This is the last part in this 15-part series. Here we'll focus on how to improve factory productivity in China. Why is it important for buyers? Because, unless your suppliers make progress in this area in the next 5-10 years, many of them will go out of business. Admittedly, if you are not their biggest customer, they will not follow your suggestions of re-organizing production, but it is your responsibility to open their minds about best-in-class practices. I have prepared a simple … [Read more...]
Sourcing from China 101, Part 14: How To Improve A Factory’s Quality
I bet you are tired of hearing your Chinese suppliers say “this is made by hand, so avoiding defects is impossible”. So am I, because it’s so wrong. Some small factories have decreased their defect rate below 50 parts per million (that’s 0.005%). Some of them, in Japan, employs housewives in the countryside, and their operations are all manual! So, what's their secret for getting so close to zero defects, and how to improve a factory's quality in China along the same lines? The answer … [Read more...]
Sourcing from China 101, Part 13: Developing a Chinese Supplier
Many importers work in one or two product categories. They buy 80% of their volume from 1-4 manufacturers. And many of them make the same mistake: they don’t try developing a Chinese supplier who they are CURRENTLY working with. Instead, they spend time sourcing NEW factories and training them to their requirements, and, consequently, they are taking risks on the first order from a new supplier each time. Is there an alternative? Sure. A supplier development program follows 5 steps. And … [Read more...]
Sourcing from China 101, Part 11: Build A Good rapport with Suppliers
Up until now, I have written lessons about “hard” issues: screening suppliers, writing specifications, negotiating the right terms, and inspecting quality. But I feel I should take a moment and focus on “soft” issues, and in particular, how to build a good rapport with suppliers because it is so important, while at the same time so difficult to get right. First, let’s look at what specialists call the “inner circle” and the “outer circle”. 1. Some background: the inner and outer … [Read more...]
Sourcing from China 101, Part 10: Always Verify Quality Before Shipment
Once the products hit your dock and once you have paid 100% of the order, there is little you can do in case products are not up to your specifications. Chances are, you have already paid the supplier in full. And the supplier will certainly not give your money back, or re-produce for free. (It does happen, but very seldom.) That’s why professional importers generally have every order inspected before shipment. (Chinese factories are famous for cheapening the product when the buyer starts … [Read more...]
Sourcing from China 101, Part 9: Check Quality Early In Production
I’ll assume you have found and audited a good manufacturer. They have communicated well up until now, and you feel confident about them. But should you feel confident? Several things can go wrong: They might be too busy and farm your job out to another factory – without telling you. They might receive substandard components from their suppliers, and decide to use them anyway. Your product might be new to them in a way you did not anticipate or forecast. Fortunately, there is a … [Read more...]
Sourcing from China 101, Part 8: Project Management of Your Orders
One recurring theme in this course is that you should not rely on the supplier’s salespeople. Most of them would have been hired solely on the basis of their English skills. They are interpreters with very little technical knowledge, and they are not project managers. There is actually no proper “project manager” in 99% of Chinese factories. So, who should manage the orders? The bad news is, it’s the buyer’s job. The good news is, it’s not necessarily much work. … [Read more...]
Sourcing from China 101, Part 7: Pre-Production: Describing What You Want
I have stated several times that you need to describe your product in detail. I know this is obvious, but most buyers don’t do is well… and often regret it later. There are two ways of formalizing your requirements: A written specification sheet, which contains all your expectations regarding the product and its packaging. Pre-production samples, which are supposed to represent what cannot easily be described in written form: the look & feel, the quality of the finishing, etc. … [Read more...]
Sourcing From China 101, Part 6: Keep Some Leverage Over Suppliers
Up until now, I have explained how to find a good supplier and what terms to negotiate from the get-go. But this is not enough. Buyers who are new to China often make a mistake: they trust their suppliers too much. China is a dog-eat-dog environment. You can’t trust a company simply because you have checked and qualified them. You need to structure your deals in such a way that you keep some power over your supplier. I'll suggest three good ways of keeping this leverage. 1. Payment by … [Read more...]
Sourcing from China 101, Part 5: Negotiation: The Terms you Need to Discuss
Chinese suppliers are good at detecting which purchaser is inexperienced. If that's the case, and if you are dealing with dishonest suppliers, they could think that they will be able to take advantage of you. Therefore, it is important that you come across as someone who is fully prepared. You need to know what to ask, and how to respond when a supplier is being unreasonable. Let’s have a look at the main terms you will need to discuss with potential suppliers. I advise you to discuss … [Read more...]