Rendanheyi & Tianbao

This is an excerpt from our book titled 'Start-up Factory'

Shangdong Tianbao Group

Close to the Asian roots of Rendanheyi lies the transformation of the Shangdong Tianbao Group. Founded in 1996 by Zhang Chuanfa, the group is also located in Qingdao. The company, with some 200 employees, trades mainly in iron and steel products. Tianbao is the link between raw-material producers such as steel and iron mills and SMEs that create the products. It must satisfy both sides of this relationship.

But the interests of the raw material suppliers and the many small vendors are misaligned. The production process is flawed: volumes are high, the quality of products often low. Innovation is negligible, with slow response to the needs of manufacturers. These smaller organisations have little say, or bargaining power, in how the raw material is delivered. By championing simple transactions, the relationship between supply and user sides will improve.

Chuanfa believed that the “ecosystem thinking” of the Rendanheyi model can potentially solve this. He was right. With the help of experts from Haier’s Model Institute (HMI), he has built an interconnected system between Tianbao, suppliers, and manufacturers. Tianbao created its own digital platform, Kuaigang Cloud, directly connecting the upstream with the downstream.

It was a success. Within six months, 100 suppliers and 10,000 vendors from warehousing, manufacturing, logistics, finance, and delivery sectors were connected to the Kuaigang Cloud. The platform was specifically designed to empower vendors. The purchasing of small amounts of raw material would run into problems because of the scale of the order. In the new situation, the Kuaigang Cloud takes over the process. It collects vendor demands and makes the purchasing request directly to the steel mills. The platform even takes care of financial transactions to speed-up the order. Six months after the introduction of the Kuaigang Cloud, Tianbao saw its annual sales nearly triple in the first two quarters of 2021.

Tianbao started to encourage employees to come up with better ways to organise themselves and work more efficiently. Next steps included the introduction of bidding mechanisms, EMC contracts, and market-driven reward mechanisms. Employees become Haier-style entrepreneurs, motivated to chase external market opportunities. Chuanfa encouraged employees to visit Qingdao and the institute to have in-depth conversations with Haier’s entrepreneurs.

Tianbao has shown that to implement Rendanheyi, businesses should choose to adopt only the parts that will work for each specific situation. In the case of Tianbao, that was ecosystem thinking, the starting point to implement a more comprehensive Rendanheyi philosophy. Other companies have started by restructuring the organisation (as in Fujitsu’s case) or the reward mechanisms (as at Sanyo).

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