Betrayed in China: One Entrepreneur's Hard Journey East
Kasha and Wang sat down in a Bai-Shi Craft conference room, and Wang rehashed recent events from his point of view. Kasha had refused to trust him; he had stuck his nose into things he didn't understand. Moreover, Wang said, doubling the business with Walmart was foolish. Wang didn't have the money to pay suppliers for the amount of goods he needed to order, and Akasha in the U.S. wasn't paying him enough up front to cover the difference. So why should he expand operations? Why should he put up his own money? Why should he even write back?
Kasha listened. Now it was his turn to wear the smiling mask. So, Kasha asked, what could he do to make things work?
Wang began rattling off a list of demands: He wanted a new forklift for the warehouse, an operational account funded monthly with $30,000, more flexible lead times for orders...
Kasha agreed to all of it. Soon, he would be able to ditch Wang for a replacement. Kasha already had a prime lead.
Years earlier, a man named Tiger Hou had cold-called Kasha at his office in Michigan. He claimed to supply decorative fillers for stores in Australia and Europe. Wang had immediately dismissed him as a middleman who would lead them back to their own suppliers in exchange for a finder's fee. Every year since, however, Hou tracked Kasha down at the trading expos with the same refrain: "Adam, I am ready." It was time to give him a try.
They arranged to meet in Changzhou on a Saturday in May. In Hou's black Audi, they drove toward Nanjing. Then they drove past it. The Audi turned onto a dirt road. They passed rice paddies and a primitive cemetery. Then, as they drove past rows of squat concrete houses, Kasha noticed something familiar outside of each home: vinyl sacks. Sacks of rocks. Outside every house were stacks and stacks of these sacks of rocks. Next, they pulled over a hill, and there before him Kasha saw Hou's operation. A massive bulldozer pushed earth. Next to it was an enormous series of chutes and conveyor belts. This was Luhe, a district filigreed with tributaries to the Yangtze River. Hou's family was buying up mining rights to a huge swath of it. River rocks were so plentiful here that the nearby farmers bought rock tumblers; the ubiquitous sacks of rocks were waiting to be picked up by Hou. In a nearby warehouse, trucks filled with glass gems arrived and unloaded. Hou was no middleman. Kasha had arrived in decorative filler paradise.
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From: Carl Kimbro, Walmart
To: Adam Kasha
Sent: July 6, 2009
Subject: In stockAdam:
Where are we at on the out of stocks. The number is still very high. We have had get well dates come and go. If you are not shipping 100% by now, then we will need to buy from someone else. We can't keep sending customers to the competition.
By June, Hou had nine assembly lines for Akasha. Finally, Kasha could fill Walmart's orders completely. He still needed output from Bai-Shi Craft, but as Hou ramped up, Kasha could order less and less from Wang. He predicted that by September, he could dump Wang completely.
The shipping time between China and the U.S., however, meant Walmart's buyers didn't see the results right away. On July 7, Carl Kimbro, Walmart's fabrics and crafts director, officially lost his patience. He told Kasha by email that his staff had begun calculating a lost-profits penalty for every shortfall since March. (It would eventually work out to $300,000.) Furthermore, Akasha was now on probation. If it fell short of any order by so much as one miniature river rock, Walmart would fine the company $10,000 per product per week. After that, Kasha could kiss the business goodbye.
Production became a high-wire act. Each week, Kasha needed everything to ship from both Hou's and Wang's facilities with no problems.
It was on July 30, almost exactly halfway through the probation period, that an incoming email sent his whole plan reeling. It was from Wang. He had found out about Hou. He was not happy.
