In this interview, Managing Director Hubert Roth explains the challenges that our customer, Mecheltron, faces when importing goods from Asia, and how the iBanFirst platform supports the company.
Mecheltron (NTS electronic and components GmbH) was founded in 1983 as the successor organisation to a partnership. It specialises in the trade of electromechanical and electronic products. As the majority of its suppliers are in China, Mecheltron has its own office in Shanghai which maintains close contact with the company’s suppliers, inspects goods and processes transactions. A small proportion of goods is also sourced from Japan. Its customers, however, are mostly based in Germany, with a smaller number in other European countries and elsewhere around the world.
As a German company, what are the main problems involved with sourcing products abroad?
Like no other market, China offers a huge variety of sources of supply and sales opportunities, each having different quality standards and varying degrees of knowledge about European product regulations. Finding the right business partner is not always easy.
The biggest problem with sourcing goods, especially from China, is when quality issues arise. In Europe it’s simple – you send the goods back to the supplier, who then repairs or improves them. In China, this is almost impossible as the exporter would usually have to re-import the goods via the proper channels and thus incur considerable import duties. On top of that there are the transport costs. This often means that it’s not worth it. So, in case of doubt, you are left with defective goods. The advantage of having an office in Shanghai is that the goods are inspected there – either in the office itself, or by employees carrying out technical inspections in situ. This means that quality issues are as good as resolved or can be rectified directly in situ.
Bank transaction fees for international payments are also a cost factor. If the amounts involved are relatively small, the transfer costs are very high in percentage terms. It tends to be cheaper for larger amounts, but of course it’s not always possible to bundle all payments together into one big payment. Smaller companies, in particular, will then incur somewhat higher costs.
What did you use before iBanFirst?
We used traditional banks for our international payments. We switched to iBanFirst about two years ago and have already saved several thousand euros.
For which services do you use the iBanFirst platform?
For outgoing payments, currency exchange, currency risk hedging.
What do you think are the biggest advantages of iBanFirst?
The high level of transparency, both in terms of payments and accounts. And, of course, the lower prices and the speed. In our experience, payments are processed faster than they are at banks: if you transfer money in the morning, it is usually in the supplier’s account in China the next day.
Also, one of our suppliers was hacked a while ago. The scammers posed as the supplier and informed us that the bank details had changed. This was done so professionally that the deception was undetectable. Even the criminal investigation department was amazed at the care and attention to detail with which the scammers operated.
So it wasn’t until after the transfer that we noticed that the supplier, and therefore us, had been the victims of fraud. Fortunately, thanks to iBanFirst’s quick response and cooperation with the public prosecutor’s office, we were able to recover a large part of the money.
Is the Covid crisis having an impact on your business?
Fortunately, thanks to the experience of our colleagues on the ground in China, we were able to react very quickly. Whilst here in Germany people were still puzzling over how best to deal with this situation, we had already taken action. Thanks to the close relationship we have with our business partners, we took precautions and built up stocks very early on. This enabled us to grow business volume considerably throughout the Covid crisis. So you could say that we have come through the crisis relatively well. At the beginning of the Covid pandemic, when masks were still in short supply, we also donated 20,000 masks to a local hospital, which we ordered through our local office in Shanghai.
How do you see the wider impact on the economy in general?
The impact on the supply chain will be felt for some time to come. This will range from major supply bottlenecks to the cessation of trading for some businesses because goods are difficult to procure or very expensive to transport and have long transit times. There is a lack of freight capacity because there are not enough container and cargo ships available. Sea freight rates are currently 6-8 times the long-term average transport costs. Entire ports in China are also being repeatedly closed because of Covid. And then there is congestion at the arrival ports and at local freight forwarders. In the meantime, for certain items, freight is already more expensive than the product value. We will have to get used to the fact that some products will probably not be available in sufficient quantities for quite some time.