you ask, and inspection is crucial. Quality expectations must be clearly set, consistently communicated and inspected for in each shipment.

#4. A transparent supply chain is key.

Suppliers should be pre-qualified on critical manufacturing capabilities, agency (UL, CE, etc.) approvals, competitiveness, IP stewardship, safety and labor practices.

#5. Offshore manufacturing is not “one size fits all.”

For reasons of strategic core competencies, specialized material or process unavailability, freight considerations and cost make-up, not every part or assembly is a good candidate to be made offshore or in China.

Can you please give us your favorite “Life Lesson Quote”? Can you share how that was relevant to you in your life?

Don’t take life too seriously. Have fun along the way and make it an adventure. Do everything in an honest way so that you can look back and be proud of what you’ve accomplished.

You are a person of great influence. If you could inspire a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger. :-)

Two things: First, the risk I took to become an entrepreneur, which I did at a young age, I would like to encourage more people to become entrepreneurs themselves. I would love to share stories and motivate people to take that risk. We want and need more people to start businesses. Second, our company wants to play a role in bringing new technologies to the forefront. We want to bring life to incredible products that will make the world a better, cleaner, smarter, safer, and healthier place to live. We would love to lead a revolution doing that.