David Dayton just published another insightful blog post about China sourcing: Foreign Mental Blocks. It lists a few issues that many importers have a hard time to understand.
One of the points he raises is that “Working with China is like working with a contractor–it’s always going to be late and over budget”
If you’ve ever worked with a contractor on any building or remodeling project you know that while the end result can be very satisfying, the process is usually hell. Delays, over billing, living through a mess in your house (or office); it’s just not pleasant until it’s completely finished. Working in China is much more like working with a contractor than working with a box store (which is the attitude that I feel like some people come to China with).
China is not Wal-Mart or Home Depot or Target or Costco. You can’t just walk in and buy 5 or 500,000 pcs in the same amount of time. If you order 5,000 pcs you’re not going to be able to get 500,000 pcs made in the same amount of time. Even if the contract says the lead-time is 45 days, that does NOT mean that you’ll have product in your warehouse with in 7 weeks. If you get a bid on 350,000 pcs you’re not going to buy 70,000 pcs for the same price. Just because they’ve “done it before” doesn’t mean that your production run will not have issues. I caution everyone to assume that production will certainly have issues—the question is just how many issues you’re going to have. You’ll probably have at least 2-3 pull your hair out scream at the wall issues. Know it going in, and when it happens, you’re ready. And if it doesn’t, well….it never doesn’t.
All this is true, and I like the analogy to a contractor vs. a retail shop. These few paragraphs should be required reading for new buyers coming to China.
BUT it is only applicable for part of Chinese production. There are a couple of noteworthy exceptions, I think.
Are there ALWAYS problems with China production?
In the course of my job (as a provider of QC services), I see a lot of factories that don’t respect their commitments… But there are also a few factories that do everything to please their buyers. Yes, there are manufacturers here in China that play by the rules and respect their customers.
These companies know that they have to behave as is expected of them for their long-term success. They place a strong emphasis on quality and delays, and they don’t play cat-and-mouse games to increase prices.
These manufacturers are usually large (at least 1,000 workers), and the boss is often from Hong Kong or Taiwan… But not always. More and more local players are trustworthy, even if they are still a small minority of the total supplier pool.
And yes, in 99% of cases their prices are higher than average. But remember, the purchasing price is only a fraction of the total cost of ownership.
Are ALL importers coming to buy made-to-order products?
Of course not. Many different types of products are purchased from China, with vastly different implications for production follow up and QC. I wrote an article about it last year: How To Control The Quality Of Your Products?
Thousands of people come to Shenzhen, Guangzhou or Yiwu to buy off-the-shelf goods. Sometimes they are not asking for any customization–not even printing a logo, or using a different packing.
These include computer accessories sold to Africa, mobile phones exported to India, but also small “art & craft” bought by discount retailers in North America and Christmas decorations sent to Europe. Factories are mostly interchangeable. The volumes are often small (just enough to consolidate a full container).
How does it work? Say you want to buy computer chips. They are made in Guangdong province, brought to Hong Kong (to avoid paying VAT in China) and smuggled back to Shenzhen. You go to a sort of shopping mall on Huaqiangbei Road, you choose what you need and you negotiate a price. The chips are already in stock, in a nearby warehouse. This shopping experience is not very different from that in a Home Depot in the US. All you need to do is make sure your forwarder coordinates with the supplier.
Naturally, this type of transaction tends to be below the radar of most service providers, since buyers usually don’t need our assistance. Why hire a procurement expert or a QC firm if the buyer can reach a deal in a few minutes and then go have a quick look at the goods by himself?
I actually think this type of small orders, while they are very “easy to handle” for small importers/retailers, are a never-ending source of unsafe products in importing countries. See my last post: Small Importers Buying Unsafe Products In China.