Relationships with Chinese suppliers: be clean!

Supplier ManagementIf Clint Eastwood worked with importers, he might say this:

You see in this world there’s two kinds of buyers, my friend. Those who are clean, and those who need to ask favors from their suppliers.

What I call the “clean” buyers have the following characteristics:

  • They don’t accept invitations to karaoke or anything “over the top”, and they don’t drink with suppliers. If they want to have a holiday, they do a stopover in Thailand or in the Philippines.
  • They don’t pretend to be friends with their suppliers. They can be curious and get to know them, but with respect and restraint.
  • They take responsibility when they make a mistake or when they create a delay.
  • They are very clear about their expectations (for example, the latest acceptable date and the quality standard) and they communicate clearly about their disappointments.

The opposite is the buyer who thinks “we are in China, everything is on a personal level here, so I have to develop close relationships with my suppliers to get the best results.”

It makes sense up to a point. But I see three problems with this approach:

  1. I don’t see any reason for it because most businesspeople involved in exports are familiar with the Americans and the Europeans’ way of working.
  2. Friendly business, done the Chinese way, is not conducive to the respect of standards or to any kind of accountability. In the end, I think it is not effective, unless the importer has a lot of freedom regarding timing and quality.
  3. It can set some expectations in the mind of the supplier, who will probably end up bitterly disappointed.

No one is better than David Dayton to put the finger on these issues. He wrote a very good article about it (Sometimes there just isn’t a second chance):

[The buyer] misses a couple of small design/art dates in the beginning but continue to push the supplier to meet the delivery dates originally agreed too. The supplier agrees, of course, as they want to cooperate and hope to build some type of relationship that will turn into future orders. They also assume that since they accommodated the client, the client will do the same later.

What factories don’t understand is the West’s infatuation with contractual dates. You know that if you’re planning on getting your product into any of the box stores you’ve probably got a 72 hour delivery window that if you miss you’re completely out of luck. Your factory doesn’t know this.

What the buyer doesn’t understand is the quid pro quo that is part of the Chinese business culture. All those little favors are counted and recorded. There is a very tacit expectation that each one will be paid back.

I advise you to go and read the whole article. In a few words: letting a Chinese supplier think that business will be conducted in a friendly manner, while some constraints on the buyer’s side cannot be lifted, is a recipe for disaster.

When you suddenly stop being flexible, and you show that you are about to cancel the order, the supplier will think in terms of “how can I cut my losses out of this deal, whatever happens to the relationship with this buyer?” This might not end up nicely for you.

Dayton’s example is a late shipment, but it could have been about unacceptable quality. Once again, keep arms length relationships with your suppliers and be clear about your expectations. This is the best way to build long term relationships.

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Comments

  1. sam miller says

    Interesting Blog, though I must say I disagree with this point of view. You will get more out of your vendor if you are on friendly terms with them than if you are percieved as just another cool, level-headed, arrogant Westerner only in China to make a quick buck and get out. Drinking or doing Karaoke with the vendor is often necessary ritual when doing business in China ( women are sometimes excused). If you do not partake you run the risk as coming off as rude. The best approach is a combination of carrot and stick. Be firm and business like at the factory but show your vendor that you are having a good time in China.

  2. Renaud Anjoran says

    What I had in mind is that few buyers have the maturity to have fun with
    their suppliers (to be called their friend, to get to know their family
    and so on) and then be business-like the following day.
    It is human nature–Cialdini call it the rule of reciprocity. I have
    observed it countless times. Chinese suppliers are pretty charming, and
    use it to their advantage.
    My conclusion is that inexperienced importers had better play business
    according to the rules they know. They are the buyers, and many Chinese
    exporters located in Guangdong or around Shanghai will respect this.
    After they have gotten familiar with the Chinese environment, of course
    they can follow their own path.

  3. CT says

    If you are on tight deadlines, just explain it as being due to the third party client’s demands. The factories often know that smaller buyers can deal with mistakes but larger companies can’t. If you are small you can say you have a larger client, for example. Doesn’t always work of course, but it’s another thing you can try. This also gives them some hope of getting larger orders down the road if you can land big clients.

  4. Renaud Anjoran says

    Right, that’s a good point. “I’m a nice guy, but that bad guy just leaves me no choice”. Highly effective in China!

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