World Kitchen uses SAP internally, but it can be difficult to convince a supplier that an ERP system is worth it. "Technology is the largest chunk of the challenge," he says. "Not many companies are starting to invest in technology, though they are upgrading their manufacturing equipment."

When a supplier does have an ERP system installed, it makes a big difference, Tan says. "Without ERP, we have to have on-site people at that factory. We monitor everything," he says.

To encourage IT investments, World Kitchen's technical experts work with its suppliers. "Our IT people come out and do their own evaluation," Tan says. "We walk them through what we want them to have."

Having an ERP system in place helps alleviate some of the cultural barriers to communication between Chinese suppliers and Western companies, Tan says. "It makes it more convenient to communicate with each other and helps with forecasting and planning," he explains.

An ERP system is also a good indicator that a supplier has internal processes and procedures under control, Tan adds. "If they don't have ERP, their procedures are a little unstable."