After my post about how Chinese factory owners treat their workers, here is a post about how they treat their customers. Much could be said on this subject, but I gave a shot at summarizing it.

Some customers are more equal than others

China suppliers don’t follow the principle of “the customer is king” in an indiscriminate manner. They will always favor certain customers over others. In their view, there will always be late shipments, for example. So why not give priority to “good” customers over “bad” customers?

Unfortunately, it is not reserved to late shipping. Buyer/seller are always seen in a holistic manner, and every element impacts each other.

What constitutes the complete profile of the “bad customer”?

• A low volume buyer
• A constant bargainer, who shops around and switches suppliers easily and frequently
• An intermediary such as a trading company, rather than a direct oversea customer
• Very strict requirements, systematic control points, and penalties for discrepancies
• A weak commitment to payment, such as a letter of credit with “soft terms”
• A bad reputation, such as rumors of cancelled shipments reported by other suppliers in the same city
• Rather complex products that consume the attention of management

How are “bad customers” treated?

• Price negotiations are harder
• Generally speaking, every order is treated as a one-shot deal. No unnecessary effort on anything!
• The temptation to substitute substandard materials is much stronger
• Products are manufactured in the lines with the least experimented workers, and QC is minimal
• A junior merchandiser is assigned to follow the order, often without close supervision
• Samples are not prepared in priority, and if possible not by the most skilled technicians
• Whenever a “better” customer has an urgent shipment, production takes longer

What can a buyer do to be perceived more favorably?

The difficulty here is to make sacrifices while avoiding being taken advantage of. Here is what a buyer can try to do:

• Find a supplier of the right size, and avoid large factories that deal with much bigger customers
• Avoid negotiating prices so low that there is no margin left
• Show a commitment to buying from that supplier for the long term, and walk the talk
• Work with fewer suppliers and take advantage of it to spend more time with them
• Adapt to the factory’s way of working, if at all possible. For example, standardize components and increase purchased quantities

And here are a few issues about which buyers should never give in:

• Doing product inspections, and picking up samples for testing
• Tying payments to quality acceptance
• Keeping track of all available information, being organized, leading the relationship, and asking the tough questions

What have I forgotten?