Last Updated: 6:06AM GMT 24 Feb 2009  Every day about 200 20ft containers full of clothing, TV sets, barbecues and shopping trolleys are winched on to cargo boats and shipped out of Hong Kong's Kwai Chung port bound for Tesco stores around the world.  Every day about 200 20ft containers full of clothing, TV sets, barbecues and shopping trolleys are winched on to cargo boats and shipped out of Kwai Chung Container Port - better known as the Port of Hong Kong - and other nearby harbours, all bound for Tesco stores around the world.  More than 60pc of all clothing and 40pc of other non-food products sold in Tesco's UK stores, as well as most of the non-food items sold in the 12 other countries Tesco operates in, are procured via the retailer's global sourcing office in Hong Kong.  This trading outpost is responsible for designing, sourcing, overseeing production, quality controlling, and sorting out the customs documentation for 50,000 Tesco product lines. The operation's scale is phenomenal. Tesco International Sourcing (TIS), as the division is called, uses more than 800 suppliers across 1,200 factories. In ambition terms, it is a vast modern equivalent of the East India Company, but it only has one customer: Tesco.  TIS is run by Christophe Roussel, a dapper Frenchman and former Carrefour and J Sainsbury executive. From the division's HQ on the top floor of a tower block on Hong Kong Island's Quarry Bay, Mr Roussel explains how it all works.  TIS employs 533 staff, 250 of whom are based in Hong Kong, the rest in eight satellite hubs in places such as Bangkok in Thailand and Colombo in Sri Lanka. All the activity is co-ordinated centrally, and TIS procures goods from 44 countries, although the vast majority come from China and Hong Kong. TIS is Tesco's lifeblood; the machine behind the machine.  Interestingly, in order to keep the division competitive, the buyers in Tesco's supermarkets divisions across the world are not mandated by chief executive Sir Terry Leahy to place orders for goods with TIS. Buyers are free to acquire their products from other organisations if they so require. Mr Roussel says this is vital to keep TIS on its toes.  Auness Lee is general manager of Realtoy, a Chinese toy manufacturer that makes mini Tesco lorries and other toy cars for sale in the retailer's stores. The company has one factory in south China, in Dongguan, and supplies Tesco with £3.5m worth of goods, or 3m toy cars, a year. One of Realtoy's big sellers this year is expected to be a six-inch toy of a Tesco petrol tanker with the slogan "Why pay more?" emblazoned down the side.  This toy lorry's journey from conception to shop provides a snapshot of how TIS works.  TIS's toy department started the process months ago by telling Realtoy what products it required. Mr Lee's team developed a prototype in the company's Wing Wai metal factory in Qiao Tou. This was sent to TIS for inspection and any changes to colour or design required by the retailer were made. The prototype was then tested by a Tesco technician to check its sturdiness and its compatibility with health and safety regulations. Once passed, the financial terms and size of the order were hammered out and production started.  The entire manufacturing process was overseen by Tesco, with a TIS employee checking quality at various points. Realtoy then carried out its own "pull test" on the vehicle, literally a test that stretched the lorry to check it was solid.  The vehicles were then packaged in Tesco boxes. To save money and allow the same packaging to be used in Tesco stores worldwide, the box carries the same information in six languages. Boxes of the goods were placed on pallets, wrapped in a protective layer, and transported to Kwai Chung for shipping.  Mr Lee, who also supplies to Asda and Auchan, says that Tesco is a good, if rigorous, customer. "The key factor is product development. They are very good at this," he says.  Like all Tesco suppliers, Realtoy has been subject to strict auditing procedures. Ethical trading has become a cornerstone for all retailers, with any breaches of trading standards pounced on by rivals, NGOs and the media.  Making sure that its supply base comes up to scratch is key for Tesco, particularly as its myriad factories are almost exclusively located in the developing world, where standards can be poor.  Lara Ladipo is head of technical at TIS. She says that customers have a "zero tolerance" policy towards unethical manufacturers. All 800 of TIS's suppliers undergo both technical and ethical audits. The former looks at machinery and product standards, the latter looks at how the factory treats workers, from three points of view; its own research, from what workers say, and what the factory owners say. Once on board, suppliers are subject to arranged and surprise visits from Tesco. Tesco also uses external auditors. Tesco's UK HQ has a list of 530 centrally approved supply chain experts from 11 different organisations that it sends to TIS and its hubs. These auditors are themselves audited, to add an extra safety net.  Last year Tesco ditched 12 suppliers who "persistently didn't improve," says Ms Ladipo. One was a Turkish supplier whose workers' dormitories were not upgraded after continuous requests by Tesco. Ms Ladipo says that Tesco employees and suppliers are sent on regular training courses. The former go on a course called "Buying with your eyes open" to teach them "how to smell a rat", perhaps literally on occasion.  One of the advantages of TIS's broad spread is that it can move production around as economic and political situations require. For example, as wage inflation hits certain areas of China it can move production to cheaper areas. This is the advantage of having 300-odd clothing suppliers. Different fashions are also better suited to different locations; Indian textile factories are strong at producing embellished garments – clothes with decorative features – whereas Chinese factories are better at producing technical gear and outdoor fabrics.  As Tesco customers around the world tighten their belts, the company is using what it calls "value engineering". This involves using cheaper fabrics in order to keep the prices down.  Albert Auo is a Chinese TIS executive in charge of procuring Tesco's Christmas decorations. In a Hong Kong showroom overlooking the harbour last week, he gave The Daily Telegraph a look at this coming Christmas's ranges. Just over one month after decorations have been taken down in the UK, Tesco is gearing up to ship this December's batch.  Next to a 7ft inflatable Father Christmas stood 15 fake Christmas trees, ranging in price from a few pounds to £60. TIS also supplies Dobbies, Tesco's chain of garden centres.  Mr Auo's colleague in charge of luggage guides us to a range of suitcases. They are made from the same fabric and in the same factory as Samsonite cases, but sell for a fraction of the price.  TIS boss Mr Roussel believes Tesco has one of the slickest supply operations in the world. It goes deep and it goes wide. He even says the economic downturn has its advantages.  Due to the decline in Chinese exports, shipping rates are the cheapest they have been for years. And if, like TIS, you are sending 72,000 containers a year, that makes quite a difference.  The number of containers being shipped from Hong Kong's ports to other areas of the world fell by 23.2pc in January compared to the previous year, highlighting just how the global slowdown is affecting exports from Asia.  Local experts estimate that some 390 unused container ships are currently anchored mid-water or in harbours around the world, equivalent to around 11pc of the global fleet. In Hong Kong, the glut of empty containers is clogging up much-needed space. There is talk that the disused Kai Tak airport in Kowloon Harbour could be used as a temporary home for the empty steel boxes.  January is historically bolstered as a trading month by the annual cargo rush before the Chinese New Year. This failed to happen, sending out a dire warning.  Sunny Ho Lap-Kee, the executive director of the Hong Kong Shippers' Council, was reported in local press saying that February and March will be "a lot worse" than January. "Factories have not started production yet. There are virtually no orders," he told the South China Morning Post.  High in the control tower above the Port of Hong Kong there is chatter that one port in Asia is currently seeing activity down by 40pc.
James Hall visits Tesco's outsourcing operation in Hong Kong which is    responsible for ensuring that the supermarket's stores around the world are    supplied with non-food goods.