What are the relative advantages of China over India, when it comes to sourcing products? The China Law Blog came up with two different posts covering this question... And a reader called Joel Waldman came up with very interesting comments that I am going to reproduce in this post. From what he wrote, he has been living in India for 30 years and spent all this time sourcing from there. He has started sourcing from Chinese suppliers about 5 years ago. 1. Challenges of sourcing in … [Read more...]
China buying experience: shopping mall or contractor?
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 … [Read more...]
Is direct sourcing really the overall trend?
Over the past 15 years, foreign buyers of Chinese goods have developed direct relationships with manufacturers. Many of them have tried to bypass Hong Kong trading firms and Chinese "import & export companies", in search of lower prices and greater control. The trend, overall, has been toward direct sourcing. In the process, some large importers have set up their local offices in China. These offices are often in charge of everything, from finding suppliers to following orders and … [Read more...]
Negotiate about prices, not about quality standards
I had a funny conversation with one of my clients’ suppliers. My inspector had found too many defects and had to reject one of their shipments. I was also in the factory, monitoring the whole thing. I started questioning the supplier about their quality checks during production. This is what they told me: You know, for the price [the importer] gives us, we really select the best factories we can work with in this area. We can’t afford to work with better factories. Well, this might be true. In … [Read more...]
China business: avoiding intermediaries
In my previous job (in a small trading company based in Hong Kong), I quickly concluded that it was better to deal directly with a retailer, rather than a wholesaler who sells to retailers. With few exceptions, retailers are less sensitive to price and impose less constraints. The trick was finding retailers of a certain size, and weed out the "I have 2 boutiques and I'd like to buy direct from China" crowd. The same goes for factories: it is better for them to deal directly with an importer … [Read more...]
Should you know something about your Chinese suppliers?
Very few importers make an effort to know the exact financial standing of their Chinese suppliers. China is viewed as a fundamentally opaque country, where "nobody knows who the real boss is anyway". For example, meeting a representative of a given company, and then sending P/Os and payments in the name of a different company, is quite frequent. I am not saying it is a mistake. It is perfectly fine for small purchases, especially if quality is confirmed before payment. But it is NOT advised … [Read more...]
Contacts of “good factories”
These days I am exhibiting on a trade show (China Sourcing Fair in Hong Kong). Every time I attend a fair to find new clients, I am amazed by the number of buyers who say “Oh, so you visit factories all over China… You must know some good factories… Can you give me a list?” I can understand them. They see salespeople (who can say whatever they want) and samples (which might come from many different factories). There is no way of making sure what production will look like, whether there … [Read more...]
Use experienced service providers, not Chinese connections
Every year, I guess thousands of companies decide to start importing from China. Some of them already exist, and others are founded specifically for this activity. But overall, most of these companies know very little about China. They know it can be risky. They heard of all the struggles over product quality. They were told business is conducted differently. So what do they do? They try to work with somebody who knows all the tricks. They hire Chinese purchasers in their country, or they … [Read more...]
Quality system: a checklist for factory auditors
Factory audits, like product inspections, need to be performed in an objective manner. A buyer that pays for audits of two factories should be able to compare the findings and use them to pick a supplier. It means auditors should work with the same basic checklist for all their evaluations, and make a few adjustments in function of production processes or client requirements. For audits of labor conditions, the checklist is usually based on the SA8000 standard. For audits of a quality … [Read more...]
Buying from a large private Chinese factory
Small importers tend to have the feeling that buying from a large factory is more expensive but more reassuring. There is some truth regarding the higher prices, but risks are not necessarily lower. Buyers should be aware of the different dynamics at play here. What do I call a large private factory in China? I have three things in mind: At least 2,000 workers (and sometimes many, many more). The target market: most of the production is sent to large buyers in the US and/or in … [Read more...]