Many importers have a bad relationship with their key Chinese supplier(s), but they don’t look for other companies. Sometimes it leads to unbelievable situations. For example, some buyers got screwed on 3 orders in a row by the same manufacturer!
On the face of it, it is surprising, especially given the thousands of Chinese exporters competing for buyers’ attention. When one supplier is not performing as expected, the importer should terminate the relationship, right?
Unfortunately, things are not that simple.
Here is the way it often works:
- Inexperienced buyer comes to China, has a good feeling with a supplier, gives them an order.
- It takes time to develop perfect samples, and some materials/processes have to be adapted to the factory’s capabilities.
- Buyer does not check quality until delivery in importing country (i.e. after full payment).
- Quality issues are discovered; buyer asks for a compensation.
- Supplier only promises a discount on the next order; buyer has no leverage to negotiate a better deal.
- Importer is upset, but places a second order to get the discount.
- Manufacturer finds a way to increase the price after the deposit of the second order is wired; importer has no choice but to accept.
- This time, buyer checks quality before shipment. Some issues are noticed. Supplier refuses to repair. Importer’s customers are asking for the goods. Shipment is authorized, and part of it is by air (at buyer’s costs).
- Buyer looks for another factory, finds a few candidates, is very wary this time.
- Production has to start again fast. New developments with a new factory would take 2 or 3 months. Importer gives a last chance to the same supplier.
- Third order is even worse than second order; buyer gets really upset and desperate; production is canceled and deposit is lost.
In this hypothetical situation, the importer did many things wrong along the way (see best practices for importers). He should have qualified the supplier properly, followed quality closely, and secure a back-up manufacturer.
But, after he was engaged in this situation, when should he have stopped the relationship? Just after the first order? Or maybe the second order should have been smaller? There is no right answer.
In any case, a back-up source should have been developed right after the first quality problems were found (and after difficult negotiations led nowhere).
Am I right?
UPDATE: see this follow-up article: China quality: run away at the first alert!